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CBP Detains Materials Due to Alleged Use of Forced Labor

April 27, 2016

On March 30, U.S. Customs and Border Protection (CBP) detained materials produced by Chinese chemical supplier Tangshan Sanyou Group Co. Ltd. (Tangshan Sanyou) because of accusations it uses forced prison labor. The seizure was driven by a detainment notice issued by CBP Commissioner R. Gil Kerlikowske the day prior on textile manufacturing materials containing soda ash—otherwise known as sodium carbonate, a chemical used for cleaning and dying fabric—and viscose rayon—a fabric made from purified cellulose, manufactured or mined by Tangshan Sanyou in China.

Tangshan Sanyou is a second-tier supplier to numerous U.S. clothing importers.

Pursuant to the Trade Facilitation and Trade Enforcement Act of 2015, the U.S. now enforces a ban on the importation of products made, wholly or in part, with convict labor and/or forced labor (including forced child labor) and/or indentured labor under penal sanctions. When information reasonably but not conclusively indicates that merchandise within the purview of this provision is being imported, CBP may withhold release pursuant to 19 C.F.R. § 12.42(e). Moreover, if CBP is provided with information sufficient to make a determination that the goods in question are subject to the provisions of 19 U.S.C. § 1307, the Commissioner will publish a formal finding to that effect in the Customs Bulletin and in the Federal Register pursuant to 19 C.F.R. § 12.42(f).

If the allegations against Tangshan Sanyou are proved true, it will have major implications for certain U.S. clothing importers because American companies could be selling clothes partially manufactured using forced prison labor. Companies found to be sourcing goods from these importers will be publicly named.

For example, Sritex is a company allegedly sourcing material from Tangshan Sanyou. Sritex is an Indonesian textile manufacturer and subsidiary of PT Huddleston Indonesia that produces uniforms for the military forces of Australia, Indonesia, the Netherlands, Norway, Saudi Arabia, Sweden, the U.K., and the U.S. If your company purchases products or materials from Sritex, then your company might be publicly named as an entity making or selling products produced in part with child or forced labor.

For at least the past decade, CBP has not enforced restrictions on products made with forced labor. One reason for this lack of enforcement is that historically many importers could rely on the consumptive demand exemption in the Tariff Act. This exemption limited CBP's ability to restrict products produced by forced labor if the product was not produced (or produced in sufficient quantity) in the U.S. (e.g., chocolate or coffee products). The Trade Facilitation and Trade Enforcement Act of 2015 eliminated this loophole. It is likely that importers will now see heightened scrutiny into their supply chains as a consequence of the new law.

How might CPB have found out about Tangshan?

Frequently it is competitors or U.S. domestic industry/manufacturers that will disclose such information to CBP. There is a website where alleged trade fraud violations may be reported via the e-Allegations Online Trade Violation Reporting System. Allegations are reported anonymously. Moreover, there are many organizations such as Jobs with Justice or the Cotton Campaign that independently investigate and disclose the use of child or forced labor. The Cotton Campaign is already taking advantage of this change in law and has listed companies for which it has made Forced Labor allegations to CBP on its website. Jobs for Justice listed Sritex as a major supplier for clothing brands and department stores on its website, and disclosed those with which it was associated. Finally, the U.S. Department of Labor also provides a List of Goods Produced by Child Labor or Forced Labor (pursuant to Executive Order 13126).

The Supreme Court has long held that importing any product into the United States, whether it is seafood, apparel, electronics, etc. is a privilege, not a right (Buttfield v. Stranahan, 192 U.S. 470, 493 (1904)), and CBP may deny companies from importing unlawfully produced goods. Accordingly, importers may wish to audit their imports to ensure they know every supplier touching their products. Although a company may not be directly sourcing goods made from forced labor, this will not prevent CBP from detaining its products if an entity in its supply chain is so accused.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Frances P. Hadfield
Counsel – New York
Phone: +1.212.803.4040
Anne Elise Herold Li
Partner – New York
Phone: +1.212.895.4279