Proactive Measures Necessary to Avoid UFLPA Violations, Compliance Expert Says

Ethan Woolley, a director at Kharon, said that "without knowing which of your suppliers has exposure to risk, you're not going to know where to even start" if CBP detains a shipment. Companies in this position, which are reacting to enforcement action rather than taking proactive compliance measures, "by definition, ... then can't take a risk-based approach," he said.

The cost for companies that react to enforcement is immediate and can potentially reach into the hundreds of thousands of dollars. When CBP withholds release of a shipment "under suspicion of something in that shipment violating the UFLPA," it is the importer who has the responsibility "to provide documentation, which can be hundreds of pages, to demonstrate that there was an absence of forced labor in that supply chain," Woolley said. CBP holding up shipments over forced labor concerns can cause delays on products arriving at stores, something he refers to as "missing the season."

There are also hidden fees from forced labor detention, such as personnel distraction and reputational damage. "Every hour you spend on detention is an hour you're not spending on something else that's important. So there is the bandwidth issue for retail and apparel," he said.

Woolley said that CBP doesn't share which supplier triggered the detention, which can make responding to it very difficult because companies have so many complex supply chains: "You're not going to necessarily know which one [of the suppliers] was the cause of the problem in the first place, which makes isolating that risk very hard."

At this point, an importer has 30 days to respond to CBP. They have to determine which stage of the supply chain has exposure to UFLPA risk and then "provide documentary evidence [that it] is not in our supply chain," he said. If a company has not taken proactive steps to map their supply chains and identify risk, "it's very unlikely you're going to be able to do that in time to respond to a detention within that 30-day window," he said.

Even if a company has done the work and cleared supply chains of risk, that "doesn't mean that CBP won't detain your shipment, because they can see all the initial risk flags that you saw, the connections within China," and other risk factors; Woolley said that "they may still detain it for inspection and make you prove it."

But having done the work beforehand, companies are then able to quickly respond to CBP and demonstrate that their supply chains are free of forced labor, "and so finding this kind of exposure within your supply chain, even if the ultimate conclusion is that your products aren't actually exposed, is still really valuable," he said.

Acknowledging that information can be hard to come by about Chinese companies and their business dealings, Woolley recommended that companies try to use the government's own investigative techniques to get ahead: "How are companies being added to the UFLPA entity list, and how are shipments being selected for detention and inspection? Those decisions are the results of investigations" by CBP and other government entities. Companies should "want to be able to try as much as you can to play on a level playing field with them," he said. If a company doesn't "have the capacity or the capability to conduct investigations like that," then it can rely on compliance specialization companies, he said.

For importers, "once a shipment's been detained, the clock starts running then, so that's where you've got to be able to respond pretty quickly," Woolley said. "That can be exceptionally disruptive to a company, especially If they are very reliant upon a few key suppliers, and one of them has risk in their supply chain that the brand didn't know about."