Supply chain constraints, both expected and unexpected, continue to disrupt global trade and appear to be the new normal for the foreseeable future. As the world is slowly recovering from the pandemic and constraints in both materials and labour are creating unprecedented supply chain challenges, recent government actions are also generating often unexpected hurdles in the “last mile” such as unexpected delays and merchandise detentions.
The US, Australia and Germany have recently proposed or enacted regulations or legislation aimed at ensuring companies take affirmative steps to prevent and eliminate forced labour in both their direct and indirect supply chains. As supply chains have grown more complex with additional tiers, the risk of exposure to potential human rights issues has grown as well. Importers subject to withhold release orders (WROs) often lack complete visibility into their full supply chain and regulators might not specify where their forced labour suspicions lie. This heightened risk is also driven, in part, by geopolitical tensions and global focus on environmental, social and governance (ESG) initiatives. A forced labour investigation may originate internally within the organization wanting to ensure a compliant supply chain, through non-governmental organization (NGO) reporting, or from a regulatory inquiry.
In the US, if Customs and Border Protection (CBP) receives information that “reasonably indicates” merchandise intended for importation contains any components that are the result of forced labour, the agency may detain the suspected merchandise at the port of entry under the authority of a WRO. While the specter of forced labour is a legitimate threat, the lack of a transparent process and ongoing trade disputes have led to concerns that WROs could be also used as political tools.
To combat allegations of the use of forced labour with regards to US imported merchandise, the burden of proof is on the importer. If the importer can affirmatively demonstrate that the goods were not produced with forced labour, CBP may deem the merchandise admissible and release it. Importers must provide proof of admissibility, including a certificate of origin conforming to the template set out in 19 CFR §12.43(a), within three months of the importation. While CBP provides scant guidance or information as to why merchandise is detained or how evidence of admissibility is evaluated, practical experience suggests that merely complying with the basic requirements for a certificate of origin and attestation as described in Part 12.43 will likely be an inadequate defense against the agency’s assertions.
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Rebecca Morpeth Spayne,
Editor, International Trade Magazine
Tel: +44 (0) 1622 823 922