Exploring The Uyghur Forced Labor Prevention Act (UFLPA)

*Machine Generated Script*
Ana Hinojosa 0:00
Requiring the importer of record to exercise reasonable care to ensure that any foreign goods that they present for importation to the United States

Lalo 0:10
Welcome to simply trade. Brought to you by global Training Center. My name is Lalo, and together with my co host, Andy shaiz, we have well over 60 years of combined trade logistics and supply chain experience. Along the way, we have seen and experienced different challenges in trade compliance. We decided to put the show together and call on our friends and colleagues in the business to discuss these topics and just hang out with us to shoot the ship on all things trade. Thank you for spending some time with us. Enjoy the show.

Hey, I was thinking the other day, yeah, you have a, you have a, you have a daughter, right?

Andy 0:46
Yes, she’s married now, yeah, yeah,

Lalo 0:50
and I have a, have a couple of kids. And I was thinking the other day, you know, when they were growing up, you always used to try to have them not associate themselves with a certain group of people. Oh,

Andy 1:05
man, you always worry about that is like the influence of some folks. That may be a bad influence, right?

Lalo 1:12
Exactly, yeah, yeah. So I don’t know. I don’t know. Sometimes I’m even thinking, I I can’t imagine, or I can’t. I just think back, and maybe I was one of those kids that people that parents used to say, don’t hang around with. Who knows? Anyway? Yeah, there’s a lot of fathers I didn’t have. Well, I was

Andy 1:33
gonna say there’s a lot of fathers that hated seeing me coming up the step to pick up their daughters for a date or something like, Oh no, who’s this? You know,

Lalo 1:42
here comes Andy. Oh, well, anyway, reason I bring that up is just by our kids or whoever hanging around with that crowd. I mean, it’s, it’s immediate guilty by association type scenario, right? I mean, you immediately start thinking, hey, the there, they might be up to no good. So how does this relate to trade? Well,

Andy 2:10
I kind of see where you’re going with this is that, you know, it’s, it’s, you know, you have some folks are in your supply chain, and if they’re not of good character, not crossing the T’s and dotting the i’s for regulations and all that you yourself could be guilty of by association, right?

Lalo 2:33
That’s exactly right, yeah, and that’s why I’ve light up a couple of girls here. Ladies, really intelligent. Ladies that are going to be joining us for the podcast today, that we’re going to be talking about forced labor and, again, guilty by association, almost anything that comes out of that Uyghur territory in China, it’s almost flagged as automatic, uh, forced labor. Yeah, forced labor, whatever. Yeah. So anyway, well,

Andy 3:01
well, that’s the one thing. Is that with what we’ve got is the, you know, folks, that that’s what, what are you supposed to do about this is that new regulations have taken effect that have been spawned from new legislation. The legislation was passed back in December that we’ll be able to talk about today, but also is it became effective in June. There’s a lot of talk about the Uyghur forced labor Prevention Act. So what do you do about it? I mean, that’s what we’re going to be getting into,

Lalo 3:41
right? So it’s a really good slate that we have here. And you and I talked about these two ladies before, Amy and Anna. Very great background. I believe we couldn’t have found any anyone better than these two ladies. Well,

Andy 3:57
Amy Morgan has been around a while. Matter of fact, I first met Amy when she was somewhat of a rookie and a trade analyst. Very sharp lady, and she’s she was working for Nordstrom back in those days. And so anyway, she’s got a lot of things to talk about, as far as how to incorporate some automation into your supply chain, and a few other things to approach. And she’s actually got hands on experience with some things. So that’s, you know, from an importer’s perspective. Uh, Anna and Oh, HESA, you know, HOSA, I guess I could,

Speaker 2 4:39
you did it. She is. She’s gonna kill me. I know it. I I am

Andy 4:46
so sorry. I’m like, it’s like, I keep butchering that. And it’s like, it’s because my elevator just does not make it to the top sometimes, yeah, they’re Anna and a HOSA, right? You. Sir, Yes, sir. Okay, all right. Anna has come from customs, and actually was over in Brussels with the WCO for a while and but representing US Customs and Border Protection, and her knowledge and background is very impressive, folks, you guys can go and we have show notes that you can look at their bios and just understand this is that both ladies have impressive credentials and experience, or we wouldn’t be talking with so we’re going to be getting into a great show, and hopefully this will be something that you’ll, you know, you’ll get a nugget of knowledge that you could use, become a bit more proficient in this forced labor prevention situation, and secondly, be able to identify the next steps, at least, for the next you know, one, two or three steps that You should be taking in verifying your supply chain,

