CBP and DHS release important guidance on the Uyghur forced labor prevention act

On 13 June 2021, U.S. Customs and Border Protection (CBP) released operational guidance detailing procedures for enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) to help affected businesses address the presumption that certain goods are products of forced labor. The UFLPA, enacted on 23 December 2021 and which entered into effect on 21 June 2022, is designed to enhance the prohibition against the U.S. importation of goods made wholly or in part with forced labor in the Xinjiang Uyghur Autonomous Region (XUAR) of China and combat trade in illicit goods.

CBP defines forced labor as all work or services that are exacted from any person under the menace of a penalty for nonperformance and for which the worker does not offer work or service voluntarily. Indentured labor is considered work or services performed under a contract, the enforcement of which can be accomplished by process or penalties and includes forced or indentured child labor.

The UFLPA requires CBP to apply a rebuttable presumption that all goods made wholly or in part in the XUAR are products of forced labor. The law is extremely broad in scope and establishes a rebuttable presumption that any goods, wares, articles and merchandise mined, produced or manufactured wholly or in part in the XUAR, or produced by certain entities identified under the UFLPA, are the products of forced labor. Significantly, the presumption also applies to goods made in, or shipped through, China and other countries that include inputs (raw materials) made in Xinjiang. In other words, the rebuttable presumption applies both to finished products that were made in the XUAR, as well as to products made with raw materials produced in the XUAR, but completed in other countries or regions within China.

In addition to complying with the operational guidance released by CBP, importers should consult the Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People’s Republic of China (UFLPA strategy document) released by the Department of Homeland Security on 17 June, which contains specific importer guidance as required by the UFLPA. Specifically, the UFLPA strategy document includes information on the assessment of the risk presented by the importation of goods made with forced labor, evaluation of the various forced labor schemes, recommended efforts by CBP to combat the importation of goods made with forced labor, including new tools and resources to identify and trace goods and, most significantly, specific importer guidance as required by the UFLPA to overcome the rebuttable presumption of forced labor.

Overview of CBP guidance and UFLPA strategy document

CBP’s guidance contains an overview of how the agency will process detentions, exclusions and seizures of imported goods under UFLPA, as well as the types of evidence importers will need to produce to rebut the forced labor presumption. Enforcement of the UFLPA and application of the rebuttable presumption will apply to merchandise imported on or after 21 June, and CBP will exercise its authority to detain, exclude and/or seize and forfeit shipments.

To rebut the presumption of forced labor for goods of Xinjiang origin, importers must respond to all CBP requests for information about merchandise under review and demonstrate by clear and convincing evidence that the goods, wares, articles or merchandise were not mined, produced or manufactured wholly or in part by forced labor. The UFLPA also requires that importers demonstrate due diligence, effective supply chain tracing and supply chain management measures to ensure they do not import any goods that fall within the scope of the UFLPA, especially goods from the XUAR.

Procedurally, the guidance provides information on the enforcement actions CBP will take regarding imported merchandise suspected of being made in whole or in part with forced labor, including identifying, detaining and/or excluding shipments or seizing shipments subject to the rebuttable presumption. This includes providing importers with notice when actions are taken on their shipments, as well as steps importers can take, including requests for exceptions to the rebuttable presumption, and the information and documentation that must be provided to substantiate the absence of XUAR inputs from its supply chain.

As mentioned above, to comply with the requirements of the UFLPA, importers should consult the UFLPA strategy document, which includes:

Due diligence, effective supply chain tracing and supply chain measures to ensure that importers do not import any goods produced wholly or in part with forced labor from China, especially from Xinjiang;
The type, nature and extent of evidence that demonstrates that goods originating in China were not produced wholly or in part in Xinjiang; and
The type, nature and extent of evidence that demonstrates that goods originating in China, including goods detained, excluded or seized for violations of the UFLPA, were not produced wholly or in part with forced labor.

