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Why and how North American importers should be taking immediate action to root out forced labor from their supply chains. Hint: It will keep you in governments’ good books and eliminate significant administrative burden.
Anti-forced labor legislation
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What this means for you
Why this is important
Time to put your supply chain under a microscope
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If you import goods in the U.S., Canada, and most other industrialized nations, especially textiles, apparel, automotive, electronics, and industrial manufacturing, you may be unaware that you could end up on the wrong side of the law just by doing business with the wrong overseas partner. Customs detentions related to anti-forced-labor legislation have surged, resulting in production delays, supply shortages and supply-chain visibility challenges. Compliance with anti-forced-labor regulations is crucial to avoid penalties and loss of customers and investors.
In short, if you’ve been relying solely on supplier certificates to prove your product manufacturing doesn’t include forced labor, you’re going to need to dig in much deeper, or risk being in breach of sanctions that could lead to legal consequences and reputation damage. Proper due diligence should span the entire supply chain, including raw material sources, to avoid overlooking hidden forced labor risks. Failure to consider suppliers in other countries who transship goods sourced from China could lead to problems when goods arrive at their destination. Furthermore, growing demands for transparency and ethical sourcing from consumers, investors, and regulators make it imperative for businesses to address forced labor risks.
Terms you need to know
UFLPA
Modern Slavery Act
Remediation
Transshipment points
The Uyghur Forced Labor Prevention Act, introduced in 2022 by the U.S. government, is aimed at addressing human rights abuses in the Xinjiang Uyghur Autonomous Region of China. It presumes that goods mined, produced, or manufactured in Xinjiang or by those listed on the UFLPA Entity List are prohibited from being imported into the U.S. unless companies can provide clear and convincing evidence their supply chains are free from forced labor.
Refers to taking corrective actions when instances of forced labor are discovered within the supply chain. This might include providing compensation to affected workers, ensuring proper working conditions, or terminating supplier relationships if necessary.
The process of shipping Chinese goods through other countries by adding minimal value to production through that third country. Transshipment is common throughout the world, but evidence of transshipment through Vietnam, Malaysia, and Thailand amongst others specifically to bypass forced labor provisions and tariffs is well documented.
Also known as Bill S-211 and formally as the Fighting Against Forced Labor and Child Labor in Supply Chains Act, Canada’s anti-forced labor legislation was officially passed in May 2023 and comes into effect on January 1, 2024, placing higher reporting requirements on businesses with $20 million in assets, $40 million in revenue, 250 employees or those that are listed on a Canadian stock exchange.
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Supply chain transparency
Transparency enables you to have a clear understanding of your supply chain practices and identify potential areas where forced labor or other transgressions might occur. It involves sharing relevant information with stakeholders to demonstrate compliance with anti-forced-labor requirements.
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Forced labor violations in numbers:
According to U.S. Customs and Border Protection (CBP), the number of forced labor entries targeted between FY 2018 and FY 2022 has significantly: increased:
0
2000
4000
6000
8000
10000
After the enactment of UFLPA, from June 2022 until June 2023, the CBP put 5,346 shipments under the scanner (on suspicions of policy violations), valued together at $1.8 billion, $510 million of which has been detained.
Value of cargo stopped and inspected on suspicion of being manufactured in whole or in part by forced labor from Xinjiang, China.
$1.42 B 2,398
In 2023, the CBP detained 4,021 shipments on suspicions of UFPLA violations. Of these, 1,812 were denied entry into the U.S.
4,021
Goods from Malaysia that were detained were almost exclusively electronics and were, for the most part, released eventually. Conversely, goods from Vietnam were a hybrid of the top three categories and nearly three-quarters were denied entry.
500M+
The spotlight fell on country of origin as most of these shipments, valued at $0.82 billion, originated from Malaysia. Vietnam was a distant second, with shipments originating from the country valued at $0.27 billion, and China close behind at $0.24 billion.
58% increase over the last 10 years
Electronics, industrial and manufacturing materials, and AFT (apparel, footwear, textiles), accounted for most entries at 1,463, 900 and 785, respectively, in 2023. While electronics were by far the most targeted for detention, the percentage of detained goods that were denied entry into the U.S. was far greater for industrial and manufacturing materials.
$469 million
In 2023, CBP detained 4,021 shipments on suspicions of UFPLA violations. Of these, 1,812 were denied entry into the U.S.
$1.42 B
Additionally, after the enactment of UFLPA, from June 2022 until June 2023, the CBP put 5,346 shipments under the scanner (on suspicions of policy violations), valued together at $1.8 billion, $510 million of which has been detained.
