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Maersk Exec: Expect More Forced Labor ‘Enforcement Activity’ Next Year

From managing new regulations and detentions to success stories, forced labor was one of the top topics at the United States Fashion Industry Association’s 2022 Apparel Importers Trade & Transportation Conference.

Top of mind for the industry is the Uyghur Forced Labor Prevention Act (UFLPA), which went into effect in June and targets goods tied to China’s Xinjiang Uyghur Autonomous Region (XUAR). But the overarching issue is global. Citing the Department of Labor’s 2022 report on child and forced labor, Janet Labuda, head of compliance at Maersk Customs Services, said that 78 countries are involved. She added that forced labor oversight has now extended from finished products to the production of components. These findings and more were discussed att he United States Fashion Industry Association’s 2022 Apparel Importers Trade & Transportation Conference earlier this month.

Labuda expects “more enforcement activity” in the new year. “There is a bipartisan political pressure to strictly enforce the law,” she said.

Mark Jaeger, vice president, stakeholder engagement at WRAP (Worldwide Responsible Accredited Production), noted that the German Supply Chain Act is soon going into effect, requiring companies to have due diligence and take action to fix any problems in their entire matrix And more broadly in Europe, an EU directive will establish similar sustainability responsibilities for companies.

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“If I had to say what’s the transformation trend that I see for the fashion space, I would say…it’s the movement from voluntary compliance to mandatory compliance when it comes to social compliance and forced labor issues,” said Jaeger.

U.S. Customs and Border Protection’s executive assistant commissioner for trade AnnMarie Highsmith explained in a keynote that the agency’s efforts to tackle forced labor go beyond seizures of goods. “If merchandise that is violative or inadmissible comes to the border, we’ve already lost that battle,” she said. “Our goal is to prevent that merchandise from coming to the border in the first instance, but really to prevent that merchandise from being manufactured in the first place.”

Earlier this year, CBP worked with civil society organizations to address forced labor at an apparel factory in India. In line with its mission to change manufacturing practices, CBP also restarted its factory visits last fiscal year.

UFLPA

UFLPA established a rebuttable presumption that all goods made at least partly in the XUAR are barred from entry to the U.S.

Customs lawyer Arthur Bodek, partner at Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, said that forced labor has transitioned from something that very rarely came up in his three-decade career to a topic that now takes up half of his workday.

Bodek noted that one “pragmatic issue” with UFLPA is that when Customs detains goods, it targets an entire line of entry. However, in fashion, that one line could encompass tens of SKUs, all of which potentially have different manufacturing processes. “We’ve been having some back and forth with Customs as to whether there’s some rational way to segment the risk. Even within that one line, maybe half of it has no China connection at all, we don’t need to look at those, and just give us the other half,” he said. “And that’s an ongoing conversation. But certainly, CBP has not made any concessions along those lines.” He added that to improve efficiency, “it would be in everyone’s best interest if CBP were to identify what link in the chain gave them pause.”

Robert Chin Quee, senior vice president, U.S. Customs brokerage product at Geodis, pointed out the three options companies have when goods are detained: they can rebut the detention, export the goods or destroy them. He cautioned that companies should make sure the Manufacturer Identification Code (MID) is unique and actually signifies their factory supplier, since it’s possible for the formula used to generate the same code for different shippers. “You don’t want your MID to represent someone who Customs was targeting for detention or for any other issue,” he said.

To help the industry navigate the new requirements tied to this law, Customs is developing digital aids. One will be an interactive tool—expected to launch early in 2023—that will show data on the number and value of goods targeted in each industry, allowing importers to see where there is greater risk and enforcement. Other additions will include a chatbot, videos and expanded information about forced labor on the agency’s website.

CBP received $8.3 million in funding to implement technology related to UFLPA, $5 million of which was allocated towards the agency’s laboratories for DNA testing to genotype cotton. Genetic fingerprinting is already being used for other crops—such as saffron—but CBP is exploring how effectively it will translate to apparel, including whether it can meet scale, speed and cost requirements.

The agency is also piloting artificial intelligence and machine learning solutions that could help improve its targeting.

Traceability

Supply chain visibility is now critical to navigate UFLPA as well as other due diligence laws. “You have to know and understand your supply chain. You have to be informed about where you’re making and sourcing goods,” Jaeger said. “It’s not going to stop at Tier 1; you’re going to have to get upstream, and you’re going to need efficient processes to do that.”

Labuda also noted the need for enhanced supply chain insight. “There’s very little ability to track the trade data through supply chains,” she said. “I believe that we’re going to start seeing some shifts, as we usually do when we have a legal dynamic. We know that people try to circumvent, and I expect we’ll have illegal transshipment that will occur. And we need something that’s going to give us insights into how goods move.”

One solution that is aiming to bridge this data gap is Altana AI, a platform that blends shipping and logistics information with corporate registry data to give entities a better understanding of supply chains. For forced labor in particular, geolocation details can help pinpoint which facilities might be located in the XUAR and which suppliers are connected to them.

“We’re really working very closely with regulators, as well as enterprises to really break down the division between the private and public spheres, so that they can most proactively mitigate forced labor and have productive conversations with respect to trade,” said Kristen Daniels, business development lead at Altana AI.

Uzbekistan

Since 2007, the Cotton Campaign has worked to eliminate forced labor in Uzbekistan cotton harvesting. At the time of the organization’s founding, about 1 million adults and children were being forcefully recruited to pick cotton. One of the Cotton Campaign’s efforts was the Company Pledge Against Forced Labor in the Cotton Sector of Uzbekistan, which was signed by 331 retailers including American Eagle Outfitters, Gap Inc., Levi Strauss & Co. and VF Corporation, who agreed to boycott Uzbek cotton.

In the 2021 harvest season, the Uzbek Forum for Human Rights found no evidence of systemic forced labor in the country. As a result, the Cotton Campaign has ended the pledge, opening the door for companies to again source cotton from the country.

“That boycott joined by you played an absolutely instrumental role in getting the message to the government of Uzbekistan that it could not be able to fully participate and benefit from the global cotton trade, investment flows, industry, and would not have full access to markets in certain countries, especially the U.S.,” said Bennett Freeman, co-founder of the Cotton Campaign, in a virtual address to the audience.

Abby McGill, program officer at worker rights organization Solidarity Center, which is a Cotton Campaign member, cautioned that despite the success in Uzbekistan, state-imposed forced labor remains an issue in Turkmenistan and withhold release orders are in place for cotton produced there.

In Uzbekistan, the Cotton Campaign continues to do work to improve labor conditions and human rights. This includes engaging the government on topics like freedom of association, collective bargaining and creating channels for workers to report grievances. “There’s a long way to go yet to create a full enabling environment that you responsible apparel brands and others in the industry expect, require in order to begin sourcing in a new country,” said Freeman.

WRAP is working already to provide social compliance verification in Uzbekistan for those factories that are very keen on meeting global standards to export to the U.S.,” said Jaeger.

McGill suggested building from the “ground up,” firstly ensuring that workers understand their rights. Another piece of the puzzle for establishing more responsible material sourcing, including traceability, is demand. She noted, “The producers on the ground need the assurances that there’s going to be a market for those goods that will probably be a little bit more costly for having all of these oversight mechanisms in place.”