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June 29, 2022 | Monica DeMars Senior Manager Compliance
Importer Guidance—the Uyghur Forced Labor Prevention Act
Over the last few years, the industry has seen a significant rise in the enforcement of forced labor rules for importing to the United States. Currently U.S. Customs and Border Protection (CBP) has enforcement actions including 54 Withhold Release Orders (WRO's) and 9 Findings. According to this report, CBP detained 912 shipments because of suspected forced labor between October 1, 2021, and December 31, 2021.
On December 23, 2021, President Biden signed into law the Uyghur Forced Labor Prevention Act (UFLPA), which took effect on June 21, 2022. UFLPA establishes a rebuttable presumption that the importation of any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of China, or produced by certain entities on the Forced Labor Enforcement Task Force (FLETF) Entity List, is prohibited for import into the United States.
The Department of Homeland Security (DHS) has recently issued a report to Congress which outlines their Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in China. This strategy outlines the assessment, the evaluation and description of forced labor schemes, the UFLPA Entity List, recommendations for opportunities to identify and trace goods, as well as guidance to importers.
What should importers be doing? Where do you start?
CBP will employ a risk-based approach to the enforcement of ULFPA. Importers should be reviewing their supply chain against these resources for possible risks. CBP will also prioritize high-risk goods and banned entities in its enforcement. Importers should be thoroughly reviewing their goods and suppliers at all levels of their supply chain against potential risks of forced labor, transshipment, and other targeted areas.
Importers should review CBP’s Operational Guidance for Importers and DHS Strategy document as well as UFLPA Entity list as a first step in the preliminary review. CBP will initially be targeting shipments that are:
- High Priority Sectors (cotton and cotton products, tomatoes, and silica-based products including polysilicon)
- Illegally transshipped goods with inputs from Xingang
- Goods imported from entities, not located in Xingang, that are a parent, subsidiary, or affiliate, related to an entity in Xingang and likely to contain inputs from that region.
It is strongly recommended that importers start as soon as possible to conduct a supply chain mapping exercise tracing the origin of each input to the product to confirm the entity and who produced it, that it was not made with forced labor, and be able to provide supporting documentation.
The most effective way to do this is to develop a questionnaire, based on the International Labor Organization forced labor indicators, and outline the process for how your product is produced. If you catch any red flags through this process, discuss with your supplier how they will rectify the situation. You can also use the U.S. Department of Labor’s Comply Chain website.
The guidance and strategy published outlines:
- The types of evidence that may demonstrate a good is out of scope and what documentation needs to be provided
- What documentation is clear and convincing evidence to obtain an exception to UFLPA
- Outlines due diligence, effective supply chain tracing, supply chain management measures and other resources
The process
CBP has outlined a general process they will follow when screening and detaining potentially violative cargo under the ULFPA.
CBP risk assessment and enforcement: Potential violative cargo will have a risk assessment conducted and will be detained, seized, or flagged for an exam by CBP according to the current detention process. CBP will issue a detention notice that will cite the forced labor UFLPA requirements. The detention is for 30 days after which the goods will be seized.
Importer actions: Importers can choose to rebut the presumption of the forced labor finding. However, they must be able to prove that they have fully complied with the law and have implemented a strong due diligence and management process over the potential forced labor incorporated in their supply chains. If an importer is unsure of their supply chain or it cannot be verified, there is an option to export the goods.
If an importer wishes to petition CBP, the importer must provide all the potential evidence outlined in CBP’s strategy—making sure the evidence is clear and convincing, and ensuring the documentation presented to them, if it is in English, allows CBP to conduct a more efficient review.
- Petition shipment outside the of scope of UFLPA: The importer can petition CBP if they can provide documentation proving that the importer’s merchandise is sourced completely outside of Xinjiang and none of the entities are connected to the UFLPA entity list. The importer will need to provide clear and convincing evidence that their goods are excluded or not applicable to UFLPA.
- Request an exception: This option is applicable for the importation of goods within the scope of ULFPA, where the entity or XUAR product is within the supply chain of the product being imported. This evidence and support are good for one specific shipment unless the importer can prove and supply documentation to CBP that additional identical shipments previously determined to be admissible are from the same supply chain. Only the Commissioner of CBP can grant an exception. If an exception is approved, CBP will need to notify Congress and the public within 30 days.
To apply for an exception, the importer must:- Present clear and convincing evidence, the goods were not mined, produced, or manufactured wholly or in part with forced labor
- Respond completely and substantively to all CBP requests for information
- Comply with all guidance, strategy, and regulations under UFLPA
- Final decision: If the evidence is not found to be clear and convincing by CBP, the importer is entitled to continue to protest the decision. However, the importer is responsible for all storage and other fees while the cargo is detained.
