CBP enforcement of the new UFLPA restrictions

As DLA Piper previously alerted here, on December 23, 2021, President Joe Biden signed the Uyghur Forced Labor Prevention Act (UFLPA) into law to “ensure that goods made with forced labor in the Xinjiang Uyghur Autonomous Region [XUAR] of the People’s Republic of China do not enter the United States market, and for other purposes.” The UFLPA took effect on June 21, 2022.

Most notably, the UFLPA creates a rebuttable presumption that goods with any input from the Xinjiang Region in the People’s Republic of China (PRC) or made by certain entities were manufactured in part or wholly by forced labor and, therefore, are prohibited from entry into the United States.  To overcome the rebuttable presumption and receive an exception from US Customs and Border Protection (CBP), importers must meet a high evidentiary standard in demonstrating that the goods were not made with forced labor, among other requirements.

If an importer is subjected to the rebuttable presumption, the CBP Commissioner may grant that importer an exception.  The importer must show by clear and convincing evidence that the goods were not produced, wholly or in part, by forced labor.  Along with the tangible evidence satisfying the clear and convincing standard, the Commissioner will also assess the importer’s cooperation with CBP in responding to all CBP requests for information.  In addition, the Commissioner will assess the importer’s compliance with the regulations on the matter and guidance outlined in the UFLPA’s enforcement strategy.

In this update, we focus on (a) steps an importer may take to rebut the presumption established under the UFLPA and obtain an exception from the CBP Commissioner and (b) actions CBP can take in enforcing the UFLPA as well as recourses available to the importer for seeking review and release of shipments held by CBP pursuant to the UFLPA.

Background

On June 21, 2022, the Department of Homeland Security (DHS) began enforcing the UFLPA.  DHS, through the Forced Labor Enforcement Task Force (FLETF), published the UFLPA Strategy on June 17, 2022.[1]  The UFLPA Strategy outlined key information importers must provide in order to avoid or overcome UFLPA’s rebuttable presumption. The UFLPA Strategy also included a list of entities identified as sources or parties associated with the production of goods made, in whole or in part, with the use of forced labor in the Xinjiang region.  The UFLPA Entity List appears here.  DHS will publish any subsequent additions and updates in the Federal Register.

In addition, on June 13, 2022, CBP published an “Operational Guidance for Importers” to assist importers in preparing for the implementation of the UFLPA.  The Operational Guidance outlines the documents CBP may require of importers seeking to demonstrate that their imported articles fall outside the scope of the UFLPA, or for importers seeking to rebut the presumption established under the UFLPA.[2]

CBP process for handling UFLPA’s rebuttable presumption

The rebuttable presumption applies to all goods with any Xinjiang content, regardless of other countries where the products were also produced or if they were shipped through third countries.  The rebuttable presumption also applies to products made by entities on the UFLPA Entity List.  If the goods were manufactured wholly or partly in the Xinjiang region, or by an entity on UFLPA Entity List, then the goods are presumed to violate 19 U.S.C §1307.

In order to refute the presumption that goods originating from the Xinjiang Region or from a company identified on the UFLPA Entity List were made with forced labor, there are specific conditions that importers must satisfy before CBP Commissioner will consider granting an exception.  It is crucial that importers maintain all records pertaining to US-bound shipments because importers must have records proving they complied with the UFLPA.  Pursuant to Section 3(b) of the UFLPA, the Commissioner will use the following factors when determining whether to grant an exception:

1. Whether the importer has records of their full compliance with UFLPA Strategy, specifically compliance with UFLPA § 2(d)(6) and any subsequent regulation
2. Whether the importer completely and substantively responds to all of the Commissioner’s inquiries for information and
3. Whether the importer, clearly and convincingly, demonstrates that the imports were not mined, produced or manufactured wholly or in part by forced labor.

The UFLPA Strategy also outlines categories of evidence CBP may request to grant an exception.  The following information is not exhaustive and is meant to provide importers with the flexibility to collect the evidence consistent with their business model.

First, an importer can provide CBP with evidence that demonstrates that the importer maintained a due diligence system or process.  That system or process can include the following: (a) engagement with suppliers to assess and address forced labor risk, (b) mapping the supply chain and assessment of forced labor risk along the supply chain, (c) written code of conduct forbidding the use of forced labor and addressing the risk of Chinese government labor schemes, (d) training for employees and agents who select and interact with suppliers, (e) system monitoring compliance with code of conduct, (f) remedial measures if forced labor is detected, (g) independent verification of due diligence systems and (h) public reports highlighting performance and engagement with due diligence systems.

Second, an importer can provide CBP with supply chain tracing evidence.  This is a broad category that encompasses any documentation that shows the imports are not subject to the UFLPA rebuttable presumption.  The kind of evidence that may be used includes: (a) documentation of the roles of all the entities in the supply chain, (b) a list of suppliers associated with each step of the production process, including names, numbers, addresses and emails, (c) affidavits from each entity involved in the production process, (d) purchase orders, invoices and certificates of origin, and (e) documents that allow CBP to trace raw material to merchandise mined, produced or manufactured.

