China Products Made with Forced Labor are now in U.S. Customs’ Crosshairs

On May 1, U.S. Customs and Border Protection (CBP) announced it had issued a withhold release order (WRO) against hair products manufactured by a Xinjiang company called Hetian Haolin Hair Accessories Co. Ltd. (Haolin). The WRO was issued under the authority of 19 U.S.C. 1307, which prohibits importing merchandise produced by forced labor.

To be fair, the evidentiary standard for issuing a WRO is — by necessity — not particularly strict. As CBP indicated in their press release regarding Haolin, the WRO was issued “based on information that reasonably indicates the use of forced labor” (emphasis supplied).

Because of work I have done representing non-Chinese companies subject to WROs, I know bad-faith accusations by a competitor can result in a WRO. In an ideal world, CBP would verify forced labor allegations onsite, but sending investigators overseas is costly, potentially dangerous, and likely impossible in hostile countries such as China. As long as CBP provides avenues for affected companies to respond to allegations — which it generally does — the current system probably offers the best compromise.

We are not privy to the specific information that supports the WRO against Haolin. However, if there is one place in the world at the moment where an allegation of forced labor pretty much always must be taken seriously, it is Xinjiang.

Back in March, in China’s Other Supply Chain Infection — Forced Labor, we wrote about a report issued by the Australian Strategic Policy Institute (ASPI) titled Uyghurs for sale, which described “the mass transfer of Uyghur and other ethnic minority citizens from  Xinjiang (a/k/a East Turkestan) to factories across the country.” And as we warned then, “China’s forced labor infection has now moved beyond labor intensive industries to virtually all of China’s export industries. No foreign company is safe from this.”

Though the Xinjiang forced labor problem has spread across China, it was in Xinjiang itself that the groundwork was laid.

Estimates are that over 4,400 Chinese enterprises established ‘satellite factories’ in Xinjiang to take advantage of the slaves being provided by the Xinjiang government. These factories are mostly in labor intensive industries, dominated by clothing and footwear. As would be expected, this pool of forced labor has already infected the supply chain for foreign buyers. The ASPI Report lists 54 large and well-known foreign companies that are purchasing goods manufactured by forced labor.

As tensions with China rise over its handling of the COVID-19 outbreak — fueling existing tensions over IP theft, military posturing in the South China Sea, and many other issues — you should expect an increasing number of Chinese and foreign entities will end up in CBP’s crosshairs. And though entities associated with the Xinjiang program will likely be at the top of CBP’s forced labor list, the forced labor problem in China both predates and goes far beyond Xinjiang. The long list of Chinese manufacturers subject to WROs is a testament to this.

As we described in our article on the Xinjiang forced labor program and in Forced Labor in China: Don’t Trust AND Do Verify, forced labor is a more pervasive problem than most foreign companies seem to realize. And as we repeatedly point out, this is not just an ethical issue: It is also (for American companies anyway) a violation of your own country’s law.

It is often the case that this blog’s advice is timeless, and when it comes to this issue we anticipate it will be a very long time before we start sounding the all-clear. We can therefore reissue the following advice we gave back in March verbatim:

U.S. importers need to take the measures required by U.S. Customs to deal with the issue. Every importer of products must develop a written program dealing with the forced labor issue by taking affirmative action to reduce their risks. There are no exceptions and there is no ‘get out jail free’ card.

Are you sure that the products you buy from China were made without forced labor?

To all the other good reasons companies might have to reconsider China, you should be sure to add this one.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.