CBP Offers Forced Labor Enforcement Benefits for "Trusted Traders"
What are they? Are they any good?
It’s a quiet holiday week in Washington, but CBP has released the first concrete offer of benefits to high-compliance importers facing UFLPA enforcement. Teased last week in the WSJ as a “prevetting” program to promote the seamless importation of legitimate trade, the formal program aimed at enhancing the forced labor trade enforcement experience for importers known as “Trusted Traders” is worth a closer look.
To qualify for these new benefits, an importer must be a member of a voluntary program known as “Customs Trade Partnership Against Terrorism (CTPAT) Trade Compliance”. Because membership in CTPAT Trade Compliance is voluntary, it presents one of the few contexts where CBP has to function like a free-market actor—it either offers benefits that the importing public deem worthy of the costs of program membership, or it does not.
The CTPAT Trade Compliance handbook was just updated at the end of last month to include new compliance obligations on members related to preventing forced labor in the supply chain of imported merchandise. In essence, CBP now expects member companies to conduct supply chain screening, have and enforce codes of conduct that prohibit the use of forced labor, and generally maintain “social compliance” programs.
In exchange for complying with those requirements (as well as other more conventional trade compliance obligations imposed the program), CBP has this week officially announced three new “forced labor benefits”, which are described in classically impenetrable customs-speak:
“Front of the Line Admissibility Review”
“Redelivery Hold”
“Detained Withhold Release Order Shipments Move to Bonded Facility”
I’ll help unpack each benefit, but as they appear to be listed in roughly descending order of ostensible value to importers, I’m going to start at the bottom and work my way back up.
Benefit 3 - Move Detained Goods to Bonded Facility
Save (Some Very Marginal) Costs on (Only Non-UFLPA) Detentions
The third benefit is arguably the lowest impact. CBP is promising that CTPAT Trade Compliance members who have goods detained as a result of a withhold release order will be allowed to move those goods to a bonded facility pending a determination by CBP of admissibility.
In theory, being able to move your goods to a bonded warehouse pending a decision on admissibility by CBP could result in a minor reduction in the financial impact of a CBP detention (as opposed to having your goods simply be held at the port pending CBP’s decision to admit or exclude the merchandise). This seems like it would offer trivial savings, if any.
But what’s especially odd about this offer is that it only applies to goods detained as a result of a withhold release order.
By way of refresher, the Uyghur Forced Labor Prevention Act (UFLPA) is built atop the U.S. forced labor import ban (Section 307). CBP enforces Section 307 against goods from most of the world by issuing orders known as withhold release orders, or WROs. Since the enactment of the UFLPA, however, all China/Xinjiang related forced labor enforcement now takes place pursuant to the UFLPA, and not pursuant to withhold release orders.
Thus, this third benefit does not apply to the largest category of goods currently subject to forced labor enforcement—those targeted under the UFLPA. That could change, of course, but it is a curious limitation for an already very modest benefit.
Benefit 2 - Redelivery Hold
Nice Released Merchandise you have there. Would be a shame if it had to be redelivered.
Moving our way up to the second “benefit”, we are confronted with a reminder that however messy forced labor trade enforcement is, it could always be worse.
When CBP wants to target a shipment for forced labor enforcement, it typically does this by issuing a detention before the goods leave the port. By law, CBP has to decide whether it is going to detain a shipment within 5 days after the goods are presented for entry.1 But just because your shipment passes through the port doesn't mean you're out of the woods. Not by a long shot.
The initial 30 days after goods are released from CBP custody is referred to as the “conditional release period”. (In some instances, the conditional release period can extend longer than 30 days.) Under the customs regulations, CBP can issue a “demand for redelivery” at any point during the conditional release period, and for almost any reason needed to ensure compliance with a law governing admissibility (which would include both Section 307 and the UFLPA).2
If CBP decides to issue such a demand for redelivery and an importer cannot comply (e.g., because the imported goods have been consumed, sold, distributed, etc.), the importer is subject to an assessment of liquidated damages.
