Global forced labour compliance
Adrienne Braumiller and Harold Jackson review the international position on forced labour law and modern slavery
The concept of forced labour prevention within the supply chain has evolved from a social responsibility concern to a high-risk area of regulatory compliance. This article provides guidance for complying with forced labour laws for supply chains in the United States, United Kingdom, European Union, and other jurisdictions, and includes an introductory overview to forced labour laws, and a list of key recommended compliance actions for adhering to forced labour laws across multiple jurisdictions.
Defining forced labour
The terminology surrounding forced labour is defined by international law in the Forced Labour Conventions administered by the International Labour Organization (ILO). The term ‘forced labour’ is defined as all work or service which is exacted from any person under the menace of any penalty for its non-performance and for which the worker does not offer himself voluntarily. The term ‘forced labour’ includes slave labour – but also includes forced or indentured child labour and indentured servitude. As defined by the ILO, the phrase ‘menace of any penalty’ refers to a wide range of penalties used to compel someone to work. The phrase ‘offered voluntarily’ means the free and informed consent of a worker to take a job and their freedom to leave at any time.
The ILO has published several indicators that forced labour is occurring, including debt bondage, abuse of worker vulnerabilities or disabilities, withholding of identity documents and wages, restriction of movement, intimidation and threats, physical and sexual violence, abusive working and living conditions, and excessive overtime. However, certain types of nonconsensual labour do not fall under the ILO’s definition of ‘forced labour,’ such as community service imposed by a court of law, work in an emergency (such as war, fire, flood, famine or earthquake), prison labour under supervision and control of a public authority, and normal civic obligations (such as compulsory military service).
Forced labour laws in the United States
The United States is the frontrunner in forced labour laws and enforcement for imported merchandise. The US law prohibiting imports of goods made with forced labour is Section 1307 under Title 19 of the United States Code. Penalties for importing goods made using forced labour are severe and can include issuance of new import restrictions (such as WROs and findings), the detention, seizure or forfeiture of violative merchandise, civil penalties for entering merchandise contrary to law under 19 USC 1595a(b), up to 20 years of imprisonment for individuals under 18 USC 1589, and revocation of import privileges, such as bond or CTPAT privileges.
1) WROs and findings
US Customs and Border Protection (CBP) can issue WROs and findings after investigating foreign companies that use forced labour, which prohibit the goods made by those companies to enter the US. The WROs will list the foreign company that is using forced labour, provide a product description of the prohibited goods and provide the ILO indicators of forced labour present. Different from a WRO, a finding is a determination made by the CBP commissioner that information conclusively demonstrates that merchandise is produced by forced labour. This is different from a WRO in that a finding requires probable cause that forced labour is being used, while a WRO merely requires a reasonable suspicion that forced labour is being used. For example, the Hoshine Silicon Supply Chain WRO, applies to “silica-based products made by Hoshine Silicon Industry Co (Hoshine) and its subsidiaries as well as to materials and final goods derived from, or produced, using those silica-based products, regardless of where the materials and final goods are produced.”
The WRO further specifies that the prohibition applies to all products in the company’s supply chain, including component materials (such as silicon, including metallurgic grade silicon, silicon oxide and certain silicones in primary forms), intermediate goods (such as additives for aluminum alloys and concrete, integrated circuits, and semiconductor devices), and finished Hoshine goods (such as adhesives, electronics, lubricants, photovoltaic cells, solar generators, solar panels, and parts thereof). The most guidance on forced labour compliance comes from this WRO, including a highly detailed WRO description, frequently updated FAQs, and a detailed importer guidance document.
Unlike the detention process used for most imported merchandise under 19 USC § 1499 and 19 CFR 151.16, merchandise detained under a WRO or finding is subject to the detention process under 19 CFR 12.42-45 as merchandise produced by convict, forced, or indentured labour. When merchandise is detained under a WRO, it must be exported within three months after the date of importation, or the importer must prove that the goods were not made using forced labour. If the detained goods are not exported or sufficient proof is not offered related to forced labour used in the production of the goods, the merchandise will be deemed abandoned and destroyed by CBP. Merchandise detained under the authority of a finding cannot be exported to comply, and the importer must prove admissibility or abandon for destruction.
