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Jail Time Awaits Retailers Trading in Forced-Labor Goods

Companies that knowingly import goods made by forced labor could face as much as 20 years in jail—and, as part of a federal crackdown, that could soon expand to merchants selling the merchandise, too.

This year alone, Customs & Border Protections (CBP) has issued six Withhold Release Orders and, according to Kenneth J.F. Kennedy, senior policy advisor for forced labor programs for Homeland Security Investigations (HSI) at the U.S. Immigration & Customs Enforcement division of the Department of Homeland Security, “we are teeing up for another investigation that…will result in criminal prosecution.”

Speaking at last week’s United States Fashion Industry Association (USFIA) hosted Apparel Importers Trade & Transportation Conference in New York, Kennedy said much of the attention of late has been on those Withhold Release Orders, in which shipments are seized in order to investigate whether goods involved were made with forced labor.

Last month, CBP issued five Withhold Release Orders prompted by information procured and reviewed by the agency, which indicated the products had been manufactured in whole or part using modern slavery. This included garments made by Hetian Taida Apparel Co., a clothing manufacturer in Xinjiang, China. While CBP’s actions are civil in nature, HSI targets criminal behavior.

“Lurking in the background are potential criminal investigations that are going to be much more dramatic and much more life changing for people in this room and the countries you represent,” Kennedy told the audience at the event. “The reason for that is this law has never been used in this way and where CBP’s enforcement actions have civil penalties attached to them, ours have jail time attached to them.”

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Sentencing guidelines can call for as much as 20 years in jail for corporate officials who knew, or should have known, about forced labor in their supply chain.

“While their enforcement actions are aimed at companies, our enforcement actions are aimed at companies and individuals in the U.S.,” Kennedy cautioned. “The time to act is now and the time to have a discussion has already past.”

Companies without the necessary visibility into their supply chains to ensure no traces of forced labor, may want to act now to sure up their efforts.

“You need to get up to speed on what the law actually says. We are under extraordinary pressure from Congress and the White House to enforce these laws,” Kennedy said.

Though HSI does focus its efforts on the “bottom feeders”–companies that are known to be bad actors–and not established legitimate enterprises, if an enforcement action goes forward, the net is generally cast wider and could catch unsuspecting companies, too.

The key to avoiding getting goods confiscated and becoming embroiled in an investigation, whether it’s civil or criminal, according to CBP executive director of the trade remedy enforcement directorate Debbie Augustin, is to “know your supply chain,” which includes every detail of where goods are coming from and where they’re being made.

“It does come down to understanding what the law is, the risk areas…and to be able to back up the work that you have done with documentation that demonstrates your due diligence,” Augustin said.

The 1930 law HSI enforces for potential criminal action defines forced labor as “any work that somebody does not present themselves voluntarily for.” However, International Labor Organization definitions are much broader, as is the 2016 statute being used by CBP that says it is illegal to import goods into the country that are made entirely or in part by forced labor, a term that covers convict labor, indentured labor and forced or indentured child labor. When “sufficient information” is available, CBP said, the agency may detain goods believed to have been produced with forced labor by issuing a Withhold Release Order.

Contrary to some opinions that “this is going to go away” come the next election or the next Congress, Kennedy said, referring to the crackdown, “quite honestly, I don’t think that is the case.”

Around the world, he said, there’s movement to crack down on forced or slave labor, and if the U.S.-Mexico-Canada Agreement is ratified, it requires that Canada and Mexico put in place restrictions like the U.S. has on the importation of such goods.

The traditional interpretation of who would be a target of an investigation, was the importer and the importer’s corporate officials. However, “recent meetings in Washington have determined that DOJ (Department of Justice) is willing to prosecute retailers, willing to prosecute online marketplaces and so on, and that is both the company and corporate officials,” Kennedy said.

Seconding the statement, Augustin said, “This remains a priority focus within CBP and I don’t see that changing.”