From January to June this year, the U.S. Customs and Border Protection (CBP) issued temporary detention orders on Chinese tomatoes, cotton, seafood, silicon powder and their downstream products for the use of "forced labor." In fact, the U.S. Customs has a long history of issuing temporary detention orders on products made with "forced labor," but they have not been used frequently before. In the past 30 years, there have been only 44 U.S. customs suspensions involving Chinese products. Of the 50 provisional orders currently in effect issued by the US Customs, 36, or 70 per cent, are against Chinese products, and 12 of them were issued after 2020. Most of the suspensions on Chinese products are specific to specific companies, but the three most recent suspensions on cotton, tomato, silicon powder and their downstream products have a wide range of entities and products and have a large impact.

In addition to 337 investigations, safeguard measures, anti-dumping and countervailing investigations, there are indications that "forced labor" may become a new and conventional means of U.S. trade barriers against China. As a non-tariff trade barrier, "forced labor" has great damage. It can completely exclude related products from the United States by temporary withholding order, and may involve downstream products of the product and other countries' transshipment or processed goods using the product. There is no termination date for the restraining order unless it is revoked by U.S. Customs.

Legal basis

Section 307 of the Customs Act of 1930 prohibits the importation into the United States of any foreign product that has been mined, grown, or produced in whole or in part by forced or indentured labor, including forced child labor, unless the product is to be imported for consumption in the United States. In February 2016, then-U.s. President Barack Obama signed the Trade Facilitation and Trade Enforcement Act of 2015, which removed the above exception and explicitly prohibited the import of foreign products manufactured in whole or in part by criminals, forced labor, or indentured labor under any circumstances. Since then, the U.S. Customs Service has set up an internal department and think tank to carry out "forced labor" related work.

In judging a company or a product or an area the existence of "forced labor", at the discretion of the U.S. customs have large, as long as the U.S. customs information available is reasonable but not conclusive shows the goods is made by the "forced labor", these goods are imported into the United States will face a ban. U.S. Customs may instruct customs officers to detain goods containing these products, including goods that have been transshipped or processed in a third country.

Implementation measures and responses

When the United States Customs determines that there is "forced labor" in a certain enterprise or a certain product or a certain region, it usually issues a temporary detention order to prevent the goods containing "forced labor" from entering the United States. Sometimes, however, U.S. Customs will review additional relevant information by issuing a customs declaration 28 request for information or by conducting a risk analysis and investigation assessment.

Importers have two options for goods that have already been seized: they can either transfer the goods to a non-US location or prove within three months that the goods were not produced using "forced labor" by submitting documents to US customs. U.S. Customs destroys goods seized within three months if they are neither transhipped nor proven to have been produced using "forced labor."

Because the US Customs examination is very demanding, and the burden of proof is transferred to the importer, the importer needs the exporter and the upstream supplier of the exporter to cooperate to provide a complete chain of evidence, one of the links can not be proved to meet the US Customs examination requirements. Therefore, the enterprises whose goods have been seized should seek the help of professional lawyers as soon as possible, and under the guidance of professional lawyers, coordinate with suppliers to provide all useful supporting documents. Of course, it is also necessary to be prepared to transfer the goods to a third country or even back to the country if they are not cleared by U.S. Customs. Since the US Customs has a great discretion in determining whether the certification materials are sufficient or not, exporters and importers can also seek remedies through the US Court of International Trade if they think there are legal problems in the examination of the US Customs.

Prevention advice

Enterprises in sensitive areas and sensitive industries that have not been included in the temporary withholding order should also be very vigilant and take some preventive measures in advance. Once the products are included in the scope of the ban, they will not be taken by surprise. The author summarizes some experiences from practice for reference:

First, establish and improve a reliable material traceability system. Since withholding orders are for products of specific companies or regions, enterprises need to have a logical internal tracking system and relevant documents to prove the source of materials used in products. This is a prerequisite for us customs clearance.

Second, strengthen the management and risk assessment of supply chain. Attention should be paid to the inspection of the company's upstream suppliers, especially for the raw materials whose origin and source are difficult to identify or whose proof materials are not clear, and the specific source of the materials should be clarified through due diligence. For the products involved in the supply chain, which belong to the high risk products concerned by the United States law enforcement agencies, the enterprise should know the source of the products in the supply chain and the final region of the product, and regularly check the risk.

Third, optimize the contract terms. When it is difficult to carry out due diligence on the above supply chain, specific compliance commitment clauses can be added to the contract to protect the enterprise to a certain extent. It could also include a provision to provide relevant materials in case of investigation by relevant authorities.

Fourth, qualified enterprises can find authorized third party organizations recognized by Europe and the United States to do special audit or certification, the recognition of the third party organizations, both in front of customers or investigation agencies will have many points.

Fifth, we will improve the compliance system for enterprises. Strengthen the internal compliance construction of the enterprise, improve the compliance procedures of relevant aspects and strictly implement them in daily life. Through compliance procedures, enterprises can regularly review the supply chain to ensure the security of the supply chain. At the same time, relevant compliance procedures can also help companies to make timely decisions when illegal transactions are discovered, initiate risk plans, and properly respond to possible investigations by law enforcement authorities.

Faced with the use of "forced labor" as a trade barrier by the United States, enterprises should improve their awareness, deploy defense in advance, and formulate personalized strategies to reduce their compliance risks, protect their interests and reputation, and maintain and enhance their competitiveness.