[Senate Hearing 105-253]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 105-253
 
       U.S. IMPLEMENTATION OF PRISON LABOR AGREEMENTS WITH CHINA

=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 21, 1997

                               __________

       Printed for the use of the Committee on Foreign Relations




                     U.S. GOVERNMENT PRINTING OFFICE
41-198 CC                    WASHINGTON : 1997






                     COMMITTEE ON FOREIGN RELATIONS

                 JESSE HELMS, North Carolina, Chairman
RICHARD G. LUGAR, Indiana            JOSEPH R. BIDEN, Jr., Delaware
PAUL COVERDELL, Georgia              PAUL S. SARBANES, Maryland
CHUCK HAGEL, Nebraska                CHRISTOPHER J. DODD, Connecticut
GORDON H. SMITH, Oregon              JOHN F. KERRY, Massachusetts
CRAIG THOMAS, Wyoming                CHARLES S. ROBB, Virginia
ROD GRAMS, Minnesota                 RUSSELL D. FEINGOLD, Wisconsin
JOHN ASHCROFT, Missouri              DIANNE FEINSTEIN, California
BILL FRIST, Tennessee                PAUL D. WELLSTONE, Minnesota
SAM BROWNBACK, Kansas
                     James W. Nance, Staff Director
                 Edwin K. Hall, Minority Staff Director

                                  (ii)

  




                            C O N T E N T S

                              ----------                              
                                                                   Page

Bader, Jeffrey A., Deputy Assistant Secretary for East Asian and 
  Pacific Affairs, U.S. Department of State......................    16
    Prepared statement...........................................    18
Fiedler, Jeffrey L., President, Food and Allied Service Trades 
  Department, AFL-CIO, Washington, DC............................    73
    Prepared statement...........................................    75
Johnson, Hon. James E., Assistant Secretary for Enforcement, U.S. 
  Department of the Treasury.....................................     2
    Prepared statement...........................................     5
Levy, Peter B., President, Labelon/Noesting Company, Mt. Vernon, 
  New York.......................................................    64
    Prepared statement...........................................    67
Shenqi, Fu, Chinese dissident and Laogai Survivor, New York, New 
  York...........................................................    72
Weise, Hon. George, Commissioner, U.S. Customs Service...........     7
    Prepared statement...........................................     9
Wu, Harry, Executive Director, Laogai Research Foundation, 
  Milpitas, California...........................................    44
    Prepared statement...........................................    48
Shieh, Maranda, President, Greater Washington Network for 
  Democracy in China and Friends of Hong Kong and Macao 
  Association....................................................    68
    Prepared statement...........................................    71

                                Appendix

Letter from Barbara Larkin, Assistant Secretary, Legislative 
  Affairs, Department of State, to Chairman Helms................    83
Responses of Mr. Bader to Questions Asked by Senator Helms.......    83
Letter from Liam Higgins, Office of Legislative Affairs, 
  Department of the Treasury, to Chairman Helms..................   155
Responses of Mr. Johnson to Questions Asked by Senator Wellstone.   155
Responses of Mr. Bader to Questions Asked by Senator Wellstone...   156

                                 (iii)

  


