Importers Should Consider High-Risk Factors When Developing Forced Labor Programs, Experts Say

Importers should consider four areas of risk as they develop anti-forced labor programs – at-risk populations, high-risk sectors, high-risk geographies and high-risk business models -- amid a rise of laws banning imports of goods made with forced labor worldwide, KPMG’s Elizabeth Shingler said during a webinar Jan. 24.

Speaking with three other KPMG consultants on the webinar, which focused on implementation of environmental, social and governance (ESG) programs, including for forced labor, Shingler said developing an anti-forced labor program can be “overwhelming” and is “still a relatively new concept” for the trade community. “It’s something we’ve had to digest very quickly and implementing into our programs," she said.

As importers are “building out their risk assessments,” they should consider whether their supply chains might touch any at-risk population that may be an ethnic minority group susceptible to forced labor situations. “Are they being forced off their property and are income opportunities that previously existed no longer existing? This can all lead to a forced labor situation,” she said, citing Xinjiang’s Uyghur minority as an example.

Some high-risk sectors have already been identified by CBP, including cotton and polysilicon, and more recently aluminum (see 2301120046), Shingler said. Computers and mobile phones have also recently been identified by Australia nongovernmental organization Walk Free as high risk. “Pay attention to what's being published and understand how your industry is being benchmarked in other reporting mechanisms,” she said.

High-risk geographies also should be considered, especially in light of the U.S. Uyghur Forced Labor Prevention Act, under which goods with a nexus to Xinjiang can’t be imported, “and that doesn’t just mean a country of origin of China,” Shingler said.

And high-risk business models should be considered, Shingler said. “Outsourcing labor can create inherent risks,” she said. “You’re looking to a third party to fulfill your staffing needs,” and “they’re inserted into your supply chain, but you might not have as much visibility into their hiring practices that you would have if you have direct control,” Singler said.

Once risk factors have been identified, internal and external communications and good supplier relationships are among important factors in implementing a successful ESG program, KPMG tax and trade consultants said during the webinar. Internal stakeholders must be helped to understand why the program should be important to them, so language should be used that’s relevant to them. “That really means understanding what they do, and where their responsibilities may be impacted by forced labor concerns [and] where they may have insight no one else has,” Shingler said.

It's important “that you have buy-in and leadership support to move these goals forward,” KPMG’s Jessica Libby said during the webinar. “This can’t just be a business objective,” she said. There needs to be a focus on being a “responsible corporate citizen.”

More than ever, relationships with suppliers are important, Libby said. “You are relying upon your suppliers to support your objectives through your ESG program, including providing transparency to potentially confidential documents around supplier and manufacturing sites,” Libby said. “So take your suppliers as a partner, work with them to understand what it is that they're doing within their own internal programs,” she said. “How you can layer in your own objectives into their programs ... to have mutual benefits?”