If there are North Korea-made products or actual North Koreans in your supply chain, your company will be in for some issues.
The U.S. has hit North Korea with a series of new sanctions of late, some of which say any company doing business with North Korea could face having their assets frozen or be cut off from access to the U.S. financial system.
More specifically for the apparel and textile sectors, however, one such sanction addresses human rights abuses, and essentially creates a presumption that anything made by a North Korean will be considered as made using forced labor.
[Read more about the impact of North Korea sanctions: Textile Exports at the Forefront of UN Sanctions on North Korea]
That means if it’s found—or even just believed—that goods made by North Korean citizens or nationals anywhere in the world are in the supply chain in question, U.S. Customs and Border Protection (CBP) could ban any of those associated import shipments or seize goods in a sort of guilty until proven innocent approach. Evidence of North Korean labor in a supply chain could also lead CBP to initiate a criminal investigation.
As CBP puts it, “any significant merchandise mined, produced, or manufactured wholly or in part by North Korean nationals or citizens is prohibited from entry into the United States unless CBP finds through clear and convincing evidence that the merchandise was not produced with a form of prohibited labor.”
When it comes to apparel supply chains, this problem becomes far bigger than just not sourcing from North Korea.
“While this policy does address a very real problem, it also creates complications for companies as they will now have to research workers’ nationalities throughout the supply chain, expanding upon existing compliance priorities such as preventing forced and child labor, ensuring factory safety and eliminating the use of harmful chemicals,” said Nate Herman, SVP of supply chain for the American Apparel & Footwear Association.
As many as 65,000 North Koreans work in 40 countries across Asia and Eastern Europe, according to Associated Press estimates, and for many of them, working conditions are dire, pay is subpar and the North Korean government reportedly takes as much as 70 percent of their salaries, which could leave workers with as little as $90 per month or 46 cents per hour.
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“This means Americans buying salmon for dinner at Walmart or Aldi may inadvertently have subsidized the North Korean government as it builds its nuclear weapons program,” AP said following its own investigation.
Apart from seafood, AP’s findings uncovered North Korean laborers sewing garments at factories in Hunchun in northeast China, bordering North Korea, and some of those garments could have been for export to the U.S.
With the U.S. putting increasing economic pressure on North Korea and tensions rising as a result, CBP has urged companies to take all efforts in doing their due diligence. To aid that effort, CBP recently updated its Informed Compliance Publication, outlining “What Every Member of the Trade Community Should Know,” with a section focused on forced labor that’s expected to serve as a guideline for keeping companies out of hot water over unethical labor issues.
“CBP will continue to engage its interagency partners to assess how this change affects the supply chain risk associated with merchandise produced in any foreign location and imported or likely to be imported into the United States,” a statement released Tuesday said.
More than ever, brands will have to be crystal clear about where their goods are coming from and who’s had a hand in making them.
“The change in policy reinforces the need for brands to achieve full transparency and traceability throughout their supply chains and to implement comprehensive due diligence programs to ensure that supply chains are compliant,” Herman said.