       U.S. IMPLEMENTATION OF PRISON LABOR AGREEMENTS WITH CHINA

                              ----------                              


                        WEDNESDAY, MAY 21, 1997

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met at 10:02 a.m., in room SD-419, Dirksen 
Senate Office Building, Hon. Craig Thomas, presiding.
    Present: Senators Thomas, Ashcroft, Biden, Robb, Feingold, 
Feinstein, and Wellstone.
    Senator Thomas. Thank you very much, gentlemen. I will call 
the meeting of the committee to order.
    Let me first express the chairman's regrets that he is not 
here, but I think he will probably be here shortly. He is on 
the floor dealing with some issues and will be here, but we 
wanted to go forward with the hearing at the time that was 
prescribed.
    Let me ask consent to place into the record the chairman's 
statement. If he comes and wants to do it, of course he will be 
able to do that. Otherwise, it will be in the record.
    [The prepared statement of Chairman Helms follows:]
                  Prepared Statement of Chairman Helms
    The Committee will come to order. The Foreign Relations Committee 
will this morning address the matter of U.S. enforcement of prison 
labor agreements with the People's Republic of China, which the 
Committee has not considered since 1991. Since then, a lot has 
happened. The United States has signed two agreements with China on 
prison labor. However, there continues to be evidence of Chinese prison 
labor imports to the United States and a disturbing lack of cooperation 
from the Chinese government.
    China's penal system relies on an extensive system of forced labor 
camps, farms, and factories. Prisoners can be sentenced to ``reform 
through labor'' as part of the judicial process, that is, as criminals, 
or administratively to ``reeducation through labor.'' This distinction 
has created a major problem in enforcement of the agreement between 
China and the U.S. on prison labor, with China refusing access to 
``reeducation through labor'' facilities on the grounds that they are 
not prisons.
    Prisoners sentenced through the administrative process have not 
been tried or convicted of a crime. Often, prisoners are held in labor 
camps long after the completion of their sentences.
    By one estimate, over half of China's prison labor goods are 
exported. Labor reform facilities produce everything from agricultural 
products to manufactured goods, or as we will hear from the second 
panel of witnesses, everything from brake rotors to Christmas lights. 
Chinese authorities aggressively target foreign markets and business 
partners for joint ventures. We will hear from our witnesses today 
about American companies who knowingly contract for prison labor goods 
and sell them to the American public.
    An economy that relies heavily on prison labor is an awful truth of 
the Chinese system. But China's intentional export of prison labor 
exports to the U.S., China's largest market, is not simply repulsive--
it is a violation of U.S. law.
    U.S. law has prohibited the importation of prison labor products 
from anywhere in the world since 1932. However, prison labor imports 
from the People's Republic of China constitute the largest group of 
cases open within the U.S. Customs Service.
    In an effort to enlist Chinese cooperation in enforcement of U.S. 
law, the U.S. concluded two agreements with the Chinese government on 
prison labor--a 1992 Memorandum of Understanding, or M.O.U., and 1994 
agreement called the Statement of Cooperation, or S.O.C.
    These agreements are not working. This isn't my opinion--it is the 
conclusion of the Clinton Administration which in its annual human 
rights reports, testimony to the Congress and publicly quoted internal 
documents has concluded that China is failing to comply with its 
obligations in the 1992 M.O.U. on prison labor.
    In fact, in December 1995, Customs Commissioner Weise, told his 
colleagues at the State Department and the U.S. Trade Representative's 
Office that in the Customs Service's view, the Memorandum of 
Understanding and the Statement of Cooperation are ``not working at 
this point and there is nothing more U.S. Customs can do to make [them] 
work.''
    The State Department also has concluded that China is not complying 
with its obligations under the prison labor memorandum of 
understanding. In this year and previous years, the annual human rights 
report on China has noted ``limited'' or ``stalled'' cooperation with 
the M.O.U.. According to the State Department, China categorically 
refuses to admit American officials to visit ``re-education through 
labor'' facilities on the grounds that these are not prisons and are 
not therefore covered by the M.O.U. I suspect there is a great deal 
more the State Department can say than these sparing comments in the 
human rights reports.
    I look forward to hearing from the Administration witnesses, 
Commissioner of Customs, George Weise (Weiss), Assistant Secretary of 
the Treasury for Enforcement, James Johnson, and Deputy Assistant 
Secretary of State for East Asian and Pacific Affairs, Jeffrey Bader.
    These witnesses will be followed by a second panel, which I will 
introduce later.

    Senator Thomas. Our first panel consists of the Honorable 
James Johnson, Assistant Secretary for Enforcement, U.S. 
Department of the Treasury; the Honorable George Weise, 
Commissioner, U.S. Customs Service; and Mr. Jeffrey Bader, 
Deputy Assistant Secretary for East Asian and Pacific Affairs.
    Why do we not begin then with Mr. Johnson, if you will, 
sir?