According to U.S. Customs and Border Protection (CBP), the number of forced labor entries targeted between FY 2018 and FY 2022 has significantly increased.
6 2398
Entries targeted in FY 2018
Entries targeted in FY 2022
It’s interesting to note that during the same period, the value of the targeted entries has also increased exponentially.
FY2018
FY2022
$218,000 $469 million
The spotlight fell on country of origin as most of these shipments, valued at $1.06 billion, originated from Malaysia. Vietnam was a distant second, with shipments originating from the country valued at $429.3 million.
Electronics, AFT (apparel, footwear, textiles), and industrial manufacturing materials accounted for most entries at 2,412, 923, and 951, respectively.
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To put things in perspective, here are a few interesting trends in U.S. textile imports from China and Vietnam since 2018. Imports from China have consistently declined since 2020, with a significant 9% year-on-year decrease in 2022. Conversely, shipments from Vietnam have shown steady growth over the years, experiencing a noteworthy 25% year-on-year increase in 2022. The shift could be attributed to various factors, including changes in supply-chain and production strategy, shifts in supplier base, increases in transshipment to bypass tariffs on Chinese goods or UFLPA compliance. Your business must remember to perform its due diligence while trying to identify potential risks in the supply chain. Equally critical is establishing open communication channels with suppliers and implementing traceability and transparency. This can be done with the help of technology tools and data analytics to track and trace the origin of products imported and, therefore, avoid the risk of hefty penalties and financial losses.
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30%
22%
13%
15%
20%
Vietnam
China
2018 2019 2020 2021 2022
U.S. Textile Imports (Origin)
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1
1. Source: U.S. International Trade Commission 2. UFLPA implemented in 2022
To put things in perspective, here are a few interesting trends in U.S. textile imports from China and Vietnam since 2018. Imports from China have consistently declined since 2020, with a significant 9% year-on-year decrease in 2022. Conversely, shipments from Vietnam have shown steady growth over the years, experiencing a noteworthy 25% year-on-year increase in 2022. The shift could be attributed to various factors, including changes in supply-chain and production strategy, shifts in supplier base, increases in transshipment to bypass tariffs on Chinese goods or UFLPA compliance.
Your business must remember to perform its due diligence while trying to identify potential risks in the supply chain. Equally critical is establishing open communication channels with suppliers and implementing traceability and transparency. This can be done with the help of technology tools and data analytics to track and trace the origin of products imported and therefore avoid the risk of hefty penalties and financial losses.
Common questions answered
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What options are available to me if I am already under investigation for potentially violating UFLPA contraventions?
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If the CBP detains your shipment due to concerns related to UFLPA, you'll be given three months to file a response. You should submit an Applicability Review within 30 days of getting the notice. If the CBP rejects your application or doesn't respond in 30 days, you can take it up with the Court of International Trade. If the CBP says they're excluding your merchandise, you can still protest the decision and follow the same steps if the CBP doesn't respond.
Look out for the origin of your source material, and ties to Xinjiang-Uyghur (China). If your suppliers can’t share data about where your goods are made, it's a red flag. Check if your supplier or their associates are on the UFLPA Entity List. For further guidance, check out the UN and OECD guidelines for multinational enterprises.
What indicators should I be vigilant about when examining suppliers' practices and material sourcing?
The CBP guidebook provides a quick rundown of what’s required to perform forced labor checks. It includes: documents such as invoices, POs, and contracts; payments and transportation paperwork; transactions and supply chain records, like origin certificates, lists, and shipping documents. Information on Canada’s reporting requirements is less defined but can be found in the quick links.
Are there any standardized queries regarding the inquiries and documentation that I should seek from my suppliers, or do they differ by industry?
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Cease business with the supplier or, at the very least, demand the supplier eliminate the risk of forced labor from their supply chain concerning the imported products. You can voluntarily report trade violations related to the UFLPA through CBP's e-Allegations website for trade violations.
What actions should I take if I uncover previously unknown use of forced labor within my supply chain?
QUICK LINKS
CBP Guidebook Canada's reporing requirements
Businesses must prioritize legal sourcing practices to protect their reputation and ensure long-term sustainability
Ethical sourcing is non-negotiable:
Transparent supply chains instill confidence in customers, investors, and stakeholders.
Transparency builds trust:
Proactively identifying and addressing forced labor risks is crucial for maintaining a resilient supply chain.
Early action is essential:
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Businesses can benefit from joining forces with industry peers and stakeholders to combat forced labor effectively.
Collaboration is key:
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4 Key Takeaways
Early action is essential
Collaboration is key
Transparency builds trust
Ethical sourcing is non-negotiable
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