Lalo 6:02
right? Okay, well, let’s bring them on. Andy, alrighty,

Andy 6:06
cutting to the chase, we can talk a little bit about the history on this, but people can gather the history. People can get into more of the details. What usually goes lacking is, okay, so forced labor Prevention Act. So what? What’s the action that somebody needs to take and as we’re going through and one of the questions I’ll just tell you right now on one of the things that I saw that has come up several times, and that is, people have supplied customs with what they felt was proof that they’ve checked out their supply chain. There’s no forced labor, and customs rejected that. So that’s one of those things that is like, Okay, what did they supply and what is it you guys were looking for? This is a big deal, not only in the States, obviously, but, you know, in the WCO as a whole, across the board, I’m sure that in the WCO conversations, China, possibly even Russia, were were fighting you on some of these committees at the same time. Regardless of that, it’s come through. How people can when we’re sitting here talking like, well, they I’ve checked out my supply chain as best I can. Ana, why don’t you start us off on this segment for the forced labor protection act? Give us a little bit of a history on obviously, you’ve got a very impressive background, not only here in the States, but also in Europe. With the WCO that said you’ve probably looked at many regulations and proposals and all of that, tell us a little bit of why this is such a big deal, and what we what’s come out of it regarding the regulations.

Speaker 1 7:53
Well, you know, thank you, Andy. I’ll, I’ll mention that. You know, the issue of forced labor is one that the United States has been focused on, or has had laws on the books for, for a very, very long time, there were some, some statutes, and, you know, before 1930 but the forced labor statutes that that we have today is part of the Tariff Act of 1930 under Section 307 I don’t want to get too technical on it, but under Section 307 and you know, for many years, the US had a consumptive demand clause that had evolved due to business interests and had been put onto the section 307 and what that consumptive demand clause? We’re not going to go deep into this, but I this, but what that consumptive demand clause said was that the it it converted the statute to say that the US was to prohibit the importation of any goods produced in whole or in part with forced labor, prison labor, convict labor, forced child labor, etc, unless the US did not manufacture sufficient quantities of those goods to satisfy us. Consumers demand. You and I know that over the last 30 years, at least, the US has offshored manufacturing. And so basically, almost everything qualifies for that, for that exception. And so since that that clause went into effect, enforcement was, was basically non existent, because everything you know, practically fit into that exception. So you know, over the years, Congress has sought to type, try to tighten up the the statute, and they were successful in doing that in 2016 as part of TIF Tia of 2015 which is a weird misnomer, but as part of TIF Tia, they amended the statute again and removed that consumptive demand clause. And so from that, Customs and Border Protection began taking some enforcement action, building the capability that they didn’t have because they. Weren’t able to really take enforcement before, and so they build the capability and start issuing withhold release orders under Section 307, and a few findings as well. And so the private sector is getting used to kind of what that means and what that process is. Okay, you have a detention for forced labor, you know, what do you have to do to put together an admissibility package? Still a lot of confusion on the part of of the private sector, but over the last few years, they’ve kind of been starting to get their act together in in trying to figure out what kinds of supporting documentation, what kind of due diligence they need to undertake with their supply chain. Then Congress felt that there really wasn’t enough being done to address the issue of the atrocities that are happening in the Xinjiang Autonomous re the Xinjiang Uyghur Autonomous Region of China. And so, because the the normal enforcement you call

Andy 11:05
it, excuse me for, well, forgive me for interrupting in that region. Is that what you call it was a x u a is it x u a r?

Speaker 1 11:16
Because it stands for the shin John, autonomous region, x, u, A, R region. So, yeah, okay, so Congress decided that it wasn’t enough and that more needed to be done to really make a strong statement. You know, back in July of 2020, the US government as a whole issued a Xinjiang business advisory, and basically it said, get out of Xinjiang, because there’s so much forced labor there that you’re not going to be able to avoid enforcement. And then in July of 2021 there was an updated Xinjiang business advisory that was issued by the US government. And so there’s been a lot of a lot of messaging to the public, to the private sector, to other governments, that there’s a real problem. Obviously, there’s a real forced labor problem around the world, but there’s a real, serious problem of forced labor in this region of China. So fast forward to December of 2021 and Congress successfully passed this Uyghur forced labor Prevention Act. And what it does that’s different than what the normal 307 enforcement is, is that it institutes a rebuttable presumption that any goods that are tied in any way to the Xinjiang region are presumed to be made with forced labor until they’re proved otherwise. And so that’s different than then the standards and the thresholds of evidence that are that CBP might consider when looking to see if they’re going to if they’re going to release the good what the the enforcement and the provisions that were put in for Xinjiang are modeled after the provisions that we that the US had in place for dealing with North Korea. So there were already provisions that the US government used to take enforcement action against any goods produced by North Koreans, and that included a rebuttable presumption. So if, if the US government had indications that there were any North Koreans involved in making those products, then they would, they could prohibit the importation, because they were deemed produced with forced labor.

