Image: A farmer picks cotton in Hami in northwest China’s Xinjiang Region on Oct. 9, 2020.Feature China / Barcroft Media via Getty Images file
With the closing of an old loophole, the U.S. is blocking the import of millions of dollars worth of clothing and other goods made with “slave” labor.
Last month, dozens of boxes of sneakers, men’s dress shirts, blouses and other clothing were unloaded off a plane in Atlanta, bound for U.S. consumers. But the shipments never made it out of the port.
Although many of the goods listed Vietnam as their country of origin, Customs and Border Protection inspectors detained the goods because of “reasonable suspicion” that they were actually made with cotton harvested by forced labor in China’s Xinjiang region, where more than 1 million Uyghurs are believed to be held in camps.
Just a year ago, the goods might have sailed through customs. Now, however, customs officials are detaining hundreds of millions of dollars of goods suspected of being made with forced labor, many of them products Americans consume and use every day, from clothes to palm oil, tomatoes, rubber gloves and even hair extensions.
Already, it is clear that Chinese cotton has become the main target of the new enforcement push. Seventy-five percent of the nearly 1,000 import shipments intercepted so far this fiscal year were suspected of containing cotton from Xinjiang, which produces 20 percent of the world’s supply.
The U.S. has had the legal authority to detain goods it suspects were produced through forced labor since 1930, but for 85 years it was almost impossible for officials to apply that power because of a trade law loophole. Officials issued orders barring goods only twice in the 1950s and 30 times in the ’90s — many against Chinese imports made with prison labor.
The government had not issued a forced labor order in 15 years when the loophole, which exempted any goods for which domestic production did not meet demand, was closed in 2016. The U.S. began cracking down slowly, with just four orders that year and two more in 2018. This year, enforcement actions have skyrocketed. This fiscal year, which ends this month, Customs and Border Protection, or CBP, has detained at least 967 shipments worth more than $367 million, according to the agency. Detention of goods does not mean the companies affected were necessarily aware of forced labor in the supply chain.
“That change is extremely significant,” said Scott Nova, executive director of the Worker Rights Consortium, a nonprofit organization that investigates working conditions in factories around the world. “Brands have effectively never had to think about legal liability in the context of the labor practices of their overseas suppliers. [This] forces them to do so.”
The U.N. estimates that 25 million people around the world suffer under forced labor conditions, from employers’ withholding wages or passports to physical violence and even imprisonment. Substantial enforcement by the U.S., the largest goods importer in the world, could create economic incentives for companies to change their supply chains and inspire other countries to fight forced labor in similar ways.
“The impact is growing,” said Ana Hinojosa, executive director of CBP’s trade remedy law enforcement directorate, which oversees forced labor enforcement. “As we’ve been taking more and more action, people realize that we’re serious about this and that we’re going to continue our investigating and continue taking enforcement actions as appropriate.”
The power to detain
When CBP has reasonable suspicion that goods from a factory, a company or a country are made with forced labor, it issues a withhold release order — a public notice telling port officials to detain the goods.
CBP has barred imports from Top Glove, the world’s largest disposable glove manufacturer, and two of the largest palm oil companies in the world. Top Glove announced this year that it has addressed all the forced labor indicators CBP found and submitted evidence to the agency for review. A spokesperson for the company said it “remains committed to [improving] its workers’ welfare as it understands this is key to ensuring their continued wellbeing, health, safety, and happiness” and directed NBC News to its continuous improvement report.
(A few days after initial publication of this article, CBP announced Top Glove imports would again be allowed into the U.S. after the company provided evidence it had addressed the forced labor indicators CBP identified. This included issuing more than $30 million in remediation payments to workers, according to the agency.)
In public statements, palm oil producer Sime Darby Plantation said that it is committed to fighting forced labor and that it has hired contractors to examine its practices since the CBP order went into effect. However, the assessment has been delayed by recent Covid-19 lockdowns in Malaysia, the company told NBC News.
“SDP remains committed to completing this important work and to ensure our workers have safe working and living conditions,” it said.
Its competitor FGV Holdings Berhad issued a statement saying that the allegations against it had been public for years and that it had previously taken steps to improve conditions before CBP issued an order against its goods. The company recently announced that it will hire an independent auditor to review its labor practices. It did not respond to a request for comment.
CBP is now going after goods as wide-ranging as the catches from individual fishing vessels to whole classes of products from entire countries, like tobacco from Malawi and artisanally mined gold from the Democratic Republic of Congo.
According to the agency, its orders have led to improved standards in some areas already.
In 2019, CBP banned imports of bone black, charcoal made from animal bones and used in filters, from a Brazilian company. A year later, the agency announced that imports were once again admissible after the company addressed the indicators of forced labor CBP found. The agency also revoked an order against a Malaysian glove manufacturer last year after it obtained information “showing the company is no longer producing [the gloves] under forced labor conditions.”
Three-quarters of the detentions this fiscal year, however, have been under two orders related to cotton produced in the Xinjiang region of China, which have also made up the largest volume of goods detained since the loophole was closed five years ago.
Many international apparel brands have said in recent statements that they do not source from or approve of forced labor in Xinjiang. This spring, brands like Nike and H&M were targeted by boycotts by Chinese consumers over past public statements about the companies’ commitments not to use cotton made with Uyghur forced labor. China has repeatedly denied allegations of forced labor and human rights abuses, and it said a statement about Xinjiang in June from the Group of Seven leading industrialized countries was “fact-distorting content.”
