E-Guide

Forced Labor

Introduction

The International Labor Organization defines forced labor as "all work or service which is exacted from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily." Also relevant to this enforcement domain are child labor and human trafficking violations. Several U.S. agencies have strong mandates and authorities to prevent products manufactured by forced labor from entering the commerce of the United States.

The U.S. Department of Labor, through the Bureau of International Labor Affairs (ILAB) maintains a “public a list of goods from countries that ILAB has reason to believe are produced by forced labor or child labor in violation of international standards, including, to the extent practicable, goods that are produced with inputs that are produced with forced labor or child labor.” [See Trafficking Victims Protection Reauthorization Act (TVPRA of 2005)]. As of September 2022, the ILAB’s TVPRA List contains 159 goods from 78 countries and areas.

Customs and Border Protection (CBP) plays an important role in preventing the entry of goods into the U.S. made by forced/child labor: Section 307 of the Tariff Act of 1930 (19 U.S.C. 1307) authorizes CBP to issue Withhold Release Orders (WRO) to prevent merchandise produced using forced labor from being imported into the United States. The WRO is a CBP order that prevents imports from entering the U.S. due to “reasonable but not conclusive” evidence that forced labor was used in the overseas production of the goods. CBP may detain and/or seize goods. The importer of record is required to provide proof that the goods they are importing are not manufactured using forced labor.

CBP has significantly increased forced labor enforcement actions through WROs since the The Uyghur Forced Labor Prevention Act (UFLPA) was enacted on December 23, 2021. The UFLPA establishes a rebuttable presumption covering the import of any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (XUAR) of the People’s Republic of China.

The rebuttable presumption standard means CBP will treat all goods produced entirely or in part in the XUAR as if they were produced with forced labor, and therefore, prohibited from entering the U.S. pursuant to Section 307 of the Tariff Act of 1930. Critically, this places the burden of proof on the importer of record to show that the goods were not manufactured using forced labor.

Just as the Department of Labor maintains its forced labor TVPRA List, the Department of Homeland Security maintains the UFLPA Entity List for entities that have produced goods in XUAR using forced labor; have worked with Xinjiang government entities to use forced labor; have exported into the U.S. products made with forced labor; or have sourced materials from Xinjiang or entities working with Xinjiang.

In addition to government issued lists and controls, NGOs have been very active in providing research and intelligence on forced labor violations, including Chinese entities associated with the XUAR.

Finally, in addition to the DOL, DHS and NGO lists, the Department of Commerce has added XUAR entities onto its Commerce’s entity list - “This action targets these entities’ ability to access commodities, software, and technology subject to the Export Administration Regulations (EAR), and is part of a U.S. Government-wide effort to take strong action against China’s ongoing campaign of repression against Muslim minority groups in the XUAR.”

Why is Forced Labor Compliance Important

The U.S. government, European Union as well as other critical trade partners have increasingly recognized forced labor as a “pervasive and pernicious element of the global marketplace.” Consequently, several statutes and regulations have been implemented in the U.S. to address forced labor throughout the global supply chain. Companies that do not perform effective due diligence and know your customer (KYC) checks for their global trade transactions are at risk for violating these statutes and supporting forced labor. The following summarizes some of the reasons why forced labor risk compliance is important:

Forced labor is a form of modern slavery that stubbornly persists, particularly in the XUAR, contributing to Uyghur repression.
Forced labor unfairly lowers manufacturing costs which hurts U.S. domestic industries and American job security.
Forced labor civil and criminal penalties can be very severe for companies found to be in violation.
Companies associated with forced labor violations suffer severe reputational damage.
CBP and Homeland Security Investigations are proactively pursuing forced labor violations with strong Congressional budgetary support.

What rules do you need to adhere to?

‍There are multiple forced labor statutes and regulations that need to be complied with and failure to do so can lead to severe criminal penalties and civil fines.

The primary import statutes and regulations are listed below, but the trade community should be aware that several other statutes pertaining to money laundering, conspiracy, and false statements can and often are additionally charged for egregious violations:

Item #	Statute / Regulation	Description	Enforcement Agencies	Highest Civil	Highest Criminal Penalty
1.	Sanctions Statutes (Multiple - https://ofac.treasury.gov/additional-ofac-resources/ofac-legal-library/united-states-statutes)	Sanctions related statutes / regulations related to people, organizations and regions	Department of Treasury, HSI, DOJ, OEE	Up to $356,579	Up to 20 years and $1,000,000
Example: Department of Treasury / OFAC have started to list Chinese entities involved with Forced Labor, onto their Specially Designated Nationals (SDNs) list, thereby opening companies up for further enforcement action should they do business with SDNs.
2.	18 U.S. Code § 542 - Entry of goods by means of false statements	Criminal statute related to the importation of goods into the United States	HSI, CBP, DOJ	N/A	Shall be fined for each offense under this title or imprisoned not more than two years, or both.
Example: When a company falsifies the true Chinese manufacturer of solar panels on U.S. customs documents to avoid triggering CBP’s UFLPA Entity List.
3.	19 U.S. Code § 1592 Penalties for fraud, gross negligence, and negligence	Civil sanctions	HSI, CBP, DOJ	Penalty in an amount not to exceed the domestic value of the merchandise.	N/A
Example: If a U.S. company knowingly or unknowingly imports cotton apparel transshipped from XUAR through Vietnam, they are liable to civil penalties.
4.	19 U.S. Code § 1307 - Convict-made goods; importation prohibited.	Prohibits U.S. import of all goods made with convict labor or/and forced labor or/and indentured labor	DOL, CBP, HSI, DOJ	Penalty covered under 19 U.S. Code § 1592 - see row 2 of this table for reference.	Penalty covered under 18 U.S. Code § 542 - See row 1 of this table for reference
Example: If a U.S. company signs a contract with a XUAR company to purchase tomato products, it will be liable to criminal or civil penalties.
5.	18 U.S. Code § 1589 - Forced labor	Knowingly provides or obtains the labor or services of a person through threat, fraud or coercion.	DOL, CBP, HSI, DOJ	N/A	Whoever violates this section shall be fined under this title, imprisoned not more than 20 years, or both.
Example: If a company were to knowingly import gold or gold products mined in the Democratic Republic of Congo, from a US-listed Forced Labor entity, they would be liable for severe penalties, should their transactions be investigated.
6.	18 USC Sections 1761-62	Transportation or importation and marking of packages of goods manufactured with prison labor.	CBP, HSI		Shall be fined under this title or imprisoned not more than two years, or both.
Example: If a company were to import video games or connector plugs manufactured in a Japanese prison, they would be liable to penalties and/or fines if found guilty.
7.	Export Control Reform Act 2018 - 50 USC 4801-4852 / Export Administration Regulations - 15 CFR 730 - 744	Regulates the export control, the export and Re-export of commercial and dual-use (commercial and military/security applications) items	Homeland Security, Commerce, FBI	$300,000 per violation or twice the value of the transaction	Up to 20 years and $1,000,000
Example: If a company creates and sells software or software products / services, such as cutting edge Artificial Intelligence (AI) and/ or other Critical and Emerging Technologies (CET), they are required to perform due diligence actions to ensure the technology does not involve a Commerce Denied Party. Failure to obtain a license to sell their products or service - whether knowingly or unknowingly can lead to severe criminal and civil penalties. This statute covers deemed exports as well, which includes the transfer of knowledge, blueprints, and intangible sources of information to known adversaries.

BITE is a tool suite that assists companies in multiple domains to reduce risk in their supply chain. Our AI technology assists companies to remain on the right side of compliance through cost-effective, easy-to-use tools.

This document covers information and processes to assist companies understand the risks involved with forced labor compliance.

How does BITE Help?

The BITE Playbook, available in the BITE app, helps you navigate these regulatory requirements and quickly understand which agencies enforce what regulations associated with your specific transaction.

BITE Data: our BITE Playbook maps directly to watchlists, Harmonized Schedule codes and commodity screening lists, allowing you to quickly check a commodity or person against the extensive filters in our platform.

Training Modules: Gets access to concise, easy-to-follow tutorials and guidelines.

BITE Data Mapping

BITE Module	What’s included	Relevance to Forced Labor
Watchlists	40,000+ entities from official worldwide sanctions and watchlists	By reviewing entities in your supply chain and checking them against the BITE Watchlists, you will show due diligence in complying with US sanctions regulations, and therefore assist a user in complying with items 1 and 7.
BITE List	300,000+ politically exposed persons, transshippers and 2nd/3rd tier relationships with sanctioned entities or entities engaging in forced labor	Importers can perform enhanced due diligence and risk management actions in order to secure their supply chain and make sure the commodities they are transporting are not ending in the wrong hands and therefore assist a user in complying with items 4, 5, and 6.
BITE Trade Protection	Commodity control lists related to multiple agencies	The Trade Protection module allows users to search for a commodity and identify import-related controls such as forced and child labor regulations and therefore assist a user in complying with items 2, 3, 5, 6, and 7.

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