With just over two weeks until the Uyghur Forced Labor Prevention Act (UFLPA) goes into effect on June 21, 2022, U.S. Customs and Border Protection (CBP) has issued very minimal guidance to the importing community on how it will enforce the legislation. In webinars and meetings conducted by CBP last week, CBP stated that it will nonetheless begin enforcement of the UFLPA on the effective date and importers should prepare for the law’s implementation. CBP has already indicated that it will not employ a de mininis rule in enforcing the UFLPA – that is, all inputs used to produce an imported good, no matter of their tier/value/significance, must not have been made with forced labor.
UFLPA’s effective date is also the date that the Department of Homeland Security’s Forced Labor Enforcement Task Force is expected to publish its forced labor guidance.
CBP Guidance to Importers so Far
On May 20, 2022 CBP issued CBP Publication No. 1790-0522 that compared the enforcement provisions of the UFLPA with those implemented under Withhold Release Order (WRO) actions. Notably, while WRO’s detention authority is determined under 19 CFR § 12.42(e), the UFLPA’s detention authority is governed by 19 CFR § 151.16. This difference in detention authority results in a much more abbreviated timeline for shipments subject to the UFLPA.
Under 19 CFR § 12.43(a), an importer that has had its merchandise detained under a WRO generally has 90 days (3 months) to provide proof of admissibility of the merchandise to CBP. It has been our experience with WRO detentions that CBP often will grant the importer a 30-day extension of time to produce additional evidence validating the product’s origin. This additional time is usually essential for the importer to obtain all required supply chain records to confirm origin.
The appeals process for merchandise detained under the UFLPA is on a much shorter timeline than the typical detained goods timeline. Per 19 CFR § 151.16, CBP will have 5 days (excluding weekends and holidays) from when the merchandise is presented for examination to determine if it will detain or release the goods. If CBP affirmatively decides to detain the merchandise or fails to release the merchandise within the 5-day period, the merchandise will be considered detained. Once the merchandise is officially detained CBP will issue a notice of detention to the importer no later than 5 days after the decision to detain or failure to release.
The detention notice must advise the importer of the:
- Initiation of the detention;
- Specific reason for the detention;
- Anticipated length of the detention;
- Nature of the tests or inquiries to be conducted; and
- Any information which may be provided to CBP to accelerate the disposition of the detention.
During the detention period, an importer has the right to request from CBP copies of the results of any testing procedures or methodologies used, as well as the testing results. For example, we understand that CBP has been exploring the use of forensic science to test and trace a product’s intrinsic properties to verify origin, and presumably these test results will be subject to disclosure.
For goods detained pursuant to UFLPA, within 30 days from the date the merchandise is presented to CBP for examination, CBP will decide the admissibility of the detained merchandise. There is as of yet no indication of whether CBP will grant an extension of time to produce records. Should CBP fail to decide with respect to the detained merchandise’s admissibility within the 30-day period, the merchandise shall be considered excluded. This means that unlike the WRO process that gives importers at least 90 days to provide proof of admissibility, importers will only have 30 days to rebut the presumption that the merchandise was produced using forced labor, as established by the UFLPA.
Pursuant to 19 C.F.R. § 12.43, an importer may produce records to contend that the goods were not produced with forced labor. The CBP guidance notes that similar to the WRO process, the importer may file a protest 180 days after CBP makes its final determination regarding the exclusion.
Projected Supply Chain Documents Needed
Our experience with WRO detentions from the XUAR region is that the importer has to provide sufficient documentation to show the entire supply chain from the origin of the raw materials through the final production of the finished product and identify the parties involved in the production process. Specifically, the following documents and materials were required to be produced in order to substantiate the supply chain:
- A list of suppliers at all tiers of the supply chain, with their associated production process. The supplier list and information will likely require names, addresses, a flow chart of the production process, and maps of the region where the production processes occurred.
- Each step of the production processes for the article and the supporting documents associated with each step. This may include a bill of materials or specification.
- Affidavits from the origin of raw materials for farming, smelting, mining, or other raw material sourcing evidence. If forced labor is alleged at a specific tier, then documents showing compliance with the eleven (11) International Labour Organization standards will be necessary.
- Evidence of worker production at the first stage of production (e.g., a smelter, the factory which ginned the raw cotton, etc.). And evidence of worker production at subsequent tiers if that is where forced labor is alleged.
- Supporting documents for each stage of the production the production process will likely need to include transportation records (e.g., bills of lading), purchase orders, invoices, and proofs of payment.
Additionally, a Certificate of Origin signed by the foreign seller may be required and a detailed statement from the importer.
If an importer is unable to produce the necessary records to support the lack of forced labor in the supply chain, it has the option of exporting the goods to any location outside the United States (under CBP supervision) pursuant to 19 C.F.R. § 12.44(a).
It has been our experience with WRO modifications for clients and WRO detention responses that CBP does not allow a product to incorporate a de minimis amount of inputs made with forced labor. As noted above, we also see no indication that there will be a de minimis content allowed under the UFLPA. If the contribution of forced labor to the whole product is insignificant (e.g., cotton thread from the XUAR region), CBP will assume the product to have been made with forced labor.
UFLPA Burden of Proof is Similar to CAATSA
Last week, CBP issued another Fact Sheet via Publication No. 1791-0522, a one page document stating that beginning June 21, 2022, CBP will apply UFLPA’s rebuttable presumption that goods produced wholly or in part in the region or by entities identified in the enforcement strategy are not allowed to enter into the United States. The importer has the option of requesting CBP permit it to overcome the burden of the presumption. The importer then must provide clear and convincing evidence that its imported merchandise was not mined, produced, or manufactured wholly or in part by forced labor.