  STATEMENT OF HON. JAMES E. JOHNSON, ASSISTANT SECRETARY FOR 
          ENFORCEMENT, U.S. DEPARTMENT OF THE TREASURY

    Mr. Johnson. Thank you, Senator Thomas.
    To you, Senator Thomas, and to the members and the staff of 
this committee, I appreciate the opportunity to discuss with 
you today a very important trade issue: Our responsibility to 
ban from U.S. markets products of forced labor manufactured in 
the People's Republic of China.
    In my written testimony, I cover in greater detail three 
issues. One, I provide an overview of the Custom Service's role 
in forced labor enforcement. Two, I discuss the status and 
outlook for enforcement arrangements with China and, three, I 
discuss avenues for strengthening our law enforcement efforts.
    I respectfully request that my written testimony be made 
part of the record of these proceedings. I will use the balance 
of my time to summarize the foregoing points.
    Senator Thomas. Without objection, all of your statements 
will be made a part of the record.
    Mr. Johnson. Key provisions of Federal law prohibit the 
importation of goods of any kind that are the product of forced 
or convict labor. The Customs Service enforces those laws, 
along with 400 other Federal laws and regulations, at our 
borders. It is the responsibility of the Treasury's Office of 
Enforcement to provide policy direction and regulatory 
oversight to the Customs Service as it carries out these 
important responsibilities.
    Section 1307 of the Customs title of the U.S. Code 
prohibits the importation of merchandise mined, produced, or 
manufactured wholly or in part, in any foreign country by 
convict, forced, or indentured labor.
    Another statute, section 1761 of title 18, U.S. Code, makes 
it a criminal offense to knowingly import or transport in 
interstate commerce prison-made goods.
    These laws, originally intended solely as trade laws, now 
serve two purposes. First, they protect the U.S. economy and 
U.S. businesses and laborers from unfair foreign competition, 
and second, they provide an important means of expressing our 
foreign policy concerns about certain human rights abuses 
abroad. In exercising these statutory powers, the 
administration has imposed prohibitions against a broad range 
of trade goods from China.
    In carrying out its mandate to enforce the laws concerning 
forced labor, Customs has the power to take two types of 
action, one provisional, the other permanent. These actions 
would prevent forced labor merchandise from clearing Customs 
and entering the U.S. market.
    First, Customs can issue a detention order based on 
information that reasonably indicates that the merchandise is 
the product of forced or prison labor. Products subject to a 
detention order may not be released from Customs custody for 
importation until that order is lifted. Normally an 
investigation would follow to determine whether a detention 
order should be replaced by a finding. If the Commissioner of 
Customs makes a determination based on probable cause that the 
merchandise in question falls within the purview of the 
statute, a finding to that effect would be published in the 
Federal Register. Publications of such findings are subject to 
the approval of the Secretary of the Treasury. In effect, the 
publication of a finding imposes a permanent ban on the 
importation of merchandise from the facility in question until 
the finding is revoked. In practice, the Office of Enforcement, 
acting on behalf of the Secretary of the Treasury, has the 
responsibility for reviewing and approving these Customs 
actions.
    I would like to outline briefly our efforts to enforce the 
convict labor statutes, particularly with respect to our focus 
on China, currently the country most frequently associated with 
the export of products of forced or prison labor to the United 
States.
    Firm enforcement to prevent entry of convict-made goods 
into the United States is a matter on which there has long been 
bipartisan agreement. This administration, from its first 
months in office, has used the legal tools available to deny 
the U.S. market to forced labor products, as did the previous 
administration before it. Seven of the 20 detention orders now 
in effect against Chinese merchandise and two of the four 
findings that have been issued against China have been issued 
under this administration.
    In an effort to improve enforcement with respect to exports 
of convict-made goods from China, the United States and China 
entered into a Memorandum of Understanding in August 1992. The 
Memorandum of Understanding calls for, among other things, 
prompt investigation of suspected violations of either party, 
that is, either nation's laws, respecting prison labor 
products. It provides for the exchange of information on 
enforcement efforts, and finally it provides for the prompt 
facilitation of visits to relevant facilities upon the request 
of either nation.
    Since the MOU was executed, we have experienced 
difficulties with China in implementation. The Chinese have 
been slow to respond to our requests and their responses have 
at times lacked detail. Following complaints by the State 
