Early Spring '24 FLT News Roundup
FLT Funding; Forced Labor in India & Taiwan; Labor Transfers Ramp Up; New Software
Happy first Friday of Spring from Washington, DC, where the cherry trees are blooming early, and the stumpy shell of one tree’s former glory is producing beauty and goodness for one more year. An inspiring metaphor for so much, and this town can’t get enough of it.
Let me begin by saying welcome to my new subscribers, and thanks to subscribers & readers alike for all your interest in the Volkswagen piece last month. It was my most read essay to date, and FLT saw double-digit subscriber growth as a result. I’m honored by your interest.
For those of you who are new around here, I write to illuminate the performance of U.S. forced labor trade laws, and to explore their potential, both for good and for ill. These laws are—to me—fascinating. They’re a genuinely new development in the discipline of international trade, an order where innovation is exceedingly rare. They are at once dearly cherished and silently resented, and are freighted on all sides with massive expectations. If I can help you understand them better, my labor here is not in vain.
Forced labor trade laws are technical and wonky, so sometimes FLT essays follow suit. These laws are also an unexpected and unapologetically American swing at the excesses of globalism. If that seems conceptual and grandiose, then I beg pardon when these essays veer the same direction; I aim only to keep pace. Whether you sweat the details of day-in-day-out forced labor trade enforcement, or harbor merely a passing interest in what seems a quixotic footnote in the evolution of global trade, I write for you.
This week, we’re returning to an FLT stalwart, the news roundup. On tap: forced labor trade enforcement funding for FY ‘24; forced labor in India & Taiwan; the most important new factual development in forced Uyghur labor; and a new entrant looks to shake things up in the software scene.
Forced Labor Trade Enforcement Funding FY ‘24
In 2016, the U.S. stumbled backwards into possession of the most conceptually powerful trade law in history—a law making it unilaterally illegal to trade in goods produced wholly or in part with slave labor. From that year until 2021, the law was the legislative equivalent of a tree falling in a barren wood. You could credibly debate whether the fell tree made a noise. Quite frankly, you could dispute the tree’s existence.
That changed in the final hours of the (first) Trump administration. Quite literally at the halfway point between the insurrection and Biden’s inauguration, and comfortable in the knowledge that it would be the responsibility of their successors to figure out how to administer the dang thing, the forced labor import ban was leveraged to take an enforcement action (by issuance of a “WRO”) against 18% of the global supply of cotton (i.e., all cotton grown in the Xinjiang province of China).
There are two ways end debate over whether a tree falling in a barren forest actually makes a noise. The first is to lace an explosive to the uppermost boughs, so that when it falls it makes a noise everyone can hear. That was the January 2021 Xinjiang cotton WRO. The second way is to bulldoze a perimeter in the woods, and construct a hundred million dollar arena with a copse of trees at the center, and fill the stands with observers for every swing of the axe. That has been the effect of forced labor trade enforcement funding.
Beginning at the tail end of 2021, immediately after enacting the UFLPA (and before agreement had been reached on FY ‘22 federal government funding), Congress added $10 million to the budget for general forced labor trade enforcement, and $27.5 million for enforcement of the UFLPA. In FY ‘23, the Biden administration asked for $70 million for combined forced labor trade enforcement, and Congress doled out just shy of $100 million.
We’re halfway through FY ‘24, and the final numbers for current year funding rolled out yesterday. According to the FY ‘24 Homeland Security joint explanatory statement: “the agreement includes . . . $19,988,000 over the fiscal year 2023 enacted level for forced labor for a total of $114,515,000.” In other words, the arena just got a new upper deck.
The perennial questions in government funding are: is that a lot or a little, too much, or not enough? I will not try to answer that question, but I will offer a few reference points. For FY ‘24, Congress allocated a lot more money to U.S. Customs and Border Protection than the Biden administration had formally sought (“$3,041,949,000 above the request”), primarily for immigration enforcement. Of that extra money, this +$20M is just 0.6%. At the same time, a budget of $114 Million is approximately 25% of the entire budget of the Federal Trade Commission. Forced labor trade laws are also the only class of trade laws for which CBP now receives dedicated funding.
I remain of the view (and beckon the trade wonks, appropriations nerds and history buffs among you to bring forth evidence to the contrary) that these are the most aggressively funded individual trade laws in U.S. history.
Forced Labor in India & Taiwan
I’ll self-congratulate for exercising the self-restraint not to title this section “forced labor: it’s not just for Uyghurs anymore”, because of course it isn’t, and it never was. But if you observed only the rhetoric and state of dialogue, perhaps from a vantage far enough removed from this town, you might be forgiven for thinking Uyghur forced labor is the only forced labor of relevance to international trade (or at the very least the only forced labor Washington cares about). While the latter might be true for some of Washington, the former most definitely is not.
One of the biggest consequences of creating trade laws that prohibit trade in goods made with forced labor is that it established a different audience for forced labor exposés: namely, U.S. Customs and Border Protection. In a world in which it is not illegal to trade in slave-made goods—i.e., earth, prior to 2016—evidence of forced labor in a supply chain was exclusively a matter of shame and public accountability. But today, the fruit of such exploitation is per se inadmissible into the United States, and vulnerable to enforcement action.
