What Every Multinational Company Needs to Know About … CBP’s Uyghur Forced Labor Prevention Act Detentions and Admissibility Reviews (Part III)

In Part I and Part II of “What Every Multinational Company Needs to Know About … The Uyghur Forced Labor Prevention Act” (UFLPA), we summarized the UFLPA requirements and UFLPA compliance best practices. In this third and final UFLPA post, we provide guidance regarding steps that importers can take if they find that their goods have been detained by U.S. Customs and Border Protection (CBP) for UFLPA concerns and now must go through a UFLPA admissibility review.

As outlined in our first UFLPA update, CBP has provided detailed guidance to the importing community. The new CBP guidance materials signal that (1) CBP is putting significant emphasis on UFLPA enforcement, (2) CBP is looking to help the trade community submit uniform submissions to help CBP quickly finish each investigation, and (3) CBP has no plans to ease enforcement, particularly against sectors that already are receiving high priority. Further, with CBP recently designating new high-priority sectors (PVC and aluminum, on top of already-identified imports of cotton, polysilicon, and tomatoes), it is apparent that CBP will likely be enhancing its enforcement efforts.

Companies that frequently import from Southeast Asia, or that otherwise have imports at a high risk for detention on forced labor, human trafficking, or UFLPA grounds, accordingly should be maintaining information to support the clearance of such goods even before importation. This is especially true for items where a heightened risk of a detention under the UFLPA is concerned.

For these goods, an action plan of response includes the following:

Step 1: Identify Potential UFLPA Issues

One frustration that importers have under the UFLPA is that CBP will not provide the importer with the reason for any given detention. While some detentions may be obvious, such as attempted imports of products made by companies on the UFLPA Entity List, products that are made from non-identified companies with suspected supply chain exposure to the XUAR may not be so obvious. It appears, however, that CBP is targeting imports based mostly on public, open-source information as well as its prior enforcement activity. Thus, research into publicly available sources often is required to determine why a given set of entries is detained, which puts a premium on companies carefully monitoring reports occasionally released by the media, non-governmental organizations, and academic organizations that are focused on forced labor, human trafficking, and the use of labor from the XUAR.

Another useful tool that can help guide due diligence is the UFLPA Dashboard, which contains detailed statistics on enforcement. The dashboard provides UFLPA enforcement statistics that can be filtered by dollar value, country of origin, commodity, and the timing of detention. The UFLPA Dashboard currently shows that there have been over 5,500 total detentions, at a value approaching $2 billion, primarily in the electronics, apparel, industrial and manufacturing materials, agricultural, consumer products, pharmaceuticals, base metals, machinery, and automotive and aerospace sectors. Among other surprising facts that would not be immediately relevant, the Dashboard shows that China is not the most common source of detentions — that position belongs to Malaysia, with Vietnam, China, Thailand, and Mexico rounding out the list. The presence of these other countries shows the key role that Chinese-origin components often play as inputs. The fact that most of the detained shipments are from countries other than China shows that importers should not limit their UFLPA risk assessment to suppliers located in just that country. This is consistent with the CBP Best Practices document, which stated that importers should identify “manufacturers in regions and third world countries with a high risk of XUAR inputs.”

Step 2: Promptly Respond to a UFLPA Notice from CBP

• Immediately contact the CBP point of contact listed on the detention notice to establish contact and to begin a dialogue to address all CBP concerns.
• CBP will give the importer 30 days to export the goods or submit documentation to dispute the detention. This is a serious deadline, and you need to comply with it. If you need an extension, CBP will work with you provided that you request it in advance of the due date.
• If your company is a Customs-Trade Partnership Against Terrorism (CTPAT) partner, your admissibility packages will be prioritized for review by the appropriate Center for Excellence and Expertise.

Step 3: Prepare a UFLPA Response Package

Although CBP has stated that it will not provide an authoritative list of documentation and information needed to clear a shipment under the UFLPA (favoring instead a review that examines the “totality of information”), its new guidelines for admissibility packages provide useful starting points for putting together responses to UFLPA detention notices. Following these guidelines is important because it streamlines review. CBP estimates that an admissibility review can take two-to-three weeks, but providing information that is incomplete or poorly organized can extend this timeline as importers engage in extended back-and-forth and collection of additional traceability documentation to allow CBP to clear a given shipment.

In preparing your response packet, you should ensure the documentation is complete, accurate, and that English translations are available for ready comprehension by CBP. If the submission is a follow-up to a previously reviewed supply chain for which the goods were deemed admissible, you should provide a copy of the previous clearance and clearly lay out the similarities with the current admissibility review. This can most easily be done by providing a summary report that includes the previous entry packet and a showing that the suppliers/producers at all stages of production and relevant commercial records support the same conclusion for the current shipment.

It is common for CBP to have follow-up questions. If so, you should provide the requested additional information promptly to avoid significant delays.

The task of putting together a UFLPA response was considerably aided by CBP’s publication of a model “Table of Contents” for a UFLPA Applicability Review Submission. You should provide information that follows this model, supplementing it where needed with information that is tailored to your particular proof. You also should uniformly follow the suggestion that each submission should include an Executive Summary summarizing the documentation. The easier the submission is to follow, the quicker the potential release time by CBP.

