CBP Says de Minimis Provisions Within WROs Something for Courts to Consider

CBP recently updated its frequently asked questions about the withhold release order aimed at silica-based products from China that made a first mention of de minimis considerations (see 2108030026). CBP's revised response to a question about whether finished products containing a small percentage of silica-based products subject to the WRO now says the agency “recognizes there may be some very fact-specific instances, where the question of the contribution of prohibited labor to the whole of a product (from a quantitative and a qualitative perspective) is something that a court might consider with respect to the statutory intent of Section 1307 of Title 19, United States Code.” The updated version also removes any mention of the phrase “de minimis” and an example of a de minimis contribution.

An earlier version of the FAQs said that “if the contribution of prohibited labor to the whole product is insignificant (both from a quantitative and a qualitative perspective), CBP may consider the product outside the scope of the statute. For example, if prohibited labor is used to manufacture a single part in the engine of a car, the contribution of prohibited labor to the final product (the car) may be considered 'de minimis' for purposes of Section 1307. But, if the part is an essential part of the engine or the manufacture of the part comprises a substantial portion of the total labor, CBP may deem the car to be within the scope of Section 1307.” CBP didn't comment on the changes.

The update indicates that the question of de minimis is something for the courts to decide, rather than CBP. The agency responded with language similar to the revised FAQs last month to an International Trade Today inquiry about its WRO de minimis policy (see 2108180017). “Hypotheticals are used for illustrative purposes only; CBP does not take positions based on hypothetical scenarios,” the CBP spokesperson said in August. “Rather, in accordance with its statutory and regulatory authorities, CBP issues rulings and makes decisions when presented with actual facts for specific importations.” The agency also then said the de minimis language was applicable to all WROs and findings.

The change “effectively revoked” the de minimis exception and “it is now reasonably clear that CBP would not recognize any de minimis exception in the first instance, i.e., a challenge to the detention of specific goods,” law firm Covington and Burling said in an alert. As a result of the change, “companies should continue to assess the strength of arguments that any forced labor contribution is de minimis,” the firm said. “If goods are detained subject to the Hoshine WRO, CBP is likely to reject these arguments unless and until the CIT authorizes the application of a de minimis exception with respect to the detained goods. It is also possible that CBP would view any future court decision as fact- and product-specific, depending on the reasoning and approach of the court. Interested parties may also wish to evaluate the viability of presenting a hypothetical or proposed manufacturing process in the context of an advance ruling. The advantage of this approach would be the creation of a more complete record for ultimate consideration by the CIT.”

Mayer Brown said in an alert that CBP "has walked back its previous guidance" by making the change. "Neither the underlying statute nor CBP's implementing regulations for the statute contain a de minimis provision," it said. "CBP's most recent guidance suggests it is not willing to rely solely on its authority to enforce the law to create a de minimis standard."