Winter '25 (pre-Inauguration) FLT News Roundup

The UFLPA comes for autos (sort of); the Rand Corporation writes a surprising report for DHS, and the U.S. has forced labor trade strategy (named document).

Greetings from snowy Washington, where the forecast for Inauguration Day is brutal cold, but plans for the new administration are just heating up. Case in point, Tuesday morning brought word that U.S. Customs and Border Protection has been tagged for a possible reorganization—or at least rebrand—as the External Revenue Service! The news came via Truth Social, and “truth” is right there in the name so it must be happening.

How exactly this will shake out is anyone’s guess, but the meaning seems fairly straightforward. The U.S. Customs Service was established by Act of Congress in 1789 primarily for the purpose of collecting import tariffs. This role was so pivotal to the success of the new nation that “customs houses” (or “custom houses”), needed to facilitate this revenue collection, were eventually built in major cities throughout the United States. These stately architectural gems can still be seen not only in well-known locations like Charleston, New York, Nashville, and San Francisco, but in literally every corner of the nation: from Portland Maine to Key West, from San Ysidro to Seattle.

Many of these customs houses were built near the turn of the 20th century, during a time when tariffs still made up 40-50% of U.S. federal revenue. This was down from the ~95% of federal revenue prevailed during the 18th and 19th centuries, but by 1913, that figure had plummeted to around 2%. Since then, except for a short window coinciding with the Great Depression and interwar era, tariffs have remained roughly as insignificant to the United States. Even so, U.S. Customs continued to be housed alongside the IRS as a part of the Treasury Department until 2003, when, in the wake of 9/11, it was reorganized into the Department of Homeland Security.

It’s fair to think of CBP’s role vis-à-vis trade as dual-focused. You have revenue collection, and you have admissibility of merchandise (covering everything from food safety, to IP rights enforcement, to pest inspections, to, now, forced labor). But a customs service without revenue to collect can feel a little like a Maytag repair shop. And these days, CBP’s job includes letting more than four million shipments enter the country every day without any revenue collection whatsoever.

There’s a way of viewing CBP’s intense interest in forced labor over the last decade as a partial response to the macro inconsequentiality of revenue collection. In any event, the relative importance of the revenue collection mandate seems poised to change in a way that no one living today has any memory of. Can you imagine the good fortune of your loyal servant, the humble customs attorney? Er, I mean, my sincere condolences to importers everywhere. Perhaps they’ll ban inflation by Executive Order on Day 1.

In any event, on to the FLT news roundup! This week, (1) a check-in on some radical changes in UFLPA enforcement, (2) the Department of Homeland Security gets a tome of surprising advice about its approach to forced labor enforcement, and (3) the U.S. government finally, officially has a “trade strategy” for combatting forced labor.

Where Has All the UFLPA Detention Value Gone?

If you visit the UFLPA dashboard with even passing regularity, you’ve probably noticed that FY 2025, now 3 months old, looks radically different than the other two plus years of UFLPA enforcement that preceded it.

October through December of 2024 were the three lowest value detention months in UFLPA history, and frankly, it isn’t even close. CBP is averaging $18.5 million in detention value over the last three months, down from $144.1 million in average monthly detention value in FY 2024, and $118.3 million in FY 2023. What gives?

The answer is that solar enforcement has finally been dethroned from its outsize role as the biggest driver of detention value. Solar panels are expensive, and shipments of solar panels, even more so. Cast opposite CBP’s practice of detaining dozens, and sometimes hundreds of shipments of panels produced from exactly the same supply chain meant that over a two year period (FY 23 and 24), CBP detained some $2.2 billion of solar panels that were conclusively determined NOT to have any supply chain exposure to forced Uyghur labor. Doesn’t seem like the most effective use of a forced labor import ban, does it?

Fortunately, CBP finally seems to have weaned itself from the narcotic of high detention values (driven by detentions of merchandise pretty obviously not subject to the UFLPA) and is no longer depending on such numbers as a sketchy proxy for effective UFLPA enforcement. Even if you yearn for UFLPA solar enforcement, surely you will agree that this is a positive development.

In FY 25 to date, CBP has detained just 141 shipments of “electronics” valued at $34.1 million. It’s too early to derive any conclusions about release rates for these detentions (i.e., whether CBP is getting better at picking UFLPA-subject merchandise), but I will note that that the average value of an “electronics” detention over the last three months is approximately 1/3 what it has been over the foregoing two years. This could be an indication that some of the “electronics” detentions aren’t just solar detentions any more, and have morphed into other categories of electronic goods.

Or it could be a fluke. Honestly, it’s really unfortunate to have to try and read tea leaves like this. It’s also unnecessary! CBP knows what it’s detaining, and can—and should—share that information with the importing public. If consumer electronics are being detained, the world deserves to know. If “electronics” detentions are still just coextensive with solar detentions, and the consumer electronic industry has nothing to worry about, that too should be welcome to know.