Department, the United States and China negotiated a Statement 
of Cooperation that was signed in March 1994. The purpose of 
this Statement of Cooperation was to establish clear rules for 
the implementation of the MOU.
    As Commissioner George Weise will describe in further 
detail, our experience under the MOU has been mixed. While we 
have had some measure of success, several problems have 
continued. The Chinese Government has frequently denied the 
facilities in which Customs is interested are in fact prisons. 
Moreover, where facilities are conceded to be prisons, the 
Government of China has taken the position that the products of 
that prison are not exported to the United States.
    Commissioner Weise, in his prepared statement and I believe 
in his oral testimony, will report in greater detail on our 
recent experience with the MOU and with the Statement of 
Cooperation. Obviously, that history is not a cause for 
celebration. Nonetheless, recent experience suggests to those 
who observe matters closely from our embassy in Beijing that a 
page may be turning.
    At the end of February, for example, the embassy was able 
to arrange with the Chinese Ministry of Justice for the 
investigation of two new alleged cases of prison labor exports 
to the United States. Although it is too early to tell whether 
this represents full cooperation on the MOU, the Government of 
China appears willing to engage with the U.S. on this sensitive 
issue.
    I would note more broadly that Treasury and State have 
raised United States concerns on human rights at every 
available meeting with the People's Republic of China. Treasury 
raised the issue with the Chinese Minister of Finance when he 
was in Washington in November for bilateral Joint Economic 
Commission discussions. Secretaries Christopher and Albright 
raised human rights at each of their meetings during their 
trips to Beijing in November and February, respectively. 
Finally, Secretary Rubin raised the issue of prison labor 
during his bilateral with Vice Premier Qian Qichan in April in 
Washington.
    As suggested above, more recent indications from our 
embassy are that the Chinese Ministry of Justice is expected to 
improve cooperation over the coming months. Customs attaches at 
the embassy are prepared to take advantage of this opening 
should it occur. Our first objective would be to clean up a 
backlog of over a dozen cases that require investigation in 
China.
    We intend continually to remind the Chinese Government of 
our expectation that they respect the agreements they have 
signed with us dealing with forced labor and that they 
cooperate with us to enable us to obtain the information we 
need to respond to allegations that convict-made goods from 
China are entering the United States.
    We also intend to continue cultivating strong working 
relationships with our counterparts in the Chinese Government 
and particularly in Chinese customs administration.
    In our efforts to enforce the law, we will continue to use 
the law enforcement sources and methods currently in place and 
expect to explore other avenues for obtaining better 
information.
    In conclusion, I would like to strongly reaffirm the 
importance that the administration, the Treasury Department, 
and the Customs Service attach to the enforcement of the forced 
labor laws. These laws are important instruments for the 
implementation of both our trade and economic policy and our 
foreign policy.
    I thank the committee for its interest in our enforcement 
of the forced labor laws and I look forward to your questions.
    [The prepared statement of Mr. Johnson follows:]
                 Prepared Statement of James E. Johnson
    I appreciate the opportunity to discuss a very important trade 
issue, our critical enforcement responsibility to deny the U.S. market 
to products of forced labor manufactured in the People's Republic of 
China that may be intended for the United States. Key provisions of 
Federal law prohibit the importation of goods of any kind that are the 
product of forced or convict labor. The United States Customs Service 
enforces those laws along with over 400 other Federal laws and 
regulations at our borders. It is the responsibility of the Office of 
Enforcement of the Treasury Department to provide policy direction and 
regulatory oversight to the Customs Service in carrying out these 
important responsibilities.
    Section 1307 of the Customs title of the U.S. Code prohibits the 
importation of merchandise mined, produced, or manufactured wholly or 
in part, in any foreign country by convict, forced or indentured labor. 
Another statute, section 1761 of Title 18, makes its a criminal offense 
to knowingly transport in interstate commerce or to import prison-made 
goods. These laws, originally intended solely as trade laws, now serve 
two roles; they protect the U.S. economy from unfair foreign 
competition and provide an important means of expressing our foreign 
policy concerns about certain human rights abuses abroad. In exercising 
these statutory powers, the Administration has imposed prohibitions 
against a broad range of trade goods from China.
    Today, I would like to review with you a number of issues:

   An overview of the Customs role in forced labor enforcement
   The status and outlook for our enforcement arrangements with 
        China, and
   Avenues for strengthening our law enforcement measures

    In carrying out its mandate to enforce the laws concerning forced 
labor, Customs has the power to take two types of action--one 
provisional, one permanent--that prevent forced labor merchandise from 
clearing Customs and entering the U.S. market. First, Customs can issue 
a detention order based on information that reasonably, but not 
necessarily conclusively, indicates that the merchandise is the product 
of forced or prison labor. Products subject to a detention order will 
not be released from Customs custody for importation while the order is 
in effect. Normally an investigation would follow to deter-mine whether 
a detention order should be replaced by a ``finding''. If the 
Commissioner of Customs makes a determination based on probable cause, 
with the approval of the Secretary of the Treasury, that the 
merchandise falls within the purview of the statute, a ``finding'' to 
that effect is published in the Federal Register.
    The publication of this finding has the effect of imposing a 
permanent ban on importation of merchandise from the facility until the 
finding is revoked. In practice, the Office of Enforcement has the 
responsibility for reviewing and approving these Customs actions for 
the Secretary of the Treasury.
    The People's Republic of China (PRC) is currently the country most 
frequently associated with the export of products of forced or prison 
labor to the United States, although the former Soviet Union, Mexico, 
and Japan have been the subject of prison labor allegations. Of the 21 
detention orders currently in effect, 20 apply to China and one applies 
to Japan. Of the six current findings, four apply to China and two 
rather old findings apply to Mexican facilities.
Administration's Commitment to Enforcement

    I would like to outline our efforts to enforce the convict labor 
statute, particularly with respect to our current focus on China. Firm 
enforcement to prevent entry of convict-made goods into the United 
States is a matter on which there has long been bipartisan agreement. 
This Administration, from its first months in office, has used the 
legal tools available to deny the U.S. market to forced labor products, 
as did the previous Administration and others before it. Seven of the 
20 detention orders in effect against Chinese merchandise, and two of 
the four ``findings'' have been issued under this Administration. These 
actions have barred a wide variety of goods -electric fans, hoists, 
surgical gloves, raincoats, artificial flowers, tea, sheepskin and 
leather, and iron pipe fittings--from entering the U.S. market.

Our Experience With Implementation of our Agreements with China

    In an effort to improve enforcement with respect to exports of 
convict-made goods from China, the United States and China entered into 
a Memorandum of Understanding (MOU) in August of 1992. The MOU calls 
for, inter alia, prompt investigation of suspected violations of the 
either party's laws respecting prison labor products, exchange of 
information on enforcement efforts, and the prompt facilitation of 
visits to relevant facilities upon the request of either party.
    Since the MOU was reached, we have experienced difficulties with 
China in implementation. The Chinese have been slow to respond to our 
requests and their responses lacked detail. Following complaints by the 
State Department, the U.S. and China negotiated a Statement of 
Cooperation (SOC) that was signed in March of 1994. The purpose of the 
SOC was to establish clear rules for implementation of the MOU.
    Our experience under the MOU has been mixed. Since the MOU was 
signed, Customs has referred 58 inquiries to the Ministry of Justice 
for investigation, and has received responses to 52. Customs has 
requested inspection visits to 20 facilities and 13 have been 
conducted. Over the last two years, Customs attaches at our embassy in 
Beijing have been permitted to make only one visit to a suspect 
facility, that visit occurring in April of last year. Twenty-seven 
detention orders have been issued since 1991, the year before the MOU 
was signed, and 20 of those are still in effect; 6 others were revoked 
after Customs determined that the facilities in question did not use 
convict labor and one was replaced with a finding.
    Notwithstanding the foregoing agreements, several problems have 
continued. The Chinese Government has frequently denied that facilities 
in which Customs is interested are prisons. On the other hand, where 
facilities are conceded to be prisons, the government takes the 
position that the products of that prison are not exported to the 
United States.
    Commissioner Weise's prepared statement reports in greater detail 
our recent experience with the MOU and the SOC. Obviously that history 
is not a cause for rejoicing. Nonetheless, recent experience suggests 
to those who observe matters closely from our embassy in Beijing that a 
page may be turning.
    The U.S. Embassy in Beijing has continued to raise the issue of 
implementation of the prison labor MOU with the Chinese. At the end of 
February, the Embassy was able to arrange with the Chinese Ministry of 
Justice for investigation of two new alleged cases of prison labor 
exports to the U.S. Although it is too early to tell whether this 
represents full cooperation on the MOU, the PRC appears willing to 
engage with the U.S. Government on this sensitive issue.
    I would note more broadly that Treasury and State have raised U.S. 
concerns on human rights at every available meeting with the PRC. 
Treasury raised the issue with the Chinese Minister of Finance when he 
was in Washington in November for bilateral Joint Economic Commission 
discussions. Secretaries Christopher and Albright raised human rights 
at each of their meetings during their trips to Beijing, in November 
and February respectively. Finally, Secretary Rubin raised the issue 
during his bilateral with Vice Premier Qian Qichan in April in 
Washington.
    More recent indications from our embassy are that the Chinese 
Ministry of Justice is expected to improve cooperation over the coming 
months. Customs attaches at the embassy are prepared to take advantage 
of this opening if it occurs. Our first objective is to clean up a 
backlog of over a dozen cases that require investigation in China. We 
are cautiously hopeful that the level of cooperation will improve 
somewhat.