Andy 13:33
Let’s talk about the rebuttable presumption is that when somebody brings in, in today’s world, let’s take out the controversial countries right now. You just bring in something out of Europe, out of South America, whatever. And as it’s coming in, if Customs has a question on it, it’s assumed that it’s valid of what’s presented, country of origin, the paperwork and all that. And you can supply, if you will, proof after the fact. Whereas, if I’ve got this correct, and again, understand, I’m dumb as a box of rocks here. So you got to simplify this all right. Is that in this particular case, the rebuttable presumption is I have to prove it before it’ll be allowed into the commerce.

Speaker 1 14:21
So let me, let me maybe, maybe put a little finer point on that. Under the normal process for for enforcement, for for 307, the government, or CBP in particular, has had to conduct an investigation and establish reasonable suspicion that those goods, that those particular groups, are produced with forced labor, and and CBP publishes that. They put it on a website, they say, Hey, if you buy anything from Amy Morgan’s manufacturing, it’s going to be made, it’s going to be detained, and you’re going to have to prove that it’s not made with forced labor. And so that’s everybody has noticed that that’s going to happen. Happen in a with regards to rebuttable presumption, the US government doesn’t have, you know, they, they, they have published some, you know, high risk connections, right? That as part of the strategy that was published on June 21 but they don’t have to publish anything. They don’t have to say anything. They just have to have information that there’s a connection, and then, because they can establish that connection, then the burden shifts to the importer of record to be able to prove, with clear and convincing evidence, with a much shorter time frame, that those goods are absolutely not made with forced labor or any connection to Xinjiang.

Andy 15:41
Okay, okay. So again, the it’s more than just Yeah, it does. I’m thinking of the supply chain person where, all right, you’ve got your your purchasing, your outsourcing group that is finding a factory for a widget to be manufactured, and as it’s going through with the transportation and logistics folks, a lot of times the compliance. And it’s paramount that, in my opinion, compliance needs to be included with the logistics and the purchasing folks, and they ought to be joined at the hip, not always there. But the point being is this, as the information is flowing through, the compliance they’re going to need to say, this is the information I need to have before it comes in. Otherwise you’re going to be manufacturing a widget, transporting it, exporting it from, you know, China, in this case, and importing it into the US, and it’s going to get held up and potentially either have to be returned or destroyed, if that information is, you know, not provided or suspect or whatever.

Speaker 1 16:48
Yeah, one thing that that I think people are maybe confused about is I think that they think that the requirement is new, or that that the rules are absolutely new. I mean, certainly the Uyghur forced labor Prevention Act has put in the rebutt presumption, which is kind of a new, new thing, but the issue of how CDP conducts enforcement is foundational, and it’s and and part of that, and I’m going to get to what I mean by foundational so our regulations, or the US government’s regulations, say and and this was reinforced in 1993 with the passage of the customs Modernization Act, along with NAFTA, where the burden shifted to the importer of record, requiring the importer of record to exercise reasonable care to ensure that any foreign goods that they present for importation to the United States are in compliance with all laws, rules and regulations. Everybody agrees that is on the books. That is a requirement. But then how does that get operationalized? Will that get operationalized when those goods are presented, then CBP has five days to decide, do I know enough to let these goods in, or do I not know enough to let these goods in? And the Do I not know enough? Or is there a concern? Can be agriculture related? Can be FDA related? It can be IP IPR related, or it could be forced labor related. And so within those five days, they say, You know what, I can’t let these go, because I believe that, in this case, that there is a connection with Xinjiang. And so the importer of record receives, along with every normal processing, a detention letter that tells them that they have 30 days to provide clear and convincing evidence, because these particular goods are being detained, because the US believes that these goods are made with forced labor due to a connection with Xinjiang.

