Suspension of Release Orders (WRO): Supply Chain Diligence, Compliance and Best Practices | Benesch

The Biden administration’s interest in reducing the occurrence of forced labor or child contract labor in the global supply chain, and parallel corporate social responsibility goals, draw increased attention to the orders Suspension of Release (WRO) orders enforced by US Customs and Border Protection (CBP). The challenge of strategically implementing responses to these goals and the risk of enforcement can be daunting to say the least. Today and for the foreseeable future, business leaders and their internal advisors are tasked with reviewing, mapping and documenting the entire end-to-end supply chain, from first material sourcing first through overseas manufacturing and finally import into the United States. States. This article provides high-level commentary on the WRO legal regime and what it may mean in practical terms for global sourcing.

Legal authority of WRO

The United States Congress has instructed CBP to enforce a ban on the importation of goods that are extracted, produced, or manufactured in whole or in part with forced labor, which means any work or service performed by a person under the threat of a penalty for non-compliance. and for which the worker does not offer voluntarily. [19 USC § 1307] CBP has broad enforcement discretion under 19 CFR § 12.42. Enforcement is to withhold any imports where there is “reason to believe” that forced labor practices have been used in production. Targeted imports may relate to high-risk products, geographic regions or foreign manufacturers. The topic of WRO interest over the past year has largely focused on the Xinjiang Uyghur Autonomous Region in the People’s Republic of China, although many other active WRO programs are in effect.

Compliance Risk and Enforcement Defense

Importers are required by law to observe and exercise due diligence in ensuring that imported goods comply with US laws and regulations. [19 USC § 1484] This requirement applies to all imports; however, it has great practical importance in the context of forced labor discussions because of the resulting need to consider the entire global supply chain, production locations and manufacturing processes. Violations of the prohibition of forced labor on imports may include civil penalties “by fraud, gross negligence or negligence” when goods are imported using false information or material omissions. [19 USC § 1592] At the extreme, businesses and individuals can face criminal and civil penalties under anti-trafficking laws if they knew or recklessly ignored how work was obtained on imported goods. [Id.]

If CBP elects to withhold the release of goods under a WRO program, then the burden of proof is on the importer, who must present documentary evidence to support the legal entry of those goods. [19 CFR § 12.43] This exercise largely comes down to demonstrating due diligence and the source of the article, as well as its inputs, to show the absence of forced labor (essentially, proving the negative). The importer must provide a certificate of origin signed by the foreign seller or owner of the goods, in accordance with 19 CFR § 12.43. In addition, the importer must submit documentary evidence that they have made every reasonable effort to: (1) determine the source of the goods, including its components, and (2) determine the nature of the labor used in production, including survey results coupled with a statement of the importers’ beliefs regarding the class of labor used during production. Other supporting documentary evidence may be useful in tracing the movement of goods through the supply chain, from point of origin to production, processing and importation into the United States, including: (1) producer affidavits; (2) purchase orders, invoices and proof of payment; (3) a list of producers through the stages of production; (4) transport documents; and (5) worker time sheets, wage payment receipts, etc. Each supply chain and each detention is fact-specific, and the persuasiveness of available supporting documentation will vary on a case-by-case basis.

Submission of procurement documents and other relevant documents must take place within three (3) months of possession of the goods. CBP decides whether to release the goods only after the importer presents this proof. Even if the goods are released, CBP reserves the right to require their redelivery if it is later suspected that they violate the WRO within 30 days of release. If CBP is not satisfied that there is clear evidence that the goods were not produced by forced labor and the goods are not being exported from the United States, then the items will be forfeited to the government American.

WRO Best Practices

Starting from the fundamental understanding that importers must exercise “due diligence” in their compliance activities, pragmatic processes and business practices can be developed for the supply chain under consideration. A comprehensive understanding of inputs and production is required, including forced labor risk assessment for particular items, manufacturers and regions. Four basic types of compliance activities can be built on this set of facts to help meet the duty of care standard: (1) perform supply chain due diligence; (2) maintain a comprehensive social compliance system; (3) obtain certificates of origin and additional supporting documents; and (4) include a clause prohibiting forced labor in contracts.

These activities will help manage the risk of sourcing products outside of the United States while generating documentary evidence for use in the event of a detention due to an alleged violation of the WRO. However, many additional pragmatic compliance tools are available and can be incorporated into the supply chain procurement program as appropriate, depending on the risk profile, tolerances and foreign relationships of the importing company. Thoughtfulness in designing the compliance program is often critical, as the penalties associated with WRO non-compliance can pale in comparison to the effect it can have on preventing or delaying time to market products or the reputational damage it may cause in the minds of consumers. and investors.

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