2) The Uyghur Forced Labour Prevention Act of 2022 (UFLPA)
The Uyghur Forced Labour Prevention Act (UFLPA), which took effect on 21 June 2022, bans the importation of all goods made in the Xinjiang Uyghur Autonomous Region (XUAR) in China. Where goods are imported from the XUAR, or goods whose inputs, raw materials or components are made from goods from the XUAR, CBP will presume that those goods were used using forced labour and is directed to seize the goods upon entry. The UFLPA tapped the Forced Labour Enforcement Task Force of the Department of Homeland Security to create a UFLPA Strategy for future enforcement actions pursuant to the UFLPA and maintain an UFLPA entity list, which can be found on the DHS website here: dhs.gov/uflpa. The UFLPA creates a statutory presumption that any good made in the XUAR is made with forced labour. This means that all goods made in the XUAR, including goods produced with raw materials, inputs and subassemblies made in the XUAR, are banned from entry into the US. This rule goes broader than the product specific Withhold Release Orders issued by CBP covering tomatoes and cotton products from the XUAR.
Using the UFLPA presumption and its authority under 19 USC § 1307, CBP can now seize goods it believes were made in XUAR, destroy those goods if they are not exported (absent proof of no forced labour), issue penalties against the importer, revoke import privileges, and investigate and audit importers that it believes are importing goods from XUAR. When an importer receives a detention notice regarding their shipments, the importer may respond to the detention notice within 30 days, pursuant to 19 USC § 1499 and 19 CFR 151.16. If a shipment of compliant goods is intermingled with non-compliant goods, then the importer can request CBP to manipulate the shipment and separate the compliant goods from the non-compliant goods. The importer may export non-compliant goods at any time during the detention process. When issued a seizure notice, the importer must use the petition process in 19 CFR Part 171 to request an exception to the UFLPA rebuttable presumption.
CBP can make an exception to the presumption, if the importer proves the goods were not made using forced labour. Exceptions to the UFLPA presumption will be made on a case-by-case basis at the discretion of CBP. To prove that merchandise was not made using forced labour, the importer must prove the following are true:
- The importer fully complied with new guidance (see below) and all relevant regulations;
- The importer responded to all inquiries by CBP regarding the use of forced labour; and
- In this process, the importer provided “clear and convincing evidence” that the merchandise and its raw materials, inputs, and subassemblies were not mined, produced or manufactured, in whole or in part, by using forced labour.
If CBP determines the importer has met all three elements above, CBP will grant the release of the merchandise as an exception to the presumption of forced labour used to produce the merchandise made in the XUAR. The information submitted by the importer is subject to public disclosure and must be reported to Congress under Section 3(c) of the UFLPA. Clear and convincing is evidence that is highly and substantially more likely to be true than untrue; the fact finder must be convinced that the contention is highly probable. In sum, the US is spearheading the global effort against forced labour within company supply chains. With a rise in agency enforcement and congressional action, the US forced labour laws pose the most risk. However, other jurisdictions have begun to vitalize their force labour laws.
Updates regarding forced labour laws in other jurisdictions
The primary commercial law against forced labour in the UK is the Modern Slavery Act 2015, which makes it an offence to require another person to perform forced labour. Under s54 of the Act, businesses supplying goods and services with a turnover of £36m or higher must publish annual statements that set out the steps the company has taken to identify and address the risk of forced labour in their supply chains. The statutory guidance advises companies to touch the following six reporting categories of compliance: policies, structures, due diligence, risk assessment, training and effectiveness. The annual statements are filed with the Modern Slavery Registry. At this time, the UK has not implemented the type of import restrictions that the US and other jurisdictions have already initiated, and whether the UK government decides to follow in suit with its western allies, both in implementation of laws and significant enforcement, remains to be seen.
On 14 September 2022, the European Commission published a proposed regulation to ban products made with forced labour to be sold within the European market – including importing into the jurisdiction (Regulation of the European Parliament and of the Council on prohibiting products made with forced labour on the Union market, European Commission, 14 September 2022). The regulations would give national authorities the power to start investigations on products that may be made using forced labour. The national authorities would be instructed to take a ‘risk-based’ approach, or to focus enforcement where forced labour is more likely to be proven – high risk areas, which are expected to be provided in further detail by the Commission. When targeting companies, national authorities are instructed to consider the involvement of the economic operator in the value chain as close as possible to where the risk of forced labour is likely to occur, the size and economic resources of the economic operator, the quantity of products concerned and the scale of suspected forced labour. If the national authorities determine that forced labour was used to produce a product, the national authority can order the withdrawal of the products already placed on the market and prohibit the sale and import of those products.
