Companies Face Growing Pressure to Combat Forced Labor in Their Supply Chains

Companies Face Growing Pressure to Combat Forced Labor in Their Supply Chains

Companies have more than a moral imperative to remove forced labor from their supply chains — they face stiff financial penalties, risk to their reputations and, if importing goods into the U.S., the possibility that their products may be barred from entry.

Section 307 of the Tariff Act of 1930 (Section 307) prohibits the importation of merchandise mined, produced or manufactured, wholly or in part, in any foreign country using forced labor. Under this act, U.S. Customs and Border Protection (CBP) has the authority to issue Withhold Release Orders (WROs), blocking such goods from entry. Companies impacted by a WRO have the opportunity to demonstrate that the goods in question were not produced using forced labor, or export them to a different country.

Previously, the act was more limited in its effect, as the “consumptive demand” clause exempted goods that were not currently being produced in sufficient quantity to meet U.S. demand. This clause was repealed by the Trade Facilitation and Trade Enforcement Act in 2016, bringing more products and companies into scope.

Under this legislation, any person who has reason to believe merchandise produced by forced labor is being, or is likely to be, imported into the U.S. may petition CBP to initiate an investigation. Customs and Border Protection maintains an active tip line for consumers or groups to report allegations. Members of Congress may also request that CBP investigate and block imports under Section 307 of the Tariff Act. For example, in a letter dated July 12, 2019, U.S. Senators Sherrod Brown (D-OH) and Ron Wyden (D-OR) urged CBP to investigate and block certain imports reportedly made with forced labor from entering the U.S. market. Customs and Border Protection can also self-initiate investigations.  

To avoid a WRO, CBP recommends that importers “exercise reasonable care over their supply chains and understand where and how their products are manufactured or produced.”

A WRO can result in disruption to supply chains, potential financial losses and reputational damage. As such, companies should demonstrate due diligence in their supply chains with regard to rooting out forced labor. 

How to Respond to a WRO

Within three months of the importation date, importers impacted by a WRO have the opportunity to submit information to CBP to prove admissibility of the product into the U.S. Importers may, for example, establish the country of origin of the product and/or the character of the labor used in production of the product. 

Companies are advised to consider incorporating corporate modern slavery due diligence and supply chain compliance into their compliance framework. Toward that end, CBP has published a due diligence fact sheet for importers, which provides resources to assist importers with supply chain due diligence, and updated its informed compliance pamphlet on reasonable care to include a section on forced labor. According to the guidance, the following factors can be relevant in determining whether an importer acted with reasonable care in connection with the forced labor import ban:

  • Whether the importer established reliable procedures — including internal audits, third-party audits and producing customs entry documentation with supporting information — to ensure that it is not importing goods subject to the ban.
  • Whether the importer knows how and where its goods are made from the raw material stage.
  • Whether the importer has vetted new suppliers/vendors for the intended purposes.
  • Whether the importer’s contracts with suppliers include terms that prohibit the use of forced labor, provide a time frame to take any necessary corrective action and identify consequences for failure to take action.
  • Whether the importer has reviewed information provided on CBP’s Forced Labor webpage; the U.S. Department of Labor’s list of goods produced by child or forced labor; and the International Labour Organization’s Indicators of Forced Labour booklet.

The Organisation for Economic Co-operation and Development has also issued a due diligence guidance for responsible business conduct, which includes guidance to help companies carry out due diligence for the intended purposes in specific sectors, such as minerals, agriculture, garment and footwear, extractives and finance. 

Sahar Hafeez is an associate with Pillsbury Winthrop Shaw Pittman and an expert in international trade, with experience in trade remedy and economic sanctions matters. She will be speaking at Supply Chain Insight this November. To learn more, contact us at