So, where has CBP’s enforcement attention pivoted? To the automotive sector. So far, more than 80% of FY 2025 detentions have been categorized as “automotive and aerospace”, which we infer (we think reasonably, but ultimately without certainty), to be detentions of automotive inputs. Overwhelming, this has included detentions of goods from China, but also smaller amounts of detentions from Malaysia, Vietnam and Cambodia.

Most interesting to me is the extraordinarily low value of these detentions. In December 2024, CBP detained 1,239 shipments classed “automotive and aerospace” with an average value of $1,764 per shipment. That value is below the informal entry threshold of $2,000! What sort of goods are being imported by the automotive sector in tiny packages from China? Why is CBP selecting a growing volume of tiny packages for UFLPA detention purposes? And most importantly, what is the basis for these detentions—is CBP looking at aluminum origin, or steel, or something else entirely? Inquiring minds want to know—and shouldn’t have to cast about, searching for rumors and leaks of information.

DHS Gets a Tome on Forced Labor Enforcement

Earlier this week, the Rand Corporation published an epic, 197-page report intended to help the Department of Homeland Security (DHS) “develop[] analytical capabilities for assessing the impact of its efforts to combat forced labor through trade enforcement and evaluating that impact.” It did this pursuant to a federally-funded contract with DHS, established through the Homeland Security Act of 2002. Who knew!

In a report this large, and written over the span of nearly two years, the topical coverage is as vast as you would expect.¹ I can’t do the full report justice within the confines of this newsletter, so I’ll go ahead and commend it for you to read.

Here, I’ll offer just one observation, which is that Rand’s conclusions are surprisingly pessimistic on the value of American leadership on ending trade in slave made goods., and several of the conclusions sound surprisingly like many of China’s own talking points on the UFLPA. These include:

• describing America’s leadership on the effort to end trade in slave-made goods, including goods made with forced Uyghur labor, somewhat pejoratively as a “go it alone” approach;

• asserting that “going it alone might not suffice”, while also noting that a more collaborative effort to prevent trade in slave-made goods “could face challenges too”;

• projecting that the U.S. would likely find more success in trade enforcement if it “targets small nations with shallow pockets”, than if it “targets large nations with deep pockets that are using forced labor as a political tool to meet political ends to which they are deeply committed”;

• explaining that “[i]n the latter case, the sanctioning country [that is, the United States] might have difficulty garnering domestic support for its sanctions” and the sanctioned country (ostensibly China) might be “willing to pay the price”, might “harden its position” and “rally domestic support”;

• before characterizing U.S. enforcement of the UFLPA as “bully[ing] a bully with economic measures.”

Those controversial opinions set the the stage for an unexpected trio of conclusions that (A) the unintended consequences of forced labor trade enforcement are likely to harm U.S. businesses, workers, and consumers, and (B) even with intentional stakeholder participation and support, trade enforcement “cannot be expected to achieve all aims in all circumstance and might have limited potential for success against politically motivated labor abuses in China”, but nevertheless (C), DHS should get more resources for funding and staffing.

These somewhat bewildering conclusions for a U.S. taxpayer-funded report are set out on pages 45-48 of the report, in the “Concluding Remarks” for Chapter 3.

As a rule, I try to presume positive intent, and so will do so here. I presume that DHS did not expect the Rand Corporation to construe U.S. enforcement of the UFLPA as bullying of China, something that lacks domestic support in the United States, is unlikely to be successful on its own, will probably injure U.S. interests, and is also unlikely to succeed if undertaken with more international coordination, because of China’s deep pockets and its ability to rally domestic nationalism in support of its cause.

Rather, where I think Rand went wrong here was in depending too heavily on scholarship that is critical about economic sanctions, and specifically, scholarship that was written to address “the use and abuse of economic sanctions in pursuit of foreign policy goals”.² Economic sanctions do not always achieve their stated foreign policy aims. As such, they’ve attracted a meaningful body of academic work questioning whether they are the most effective way to dis-incentivize bad behavior by foreign actors.

But it’s an error to consider the UFLPA through such a lens. Whatever anyone may think about the UFLPA, it is not best understood as a use of economic sanctions (let alone the abuse of one). In fact, it’s not being deployed in pursuit of a conventional “foreign policy goal”, such as getting China to abandon its use of forced labor by Uyghurs. That’s not what an import ban does.

The most common refrain I’ve heard from UFLPA armchair quarterbacks is skepticism that any law the U.S. might adopt could get China to end its mistreatment of the Uyghurs. These critics are usually quick to point out that the law has not yet had such an effect. My answer is always the same:

The UFLPA is predicated on far more rational and defensible view of American power. It aims to prevent the importation of goods made with forced Uyghur labor; nothing more, nothing less.

Perhaps in an earlier era it would have been fashionable for Congress to believe that it could legislate a sanction and change the behavior of a foreign government. By 2021, there was less parliamentary naivete in this regard. Just look at statement of policy in the UFLPA and you’ll see for yourself.