This rebuttable presumption will apply to all products, whether already subject to a WRO within these high-priority sectors produced in Xingang or by entities on the UFLPA Entity List. If your goods are covered by a WRO, this will significantly change the timeframe from 90 days to 30 days for importers to present their case to CBP.
Next steps
The high standard of enforcement of UFLPA has changed the requirements and diligence needed for shippers to import certain commodities to the United States. Shippers may need to change contracts and purchase orders to include requirements against forced labor in their supply chain and will need to conduct third party audits of their supply chain.
Reviewing if being a Customs Trade Partnership Against Terrorism (CTPAT) partner with CBP is more important than ever. CTPAT partners have been given priority review for UFLPA exception requests. CBP is holding the 2022 Trade Facilitation and Cargo Security Summit in Anaheim, California, July 18–19. Be sure to register today to attend in person or virtually, to learn more about forced labor, CTPAT benefits and other CBP initiatives and priorities. Connect with one of our trade policy experts to learn more.
Resources
- UFLPA/CBP resources:
- CTPAT Program page
- Department of State's Xingang Supply Chain Business Advisory
- C.H. Robinson Blog: Understanding Your Role in Forced Labor Compliance
Our information is compiled from a number of sources that to the best of our knowledge are accurate and correct. It is always the intent of our company to present accurate information. C.H. Robinson accepts no liability or responsibility for the information published herein.
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USICA resources
The United States Innovation and Competition Act (USICA) was passed by the U.S. Senate in June 2021 to counter China’s growing influence in science, technology, and advanced manufacturing.
What’s included in the bill
Major components of the bill include investments in domestic manufacturing of “strategic sectors” like computer chips and PPE.
Also included is the Trade Act of 2021, which would reinstate certain exclusions to Section 301. Additionally, under USICA, importers of Generalized System of Preferences (GSP) products could be retroactively refunded for certain duties paid and no longer have to pay duties and tariffs on GSP imports until January 1, 2027, when GSP will expire again.
Additionally, USICA would renew the Miscellaneous Tariff Bill (MTB) program through December 31, 2023—and be retroactive for four months before the bill’s enactment—providing temporary tariff reductions and suspensions on certain U.S. imports.
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Uncover potential duty refunds if the USICA passes into law* with our U.S. Tariff Search Tool. Instantly search by Harmonized Tariff Schedule (HTS) and estimate your retroactive duty refund amount today.
America COMPETES resources
The U.S. House of Representatives passed the America COMPETES Act in February 2022, in response to the Senate’s USICA.
What’s included in the bill
Under the America COMPETES Act, GSP products would be renewed for a shorter timeframe—until January 1, 2024. The MTB program would be renewed through approximately the same period as under USICA—through December 31, 2023.
One provision only included in this bill is the Importer Security & Fairness Act, which addresses de minimis value shipments and would prohibit certain goods—such as goods that are both non-market economies and on the U.S. Trade Representative’s (USTR) watch list from using de minimis. The current de minimis value in the United States is $800, which means one can import shipments valued at $800 or less without paying duties, taxes, or fees.
Notably, the America COMPETES Act does not contain provisions surrounding the Section 301 China tariffs.
*The USICA and America COMPETES are currently bills and have not yet become law. Aspects of the bills can change and amendments can be made. The information provided herein does not guarantee any refund and undue reliance should not be placed on it. Proper review and thorough analysis are required to determine outcome.
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Section 301: Unfair trade practices
What is it?
Section 301 of the Trade Act of 1974—Allows the United States Trade Representative (USTR) to suspend trade agreement concessions or impose import restrictions if it determines a U.S. trading partner is violating trade agreement commitments or engaging in discriminatory or unreasonable practices that burden or restrict U.S. commerce.
Background Report—Congressional Research Service – Section 301 of the Trade Act of 1974 – August 2020
Update: March 23, 2022
Certain Section 301 duty exclusions reinstated—The Office of the United States Trade Representative (USTR) announced it would reinstate certain previously expired (and extended) product exclusions. Of the initial 549 eligible exclusions announced in October 2021, USTR has reinstated 352 product exclusions, retroactive to October 12, 2021, and extended through December 31, 2022.
What this means for your business—Uncover potential duty refunds using our U.S. Tariff Search Tool. Instantly search by Harmonized Tariff Schedule (HTS) and review the language within the “USTR Exclusion Extension Potential” section to determine your eligibility for retroactive duty recovery and for participation on a go-forward basis, through December 31, 2022.
Update: October 4, 2021
Reinstatement of Targeted Potential Exclusions—Following United States Trade Representative’s (USTR) announcement on October 4, 2021, the USTR has started a targeted tariff exclusion process. The agency invited public comments on whether to reinstate previously extended exclusions. Of the more than 2,200 exclusions granted, 549 were extended. Most previously expired on December 31, 2020. The USTR will evaluate, on a case-by-case basis, the possible reinstatement of each exclusion. If granted, the USTR will reinstate exclusions retroactively to October 12, 2021, and publish them in the Federal Register.
