On January 13, 2021 the US Department of Homeland Security’s Customs and Border Protection (CBP) announced that, effective immediately, all cotton and tomato products imported from China’s Xinjiang Uyghur Autonomous Region (XUAR) will be barred from entering the United States. The ban, officially called a Withhold Release Order (WRO), is “based on information that reasonably indicates the use of detainee or prison labor and situations of forced labor” according to CBP. This region-wide order joins a growing list of WROs targeting alleged forced labor in China.
Under this WRO, all cotton or tomato products originating from XUAR will be detained at all US ports of entry pending the submission to CBP within three months of entry of satisfactory proof that the products were not produced with forced labor. If CBP is unsatisfied with the provided evidence the products will be seized and potential civil and criminal investigations and penalties could occur. This particular WRO also includes apparel, textiles, tomato seeds, canned tomatoes, tomato sauce and other goods made with either cotton or tomatoes from XUAR. CBO has clarified that the WRO “applies to cotton and tomatoes grown in that region and to all products made in whole or in part using this cotton or these tomatoes, regardless of where the downstream products are produced.” Importers of record are responsible for ensuring no part of their product has cotton or tomato inputs that were harvested or produced at any point in their supply chain via forced labor from XUAR.
The Xinjiang region produces 85% of China’s total cotton production according to the National Bureau of Statistics of China. Previous WROs have more narrowly targeted cotton products involving XUAR and certain restricted entities, such as those affiliated with the Xinjiang Production and Construction Corps (XPCC). According to CBP Office of Trade, these previous orders have already led to the detaining of shipments valued at $2 million.
The region-wide cotton and tomato ban aligns with broad US government efforts to combat forced labor. In September 2020, the US House of Representatives passed two separate bills intended to combat alleged forced labor and other human rights abuses in XUAR. These bills would require numerous executive actions be taken to address the allegations and likely will be reintroduced by the new Congress. The United Kingdom, Canada, and the European Union have all recently announced plans to address forced labor as well.
Given the continuous enforcement actions taken by the United States and others around the world in addition to the potential reputational risks, companies should conduct a comprehensive review of how their existing compliance programs address the risks of forced labor, indentured, convict and child labor, labor trafficking and related labor issues in their supply chains. The review should include related economic sanctions and export controls risks as described in our prior alerts (here, here, and here). Following a careful risk assessment, enhancements to policies and procedures, contractual provisions, due diligence and auditing processes, training, and reporting and response mechanisms may be warranted.
For specific advice on navigating the impacts of a possible WRO or related US sanctions and export controls, and other legal risks described above, contact a member of Steptoe’s Business & Human Rights, Economic Sanctions, Export Controls, or Customs team.