Plans to Improve Enforcement Regarding Convict-made Goods from China

    We intend continually to remind the Chinese Government of our 
expectation that they respect the agreements they have signed with us 
dealing with forced labor, and that they will cooperate to enable us to 
obtain the information we need to respond to allegations that convict 
made goods from China are entering the United States. Thus our approach 
through our attache's office in Beijing should be one of diplomatic 
persistence. Among other things, if any provision of the MOU or the SOC 
seems to be unclear or is being interpreted by the Chinese in a way 
detrimental to our enforcement efforts, we will not hesitate to 
recommend consultations or renegotiation of these documents.
    We also intend to continue cultivating strong working relationships 
with our counterparts in the Chinese Government, and particularly in 
China's customs administration. We expect that this cooperation will 
pay dividends across the spectrum of our enforcement concerns, 
including forced labor. The U.S. Customs Service has an excellent 
record of establishing strong working relations' s with the services of 
other nations, through training and cooperation on enforcement IO 
matters. We want to cultivate the elements within China who see the 
obvious benefits of a cordial working relationship with a key U.S. 
agency such as Customs.
    As we work to strengthen cooperative arrangements with the Chinese 
Government, we also expect that the broadening and deepening of U.S. 
business involvement in China as a result of normal trade relations 
will increase the amount and accessibility of information about China's 
business enterprises, for law enforcement purposes as well as business 
purposes.
    In our efforts to enforce the law, we will continue to use the law 
enforcement sources and methods currently in place and expect to 
explore other avenues for obtaining better information. Among the most 
important resources we can draw upon are the competitors of forced 
labor facilities and competitors of those who import from them. It has 
been a consistent experience of the Treasury Department and the Customs 
Service that information from competitors plays an important role in 
making cases against violators of the Customs laws, the export and 
munitions control laws, and the economic sanctions programs.
    Additionally, former employees or even current employees of U.S. 
firms often can be counted on to come forward with critical information 
if they perceive that their employers are profiting from international 
trade that violates our laws. To maximize the value of these law 
enforcement assets, we will strengthen our educational and outreach 
efforts in the forced labor area as we have in the areas of narcotics, 
money laundering, and sanctions enforcement.
    Also, importers can be reminded of the legal risks that they take 
in not knowing their suppliers or others with whom they deal. Indeed, 
in some cases private businesses may have sufficient financial 
influence over their suppliers to be able to obtain information about 
the conditions under which their products are produced overseas or even 
to request plant visits. Failure on the part of U.S. importers to 
exercise reasonable care regarding those with whom they deal can 
increase their risk of Customs violations.

Conclusion

    In conclusion, I would like to strongly reaffirm the importance 
that the Administration, the Treasury Department and the Customs 
Service attach to the enforcement of the forced labor laws. These laws 
are important instruments for the implementation of both our trade and 
economic policy and our foreign policy. We are going to do everything 
within our power to ensure that these laws are vigorously enforced.
    I thank the Committee for its interest in our enforcement of the 
forced labor laws, and look forward to your questions.

    Senator Thomas. Thank you very much, Mr. Johnson. 
Commissioner, would you begin, sir?