The first objective of the UFLPA is (1) “to strengthen the prohibition against the importation of goods with forced labor” by ensuring goods made with forced labor in China are not illegally imported into the United States. This the most important objective of the UFLPA, and one it is at least nominally well suited to aim at achieving.

Additional policy goals include (2) exercising international leadership, (3) coordinating a response with Mexico and Canada, (4) working to prevent, publicly denounce and end human trafficking, including with respect to forced labor, whether or not sponsored by a foreign government, (5) acting in the national interest of the United States to prevent atrocities like torture and mass internment, and (6) promoting bilateral and multilateral pressure on China, and using all legal authorities available to the U.S. government.

The UFLPA was not enacted with any expectation that it would suddenly cure China of the appetite to run programs of social control and ethnic elimination against Uyghurs and other ethnic minorities. The closest thing to a foreign policy goal within this list is (5), and on that front the UFLPA was a success. While China has not backed down from using forced labor in Xinjiang or across the country, it did indeed close down its programs of mass internment in response to U.S. pressure associated with the UFLPA.

For newcomers to FLT, let me remind you some of our historic coverage in an effort to set the record straight. The UFLPA is not an economic sanction, and it’s wrong to think of it as such. Rather, it’s an import prohibition, for which the policy rationale is protecting U.S. consumers from unintentional participation in immoral economic activity. It was outrageously popular with members of a democratically elected legislature, and one can therefore reasonably infer, it is popular with the American people. And whatever else one can say about the UFLPA—that it is an abidingly strange law, that it doesn’t do exactly what it should do, that it may or may not prove good for human rights in the long term—it certainly isn’t bullying toward China.

The U.S. Trade Strategy to Combat Forced Labor

This week, like the final week in any presidential administration, has been marked by a flurry of executive actions, many of which are unlikely to survive the first 100 days of the next administration. I, for one, think that the United States could really benefit from a trade strategy to combat forced labor—at least, we’ll need one at some point. Given that the Biden Administration was the first to attempt such a task, I had been hoping to see it well before these fateful final days, and hoping to see a text crafted with the intent to endure on a bipartisan basis. In short, I’d been wishing them nothing but success.

The first U.S. forced labor trade strategy is an unapologetically progressive document—something the incoming President might describe as a DEMOCRAT Trade Strategy. (I can hear the smiles and heads nodding over at the Winder building.) The first goal of the strategy is to be “equitable” and “inclusive” and to ensure the participation of a lengthy (and familiar) list of diverse participants like Hawaiians, intersex persons, poor people and country folk. Fine goals! But endure as a bipartisan template, this will not. That’s okay; just as noteworthy to me was how starkly earnest it is. The strategy concludes: “We call on all of our trading partners to heed this clarion call to combat forced labor. . . . Join with us and, together, let’s make forced labor a relic of the past.” Can the U.S. government be wistful?! I think it just was!

I frequently get hung up on the U.S. government publishing “strategy” documents that contain no actual strategy. But someone described this strategy to me as actually constituting a retrospective on the diversity of approaches and engagements that the Biden Administration has taken to address forced labor, and viewed through that lens, it makes a lot more sense. It’s a value of mine not to despise small beginnings, so instead I’ll give credit where credit is due.

Ambassador Tai led the United States to give more attention to a matter of critical ethical importance to trade—more attention than has been given by any other U.S. Trade Representative, perhaps more than any trade official in history. This was unquestionably the right thing to do, disagreements about tenor or emphasis notwithstanding.

Before the U.S. can have a real strategy for coordinating with other countries to end trade in slave-made goods, it’s going to be necessary for us to figure out how to do a better job of it ourselves. But innovation is hard, especially when the place where innovation is most needed is in the law itself.

Enforcers of the law can commission all the best advice that taxpayer money can buy, but if they’re operating with a deficient law—one that fails to take seriously the dozens of factual and legal determinations that undergird every forced labor trade enforcement action, and the consequences that flow therefrom, what good will it do? Representatives of the U.S. can be eager to advance the cause of combatting forced labor on the global stage, but until the U.S. figures out how to truly run a forced labor trade ban in a manner that reliably incentivizes the identification and eradication of forced labor, how will our international audience not remain skeptical?

There are miles to go before we rest. We’ll heed your clarion call Ambassador Tai! We gotcha!

1. Full disclosure, I spoke with the authors of the Rand report in June 2023; my interview is not cited within the report. The report does include one citation to FLT, in which the report appears skeptical that CBP is actually enforcing the UFLPA against foreign companies that are not included on the UFLPA Entity List. Rand Report at 51 “Some stakeholders said that, in addition to the publicly available list, CBP might be targeting some unnamed suppliers that it viewed as high risk and suggested that it would be helpful to have access to that information (e.g., to adjust their sourcing decisions).” (Emphasis added.) It’s not a might!

2.