This change has had a dramatic impact on folks who work to raise awareness about human degradation. No longer do they produce plaintive cries for others to pay attention. Now, they produce missives and treatises specifically calculated to trigger the enforcement response. If you have a business interest in the U.S.-bound supply chain—as a producer, processer, trader, exporter, importer, wholesaler or retailer—you ignore this content at your peril.
This week, a few sterling examples of the genre caught my attention, including this piece, the result of a three year (!) investigation on forced labor in the Indian shrimping industry published by the Corporate Accountability Lab (here’s coverage of the same by the AP), this whistleblower report on an Indian shrimp producer published by Ian Urbina and his Ocean Outlaw Project, and this piece, written by investigative journalist Peter Bengtsen and published by Japanese business publication Toyo Kaizai on debt-bonded labor in the Taiwanese automotive sector.
If you read this content (and you should), here’s what you should keep in mind about the state of the law. It is illegal to import any products into the United States—shrimp, auto parts, tiny cars for shrimp—if they were produced, in whole or in part, under conditions of forced labor. There is no further condition precedent before the law applies.
There isn’t a knowledge requirement—ignorance of the law or facts is no excuse. There isn’t a mens rea requirement—whether you intended to import goods produced with forced labor is irrelevant. Even in the absence of a specific enforcement action on the part of U.S. Customs (like issuing a WRO), any company that imports such goods into the United States is vulnerable to civil, and possibly criminal, liability. In other words, if you get information like this about your supply chain, you’re gonna have to rally.
But enforcement does matter. Japan doesn’t (yet) have a forced labor import ban. There are only two other countries where it is presently also strictly illegal to import goods produced with forced labor: Canada and Mexico. I can’t say whether any trees have fallen in those forests, but even if they did they wouldn’t have made a sound. What the activists are angling for is to get CBP to take action to block the imports by issuing a withhold release order. To tie the explosive to the tree.
Then what? Well, this is the part of the enforcement apparatus that remains essentially unbuilt. Indian shrimp are easier to spot than Xinjiang cotton is when it comes across the border, but how is CBP to tell the difference between good clean shrimp and the rough stuff? And if it’s incumbent on the importer to present proof about the condition of labor in the supply chain (which it would be after a WRO is issued), what exactly would they have to prove, and how could they go about it? Is Customs going to look for paper? Are they going to travel to India to inspect work sites? The Ocean Outlaw Project whistleblower report has galling allegations of both documentary and work site manipulation intended to defraud and evade those whose job it is to provide accountability.
Once you start thinking about how any of this is actually supposed to work, it’s easy to fall into a paralysis. CBP is great at a lot of things, but designing the laws it is supposed to enforce isn’t one of them.
The most important development in forced Uyghur labor
In an environment of unanimous political orthodoxy, it can be easy to forget that facts matter. In the political realm, today’s axioms of faith started yesterday as observations of fact. And if you’re not careful, it’s easy for axioms of faith to agglomerate, and then become untethered to reality.
A great example is in the “what next” question following the UFLPA. I’ve heard countless folks talk about expanding the UFLPA to other regions or provinces within China, or even other countries. Frequently, these ideas are probed for viability even in the absence of any credible evidence that these other regions are subject to a similar environment of state surveillance and ethnic subjugation as has been documented in Xinjiang. Come on, I want to say. Snap out of it.
A uniquely horrifying set of facts merited the creation of the UFLPA. With that in mind, I want to draw attention to what struck me as the most important factual development in forced Uyghur labor in the last couple years. A month ago, Dr. Adrian Zenz published new scholarship demonstrating that “for the first time in four years [i.e., since 2019], we have evidence that transfers of Uyghur workers to other provinces have continued. In 2023 they were set to increase by 38%.”
Among the other key findings were that
labor transfers in 2023 throughout Xinjiang “exceeded those from the previous year and surpassed state-mandated quotas”;
“policy and state planning documents” indicate that “coercive Xinjiang employment and poverty alleviation policies are to continue at least through 2025”.
I have long predicted that the UFLPA Entity List, rather than the Xinjiang regional presumption, would become the enduring legacy of this law. Developments like this make me more assured of that prediction.
New Supply Chain Software Tool
News this week out of Northeastern University in Boston, as Supply Trace, an open-source hub for supply chain information of pertinence to the technical questions of forced labor trade enforcement came online for the first time. This project is worth watching, as it is staffed by researchers affiliated with Sheffield Hallam University, whose research on forced Uyghur in global supply chains has been tremendously influential on UFLPA enforcement, and also Caroline Dale, an attorney and knowledgeable customs compliance consultant (and fellow graduate of the University of Kansas School of Law . . . we Jayhawks are everywhere in trade!).
Here’s Supply Trace in their own words:
Supply Trace is an accessible, open platform that exposes potential risks in global supply chains. In its pilot phase, it focuses on the apparel sector and links between forced labor in the Uyghur Region of China and shipments to the US.
Much of the risk data currently available in Supply Trace exists elsewhere, but access is limited by costly pay-walls. This makes it prohibitive to many stakeholders in global supply chains, including small and medium-sized enterprises (SMEs) and civil society organizations.
We’ll be using this tool, as will many others, and looking to see how it does in solving the tricky challenges associated with turning the morass of global trade data into something actionable for promoting trade compliance. A data tool to combat forced labor in the supply chain is much easier said than done. Here’s wishing them success.