“The apparel and footwear industry has a moral and legal obligation to make sure forced labor does not infect our supply chains,” said Steve Lamar, president and CEO of the American Apparel and Footwear Association. “Because we take the issue of forced labor so seriously, we have found the reports of it in Xinjiang to be disturbing and have taken extensive action to ensure that products made with forced labor do not touch our industry’s supply chains.”
But determining cotton’s origin is a challenge. Xinjiang’s cotton is often combined with cotton from other areas during manufacturing, and it may be processed in multiple countries before it ends up in the supply chains of major clothing brands and is sold to unwitting consumers. Lamar said companies are using new technology and methods to monitor supply chains, but there is no silver bullet given the many ways cotton from different areas can be combined during the transnational production process.
A lack of resources
CBP’s forced labor office is still very small. Nonprofit organizations that conduct forced labor investigations, whose petitions CBP often relies on to launch its own investigations, have criticized the agency for the slow pace of its investigations and a lack of transparency.
Bipartisan members of the House Ways and Means Committee, which the agency reports to about forced labor enforcement, have also pressured CBP to increase its enforcement, sending letters urging it to take more action during both the Trump and the Biden administrations.
In a statement, CBP said that it issues withhold release orders as “expeditiously as possible, after thorough investigations,” and that it is very interested in collaborating with civil society groups and other stakeholders on forced labor. However, federal laws governing the disclosure of trade information limit what it can share publicly, and it must “carefully [balance] the need for transparency with the need to maintain the integrity of its law enforcement investigations and the safety of sources,” it said.
The biggest challenge right now is resources, said experts and government officials who work on forced labor. For more than a year after the loophole was repealed, CBP had no more than four employees working on forced labor issues, and it had no official forced labor budget. The agency established a Forced Labor Division in 2018, but it still had only about 12 staff members more than a year later, according to a report last year from the Government Accountability Office, or GAO.
A second GAO report last year noted that many investigations were on hold because of the lack of staffing and resources — it was the listed reason for as many as two-thirds of all suspended investigations.
Hinojosa, the CBP forced labor enforcement director, said the agency has implemented the GAO’s recommendations, including increasing staffing, and got a significant increase in forced labor funding from Congress this year. The House Ways and Means Committee is requesting as much as a tenfold increase in funding and a quadrupling of staffing for CBP’s forced labor investigations and enforcement next year.
The government has additional forced labor tools that have rarely or never been used, including civil fines and prosecutions of forced labor importers.
“Will CBP enforce aggressively and appropriately? Will DOJ take action where action is appropriate?” asked Nova of the Worker Rights Consortium. “If those two things happen, it is going to have a significant impact on how corporations assess risk and therefore how they behave in their supply chains, which will help workers.”
‘No safe harbor’
Goods no longer allowed to enter the U.S. can easily find their way to other markets, however.
Advocates say that is why U.S. enforcement alone is not enough and why other countries should use the U.S. law as a model for their own.
“There needs to be no safe harbor for forced labor goods,” said Allison Gill, the forced labor director of the nonprofit Global Labor Justice-International Labor Rights Forum. “We want to avoid a situation where manufacturers or importers can just dump their goods elsewhere.”
Most countries decry forced labor, but until last year, the U.S. was the only country with the statutory power to detain goods made with forced labor. Some countries, like the U.K. and France, recently implemented transparency laws requiring companies to report how they identify and take action against human rights risks in their supply chains, as well.
When the U.S. renegotiated its trade agreement with Mexico and Canada in 2018, the new treaty required Canada and Mexico to make their rules about forced labor consistent for just that reason. Canada passed its law last year, becoming only the second country with such a rule, and it has been building up its forced labor imports program since then, but as of late last month, it had not taken any enforcement action, said a spokesperson for the Canadian Border Services Agency. Mexico’s Parliament has yet to pass a version of the law.
More countries are considering U.S.-style laws, from Australia to Taiwan. The European Parliament is in the process of adopting E.U.-wide due diligence requirements for importers that could pave the way for a full ban on imports made with forced labor. Such action by the E.U., the second-largest import market after the U.S., would have substantial international impact.
“A lot of these problematic jurisdictions … the export market is somewhat diverse,” said John Sifton, advocacy director for Human Rights Watch. “But in a lot of these countries, if you add the E.U. and U.S. together, you’re basically talking about the majority of exports in a lot of sectors.”
In June, the G7 announced a commitment to fight forced labor and directed its trade ministers to come up with forced labor strategies to discuss at its next meeting in October.
“There is a sea change,” said Martina Vandenberg, president of the nonprofit Human Trafficking Legal Center. “I would compare this to the moment when enforcement of anti-bribery statutes started. Bribes used to be ubiquitous. … That all changed with the passage of the Foreign Corrupt Practices Act and, more importantly, its implementation and enforcement.”
U.S. lawmakers are working to increase forced labor import restrictions through additional legislation. In July, the Senate passed a bill that would bar all imports from Xinjiang over concerns about forced labor. The House, which passed a version of the bill last year, has yet to take up the Senate bill. A similar bill that barred imports from North Korea passed in 2017.
“The question is what does it take to enforce” the laws, Nova said. “You’re talking about, in the course of a given year, literally billions of potential violations. … It’s big, [but] it’s feasible. It’s a question of whether there’s a real commitment to do it and to provide the necessary resources.”