In 2019, US Customs and Border Protection (CBP) detained 12 shipments as a result of forced labor concerns. This number has skyrocketed to 696 detained shipments between October 1, 2020 and June 25, 2021. The majority of these detained shipments originated in China – with the enforcement being motivated by the current and previous administrations’ focus on forced labor of Uyghurs in Western China. But we’re also seeing increased enforcement impacting the technology industry, with one recent example being a detained shipment of parts produced by prisoners in Japan.
Reducing the amount of forced labor in supply chains globally is a worthy cause. However, ad hoc (and politically motivated) enforcement, lack of transparency into decision making at the CBP, and notable absence of guidelines from the CBP make compliance difficult. That said, there are steps you can take to reduce your compliance risk in your supply chains.
Steps to Reduce the Risk of Forced Labor in Supply Chains
First, you must take steps to increase transparency. Consumers and regulators are both demanding this, so if you haven’t already done so, you should be in touch with your manufacturers and/or suppliers to establish where they source their raw materials.
Second, you should regularly review your supply chain contracts to ensure they offer adequate protection from forced labor. You might consider:
- Introducing termination clauses that allow you to terminate the relationship where suppliers cannot provide adequate paperwork that documents the supply journey of their raw materials.
- Providing for regular audits of factories (and set up internal processes to make sure they take place).
- Include minimum standards for labor conditions in your contracts. The CBP recommends adopting the language used by the International Labor Organization as part of those standards.
- Restricting or prohibiting the sourcing of products from certain high risk countries or regions. Alternatively, you might require your supplier to obtain raw materials from pre-approved sources.
- Incentivizing good practice by, for example, increasing production with suppliers which offer transparency in supply chains or achieve particular standards in the audit process.
Finally, you should engage in regular training internally. Relevant departments, including HR, accounting, and procurement, in addition to legal and compliance, should be aware of the risk associated with forced labor in the supply chain. There should be strong internal processes in place that allow you to identify potential risk and mitigate against it.
If your business needs assistance developing stronger contractual protections against forced labor in your supply chain, reach out. We’re here to help!
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