Andy 18:56
Okay, now with that of what you’re saying and that it that’s they. I like the idea that they have at least five days to make that decision. Am I going to release it or not? As far as the customs inspector, it’s not indefinite yet. If they’re going to issue a CF 28 I assume, on saying you got 30 days to provide more. Is that how they’re doing it? Or how are they going to No, no, no, it would be a separate notice. It’s a detention notice, yeah, oh, okay, I’m sorry I didn’t catch that while ago. All right, so was, which is a different situation here. Okay, all right. So to that extent, when people have provided, in response to the detention notice, what customs was, hopefully, in response to what customs is looking for, and Customs has rejected that, what is it that the people are providing from their company? Companies that is not measuring up. Well, I’ll

Speaker 1 20:03
give you a couple of examples. I can’t tell you specifically, but I’ll give you a couple of examples of what not to do, right? So in the early days, we saw detentions under normal 307 and again, recognizing that 307 actually has a lower bar for for evidence, then, then the Uyghur forced labor Prevention Act, a shipment would be detained, and a company or the importer record had 90 days, which they still do under a normal withholder lease order, had 90 days to provide an admissibility package to try to gain the release of that of those goods. And then they would send the equivalent. Obviously, we do so much digitally now, the equivalent of boxes and boxes of boxes of documents, right? The electronic equivalent of that with no road map, with no explanation, with no no understanding of do these documents even relate to the specific goods that are being detained. I don’t care what you did 10 years ago or five years ago, the evidence that you’re providing needs to be very focused on. I have container number XYZ, what what’s in there is what you need to prove. And then tomorrow, when they detain container ABC, it’s a whole other package you’re going to have to submit for container ABC, because we don’t know if that’s the same merchandise. We don’t know what happened with with those goods. It’s a whole, it’s a whole other admissibility package is submitted by by the specific detention. So that’s one thing that I would say, is don’t send the kitchen sink. You know, be very focused, be very precise about what’s detained and what what went into the manufacture of that of those particular goods. The other thing is that let

Andy 21:53
me, let me hang on just second. So let me rephrase what I just heard, just for a second. Is that the strategy that maybe some would use to inundate customs with an overload of information, whether it’s relevant or not relevant, sounds like most of it was not relevant, is not a good strategy in responding to this exactly a fair statement. That’s a very fair statement. Okay, so what’s the next thing?

Speaker 1 22:19
Yeah, the next thing is submit your package as quickly as possible. Obviously, you need to do the research and have your information available before you send the merchandise to the US, ideally, because you’re not going to have a whole lot of time, you need to submit your package to CBP, and CBP needs to make a decision relatively quick, because up at the 90 day mark, the importer record accrues protest rights, and that cruise might not be the right word, but is eligible to to file a protest and CBP Can, can just say, You know what, we failed to we don’t, we haven’t had Time to review it. So we’re excluding it because we we can’t admit it. We can’t determine that it’s admissible. So that so the sooner that the package is submitted, the better. And as it relates to the Uyghur forced labor Prevention Act, that timeframe is 30 days. So there’s no way that you are going to be able to submit a package or any evidence that you haven’t already gathered within 30 days? I don’t know how that can possibly that be done with a with a Chinese supply chain, right? So definitely the answer is, start early. Start Now you should have started yesterday, but, you know, start now. Hey

Lalo 23:43
Andy, so I’m sorry to interrupt, but we’re coming at the end of the 20 minutes. But this is such an exciting show. I mean, we need to keep on going. We need to hear from Amy. Let’s just go ahead and cut it here, and hopefully everybody will tune in later. And what do you what did we take away from today’s episode?

Andy 24:07
Okay, one of the things that as we’re looking at is, again, you need to become proficient with the current legislation as well as the regulation. And with that, again, you can look at the show notes for some of that. Here’s another thing, as far as a resource, if you’ve got some questions regarding, should your would your company, be impacted by some of the commodities that would be coming out of the North West Region of China, which is that Uyghur region, you should be reaching out to ANA or to any other consultants and experts in the field, but the key again, become proficient. That’s key you need to read. It doesn’t take that long. Read the law. Read the. The regulations and the Federal Registry notices. That gets you up to par on not only what was passed, but gives you an idea of what’s expected as of you, especially being an importer. And then the next thing we’re going to be talking about in the next show, okay, what do you do about it? It’s like exactly the expectations are big, but there’s a lot of actions to fulfill those expectations.

Lalo 25:32
Perfect. Okay, well, thank you, Andy, and then let’s wrap it up, and let’s, let’s, y’all tune in for the next show. Hey

Andy 25:41
folks. Appreciate your support of simply trade, and hopefully this will be something that, again, you can get that negative knowledge that you can take with you and be able to identify the steps your next steps on what you need to do. Have a good day.

Lalo 25:58
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