Forced Labor Trade Enforcement to $100M

Time for some rules.

On December 29, 2022, President Biden signed into law Pub. L. 117-328, the Consolidated Appropriations Act, 2023. Buried in hundreds of billions of dollars of discretionary spending is a truly transformative sum for forced labor trade enforcement by U.S. Customs and Border Protection.

For FY22, we had tracked somewhere in the neighborhood of $37.5M granted to CBP for forced labor trade enforcement. For FY23, the number has climbed past the $70.3M requested by the Biden Administration to somewhere north of $100M.

The Senate Committee on Appropriations published a press release on the legislation, asserting that the total allocation for forced labor enforcement was $101M, which it characterized as a 108% increase over FY22 levels. The Explanatory Statement published alongside the bill, however, claimed that the level of funding for forced labor reaches “a total of $99,428,000 over fiscal year 2022.” If true, that means the actual funding level would be closer to $130M.

Included within these numbers is approximately $17M for DHS to build an “advanced trade analytics platform” and a separate allocation including up to $5M to spend on “DNA traceability tools to assist in identifying goods made with forced labor”.

It will be a few more months before an official document is published that provides true visibility into how much money was truly allocated, and how CBP has decided to put it to use. But we have a good enough sense of the scale of funding to do some napkin sketches of potential impact. How big of an impact can Congress garner with less than .005% of the FY23 spending bill?

In the Biden Administration’s proposed budget for FY23, the President had sought $29.6M (of the $70.3M) to support UFLPA enforcement by the Office of Trade (i.e., the brains of the forced labor enforcement operation). According to the proposed budget, this would allow the Office of Trade to increase its forced labor enforcement workload by 11.5x relative to base.

According to current CBP trade stats, at FY22 enforcement levels, just under $500M of trade has been targeted for forced labor enforcement over the last quarter, for a current annual pace of $2B in trade targeted for enforcement. Does this mean that CBP envisions scaling enforcement to something north of $20B of trade per year in forced labor targeting now that the FY23 budget has been enacted? And what should we infer given that the President’s budget request was exceeded?

It seems safe to say that we have only scratched the surface of the impact of the forced labor trade enforcement on U.S. trade.

When I wrote last year about the $37.5M of forced labor enforcement for FY22, I compared the allocation to the entire budget of Office of Foreign Asset Control (OFAC) or the Department of Commerce’s Bureau of Industry & Security (BIS), which enforce U.S. sanctions and export controls laws, respectively. CBP’s funding for the enforcement of a single law was, at that time, within shooting distance of the entire budgets of each of OFAC and BIS.

But CBP’s funding allocation for forced labor enforcement in FY23 now leaves the budgets of OFAC and BIS in the dust. A more appropriate comparison, I believe, is the budget of the Federal Trade Commission.

CBP’s Fiscal Year 2023 budget for forced labor enforcement is roughly equal to 1/3 of the entire annual budget of the FTC.

It’s an apt comparison. The FTC wields enormously consequential, if somewhat blunt, power to block or permit multi-million dollar, even multi-billion dollar economic activity on competition grounds. CBP now wields similarly consequential and blunt power to decimate or reinstate the import/export business between U.S. and foreign firms, causing impact to individual forms on the order of tens, possibly hundreds, of millions of dollars.

The biggest difference between forced labor enforcement and competition enforcement is that CBP wields its power without rules. There are no rules governing the decisions FLETF (or Congress) will make to designate additional “UFLPA priority sectors”. No published rulebook governs CBP’s decisions to detain or target shipments from any foreign firm to any importer. When the rubber meets the road, and and hundreds of thousands of imported items are ensnared in the enforcement web, there are effectively no rules governing any of the agency’s admissibility decisions, and no neutral oversight.

Companies wouldn’t hesitate to obtain judicial review of an FTC-blocked merger. But suing U.S. Customs over its forced labor enforcement? That’s another matter entirely. And so, there remain no rules governing when CBP will or will not take an enforcement action, the appropriate scope of such actions, or the standards for why it will or will not suspend an enforcement action based on a showing of satisfactory resolution.

In this town, there’s a single sheriff. Who serves also as the community judge and warden of the jail. While I have no doubt that the sheriff/judge/warden is doing its level best, your perspective on that very much depends on where you sit. A wild west, indeed.