So what is the second benefit? If you’re a CTPAT Trade Compliance member, and CBP decides after allowing goods to be released that, on second thought, those goods should actually be detained for forced labor trade enforcement purposes, and issues a demand for redelivery . . . you’ll be allowed to just hold onto those goods at your facility, pending the outcome of CBP’s admissibility decision, rather than having to physically redeliver the goods to the port.
While I suppose this is technically a benefit, it mostly strikes me as a veiled reminder of just how saucy forced labor trade enforcement could get. CBP can decide at any point up to the end of the conditional release period to issue a demand for redelivery. And truth be told, whether you’re a CTPAT Trade Compliance member or not, if the goods have already been consumed, sold or distributed, you’re out of luck.
The bigger takeaway here is that not only is CBP not offering any sort of “prevetting” or “preclearance” mechanism, rather it is highlighting to the importing public that it can’t guarantee it will identify which goods will be targeted for enforcement prior to arrival. Nor will it guarantee a decision within the 5-day period statutorily allotted for CBP to make a detention decision. Instead, CBP is underscoring that it might not make such a decision until long after the imported goods have finally reached consumers. And if it so happens to take that long for CBP to decide to act against your imported merchandise, you’re just out of luck. Wild!
Benefit 1 - Expedited Admissibility Reviews
Import from Xinjiang? Do business with UFLPA Listed Entities? Step on up to the front of the line.
The top forced labor trade enforcement benefit offered to CTPAT Trade Compliance members is arguably the oddest of all. CBP has announced that when these “Trusted Traders” experience a forced labor related detention, and wish to submit an “admissibility package” to obtain an “admissibility review”, their submissions are to be prioritized over the consideration of similar submissions from non-CTPAT Trade Compliance members.
Now, that might sound like something approaching a meaningful benefit. But longtime readers of FLT will recall that CBP has defined “admissibility reviews” to mean something very specific in the context of UFLPA enforcement, and something that, at least through the first several months of enforcement, no importer had any use for.3
To recap, in the context of UFLPA enforcement, if an importer disagrees that its detained shipment has a supply chain link to Xinjiang or to a UFLPA Listed Entity, it must seek what CBP calls an “applicability review”. That is, it can argue that the UFLPA does not apply because it lacks the required nexus to the problematic region or entities (and present ill-defined evidence to that effect).
But this “benefit” only applies to admissibility reviews, not applicability reviews. In the context of the UFLPA , only if an importer agrees that its imported shipment was produced wholly or in part in Xinjiang, or by a UFLPA Listed Entity would it seek an admissibility review. To do so, the importer would need to present “clear and convincing evidence” that, notwithstanding the link to Xinjiang or a UFLPA Listed Entity, the imported merchandise was not made with forced labor.
I’ve previously made the case that although the “presumption” imposed by the UFLPA is technically a rebuttable presumption, it is rebuttable in name only, and no importer should ever count on being able to satisfy the requisite burden of proof. Nevertheless, this is the top benefit that CBP has prepared for CTPAT Trade Compliance members.
So who would potentially gain from this new benefit? Companies that know they import goods with supply chain links to Xinjiang, or that do business with UFLPA Listed Entities, and that are facing UFLPA detentions as a result, and that want to obtained prioritized review of their efforts to nevertheless prove the admissibility of their goods.
It will be interesting to see how the market of U.S. importers evaluate CBP’s offer.
Have a great Thanksgiving. I’ll be back to you with more next week.
19 U.S.C. § 1499
19 C.F.R. § 113.62(e).
This benefit might be marginally more useful for importers facing forced labor enforcement outside of the UFLPA. CBP’s announcement of these program benefits makes clear they are not limited to the UFLPA. That said, DHS took to the Wall Street Journal to promote these benefits as specifically pertinent to UFLPA enforcement.