Governments are increasingly scrutinizing human trafficking and forced labor abuses in private sector operations. In addition to the moral imperative to address these abuses, businesses should be on alert given the significant disruptions in supply chains that government regulation may cause, resulting in potential economic, legal, and/or reputational harm. Apparel, food and beverage, technology, and financial services companies in particular should closely monitor and prepare for global regulatory developments.
1. Companies should expect more active involvement from civil society organizations in the U.S. Customs and Border Protection’s Withhold Release Order process.
The U.S. Customs and Border Protection (CBP) has utilized Withhold Release Orders (WRO) to suspend the importation of goods at a U.S. port of entry when the agency has reasonable evidence of the use of forced labor in the manufacturing or production of a good entering the U.S. supply chain. The onus is then on the importer to demonstrate to the U.S. government that the good was not made with forced labor. In the last two years, the CBP has ramped up its use of this enforcement tool, issuing 13 WROs across multiple industries in 2020 alone.
While the CBP has welcomed the public to submit information on merchandise that could be considered for a WRO, there has been limited visibility on submissions until now. In February 2021, anti-trafficking organization Liberty Shared submitted two petitions to the CBP concerning the use of forced labor in the supply chains of the apparel industry in Leicester, UK and of Boohoo, PLC.
What Business Can Do
Companies which have identified forced labor as a supply chain risk should be conducting ongoing human rights due diligence to identify, assess, and mitigate potential or actual risks of forced labor, engage in meaningful dialogue with rightsholders, and ensure their grievance mechanisms are working.
2. Companies should prepare for increased regulation and withholding of products sourced or manufactured in Xinjiang, China.
Reports have described the mass internment and surveillance of over a million ethnic Muslim minorities in Xinjiang, China. News sources detail how Uyghurs and other minorities are being forced to work in factories that produce raw materials and goods which are shipped throughout China and around the world. Reports have also documented the capital provided to Chinese technology companies by financial institutions and private equity firms to support the mass surveillance of Muslim minorities. Industries implicated in these reports include food and beverage buyers, pharmaceutical companies, apparel brands, and technology and renewable energy companies.
In response to these findings, the U.S., Canada, and UK have all published advisories for companies doing business in or with links to Xinjiang. The U.S. has also passed a Uyghur Human Rights Policy Act, issued sanctions, and banned the entry of goods allegedly produced by forced labor in Xinjiang. The EU is considering implementing sanctions as well.
What Business Can Do
Companies should map business activities and business relationships with suppliers, customers, and end users of products in China and conduct due diligence on business relationships to ensure that they are not working with entities that are involved in aiding human rights abuses. With business challenges related to Xinjiang unlikely to disappear in the short term, companies should work with third parties such as NGOs, industry associations, and business associations to better understand the human rights situation, and they should also craft and pilot traceability measures in collaboration with peers. See guidance from the CBP on best practices here.
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