Imports From Around Globe Have UFLPA Risk, Webinar Panelists Say

Correen Wood, an attorney who specializes in consulting on forced labor and due diligence in supply chains, with a number of clients in the automotive and aerospace sectors, said some of her clients are struggling to figure out what to include in the documentation they send to a CBP Center of Excellence and Expertise after a detention over suspicion of Xinjiang content in their products. She said the CBP staff who deal with apparel or with solar panels have a clear process, in contrast to her areas.

"I’m finding in the base metals [section] it’s new, and they're trying to wrap their arms around the best way to approach it," she said during a Sayari webinar Sept. 13 on UFLPA and forced labor laws around the world.

Francesca Navarro, a licensed customs broker and global sourcing and trade compliance manager at ChefWorks, said Canada's new law is going to be challenging because it requires an annual report, which takes resources.

However, she said that laws that ban imports based on forced labor content are the hardest to deal with, because there's a lack of clear guidance on how to comply.

John Foote, a partner at Kelley Drye, asked the panelists to compare the utility of in-person social audits and desk-based research, such as ownership records, trade shipment records and the like.

"Desk-based certainly matters a lot more in the UFLPA context," he said, since those historical trade relationships that can be accessed through databases are used by those who make allegations of forced labor contamination and they're used by CBP.

Wood agreed, saying the tools she's using to map supply chains are the same ones CBP is using. Still, she said, don't discount in-person visits.

"I do believe you need to do your due diligence on the desk first," she said, which will highlight where there could be concerns. She added, "If I have a supplier that is fighting me tooth and nail" when asked to provide its suppliers' names and contacts, "I’m going to need to send somebody on the ground."

Panelist Fred Waelter, a social auditor who has done audits in 35 countries and a principal consultant for sustainable supply chains at BSI Consulting, said sensitive regions in China cannot be audited because China restricts internal travel to those provinces. Moreover, auditing firms were asked to register with the government, which made executives fearful that they could be fined or lose their business licenses.

Waelter said companies can hire professional auditors to train officials from the companies who travel to factories outside the country to look for red flags. The officials are there to check quality, not to look for debt bondage, but he said they can notice if one set of workers looks a little different from the others ethnically and if they are not mixing with their co-workers.

"Is there a group of workers that’s isolated from the other workers? That’s often a sign of North Korean workers," he said.

Waelter said when companies are beginning with desk-based research to determine risk, they wouldn't just look at a suppliers' links to other companies; he would also suggest they do a test run of documenting a specific purchase order -- is it traceable back to the raw material?

Foote said when you dig into the CBP dashboard for UFLPA detentions, you see that buying products outside China is not the most effective way of protecting yourself from a detention. Only 13% of detentions have included goods with a Chinese country of origin, he noted, though China has a wide diversity of products that have been detained.

Vietnam has had five product categories detained, he said, while Malaysia has only had solar panels detained.

Since June, he said, he's noticed imports from more parts of the world have been detained, though those detentions aren't at a high volume yet.

He said apparel, agriculture, chemicals, base metals, machinery and others have been detained from the Western Hemisphere, Europe and developed countries.

He said there has been a detention of Canadian goods, of Japanese goods, of Korean goods; machinery from Poland was detained; apparel from Nicaragua was detained. The dashboard says $12.6 million worth of Mexican goods have been detained, which covered three shipments.

Foote said he believes CBP is sending a message that Xinjiang ties will be investigated everywhere.

He also asked the panelists how they approach suppliers when the suppliers do not want to say who their vendors are. Waelter said it's "a big roadblock for many clients, especially when you’re looking deeper and deeper in the supply chain." He said compliance officials saw this when they were trying to detect if conflict minerals were in their supply chains. "You just don't get any useful information," he said.

Wood said, "There’s no real secret trick; it’s a combination of negotiation, teaching the company values." She said she tries to get them to "understand we’re not targeting them as much as we’re trying to get information to keep us from being targeted." However, she finds companies in China, Mexico, India and Malaysia have a fear of reprisal.