by | Nov 30, 2016 | Imports, Trade Policy

by John M. Peterson, guest columnist

Congress recently (and quietly) removed an exception to the 85-year-old prohibition on importing goods made with forced and indentured labor. Section 910 of the Trade Facilitation and Trade Enforcement Act of 2016 repeals the “consumptive demand exception” to the ban, closing what had become an enforcement loophole.

More than ever, importers and domestic manufacturers that rely on imported goods must examine the length of their supply chains to ensure that no forced, child or indentured labor plays any part in producing these goods.

What’s been changed is the Tariff Act of 1930. Section 207 prohibits the importation of goods made using prison or indentured labor. There are no circumstances under which goods made with prison labor can be imported.

But that same section has allowed a “consumptive demand exception” under which goods made with forced, child, or indentured labor may be imported. That is, if the goods in question are not produced in the US in quantities sufficient to meet the domestic market’s “consumptive demand” they may be admitted.

Customs regulations provide that any Customs officer with reason to believe that imported goods have been made with prison or forced labor shall forward relevant information to the Commissioner of Customs, who will determine whether the goods should be barred.

When the Commissioner finds a likelihood that goods are produced with prison or forced labor, the next step is to direct Customs port directors not to release those goods when imported, and to publish the ban in the Customs Bulletin and the Federal Register.

Updating an 85-year-old ban on forced-labor imports

In the 85 years the Section 207 prohibition has been in force, Customs authorities have imposed only 39 bans on goods made with forced or child labor, with many more alleged cases slipping through the consumptive demand exception.

Private parties are also allowed to make such allegations and seek import bans (under 19 USC §1307). But private suits have generally foundered on the consumptive goods exception.

One example is the 2005 case of International Labor Rights Fund v. United States, in which several labor and fair trade groups and NGOs sued Customs seeking a ban on cocoa from Côte d’Ivoire, allegedly made with child labor. The Chocolate Manufacturers Association, intervening in the case, presented evidence that the US produces miniscule amounts of cocoa, mainly in Hawaii, and could not meet domestic demand for the product. The Court held that the “consumptive demand exception” deprived the plaintiffs of the ability to show “injury in fact” and thus deprived them of standing to bring the case.

Note that the outcome in this and similar cases has hinged on whether US domestic production is sufficient to satisfy US domestic market demand. The possibility that US demand might be satisfied from other foreign sources that do not use forced labor has been irrelevant under the exception.

With the exception’s repeal, a major stumbling block to winning private suits to block forced-labor imports has been eliminated.

First since 2001: CBP impoundment of forced-labor imports

While import bans have been rare, allegations that goods are being made with forced, child or indentured labor have not. The US Department of Labor maintains an index of hundreds of prison/child labor allegations.

In the case of cocoa, for instance, child labor allegations have been leveled at six countries: Cameroon, Côte d’Ivoire, Ghana, Guinea, Nigeria and Sierra Leone.

miners-reuters-brenda-gohNot only are more suits expected, CBP enforcement is going to get tougher. The CBP’s March 29 detention of soda ash, calcium chloride, caustic soda, and viscose/rayon it had determined was produced by force labor in China marks the first time since 2001 that US Customs has impounded goods connected to forced labor.

Importers have begun strategic reviews of their supply chains, checking not only their own imports, but also sourcing patterns for imported goods which they might purchase on a delivered, duty-paid basis.

Import vessel manifest data is extensively used in these efforts. Importers can use trade data to identify shipments by firms accused or suspected of using forced labor. They can also detect diversions that may be intended to mask the source of such goods.

If Customs does impose a ban on imported goods, the importer may file a protest. Should the protest be denied, the importer may file suit in the Court of International Trade to seek review of the protest denial.

Note, however, the Court is required by statute to presume that Customs’ liquidation decisions are correct. The importer has the burden of providing evidence to prove otherwise. Once the presumption is overcome, the Court must decide the case on the basis of the preponderance of the evidence.

Even importers who have vetted their foreign vendors to ensure that they are not selling forced-labor goods (or incorporating such goods into value-added products) will want to take a closer look at their extended chains of suppliers. The downside risk – exclusion of goods from entry, and a possible loss of access to needed materials – is simply too great to allow firms to ignore these necessary tasks.

 

john-m-peterson-portrait

About John M. Peterson

John M. Peterson is a Partner at Neville Peterson LLP, New York City and Washington D.C.  He can be reached at (212) 635-2730 or at mailto:[email protected].

The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.

 

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