How does it affect trade?
Section 232: National security concerns
What is it?
Section 232 of the Trade Expansion Act of 1962—Allows the president to adjust imports if the Department of Commerce finds certain products are imported in such quantities or under such circumstances as to threaten to impair U.S. national security.
Background Report — Congressional Research Service – Section 232 Investigations: Overview and Issues for Congress – August 2020
How does it affect trade?
Section 201: Cause/threat to domestic industry
What is it?
Section 201 of the Trade Act of 1974—Allows the president to impose temporary duties and other trade measures if the U.S. International Trade Commission (ITC) determines a surge in imports is a substantial cause or threat of serious injury to a U.S. industry.
Background Report—Congressional Research Service – Section 201 of the Trade Act of 1974 – August 2018
How does it affect trade?
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How your business can take advantage of Section 301 tariff refunds
Trade & Tariff FAQs
Q: Are products entered under the Section 321 de minimis exemption (under $800) subject to Section 301 duties?
No, not right now. Goods properly entered under Section 321 are not subject to Section 301 duties. Please note that a formal entry is required if a shipment contains merchandise subject to AD/CVD. Goods subject to AD/CVD do not qualify for Section 321.
Something to keep an eye on: U.S. Customs and Border Protection (CBP) submitted a proposal in early September 2020 to the Office of Management and Budget that would eliminate the $800 de minimis exemption for goods subject to Section 301 tariffs. Additionally, in January 2022, the Import Security and Fairness Act was introduced to address Section 321 shipment activity. Significant changes proposed within this legislation are as follows:
- Reverses Congress’s decision to raise the threshold to $800 from the previous threshold of $200
- Prohibits goods from countries that are both non-market economies and on the United States Trade Representative’s (USTR) Watch List from using de minimis benefits
- Prohibits goods subject to enforcement actions (e.g., Section 301 tariff measures) from using the program
Remember, Section 321, 19 USC 1321 is the statute that describes de minimis. De minimis provides admission of articles free of duty and of any tax imposed on, or by reason of importation, but the aggregate fair retail value in the country of shipment of articles imported by one person on one day and exempted from the payment of duty shall not exceed $800. The de minimis threshold was previously $200 but increased with the passage of the Trade Facilitation and Trade Enforcement Act (TFTEA).
Q: Can I still apply for exclusions to the Section 301 (China) tariffs?
The time window to submit new exclusion requests is now closed. While the USTR approved, on average, 35% of requests under the first two actions, the approval rates under the third and fourth actions were 5% and 7%, respectively.3 Be sure to check in with your trusted trade advisors to see if new comment periods open.
Be aware the USTR has completed its evaluation for the potential extension of 549 specific product exclusions granted from Lists 1, 2, 3, and 4. Accordingly, in March 23, 2022, of the 549 specific product exclusions, the USTR reinstated 352 previously expired Section 301 China duty exclusions, as published in the accompanying Federal Register notice. The exclusions were retroactively applied to October 12, 2021, and made valid through December 31, 2022.
Q: If I previously paid Section 301 (China) duties, but an exclusion was later issued by the United States Trade Representative (USTR), can I get my money back?
Yes. You have the opportunity to potentially recover duties paid on previous entry activity. Your customs broker, trade attorney, or trade consultant can submit a refund request via Post Summary Correction (PSC) or Protest as long as the entry has not exceeded the liquidation date plus 180-day time period (roughly 480 days from the original entry date). Remember, your company doesn’t have to be the one that requested the exclusion in the first place. You qualify as long as your product meets the specific description of the exclusion granted by the USTR.
Q: Are products used to support the fight against COVID-19 subject to the additional Section 301 (China) tariffs?
The USTR announced on March 20, 2020, that, prior to the COVID-19 outbreak, the agency had been working with the U.S. Department of Health and Human Services “to ensure that critical medicines and other essential medical products were not subject to additional Section 301 tariffs.” Consequently, the United States had not imposed tariffs on certain critical products, such as ventilators, oxygen masks, and nebulizers.
The USTR has since reviewed requests for exclusions on medical care products, resulting in exclusions granted on basic medical supplies, including gloves, soaps, face masks, surgical drapes, and hospital gowns. Since March 2020, the USTR has exempted certain medical products from Section 301 tariffs in several rounds of exclusions.3
Q: What is the timing of duty calculations on immediate transportation in bond entries subject to Section 301?
