New Regional WRO on Xinjiang Cotton, Tomatoes Presents Enforcement, Compliance Challenges

CBP’s new regional withhold release order on cotton and tomato products from China’s Xinjiang region presents new enforcement challenges for the agency, which is working on technological capabilities to be able to track origin for third-country goods made from imports covered by the WRO, CBP officials said on a call with reporters Jan. 13.

Announced that same day, the new WRO applies to all “cotton and tomato products grown and produced by entities operating in the Xinjiang Uighur Autonomous Region,” acting CBP Commissioner Mark Morgan said on the call. Products covered by the WRO include “apparel, textiles, tomato seeds, canned tomatoes, tomato sauce, and other goods made with cotton and tomatoes,” CBP said in a Jan. 13 news release.

Some cotton products from Xinjiang are already covered by a company-specific WRO issued in December on the Xinjiang Production and Construction Corps (see 2012020071). Brenda Smith, CBP executive assistant commissioner-trade, said CBP has since detained 43 shipments under the XPCC WRO valued at more than $2 million.

While the value of U.S. tomato imports from China is relatively small, China exported $9 billion in cotton products last year. Many of those exports go to third-countries for use as inputs, which presents a challenge for CBP enforcement and for importers, Smith said. CBP is working on new technologies to address those enforcement challenges, Morgan said, including a new “pollen technology that has come out.” The agency is employing artificial intelligence and link analysis, “as well as other technological capabilities that will help us to test origin,” Smith said.

For importers, it’s an “ongoing challenge” to “know their supply chain, and also be able to do that tracing back,” Smith said.

The new regional WRO, as well as other recent forced labor enforcement actions undertaken by CBP, “send a crystal clear message to the trade community: know your supply chains,” Morgan said. “Under the U.S. laws, importers are required to exercise reasonable care and to ensure that their supply chains are free from forced labor. It is their responsibility. It’s the law. There are reputational, financial and legal risks associated with importing goods made by forced labor into United States supply chains.”

The U.S. government provides “numerous resources that the trade community can and should use to better understand the risk of forced labor in global supply chains,” Morgan said, including the Department of Labor’s comply chain app, DOL’s list of goods made by child and forced labor, the State Department’s trafficking in persons reports, and the business advisory on Xinjiang issued July 1, 2020 (see 2007010040).

Intentional violators face criminal charges, and the Department of Homeland Security’s Homeland Security Investigations unit has “investigations ongoing,” acting DHS Deputy Secretary Ken Cuccinelli said on the call. As DHS improves its technologies for tracking forced labor in supply chains, it is going to be able to “more affirmatively shut down importers that are not policing their own supply chains,” Cuccinelli said.

While unusual, the WRO’s regional application is not unprecedented, and CBP is “entirely confident of the legal authority to proceed here,” Morgan said. “Nobody has ever challenged a withhold release order from CBP, period, full stop,” Morgan said. “It’s not going to happen with this one. It’s airtight, very strong, and well warranted under American law.”

Sen. Ron Wyden, the Oregon Democrat who will lead the Senate Finance Committee once the Georgia Senate winners are certified, issued a statement calling the order a positive step toward preventing goods made with Xinjiang-related forced labor from being sold in the U.S., adding, "but there is vastly more that needs to be done." He said he'll work with the administration to "eliminate these products from our market and tell China in no uncertain terms that the world will not tolerate these human rights abuses.”

The American Apparel and Footwear Association, the National Retail Federation, the Retail Industry Leaders Association, and the United States Fashion Industry Association applauded the action in a joint statement Jan. 13. “Today’s announcement matches our members’ accelerated commitment in this region,” they said. “We look forward to working with the U.S. Customs and Border Protection (CBP) to make sure enforcement is smart, transparent, targeted, and effective. We urge CBP to share with industry the evidence gathered, and the evidentiary thresholds used, that led to today’s announcement. Additionally, we ask CBP to share enforcement actions so that industry can further inform their due diligence and amplify and expand CBP’s enforcement efforts.”