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CBP’s ‘Aggressive’ WRO Stance Forces ‘Long Pathway’ to Compliance

The Sourcing at Magic trade show in Las Vegas brought out brands, buyers and producers from across the globe—albeit in smaller numbers reflecting the ongoing pandemic’s impact.

Covid-19’s effect is still being felt across the industry, evidenced by rapidly shifting consumer appetites and logistics-related challenges. A discussion led by Sourcing Journal founder and president Edward Hertzman featuring Mark Jaeger, vice president of stakeholder engagement for WRAP, highlighted the global headwinds that fashion players now face when it comes to compliance in sourcing and manufacturing.

WRAP, which audits global apparel factories and acts as a resource for companies looking to source with vetted, ethical partners, has noted a substantial impact to its own operations. “It’s been a hard slog,” Jaeger said, noting that viral outbreaks have impeded the organization’s ability to conduct its audits in person.

“Groups like WRAP expect to get access to factories, conduct audit reviews and work on corrective action plans,” he added. “That’s been shut down or interrupted in many locations over the last 18 months.” The auditing firm has adopted a number of different approaches, including a virtual review process that allows for the extension of WRAP certifications for a period of six months. Because the process is less thorough, though, it’s declining to take on new factory certifications virtually.

Hertzman said that the issue of compliance and certification is currently having an outsized impact on factories based in China due to rampant allegations of human rights abuses across the country’s labor force, and particularly in the Xinjiang region, where mounting evidence indicates that Uyghur Muslims and other ethnic minorities have been trafficked for forced labor. The U.S. government has proposed and implemented multiple actions to address the country’s misdeeds, and is now working to push through the Uyghur Forced Labor Prevention Act, legislation led by Sen. Marco Rubio (R-Fla.) that would bar goods from Xinjiang from entering the country under the presumption that they have been made under duress.

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“In the last 18 months, fairly dramatic action [has been] taken by the U.S. government and other Western governments to penalize China over forced labor concerns in Xinjiang,” Jaeger said, through the expansion of Customs and Border Protection (CBP) authority to exclude goods perceived as having been made with forced labor from crossing into the U.S. market, based on information gleaned from sources like media reports and investigations into factories. Withhold release orders have been implemented to bar containers from entering the country, putting the onus on companies to prove that their sourcing is compliant before the goods are released.

“They’ve taken this tool, and they’ve used it aggressively,” he said, calling the CBP practice “a concern” for American brands sourcing both goods and raw materials, like cotton, from China. Under the pending legislation, importers will face a “long pathway” to proving that their goods are compliant.

“I see this being a very big problem for the foreseeable future,” Hertzman said, noting that CBP lacks the resources and manpower to execute effective checks on all goods once they’ve been stopped at U.S. borders, which he believes will exacerbate bottlenecks. “They don’t have the bandwidth to execute and accelerate the paperwork to get it passed.” For brands, the issue likely means “lost sales and an inability to fulfill wholesale orders,” he said.

As the new legislation takes effect, audits stand to become a key driver in offering the proof of compliance needed to disentangle goods held up at points of entry, like U.S. ports, Jaeger said. “What you can realistically do is to take steps, at least in your tier one facilities, to get an audit to verify the identity of the employees and verify that there’s no indicators of restrained movement or forced labor,” he recommended. Now, though, companies must also consider auditing tier two and tier three partners, like fabric producers, mills, cotton farms and other inputs providers to ensure that the entire supply chain is free of forced labor.

“Cotton is the big problem,” Jaeger said, noting that the fiber is shipped to mills and factories across the globe from China, creating a traceability headache for brands. “If you’re sourcing a cotton garment, and you’re put on the hook with a WRO, you’re going to need to work through whether it’s even possible to show that those goods originated from outside of Xinjiang.” In some cases, it may not be “technically feasible” to do so, and brands will be forced to contemplate canceling orders or revising their sourcing relationships altogether to avoid any holdups, he added.

“The reality is that if you’re waiting to the time that the goods [are] at the port, and they get stuck, there’s nothing you really are going to be able to do,” Hertzman added. “This is going to accelerate the need for traceability throughout the supply chain in a very meaningful way.”

“This is not just a sexy buzzword that we’re doing now to market sustainability,” he said. “If we do not have an ability to trace back to the field where raw materials are coming from, there could be huge financial repercussions.”