The Abiding Strangeness of the UFLPA
A closer look at an attempt to hide the ball.
If you want to understand the abiding strangeness of the UFLPA, look no further than the kerfuffle last week over a proposed change to an obscure U.S. customs law governing the confidentiality of ocean shipping manifest data.
The dustup started with a proposal from a customs industry advisory group—a forum that rarely generates developments of note even to a customs attorney—and ended up the focus of a spicy takedown by the Associated Press, the target of a scornful letter from 40 human rights organizations, and subject to a blistering takedown by Senator Marco Rubio and Florida Representative Chris Smith, who accused the industry group of trying to “stifle [the UFLPA’s] enforcement” and “make it easier for importers to bring in shipments tainted by the CCP’s forced labor apparatus”.
What on earth happened? Who is right? And what does this bode for forced labor trade enforcement in the United States? To answer those questions, you have to start by understanding CBP’s unique relationship with data.
Where Trade Data Comes From; How It Is Used
U.S. Customs has long been one of the great data engines of the U.S. government. CBP collects terabytes of data annually simply as a result of its role as the enforcer of U.S. trade and other border-enforced laws. For purposes of this discussion, there are essentially two varieties of data—(1) data that importers are required to declare to the U.S. government, and (2) data that is generated incident to the international shipment of goods.
The former category consists primarily of the information that an importer must “declare” to CBP relating to the imported merchandise. If you’ve ever flown to the U.S. from another country, think of the little slips of paper the flight attendants pass out before landing. You have to declare how many rugs you bought on holiday in Morocco, and how much you paid for them. So do commercial importers, along with just a few other data elements—chiefly, how the rugs are classified, and who manufactured (or shipped) them to the U.S. And that’s about it!
In a commercial trade context, data that must be declared to CBP is (1) specifically defined, (2) subject to a clear standard of correctness (where even a negligent mistake can result in hefty fines), and (3) always considered confidential data of the importer. In the world of international trade, “enforcement” has always meant policing this data and the importers that report it—spotting the mistakes, and trying to catch the real crooks.
Now, if you happen to be in a position where you want to catch a trade crook, that can be hard to do. For example, if you’re a small business and you suspect a competitor is declaring goods inaccurately to U.S. customs to circumvent the payment of duties, how can you prove this? Maybe you suspect your competitor is importing goods from China, but declaring them as goods of another country in order to cheat on the Trump tariffs. While it would be nice to review your competitor’s declared customs data, you’re out of luck. It’s confidential, and inaccessible.
So your only option is to turn to the second type of trade data—publicly available shipping manifest data. This variety of data is not information prepared or submitted by an importer. Cargo airlines and oceangoing container ships require shippers (i.e., companies that want to send things to the U.S.) to produce a bunch of information about what they load on the ship or plane, primarily so they know what they’re carrying, and how much it weighs, in case they hit a hurricane.
Sometimes (but not always) shipping manifest data contains company names about who shipped the goods, or who was supposed to receive them. Sometimes it might include a tariff classification, though that’s not a required data element, and even if included it might be wrong. (Unlike customs declarations, no one is legally obligated to declare a correct customs classification on a shipping manifest.) Descirpotins of godos canbe msispeld. Or just really vague.
But if you want to try and divine who is doing what in global trade, this is your lifeblood. You can consult officially reported U.S. trade statistics (aggregated declared volumes and values from different countries of origin), but trade stats are anonymous. Limited and sketchy though it may be, shipping manifest data is literally the only game in town.
About That Proposed Change . . .
The committee recommendation that triggered the brouhaha proposed to change one of the rules governing confidentiality of shipping manifest data. The current rules are as follows: manifest data for shipments arriving by rail, truck or air are confidential by default. And ocean manifest shipping data can be made confidential by request. If you are a company that doesn’t want your name released along with shipping manifest data, CBP will honor a request for confidentiality. But you have to renew your request quarterly. And you have to include all conceivable spellings (including misspellings1) of your company name as might crop up on a shipping manifest.
The proposed change? To make all shipping manifest data, including oceangoing data, confidential by default.