To expand on the suggested UFLPA Table of Contents, you should consider providing detailed information regarding the following topics:

Evidence Pertaining to Overall Supply Chain

• A detailed description of the supply chain, including ties to the imported merchandise and components thereof, including all stages of mining, production, and manufacture. If you previously have prepared a supply chain map, this will allow you to put the information together quickly and easily.
• A list of suppliers and sub-suppliers associated with each step of the production process, including names and contact information.
• The roles of the entities in the supply chain, including manufacturers, shippers, and exporters as well as any related persons.
• Affidavits from each entity involved in the production process.
• Items relating to the shipments that tie to the entries, such as purchase orders, packing lists, and shipping records (manifests and bills of lading).
• Invoices and receipts for all suppliers and sub-suppliers.
• Bills of materials and certificates of origin.
• Payment records.
• Buyer and seller inventory records, including dock/warehouse receipts.
• Any other relevant import/export records.

Information on Supply Chain Management Measures

This may include internal controls to prevent or mitigate forced labor risk and any remediation steps used regarding any use of forced labor identified in the mining, production, or manufacture of imported goods. You should include copies of all of your compliance documents, such as your vendor code of conduct and other information relating to compliance with forced labor, human trafficking, and UFLPA compliance. This also would include copies of any UFLPA audits done in the recent past relating to the suppliers/sub-suppliers at issue.

Evidence Pertaining to Miner, Producer, or Manufacturer

• The evidence listed above pertaining to merchandise or components for raw materials applies equally to mined, produced, or manufactured goods. Any production records that will help CBP understand the labor situation, in particular, are often helpful in clearing goods. These can include mining, production, or manufacturing records to allow CBP to trace raw materials to merchandise mined, produced, or manufactured; production orders; and reports regarding factory production capacity for the merchandise.
• Evidence that the volume of inputs of component materials matches the volume of output for the merchandise produced, to show the claimed supplier is in a position to actually have produced the merchandise.
• Reports on factory site visits by the importer, evidence of audits or compliance checks, or a downstream supplier sourcing from the factory or a third party.
• Any other relevant evidence to demonstrate that a good was not mined, produced, or manufactured with forced labor.

In addition, the CBP UFLPA Guidance contains suggested documents for high-risk goods that are under special scrutiny, which currently includes cotton, tomatoes, polysilicon, PVC, and aluminum. These high-risk commodities are treated as high-risk commodities with enhanced risks that they are from the XUAR or used XUAR-related labor in their production. Recommended information for these items includes:

• A supply chain map identifying all entities involved in the production of the goods relating to the entry.
• Information on workers at each entity involved in the production of the goods in China, such as wage payment and production output per worker. If the goods are coming from other countries, they can still implicate the UFLPA if they include parts and components, so you may need to work back through multiple supply chain areas.
• Information that there is no connection to the XUAR or to persons from the XUAR region, or that any such connection or persons are compatible with the UFLPA requirements.
• Information on worker recruitment and internal controls to ensure all workers in China were recruited and are working voluntarily.
• Credible audits and compliance check-ups to identify forced labor indicators and proof that any issues were remediated prior to shipment of the goods at issue.

A final issue that can come up is business proprietary information held by other companies. For example, sometimes information required to clear a shipment is held by suppliers. CBP indicates in its FAQs that, where necessary, suppliers can submit materials directly to CBP if they have concerns about business confidentiality. This position reinforces that CBP is willing to be flexible and to work with importers to clear shipments where it can be shown that there is no link to the XUAR.

Step 4: Prepare for Future Admissibility Reviews

Notably CBP indicated it will continue to detain shipments of goods made by manufacturers with “known or suspected ties to the XUAR,” even if CBP has vetted and released shipments from the same supply chain. According to CBP, while importers can use prior reviews to streamline admissibility reviews, it will continue to conduct admissibility reviews for such goods until CBP has confirmed that the supply chain relationships linked to the XUAR are no longer present.

Needless to say, repeated admissibility reviews involving the same or similar merchandise can become more problematic for frequent importers, particularly if they rely on just-in-time manufacturing or have limited inventories. Fortunately, importers can rely upon, and direct CBP toward, prior clearance of similar goods/supply chains. In addition, some importers are finding they can work pro-actively with Customs, providing supply chain and UFLPA admissibility review information to CBP before the goods arrive and are flagged by Customs, potentially as soon as the goods leave the foreign port. This mechanism can considerably shorten the time to finish the admissibility review, ensuring the goods do not sit at the arrival port for long.

* * *

There is no one solution for UFLPA (or forced labor/human trafficking) compliance. Minimizing risk requires a layered approach that encompasses legal and contractual protections, due diligence, compliance policies and internal controls, awareness of  and following up on red flags, and compliance audits. If you need to follow up on any of these topics, please contact the authors or your Foley relationship attorney for more information.

Si desea recibir futuras actualizaciones sobre «Lo que toda empresa multinacional debe saber» acerca del funcionamiento del complejo mundo del comercio internacional actual, suscríbase a nuestra lista de correo electrónico quincenal. Haga clic aquí para registrarse.