The Canada Border Services Agency (CBSA) prohibits the importation of goods mined, manufactured or produced wholly or in part by forced labour (CBSA Memorandum D9-1-96 (28 May 2021); Memorandum D11-6-7 (25 May 2021). There are also several proposed Canadian legislative actions that target forced labour. For example, Bill S-211 would prohibit the government and larger companies to produce, sell, or distribute goods anywhere in the world, import goods into Canada, and require larger companies to report their due diligence processes implemented in their supply chains regarding forced labour – with a $250,000 penalty for noncompliance. Additionally, Bill S-204 would ban the importation of products produced wholly or in part in the XUAR – regardless of whether the products were produced in whole or in part from forced labour.
Like the US’s UFLPA, Australia has a statute that bans the importation of products from the XUAR and other areas of China that are produced in whole or in part using forced labour (Customs Amendment (Banning Goods Produced by Uyghur Forced Labour) Bill 2020, Parliament of the Commonwealth of Australia). Similar to the UK, Australia also has the Modern Slavery Act 2018 (Cth), which requires reporting of labour practices for companies doing business in Australia that have a minimum annual consolidated revenue of $100m.
Recommended compliance measures
The following measures are recommended for complying with forced labour laws across multiple jurisdictions, including the US.
Trace the origin of the goods and their components by compiling a detailed document trail including, but not limited to, the following types of documents and information:
- Bills of material for every component of the imported article.
- Certificates of origin.
- Seller’s inventory records, including dock/warehouse receipts.
- Buyer’s inventory records, including dock/warehouse receipts.
- Wage documents such as timecards or pay stubs from the factories showing the time workers entered and left the factory.
- Videos and photos of the goods or parts of goods being made in the factories abroad. Videos and transcripts of interviews with workers at the foreign factories showing proof that the worker is not working under duress, such as proof of no handcuffs, consent to labour, and acceptable living conditions.
Vet new and existing suppliers and vendors
When initiating a relationship with a new supplier, request that the new supplier answer a forced labour questionnaire, welcome on-site visits, and sign certificates that verify that no prison labour was or is being used, no indentured servitude (labour recruiters) was or is practised, and that no child labour or other forced labour was, or is, being used.
Maintain and monitor a company-wide forced labour compliance manual
Maintain forced labour procedures for detainments and other CBP actions pursuant to WROs, including proof of admissibility statements and certificates of origin.
Conduct periodic forced labour supply chain audits
Conduct periodic supplier audits for forced labour using independent auditors to ensure forced labour compliance in a constantly changing global supply chain and increasing CBP enforcement. When conducting post-entry audits, the auditor should search for factors such as the country of origin of the merchandise declared, the names of the foreign manufacturers and vendors, and the dates that the merchandise was produced, shipped, and entered. Periodic auditing requires effectively monitoring the company’s supply chain for possible discrepancies with an eye for forced labour.
Include forced labour terms and conditions in contracts
Include forced labour terms and conditions in operations and sales contracts that requires that goods purchased in the supply chain be made without forced labour. Add language in buying contracts that prohibits forced labour products and for products to be sourced from the XUAR and extend the language to include materials and services from subcontractors.
Beware and avoid hotspot industries for forced labour
Importers should beware of the risks of the industries in China, North Korea and Malaysia using forced labour, such as industries for quartz, cell phones and similar tech, tomatoes and downstream products of tomatoes (like tomato sauce), other vegetables and food products, computers, hair products, peeled garlic, cotton and downstream products of cotton, silicon products, handbags and leather accessories, rubber gloves, stevia, tea, palm oils, semiconductors, engines, pipes, hand tools, chemical compounds and textiles.
Adrienne Braumiller is the founder of Braumiller Law Group PLLC, a member of the IR Global network, and Harold Jackson is an associate attorney with Braumiller Law Group PLLC: braumillerlaw.com