Recently CBP provided a set of frequently asked questions about how the agency will administer the withhold release order (WRO) against silicon produced by Hoshine Silicon Industry, a company located in China's Xinjiang province, and its subsidiaries. As part of the agency’s investigation, CBP found that workers at Hoshine were subject to intimidation and threats and restriction of movement, two of the International Labour Organization’s 11 indicators of forced labor.
In the document, CBP clarifies that the WRO applies not only to the silica-based products made by Hoshine and its subsidiaries, but also materials and final goods derived from or produced using those silica-based products, regardless of where the materials and final goods are produced. Examples of these type of products include:
· Component Materials – silicon, including metallurgic grade silicon, silicon oxide and certain silicones in primary forms;
· Intermediate Goods - semiconductor devices, integrated circuits, additives for aluminum alloys and concrete; and
· Finished Goods: photovoltaic cells, solar generators, solar panels, electronics, adhesives, and lubricants.
So, while downstream products that contain silica-based products made by Hoshine and its subsidiaries are subject to the WRO, CBP may consider that some content is “de minimis.” Section 1307 of Title 19 United States Code prohibits the importation of goods made in whole or in part with the use of convict, forced or indentured labor. However, CBP acknowledged that, “if the contribution of prohibited labor to the whole product is insignificant (both from a quantitative and a qualitative perspective), CBP may consider the product outside the scope of the statute.” In the example provided to explain the discretionary approach of agency, a single car part is produced with forced labor. In the event the part is a single part of the engine, the part produced may be considered “de minimis” and the car may not be subject to the WRO. However, if the part is an essential part of the engine or the manufacture of the part comprises a substantial portion of the total labor, CBP may deem the car to be within the scope of Section 1307.
The FAQ make it clear that it is the importer’s responsibility to trace their supply chains, including the production of the silica components. CBP expects importers to provide information on the sourcing of the silica-based component materials in their imported goods, including how silica is used in production and the source of the silica. For specific documentation for merchandised detained, CBP will require a certificate of origin as detailed specifically in 19 C.F.R. § 12.43(a) and a statement from the importer as required under 19 C.F.R. § 12.43(b) that is sufficiently detailed and includes proof that the goods were not produced, wholly or in part, with forced labor. CBP will also want an affidavit from the provider of the silica and its initially processed forms (i.e., silicon metal, metallurgical grade silicon, chemical-grade silicon, silicon, etc.) and specific information and documents about the source of the silica and its initially processed forms. This documentation would include, among others, purchase documents, production steps and production records, transportation documents, and a list of entities that supplied inputs for the silica containing products being imported.
WRO enforcement actions continue to be an important supply chain and compliance issue. With that in mind, we encourage importers to take steps to ensure compliance with the law. At a minimum, this includes:
· Understanding the International Labor Organization’s indicators of forced labor;
· Understanding due diligence to identify forced labor, prison labor and child labor;
· Securing commitments from suppliers that they do not use forced labor, prison labor, or child labor;
· Including those commitments as conditions in purchase orders and contracts;
· Subjecting suppliers to on-site audits (there are several third parties that perform this service); and
· Taking immediate remedial action whenever the presence of forced labor is indicated.
If you have any questions or concerns about any WRO or forced labor in your supply chain, contact any attorney at Barnes, Richardson & Colburn LLP for assistance and more information.