Duties are due on goods that are entered for consumption, or withdrawn from warehouse for consumption, on or after the effective date of the provisional tariffs. For entries covered by an entry for immediate transportation, and with a country of origin of China, and a Harmonized Tariff Schedule (HTS) classification covered by Annex A to the FRN, such entries shall be subject to the duty rates in effect when the immediate transportation entry was accepted at the port of original importation, pursuant to 19 CFR 141.69 (b), which states:
Merchandise which is not subject to a quantitative or tariff-rate quota and which is covered by an entry for immediate transportation made at the port of original importation, if entered for consumption at the port designated by the consignee or his agent in such transportation entry without having been taken into custody by the port director for general order under section 490, Tariff Act of 1930, as amended (19 U.S.C. 1490), shall be subject to the rates in effect when the immediate transportation entry was accepted at the port of original importation.
Q: How much has the U.S. government collected from the various trade remedy measures?
U.S. CBP assesses and collects duties on U.S. imports, including the additional duties imposed as a result of the president’s tariff actions. As of April 27, 2022 U.S. CBP has reported these duty assessments.
Q: Are products of Hong Kong subject to the additional Section 301 duties against China?
No. Additional duties imposed by the Section 301 remedy only apply to articles that are products of the People’s Republic of China (ISO Country Code CN). Imported goods that are legitimately the product of Hong Kong (HK) or Macau (MO) are not subject to the additional Section 301 duties. Please note that Section 301 duties are based on country of origin, not country of export.2
Q: What are various types of import restrictions that can be imposed by the government?
Tariffs – A tax on imports of foreign goods paid by the importer. Ad valorem tariffs are assessed as a percentage of the value of the import (e.g., a tax of 25% on the value of an imported truck). Specific tariffs are assessed at a fixed rate based on the quantity of the import (e.g. 7.7% per kilogram of imported almonds), and are most common on agricultural imports.
Quotas – A restriction on the total allowable amount of imports based either on the quantity or value of goods imported. Quotas are in place on a limited number of U.S. imports, mostly agricultural commodities, in part due to past trade agreements to remove and prohibit them.
Tariff-Rate Quota (TRQ) –TRQs involve a two-tiered tariff scheme in which the tariff rate changes depending on the level of imports. Below a specific value or quantity of imports, a lower tariff rate applies. Once this threshold is reached, all additional imports face a higher, sometimes prohibitive, tariff rate.
Q: Does U.S. Customs and Border Protection (CBP) pay interest when refunding duties previously paid?
Yes! CBP does pay interest from the date the original money was deposited. The current interest rates are published in the Federal Register on a quarterly basis. Review the most recent Federal Register Notice for the latest rates.
Q: How do I find out if my product is subject to Section 301 tariff duties?
Enter the product’s harmonized tariff schedule (HTS) classification on the USTR website. In addition, you can refer to our U.S. tariff search tool to quickly search both the Section 301 tariff lists, but also identify if there are any exclusion opportunities. Talk to your Trusted Advisor® expert at C.H. Robinson to learn more.
Q: Do Section 301 (China) duties still apply if I ship goods to another country, such as Canada or Mexico, and have them packaged there before entering the commerce of the United States?
Yes. Basic changes/processes such as packaging, cleaning, and sorting would not change the country of origin to be declared in most cases. The origin would still be China and therefore the Section 301 duties would still apply.
Q: Are Section 301 duties eligible for drawback?
As noted in CSMS Message 18-000419, Section 301 duties are eligible for duty drawback. Drawback is the refund of certain duties, internal revenue taxes, and certain fees collected upon the importation of goods. Such refunds are only allowed upon the exportation or destruction of goods under U.S. Customs and Border Protection supervision.
Q: Have U.S. trading partners taken or proposed retaliatory trade actions?
Yes. Some United States’ trading partners subject to the additional United States import restrictions have taken or announced proposed retaliations against each of the three United States actions. The International Trade Administration published an article regarding retaliatory tariffs implemented by United States’ trading partners.
Q: What is a tariff?
Tariffs or duties are taxes assessed on imports of foreign goods, paid by the importer to the U.S. government, and collected by U.S. Customs and Border Protection (CBP). Current U.S. tariff rates may be found in the Harmonized Tariff Schedule (HTS) maintained by the U.S. International Trade Commission (ITC). The U.S. Constitution grants Congress the sole authority to regulate foreign commerce and therefore impose tariffs, but, through various trade laws, Congress has delegated authority to the president to modify tariffs and other trade restrictions under certain circumstances.1
References
- Congressional Research Service – Trump Administration Tariff Actions (Sections 201, 232, and 301): FAQs
- Section 301 Trade Remedies Frequently Asked Questions
- Congressional Research Service - Section 301: Tariff Exclusions on U.S. Imports from China
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All content and materials discussed herein are for informational purposes only and do not constitute legal advice. You should always independently check the related Code of Federal Regulations (CFR) and, if needed, consult with the applicable Federal Agency (e.g. CBP, USTR) and/or external counsel where any question or doubt exists. Information on this site is the property of C.H. Robinson. Any transmission or use without C.H. Robinson’s permission and approval is not allowed or authorized.