The US government’s increased use of “importation bans” to combat human trafficking generates questions for American businesses and puts supply chains at risk.

Silica importation ban

On June 24, 2021, the United States banned the importation of silica and related goods from China-based Hoshine Silicon Industry Limited and its subsidiaries due to the use of forced labor. The Withhold Release Order (WRO) that bans silica, and polysilicon products, directs the Department of Homeland Security to immediately seize shipments at ports of entry.  Silica-based products are used in consumer electronics, semiconductors, solar panels, and other goods.

There are several things companies in the United States should know about these WRO importation bans:

Importation bans are increasing in number

Although Congress created the WRO tool in 1930, it had been left largely dormant until 2015.  Since then, Customs and Border Protection (CBP) has ramped up its use of WROs as successive administrations have consistently prioritized the fight against human trafficking.  Last year, CBP issued more WROs than ever before.

Importation bans are increasing in scope

The WRO importation bans have often focused on one factory or a single fishing vessel.  The recent bans have begun to expand their scope.  On January 11, 2021, the United States issued a “regional ban” against all cotton and tomatoes from the entire Xinjiang region.  On May 26, 2021, United States issued a “fleetwide ban” for fish from Dalian Ocean Fishing Co. Ltd.  Additionally, there are country-wide bans against all cotton from Turkmenistan and all tobacco from Malawi.  Bans that cover entire regions, fleets, and countries make it more difficult for companies to know if CBP will block the products, parts, or produce they are attempting to import.

Burden shifting to importer

When CBP decides to issue a WRO they do not examine if the importing company knew about the forced labor.  The focus is on whether forced labor has tainted to goods not the intent or knowledge of the importer.  If CBP finds information that “reasonably but not conclusively” indicates that the goods may be the product of forced labor, it will issue the WRO.  Although this standard is low, the business disruption for a company unable to receive its scheduled shipment can be significant.  Notably, once CBP issues the WRO, the burden shifts to the importing business to prove that the shipment in question was not tainted by forced labor.

Bans are not limited to chinese companies

Although the China-related WROs have received significant attention in the last two years, there are many active WROs against companies in other countries.  These include Democratic Republic of the Congo (gold), India (beedi cigarettes), Japan (video games), Malawi (tobacco), Malaysia (palm oil and rubber gloves), Mexico (furniture), Nepal (carpets), Turkmenistan (cotton), and Zimbabwe (diamonds).

Next steps

The increased number and scope of WROs (along with “transparency” requirements, modern slavery acts, and mandatory due diligence laws) generate the need for companies to thoroughly examine their supply chains.  Businesses need to do the following:

• Determine if active WROs impact their current sourcing
• Assess the risks of human trafficking in their supply chains
• Examine their procurement process for signs of forced labor
• Create a comprehensive approach to policies, contracts, and trainings
• Develop audit, due diligence, and investigations protocols
• Provide accurate, clear and responsive disclosure statements

For more information about WROs, supply chains, and compliance with environmental, social, and governance (ESG) issues, contact the Alert’s authors and we also encourage you to visit our ESG hub.