There is no reason to believe that a lesser level of detail will be required under UFLPA than the already burdensome document requirements of a forced labor WRO action under 19 U.S.C. 1307. This is because unlike under a WRO, which is based on a reasonable suspicion, an importer must show by clear and convincing evidence and overcome the presumption that the goods, wares, articles, or merchandise were not produced using forced labor.
The UFLPA standard appears to be most analogous to the evidence required under Countering America’s Adversaries Through Sanctions Act-Related Sanctions (CAATSA) when North Koreas labor is alleged. Similar to UFLPA, CAATSA also requires that importers establish by “clear and convincing evidence” that their supply chains are free from involvement by North Korean nationals, wherever located. This high burden of proof (greater than a “preponderance of the evidence”) means that importers need to have extremely thorough supply chain documentation. CBP has publicly referenced as a comparison its ruling HQ H317249 (Mar. 5, 2021), which pertained to a CAATSA detention of apparel and discussed what constituted insufficient evidence.
Understanding of the Rebuttable Presumption
Clear and convincingevidence is evidence that tells CBP or the U.S. Court of International Trade (CIT) that it is highly probable that a fact is true. In other words, CBP or the Court must be able to use the evidence presented to determine that it is highly and substantially more likely that a particular fact is true rather than untrue. If CBP determines that an importer has failed to provide clear and convincing evidence that imported goods were not made with forced labor and denies a UFLPA protest, the importer may file a case at the CIT under the court’s 28 U.S.C. 1581(a) jurisdiction because it has exclusive jurisdiction of any civil action commenced to contest the denial of a protest, in whole or in part.
While CBP actions against a specific importer are confidential, actions before the CIT are public. While there have been very few cases at the CIT dealing with forced labor allegations and denied protests (often because of concerns about damage to a brand’s reputation) in April of 2021, an importer filed a challenge to CBP’s enforcement of a WRO against products containing Malaysian palm oil from Sime Darby Plantation Bhd (Sime Darby). In Virtus Nutrition LLC v. United States, Ct. No. 21- 00165 (CIT 2021), the importer submitted evidence allegedly showing that the detained products were not produced with forced labor. CBP found the importer’s forced labor submission insufficient and excluded the merchandise from entry into the United States because of the WRO against Sime Darby. CBP had denied the importer’s protest because the importer reportedly was unable to trace production back to the harvesting of the palm fruit as required by the WRO.
The case is still pending and briefs in the matter have not yet been filed as of May 2022. This type of lengthy process exemplifies why challenging UFLPA at the CIT may in many cases be impractical given the lengthy time and costs involved.
Penalties and Importer Reasonable Care
It is clear from CBP’s webinars and meetings with the trade community that importers should be prepared for CBP to detain any goods sourced from the XUAR region effective June 21, 2022. CBP has issued over 2200 Known Importer Letters to importers that the agency has reason to believe previously imported goods subject to UFLPA. In the letters it sent, CBP indicates that any future imports of such goods will be subject to enforcement actions, including seizure and penalties. For C-TPAT participants, CBP warns in the letters that importers could have their tier level reduced as a consequence of being found to violate forced labor laws. See https://www.cbp.gov/sites/default/files/documents/ctpat_enforce_appeal_3.pdf
For importers violating UFLPA, CBP could impose penalties under 19 U.S.C. 1592, with the following maximum penalties:
(1) Fraud: A fraudulent violation of subsection (a) is punishable by a civil penalty in an amount not to exceed the domestic value of the merchandise.
(2) Gross negligence: A grossly negligent violation of subsection (a) is punishable by a civil penalty in an amount not to exceed—(A)the lesser of—(i)the domestic value of the merchandise, or (ii) four times the lawful duties, taxes, and fees of which the United States is or may be deprived, or (B) if the violation did not affect the assessment of duties, 40 percent of the dutiable value of the merchandise.
(3) Negligence: A negligent violation of subsection (a) is punishable by a civil penalty in an amount not to exceed—(A)the lesser of—(i) the domestic value of the merchandise, or (ii) two times the lawful duties, taxes, and fees of which the United States is or may be deprived, or (B) if the violation did not affect the assessment of duties, 20 percent of the dutiable value of the merchandise.
Upcoming CBP UFLPA Webinars
There are still two webinars that CBP is going to hold prior to the UFLPA implementation date. Accordingly, more information may be forthcoming, but based on the prior information provided – it may not be substantive.
Tuesday, June 7, 2022, 1:00 – 2:00 p.m. EDT – Registration
Thursday, June 16, 2022, 2:00 – 3:00 p.m. EDT – Registration
Conclusion
Importers should review their sourcing and supply chain in advance of the UFLPA effective date. In a letter issued today (June 6, 2022) to The President, the bipartisan authors of the UFLPA bill indicated that “[w]e stand ready to assist you in taking this important step to protect U.S. workers and consumers and to help end the egregious human rights crimes being committed against Uyghurs, Kazakhs, and other predominantly Muslim ethnic groups in the XUAR. We look forward to the Forced Labor Enforcement Task Force’s report on the implementation of the law and will monitor its progress to stop those entities from sending forced labor-made goods into our country.”
If you have questions regarding the process, our team has extensive experience responding to WRO detentions and WRO modification requests for clients. For more information on forced labor, UFLPA compliance, detentions, WROs, CBP and actions addressing human rights abuses, contact our team and see previous posts below.
For further information, please contact:
David Stepp, Partner, Crowell & Moring
dstepp@crowell.com
