Date of publication: November 6, 2009
Source: Inside U.S. Trade
By Jamie Strawbridge
Business groups are worried by the potential effects of provisions banning the import of all goods made with convict labor, forced labor, or forced or indentured child labor that were included in a customs bill sponsored by Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA).
There is no coordinated lobbying push yet on the issue, but these groups are examining the ramifications of the bill’s provisions, especially in light of the bill’s requirements that a newly created office in the Department of Homeland Security (DHS) annually report to Congress on the volume and value of goods made with child labor, forced labor or convict labor that have been stopped at the border.
Business sources say this reporting requirement could cause DHS to more actively seek out imported products made with child labor, forced labor or convict labor. The new office would reside within the U.S. Immigration and Customs Enforcement Agency (ICE), which is a part of DHS.
Business sources fear that ICE would use lists of country-specific products made with child and forced labor issued by the Department of Labor last September as a starting point for this endeavor. These business sources are critical of the methodology that was used to create these lists, and do not believe they should form the basis for a ramped up enforcement effort.
One source said trade associations will have to determine in coming weeks whether to lobby the Finance Committee on this issue, but said they are still mulling the scope of the potential problem. The Finance Committee is hoping to hold a markup of the bill before the end of the year and has engaged in intensive consultations with private-sector stakeholders over the last month, sources said.
Sources conceded that this was a sensitive issue because industry groups do not want to be seen as opposing strict measures guarding against human rights abuses. However, one source did expect a push from lobbyists closer to the Finance Committee markup of the bill, and speculated that U.S. industry groups and foreign governments could form ad hoc coalitions to help send a united message.
Business groups criticize the Labor Department lists as being very broad, for using outdated or limited data as the basis for including countries on the lists, and not differentiating enough between countries taking steps to address labor issues, and those that fail to do so.
If these lists formed any kind of basis for stepped up ICE enforcement, it could lead to some limited disruption in global supply chains, or at least uncertainty over what country-specific products could next be targeted by ICE investigations, one source said.
Business sources say they are confident that their supply chains would not be affected, but also highlighted a potential problem with perception that could arise: namely, that U.S. companies are buying products made with forced or child labor. Any findings by ICE on specific instances of the use child labor could throw a negative light on foreign sourcing of the country-specific products in question, one source argued.
A preliminary list issued by the Departments of Labor, State and Homeland Security issued in September cites 29 products from 47 countries for which there is a “reasonable basis to believe” that they were mined, produced or manufactured with forced or indentured child labor.
That list includes carpets from India, Nepal and Pakistan; cocoa from Cote d’Ivoire and Nigeria; coffee from Cote d’Ivoire; electronics and toys from China; embroidered textiles from India and Nepal; garments from Argentina, India and Thailand; gold from Burkina Faso; shrimp from Thailand; and tobacco from Malawi.
This list, once finalized, will be used in the federal procurement process, as any contractor wishing to supply the specific goods from the specific countries so identified will have to provide certification that to the best of their knowledge, they were not made using child labor, a Labor Department official said.
However, the Department of Labor last September also released a much broader list of goods from countries that were made with child labor, including when it is not forced, or with forced labor, which includes convict labor and adult forced labor. That list covers 122 goods from 58 countries, including 60 agricultural goods, 38 manufactured goods and 23 mined or quarried goods. Business representatives focused their criticism this week on this second list.
This second list covers all of the country-specific products named in the first list, and many more. For instance, it states that China is producing fireworks using child labor and forced labor, and is producing footwear and garments with forced labor; that India is producing soccer balls with child labor; and that Mexico is producing tomatoes and coffee using child labor.
One industry source said there is “a lot” of concern about the methodology behind this second list, which was included in a report issued in accordance with the Trafficking Victims Protection Reauthorization Acts of 2005 and 2008.
This source said some information used in the report is seven years old, and that some assertions on country-specific products -- such as the assertion that China uses forced labor in its footwear production -- are based on one report on a single factory, while there are roughly 10,000 Chinese factories producing footwear.
The Baucus-Grassley customs bill would amend Section 307 of the Tariff Act of 1930 in order to ensure that no goods produced with convict labor, forced labor, or indentured labor under penal sanctions is imported into the United States. The bill states that the terms “forced labor” and “indentured labor” include forced or indentured child labor, but one source said the bill would not cover all forms of child labor.
While Section 307 already prohibits the import of goods made with convict, forced or indentured labor, it also provides an exemption when the goods in question are not mined, produced or manufactured in such quantities so as to meet “consumptive demands” in the United States.
This provides a possible “escape clause” if U.S. businesses were found to be importing goods made with forced or child labor, and the customs bill eliminates this “escape clause.” Several business sources said that the elimination of this “consumptive demand” provision would have little practical effect, as businesses do not use it in order to circumvent the general ban as outlined in Section 307.
However, they did flag as another possible problem the fact that the definition of the types of labor practices that cannot be used for imports is broader in the customs bill than in Section 307. This creates a “slippery slope” problem where this definition could be continually expanded, and creates uncertainty in terms of how the expanded definition would play out when it comes to enforcement, one industry source said.
In particular, the customs bill would ban the import not only of goods produced with convict labor, forced labor or indentured labor, as is the case with Section 307, but also goods produced “by means of coercion” and by individuals who at the time of production were being subjected to a severe form of trafficking.
Sen. Tom Harkin (D-IA) urged the Finance Committee to include language on forced labor, child labor and convict labor in the customs bill, as this is a long-standing concern of his, sources said.
Currently, when CBP receives an allegation involving the importation of merchandise produced by forced, indentured, or convict labor, it refers the allegation to ICE for investigation. Whenever CBP is provided with information sufficient to make a “determination” that the merchandise violates Section 307, it publishes a formal “finding” that bans importation, according to a CBP official.
When information reasonably, but not conclusively, indicates that merchandise is being imported in contradiction to Section 307, CBP issues detention orders. If the importer is unable to establish the admissibility of the merchandise, CBP advises the importer that the merchandise is excluded from entry. There were six such findings issued in the 1990s on forced convict labor, the CBP official said.