Since the Tariff Act of 1930 came into force, the U.S. has prohibited the importation of goods made wholly or in part by forced labor. Enforcement of this law has increased substantially after a 2015 amendment closed the consumptive demand loophole.
The main tool of enforcement is a withhold release order (WRO) and more of these orders have been issued in 2020 than any other year, breaking the previous record set just the year before. These orders are issued after an investigation by the Customs and Border Protection (CBP) Forced Labor Division, and can result from government intelligence, petitions lodged through its e-allegations system, or evidence provided from non-governmental organizations (NGOs). The Government Accountability Office (GAO) reported in 2020 that the Forced Labor Division conducted five times more investigations related to forced labor in 2018 to early 2020 than it had in 2016–2017. Twelve WROs have been issued in 2020, up from seven in 2019 and just two in 2018.
What Is a Withhold Release Order?
A WRO is an order issued by the U.S. CBP. It detains goods imported into the U.S. at their point of entry until the importer submits proof the goods were not made using forced labor, or they re-export the goods to another country. Importers have three months to submit a certificate of origin and a detailed statement demonstrating their merchandise was not produced with the use of forced labor. If approved by CBP, the withheld product will be released, if the proof is deemed insufficient, the merchandise may be seized.
An order doesn’t need conclusive information indicating forced labor was used in the manufacturing, extraction, or production of a good. It only requires reasonable evidence. The WRO can be accompanied by civil penalties for introducing, or attempting to introduce, merchandise into the commerce of the U.S. contrary to law.
The business and human rights landscape is rapidly evolving. Keep up to date on the latest issues, trends, and regulations affecting businesses on our Human Trafficking & Slavery FAQ page.
Examination of a Withhold Release Order
On September 30, 2020, FGV Holdings was issued a WRO on its palm oil and palm oil products originating from Malaysia. The company shed light on the process in a subsequent press release, which is instructive to companies seeking to understand the process.
In the press release, the company says they received no prior warning that their goods were being investigated or that such an order was pending. It also indicates that the WRO was the result of two petitions from special-interest groups: the Grant & Eisenhofer ESG Institute and a coalition of NGOs such as the Rainforest Action Network (RAN), International Labor Rights Forum (ILRF), and others.
In a conference call with CBP, FGV was informed that research identified 11 International Labour Organization (ILO) indicators of forced labor in their supply chain. The agency allegedly did not disclose further information as to what the related incidents were.
The CBP said they may consider revoking the WRO if FGV petitioned with supporting evidence from an independent third-party audit. The company says it’s in consultation with several auditing firms to this end.
This is indicative of risk impacting companies, especially those sourcing from areas of concern, such as China, which has seen wide-spread allegations of forced labor and has been the country of origin for the majority of WROs in the past 12 months.
In 2016, PureCircle was affected by a WRO on its stevia originating from China. It lost U.S. market access for six months, and the service interruption to its customers cost the company $15 million USD. Earlier this year, it faced $575,000 USD in civil penalties for importing stevia that was processed in China using prison labor. Trade sanctions by the U.S. government on electronics made with forced labor, which were then followed by a WRO, resulted in one of the world’s biggest computer companies being unable to fulfill its contract for 4,000 laptops to an Alabama school district this year. This came shortly before school was set to begin with increased online learning amid the pandemic.
The risks to companies are multi-faceted as operational disruption has direct business consequences, and the public nature of the issuance has lasting reputational repercussions.
Trend Likely to Continue
Government reports indicate the trend of increased enforcement is likely to continue and even accelerate. The October GAO report states that, despite record-setting levels of enforcement, some investigations were suspended due to staff shortages in the CBP Forced Labor Division. The division has plans to expand and train its workforce. Additionally, Immigration and Customs Enforcement (ICE) has increased its resources dedicated to combating forced labor by 50 percent from 2016 levels.
The U.S. government is also taking firm action against China due to forced labor allegations emerging from the Xinjiang region. Legislation to block imports from the area is making its way through the Senate after receiving broad bipartisan support in the House of Representatives. Additionally, China has been a key focus of recent WROs, with the country receiving eight of the 12 orders issued in 2020.
What Companies Can Do
The CBP recommends companies exercise due diligence and have comprehensive and transparent supply chain practices to mitigate the risks associated with forced labor. Assent helps companies strengthen supply chain transparency by streamlining many of the practices associated with due diligence. By automating supplier engagement and data management, and by working with industry-standard tools such as the Slavery and Trafficking Risk Template (STRT), Assent enables companies to quickly identify areas of concern so they can take action before harm occurs. To learn more, contact our experts.
