Week of 31 August 2020
The U.S. Customs and Border Protection Agency issues its first penalty (of $575,000) against a company (Pure Circle) for importing goods (stevia leaves) into the U.S. processed in China with prison labour; we are seeing growing use of Section 307 of the U.S. Tariff Act to push companies to remove forced labour from their supply chains, with recent scrutiny on goods produced with cotton from the Xinjiang region of China
In August 2020, the U.S. Customs and Border Protection Agency (CBP) issued its first penalty of $575,000 since Section 307 of the U.S. Tariff Act was passed. The penalty was levied against importer Pure Circle for sourcing stevia powder (and derivatives produced from stevia leaves) processed in China with prison labour by Baoanzhao (full name: Inner Mongolia Hengzheng Group Baoanzhao Agricultural and Trade LLC). Baoanzhao was the subject of a May 2016 WRO.
While momentum continues to grow for new regulatory approaches to enable business respect for human rights, Section 307 of the U.S. Tariff Act is increasingly being leveraged as a tool to stop labour rights violations and require companies to conduct adequate human rights due diligence in their supply chains.
What is Section 307 of the U.S. Tariff Act?
(The New York Bar may wish me to remind you before we proceed that I stopped practicing law in 2010! I now advise companies on where laws are going and the systems that are expected — not legal compliance.)
- The Trade Facilitation and Trade Enforcement Act of 2015 (Section 307) was signed into law in February 2016 and revises the U.S. Tariff Act of 1930. Section 307 repealed the Tariff Act’s ‘consumptive demand’ clause (19 U.S.C. § 1307) which had permitted the importation of some goods produced under forced labor conditions if those goods were not produced in sufficient quantities in the U.S. to meet domestic demand.
- Specifically, Section 307 prohibits the importation of merchandise “mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured child labor – including forced child labor.”
- Merchandise found to be in violation of these requirements is subject to exclusion or seizure under a Withhold Release Order (WRO), and in some cases may lead to criminal investigation of the importer.
- Any merchandise that is seized must be immediately exported before it can enter the U.S., or the importer must provide proof that the goods were not manufactured by forced labor, including a certificate of origin, a supply chain audit report, and a detailed statement providing evidence that a product was not produced using forced labor.
- The law is enforced by the U.S. Customs and Border Protection Agency (CBP) and empowers CBP officials to investigate allegations of forced labor concerning specific manufacturers/exporters and specific merchandise, in partnership with U.S. Immigration and Customs Enforcement and other participating U.S. government agencies.
Increasing application of Section 307 for business and human rights
- Via its online portal, CBP publicly reports all WROs and therefore all goods prevented from import into the U.S. The portal includes WROs related to Brazil, China, the Democratic Republic of Congo, India, Japan, Malawi, Malaysia, Mexico, Mongolia, Nepal, Turkmenistan and Zimbabwe. CBP has issued six WROs to date in 2020, seven WROs in 2019 and two in 2018.
- In some cases, specific manufacturers are barred from import (e.g. a Brazilian manufacturer of bone black, a Chinese manufacturer of galvanized pipe), whereas in other cases detention orders are applied more broadly to an entire sector or country (e.g. artisanal gold from the Democratic Republic of the Congo, tobacco produced in Malawi, and all cotton produced in Turkmenistan or products containing Turkmen cotton).
- CBP investigations are spurred by forced labor import ban petitions, which can be submitted by any individual or organizations with knowledge of potential human rights violations in the manufacture or supply chain of a product.
- Below are some recent examples:
- In August 2020, a group of human rights, labour and investor organisations petitioned CBP to issue a WRO for any goods produced with cotton from the Xinjiang region of China. Citing the human rights abuses committed against the ethnic Uyghur population in China—in particular the use of forced prison labour to manufacture goods—the organisations called on the U.S. government to issue a “blanket order” for the region; they pointed out that earlier WROs issued against particular products from Xinjiang were not “sufficiently sweeping to dissuade the government of China from continuing its persecution of the Uyghur people, or to discourage major garment brands from importing cotton goods linked to forced labor and selling them to US consumers.” They also underscored the business case for such a move: “Industry groups have repeatedly requested clear guidance from the US government and a regional WRO would provide it.”
- In October 2019, Malaysian rubber glove manufacturer WRP Asia Pacific was barred from exporting its products to the U.S., following reports by journalists and activists that migrant workers in its factories were being mistreated. The Guardian reported that workers were “subjected to forced labour, forced overtime, debt bondage, withheld wages and passport confiscation.” The Diplomat reported that workers paid high recruitment fees that were never reimbursed by the company, sending many workers into debt bondage. The WRO was revoked in March 2020 following reported adjustments to the company’s manufacturing and labour practices. Another WRO was issued for Malaysian glove manufacturer Top Glove in July 2020.
Challenges and limitations
- As a demonstration of the limitations of using Section 307 as a human rights tool, human rights advocate Andy Hall reports that forced labour in the rubber glove industry in Malaysia and Thailand continues, despite the CBP’s focus on these imports.
- In an analysis for human rights legal advocacy group Corporate Accountability Lab (CAL), Justice Catalyst Legal Fellow Allie Brudney highlights some of the challenges and limitations of using Section 307 as a tool to remedy human rights violations, including the fact that there is no obligation for the CBP to push companies to put measures in place that benefit workers (as opposed to simply walking away from a producer and its workers trapped in forced labour.)