Avoid Importing A Compliance Problem


In March, a new federal law took effect that places additional pressure on importers to develop compliance systems for their supply chains, including identification of items potentially made with forced labor. The Trade Facilitation and Trade Enforcement Act of 2015 (Trade Act) prohibits the import into the United States of goods, wares, articles, and merchandise mined, produced, or manufactured in a foreign country by convict, forced, or indentured labor. The new law comes at a time when federal and state regulators are turning their focus to supply chain management as a way to combat forced labor overseas.

At the National Association of Attorneys General 2016 Winter Meeting, U.S. Attorney General Loretta Lynch made a point of saying that fighting human trafficking (which typically features involuntary labor) is one of the Department of Justice’s top enforcement priorities. Given this high-profile scrutiny, any company—regardless of industry—that imports goods from overseas should review its supply chain policies to ensure they are appropriately tailored to address this issue.

What Does the New Law Do?

The Trade Act closed a loophole in the U.S. Tariff Act of 1930 that allowed the import of products made with forced labor if the “consumptive demand” for those goods in the United States exceeded domestic production. This loophole essentially swallowed all prohibition, as demand in most industries exceeds domestic production. The new prohibition does not target specific countries or products, but instead permits U.S. Customs and Border Protection (CBP) to investigate allegations that specific products are made using forced labor.

Why Should Companies Care?

The Trade Act places additional pressure on importers to develop compliance systems for their supply chains. Under the new law, any interested party (including competitors and public interest groups), can request that CBP investigate whether an import was produced using forced labor in another country. Any products found to be made in whole or in part using forced labor following an investigation are subject to exclusion and/or seizure, and may lead to investigation of the importer(s).

CBP and public interest groups will likely hunt for “leads” in the U.S. Department of Labor’s List of Goods Produced by Child Labor or Forced Labor and List of Products Identified by Executive Order 13126. Although these lists do not ban the import of listed products into the United States, they do identify, by country, categories of products that the United States has reason to believe are at risk of having been produced by children or forced labor.

The potential for well-intentioned importers to be held accountable for the actions of suppliers and suppliers’ subcontractors grows by the day.

Separate from the new federal law, a number of state attorneys general have created task forces focused on human trafficking. California enacted its own law in 2010, the Transparency in Supply Chains Act (CTSCA), which requires large retailers and manufacturers doing business in California to disclose on their websites their “efforts to eradicate slavery and human trafficking from [their] direct supply chain for tangible goods offered for sale.” While the federal law goes much further than the disclosure requirements of CTSCA, the bottom line is that federal and state regulators are focused more than ever on pressuring companies to police their supply chains, and dedicating enforcement and other resources to the issue.

How to Mitigate Risk

Importers can mitigate state and federal enforcement risk by confirming they have implemented appropriate policies and procedures tailored to their industries and import activities. Steps companies should consider include:

  • Working with qualified counsel to develop a comprehensive import compliance policy that addresses supply chain management, including the company’s policies for limiting the potential for human trafficking and forced labor. This policy should also address compliance with the CTSCA, which requires covered companies to post disclosures on their websites related to five specific areas: verification, audits, certification, internal accountability, and training.
  • Requiring an affirmative certification in all supplier agreements that the supplier is aware of, and in compliance with, company policies.
  • Conducting independent third-party audits on an annual basis.
  • Training employees who work directly with the supply chain to spot red flags and monitor compliance.
  • Coordinating compliance measures with existing policies and procedures that cover export controls, anti-corruption efforts, and import measures.
  • Joining the Customs-Trade Partnership Against Terrorism (C-TPAT) program. C-TPAT is a voluntary supply chain security program led by CBP that focuses on improving the security of private companies’ supply chains with respect to terrorism.


As the global supply chain deepens, the potential for well-intentioned importers to be caught unaware of, and held accountable for, the actions of suppliers and suppliers’ subcontractors grows by the day. Because of the significant public relations and brand consequences of such allegations, brands should work with experienced legal counsel and other service providers to build and implement proactive compliance, monitoring, and remediation programs.