Third, an importer can provide CBP with documents demonstrating supply chain management measures. This can include documents that show managerial measures taken to prevent or mitigate forced labor risk, as well as remediate any use of forced labor.  The importer should be able to show that the documents are a part of an operating or accounting system that includes audited financial statements.

Additionally, importers can provide CBP with direct evidence that the imports were not made with forced labor. This evidence may include: (a) information on worker recruitment and internal controls ensuring all workers in China were recruited and working voluntarily, (b) credible audits identifying forced labor indicators and (c) information on each worker at every input stage, such as wage payment and production output of each worker.

CBP provides guidance on what kind of evidence can be used in making the case for an exception.  To find more information on the type of evidence that importers can present to CBP to rebut the presumption, please refer to Section VI of the UFLPA Strategy and the CBP Operational Guidance.

While there are several ways an importer may show by clear and convincing evidence that the goods were made without forced labor, it is important to note that, if the Commissioner grants an exception, the information submitted is subject to public disclosure.  The UFLPA requires CBP to submit a report to Congress and the public identifying the shipment and the evidence that was considered in granting the exception.  Some information may be exempt from disclosure pursuant to the Freedom of Information Act, 5 U.S.C. § 552.

If, however, an importer complies with Section 3(b) of the UFLPA and there is clear and convincing evidence that the goods were not made wholly or in part with forced labor, and the Commissioner grants an exception, CBP will release the shipment.

CBP enforcement action

If importers are unable to satisfy CBP’s request for information or fail to prove by clear and convincing evidence that the imports do not fall within the scope of the UFLPA, CBP will take specific enforcement actions. Depending on the facts pertaining to each import, CBP may identify, detain, exclude and/or seize shipments subject to the UFLPA presumption.  CBP will identify shipments subject to the presumption through various sources, like the UFLPA Entity List.

If CBP flags a shipment in furtherance of the UFLPA, CBP has the authority to inspect, examine and detain the shipment pursuant to 19 U.S.C §1499. When CBP takes action against an importer’s shipment, CBP will notify importers of such action. After an importer receives a detention notice, exclusion notice, or seizure notice, the importer may request an exception to the UFLPA’s rebuttable presumption. To facilitate a faster release, an importer can identify additional shipments with identical supply chains that CBP previously reviewed and expressly deemed admissible.

Detention

In the instance CBP detains an import under the UFLPA, CBP will notify the importer of the reasons for detention and the anticipated length of detention. The notice will include instructions for submitting information to CBP to rebut the presumption. Pursuant to 19 C.F.R. Part 151, the importer should respond to the notice within the applicable timeframe, generally within 30 days from the date the shipment is presented for examination. A brief description of the kind of information that can be used to rebut the presumption is mentioned above. For more details on the kind of evidence that can be used to rebut the presumption, refer to the UFLPA Strategy and CBP Operational Guidance.

Seizure

In the event that CBP seizes an import deemed in violation of the UFLPA, CBP will refer the case to the Fines, Penalties and Forfeitures (FP&F) officer at the port of entry. In the seizure notice, the FP&F officer will outline the importer’s and interested parties’ petition rights. The notice will also advise the importer on how to provide CBP with information and the deadline to submit the petition. The importer should use the petition process outlined in 19 C.F.R. Part 171 to request an exception. The FPFO or Regulations and Rulings will review the petition and all supplemental petitions.  Refer to the Mitigation Guidelines for additional information on the seizure process.

Exclusion

If CBP determines a shipment is in violation of the UFLPA, CBP may exclude that shipment. The importer can protest the exclusion pursuant to 19 U.S.C. §1514. The protest should be submitted electronically to the appropriate Center of Excellence and Expertise.  For more information about the protest process, refer to 19 C.F.R Part 174.

Summary

In each instance where CBP takes action against an importer’s shipment, the importer must clearly state whether it seeks an exception to the UFLPA’s rebuttable presumption. The importer may request an exception during detention, after an exclusion, or during the seizure process.  If applicable, CBP will provide the importer with crucial information on how to proceed, and additional administrative processes. CBP will attempt to prioritize the request of Customs Trade Partnership Against Terrorism (CTPAT) Trade Compliance members in good standing.

Limitations

CBP recognizes the challenges associated with tracing supply chains.  However, CBP is currently working on several initiatives that will aid CBP in accurately identifying and tracing goods made with forced labor.  For example, CBP is assessing technologies that can translate data, integrate commercial data with artificial intelligence and remote sensing to support digital traceability. CBP is prioritizing technologies that support enhanced visibility into trade networks and supply chains. Additionally, CBP plans to invest in advanced search technology that will allow CBP to link known or suspected forced labor violators with their businesses and transactions. For more information on CBP’s efforts and initiatives to identify and trace goods, refer to Section III of the UFLPA Strategy.

DLA Piper attorneys have extensive experience advising importers on strategies for addressing issues of forced labor within their supply chains. If you have questions or would like to discuss your company's situation, please contact the authors.