Importers must comply with the guidance in the UFLPA strategy document to be eligible for an exception to the rebuttable presumption of forced labor. This presumption will apply unless the Commissioner of Customs determines that the presumption has been rebutted. To successfully rebut the presumption, the importer must have fully complied with the guidance in the UFLPA strategy document, including the production of documentation demonstrating the following:

A due diligence system or process;
Tracing the supply chain from raw materials to imported goods;
Information on supply chain management measures;
That the goods were not mined, produced or manufactured wholly or in part in the XUAR; and
That the goods originating in China were not mined, produced or manufactured wholly or in part by forced labor.

Procedural process and enforcement

If the Commissioner of Customs has a reasonable basis for believing the imported goods are made with forced labor, it will examine the subject merchandise (“cargo exam”) and may then proceed to detain the subject goods.
If CBP suspects that a shipment is subject to the rebuttable presumption, it will decide whether to detain the shipment within five days of examination (excluding weekends and holidays). Merchandise that is not released within the five-day period will be considered detained. CBP will issue a “detention notice” providing the reason for detention (i.e., UFLPA) and the anticipated length of the detention period. Importers may request permission from the port director to export detained shipments at any point prior to exclusion or seizure.
An importer may request an exception during detention, after an exclusion or during the seizure process. An importer receiving a detention notice will generally have 30 days from the date of the examination to request an exception. An importer receiving an exclusion notice can file an administrative protest requesting an exception, and an importer receiving a seizure notice can file a petition requesting an exception.
The importer must fully respond to all inquiries for information and present clear and convincing evidence that the goods, wares, articles or merchandise were not mined, produced or manufactured wholly or in part by forced labor.
If the importer has met its burden showing clear and convincing evidence that the goods were not made wholly or in part with forced labor, an exception to the presumption of forced labor will be warranted, and the merchandise will be released. CBP will notify Congress and within 30 days make publicly available a report identifying the good and the evidence supporting the exception.

CBP has indicated it will prioritise exception requests from Customs Trade Partnership Against Terrorism (CTPAT) members that are in good standing. (CTPAT is a voluntary supply-chain security program led by CBP focused on improving the security of private companies’ supply chains with respect to terrorism. Companies that obtain CTPAT certification must have documented processes for determining and alleviating risk throughout their international supply chain.

The documentary requirements importers must meet to rebut the presumption of forced labor are extensive and include the following:

Engaging with suppliers and other stakeholders to assess forced labor risks;
Mapping of the supply chain from raw materials to production of the imported goods;
Written supplier code of conduct and monitoring of supplier compliance;
Independent verification of the implementation of a due diligence system;
Affidavits from each company or entity involved in the production process;
Purchase orders, invoices, packing lists, certificates of origin, payment records, shipping records warehouse receipts, etc. for merchandise and components thereof;
Internal controls to prevent or mitigate the use of forced labor;
Information on wage payments and worker production; and
Audits to identify forced labor indicators and remediation, if applicable.

In addition to these documentation requirements, CBP guidelines specifically address the commodities that are considered to be subject to a high-risk of forced labor. These include cotton, tomatoes and polysilicon. The latter is especially important given its use as the key building block of semiconductor chips, which are ubiquitous in many consumer products, including automobiles, electronics, solar panels, electric vehicle batteries, etc. For polysilicon, an importer must provide complete records of transactions that identify all entities involved in the manufacture, manipulation or export of a particular good and the country of origin of each material used in the production process. This includes flow charts mapping each step in the procurement and production of all materials, going back to the locations of the quartzite used to make polysilicon, the location of the manufacturing facilities producing the polysilicon and the locations of the factories producing downstream products used to make the imported goods.

Comments

Based on the guidance from both CBP and DHS, importers must have robust source tracing mechanisms in place and be able to map their supply chains and know where their products are sourced (including the raw materials), where they are produced and by whom. Importers must also be prepared to document their engagement with suppliers and their assessment of forced labor risks and remediation measures. If CBP invokes a presumption of forced labor against any products being imported into the U.S., the importer must be ready to rebut the presumption by having sufficient documentation available to respond quickly to CBP’s request for information regarding the exact shipment that is being detained. Failure to do so could negatively impact the company by resulting in potential seizures or the exclusion of goods, and a loss of sales, revenue, and most importantly, reputational risk.

Damon Pike
dpike@bdo.com