GAO Says CBP Should Improve Communication on Forced Labor

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Mar. 8, 2021

The United States Government Accountability Office (GAO) recently published a report in which it described Customs’ approach to enforcing Section 307 of the Tariff Act of 1930 and the impact of that enforcement on other Federal agencies and private entities. Section 307 is the provision addressing the treatment of goods to be imported that are made with forced labor.

In the report GAO examined Customs’ communication with other Federal agencies and nonfederal stakeholders in addressing Section 307. The report also described the challenges related to enforcement of Section 307 that Customs, other federal agencies, and nonfederal stakeholders identified. Notably, the report included challenges from other government agencies, NGOs, and the private sector to Customs’ enforcement practices.

One of the primary enforcement tools for Customs is the Withhold Release Order (“WRO”). These orders effectively prevent everything covered by the Order from being admitted into the United States. Generally, while federal agencies, NGOs, and private sector entities reported that the WRO process was an effective deterrent for importing goods produced with forced labor, the WRO was also seen as a punitive measure used in situations that may require more finesse. For example, when the 2019 WRO for Malaysian disposable rubble gloves was issued, the Bureau of International Labor Affairs (ILAB) reported that, “many workers’ employment was terminated, which had a negative effect on workers facing exploitation.” ILAB reported that better preparation to support workers placed in a position of increased vulnerability by a WRO was necessary.

The Department of State officials at U.S. embassies reported challenges in maintaining diplomatic relationships when a WRO is issued. For instance, because the officials do not know the types of information Customs considers for its WRO investigations, the officials were unable to explain to host governments and the private sector how Customs made its determinations. The State Department officials suggested that before issuing a WRO, Customs might consider allowing State officials at U.S. embassies discretion to engage with the host government to mitigate any potential negative diplomatic effects.

Representatives from several private sector entities and NGOs also identified challenges with supply chain tracing for forced labor investigations and compliance. Although identifying forced labor in the first and second tiers of products’ supply chains might be relatively straightforward, identifying it in subsequent tiers is more difficult. For example, U.S. importers may not own and operate all factories, farms, mines, or other enterprises that produce raw materials or manufacture them into intermediary parts. This makes it very challenging to identify forced labor in these importers’ supply chain. In addition, tracing goods made with raw materials such as cotton is challenging because of the difficulty of determining the origin of the cotton and whether it was mixed with cotton picked elsewhere, potentially with forced labor. Similarly, other products, such as shoes, have multiple components that may be manufactured in several places, complicating efforts to identify forced labor.

Private sector entities and NGOs also reported that WROs might discourage the private sector from remediating or reporting forced labor. Instead, companies adopted a “cut and-run” approach under which they simply cut ties with foreign suppliers rather than encouraging them to remediate unacceptable labor practices. Additionally, private sector entities may be reluctant to share information with Customs about forced labor risks in their supply chains or their efforts to address forced labor concerns out of fear that Customs would use the information to issue a WRO. Private sector and NGO representatives stated that Customs’ approach may inadvertently discourage transparency because businesses have no “safe harbor” to communicate about forced labor. Customs’ Forced Labor Division responded that Customs regulations provide for “prior disclosures” of forced labor concerns which may result in reduced or cancelled penalties, and any penalties that may result from private sector entities’ prior disclosure of forced labor are outside the purview of the division’s forced labor enforcement.

Ultimately, the significant issue that was identified by the GAO was a lack of transparency on Customs’ process for revoking and modifying WROs. Customs’ Forced Labor Division has shared select details of its process for issuing WROs and findings with other federal agencies and nonfederal stakeholder. However, this same type of information has not been shared with respect to a revocation or modification. This may limit other agencies’ ability to support Customs’ enforcement goals and limit the private sector’s ability to comply with the regulations. The final recommendation from the GAO was for the Forced Labor Division to make a description of its WRO revocation and modification process publicly available, to the extent practicable and consistent with relevant requirements of the Privacy Act and Trade Secrets Act.

In response, CBP provided a new fact sheet on the process for modifying or revoking a WRO. In the fact sheet CBP emphasizes the need for evidence demonstrating that all identified International Labour Organization (ILO) indicators of forced labor are remediated. This may include evidence refuting each identified indicator of forced labor; evidence that policies, procedures, and controls are in place to ensure that forced labor conditions are remediated; evidence of implementation and subsequent verification by an unannounced and independent third-party auditor; and supply chain maps that specify locations of manufacturers, factories, farms, and processing centers. CBP states it will evaluate submissions and engage in remediation dialogue with the petitioner via questions or requests for additional information throughout the review. Finally, if the forced labor indicators are addressed and fully remediated, CBP will make a determination to modify or revoke. However, CBP states it will not modify or revoke the WRO unless all forced labor indicators are remediated.

If you have any questions about WROs or forced labor compliance, do not hesitate to contact one of our attorneys.