Now, in the view of this humble commentator, the proposed change was a not a good idea. Set aside that the asserted rationale—shipping data should be made confidential because of the increasing frequency of data breaches—made no sense. (By definition, data that is public cannot be vulnerable to a breach, only confidential data can bear that distinction.) But more fundamentally, as a matter of policy, there is far more to be gained from a modest amount of trade data being publicly available than having none of it be available. Especially if any company that wants to maintain confidentiality of its own data can still do so just by asking!
But the critique of the proposed change is equally weird.
Normally, persons with an interest in trade enforcement will look to publicly available shipping manifest data to turn up clues that suggest trade violations might have occurred. But the proof of a trade violation always lies in the individual customs declaration. That’s where trade data must be declared under a standard of truthfulness. So, that’s where trade crooks do their lying, cheating and stealing. The declared customs data is where bad actors lie about what they imported, claim it didn’t come from China, or pretend they bought it for a fraction of what they did.
But when it comes to UFLPA enforcement, the system can’t work that way. Tipped off about a potential UFLPA violation, CBP cannot go examine the declared customs data to see if a violation occurred, because declared customs data is essentially irrelevant to the question of UFLPA enforcement. Remember, at present state, CBP can’t even tell for certain when an importer has actually declared that the manufacturer or shipper is located in Xinjiang.
In fact, on its own, shipping manifest data isn’t much more illuminating to the questions that matter to UFLPA enforcement. That is because trade data—the public stuff, the confidential stuff—never peers deeper into the supply chain than “who sent it from there” and “who’s gonna get it over here”.
Trade data is only useful to the question of UFLPA enforcement if it can be ingested and analyzed alongside other sources of data—either by a dedicated individual researcher, a machine, or both. If you can leverage additional data and perform the additional analysis, it is fairly easy to build a circumstantial case that a particular importer or foreign producer are involved in trade that might have violated the prohibitions of the UFLPA. But this is a strange meaning for the term “trade enforcement”, and utterly unique in the panoply of import regulations.
Not Yet Built on Anything
Sometimes I go looking for the metaphors, and sometimes, the metaphors come looking for me. Last week, I read about the plan to build a 100 story skyscraper in Miami. When complete, it will be the largest skyscraper in the United States south of New York City.
To build this particular skyscraper, on highly attractive terrain that just happens to be sandy, marshy, and vulnerable to flooding and hurricanes, they had to invent this kind of “deep soil mixing” in order to compact the ground underneath and around the construction site. For a different project, a foundation was recently built before the deep soil mixing had been completed, things got, uh, shifty. (The foundation filled up with water like a “lagoon”.) Only after completing this procedure can the builders lay the proper foundation, and build the thing.
If you’ll bear with me . . . the UFLPA is this skyscraper. CBP is now enforcing the law against billions of dollars of trade annually, quickly making it the highest dollar value for enforcement south of IP rights violations. It sits on a particularly attractive piece of conceptual real estate, desirable to human rights organizations and senators alike. And it was even framed up on a strong foundation—a uniquely powerful singular prohibition on the importation of goods made, wholly or in part, with forced labor (Section 307).
But no one thought to compact the ground first, and it’s beginning to bubble and gurgle and shift.
No trade law can be sustained if its “enforcement” depends upon third parties who care enough to gather up the publicly available mediocre crumbs of global trade data, ingest it with other varieties of publicly available data, and launch exposure campaigns. And that is the present state of this law, because construction of the mighty tower (the UFLPA) atop the foundation of Section 307 has not yet undergone the “deep soil mixing” to become a modern trade law.
At some point, it is going to be necessary to take a step back, and compact the ground underneath the foundation and the tower. We must reach agreement on parameters governing the many unanswered questions of UFLPA and forced labor trade enforcement more generally—what imports are in scope of enforcement, how CBP determines what it will target, whether importers must affirmatively declare any information relevant to enforcement, and how importers interested in 100% compliance can know that they have arrived.
No other currently enforced U.S. trade law fails to answer even one of these questions.
The enforcement of the UFLPA and Section 307 each answer none.
As always, I hope this is helpful. Please feel free to share this post, and subscribe to receive new content right to your inbox.
While CBP is a great engine of data, it is a lousy data processor. It can’t do fuzzy searches!