  STATEMENT OF HON. GEORGE WEISE, COMMISSIONER, U.S. CUSTOMS 
                            SERVICE

    Mr. Weise.  Thank you very much, Senator. I very much 
appreciate the committee holding these hearings on this very 
important subject and appreciate being a part of it. I also 
appreciate the fact that you would put my entire statement in 
the record, as you have indicated.
    Since Assistant Secretary Johnson has rather 
comprehensively outlined the Customs roles and responsibilities 
in this particular area and since my statement, I think, 
completes that as well, I will try to be very brief and just 
talk for a few moments about the problems that we have been 
facing.
    I would start by saying that there are really few issues 
that the Customs Service takes more seriously than our 
responsibility to enforce the laws that prohibit the 
importation of goods manufactured by prison or forced labor. I 
will tell you, however, even though we take these areas of 
responsibility very, very seriously, we have been frustrated. I 
cannot stand before you as a committee and tell you that I 
believe that we have been very successful in our efforts over 
the course of the last 4 years, although it has been a high 
priority.
    We have attempted to work very closely with the business 
community by making it as widely known as possible what these 
prohibitions are and to make them more aware of the constraints 
about bringing products in that were produced from prison 
labor. We have used publications and seminars and all sorts of 
programs along those lines.
    We have taken an awful lot of effort to try to train our 
people, to train our agents and our important specialists, to 
be as attuned to these issues as we possibly can.
    We have obviously worked with the State Department, 
Treasury Department, and others to try to enforce the 
memorandum of understanding of 1992 that the Assistant 
Secretary has alluded to, as well as the statement of 
cooperation of 1994, to work with our Chinese counterparts to 
ensure that we are doing everything humanly possible, as the 
organization responsible for enforcing these important 
provisions, and to ensure that we are investigating thoroughly 
and completely any allegations that we receive with regard to 
products allegedly being produced in these prisons are with 
forced labor.
    Our success has been uneven. There have been times when we 
have had very good responses from the Chinese Government, but 
there have been extended periods of time when we have been 
extremely frustrated. We have actually, having made requests to 
get into facilities under the terms of the memorandum of 
understanding and the statement of cooperation, been asked to 
wait often as much as 4 years before we can get into a facility 
to actually examine what is going on in that facility.
    Our experience, when we have been successful in getting 
into some of these facilities, has been uneven as well. We have 
had instances where we have actually confirmed the production 
of products by prisoners in prisons, but in those instances, we 
have not been able to corroborate any evidence that those 
products had been exported to the United States. So, it is a 
tremendous challenge as far as U.S. Customs is concerned to 
meet the requirements of the two statutes that the Assistant 
Secretary had alluded to.
    Under section 307, which is just a prohibition of these 
goods entering the commerce of the United States, we have to 
prove that the goods that we have before us were actually 
traced back to their production in a prison with prisoner 
forced labor. That is often very difficult without having the 
cooperation of the host government.
    If we are going to try to go under the other statute, which 
is basically a criminal statute, we have to show some intent on 
the part of the importer himself that he had some knowledge at 
least or was willfully importing these products, that is, he 
knew the products were being produced in prisons in China with 
prison labor. Again, that is a terribly difficult burden to 
achieve. We have made two prison labor related criminal cases 
over the course of the last several years. In another example 
of the difficulties we face in prosecuting companies or 
individuals who knowingly violate these statutes, we recently 
had a U.S. Attorney decline a referral when he felt that there 
was insufficient evidence to prosecute the case.
    So, these are the kinds of issues that we face as far as 
Customs is concerned, and we do have some issues of 
interpretation of the actual MOU and the statement of 
cooperation, a couple of issues that the Assistant Secretary 
has alluded to. Clearly, we look at the term ``prison'' in a 
broad sense. The Chinese try to make some distinction between 
various types of education facilities--reeducation through 
labor camps they call them--that they argue are not within the 
terms of the MOU which deals with prisons. We think it is a 
broad term. It includes both. So, there have been times when 
they have tried to keep us from visiting a facility under the 
distinction that this facility, although it uses forced, 
indentured labor, is not covered by the terms of the memorandum 
of understanding.
    There have been some questions raised from time to time as 
to, when they do let us in, what capacity we have when we get 
into the facility. The terms of the memorandum of understanding 
refer to visits. We look at visits as our opportunity to go and 
examine fully all of the issues that are covered by the law and 
by the terms of the MOU which means we want to ensure that we 
observe very, very thoroughly what is going on in that 
facility, including the paper trail and any documents of where 
the goods would have been shipped. They look at the term 
``visit'' as being perhaps less comprehensive.
    So, in conclusion, I would say, Mr. Chairman, that this is 
an issue we take seriously in the Customs Service. We are 
working very hard to do as effective a job as we possibly can 
to carry out this very important responsibility. I would not 
say to you that we have been 100 percent successful. We have 
had some successes. We currently have outstanding 20 detention 
orders on products from China and 4 findings based on evidence 
that we have been able to put together from a number of 
different sources, but have not yet had a case which I would 
say really showed the full system working all the way through 
corroboration and confirmation in the facility, finding a so-
called smoking gun. That is something we are going to continue 
to struggle to be as successful as we possibly can.
    Thank you for the opportunity to appear before you.
    [The prepared statement of Mr. Weise follows:]
                 Prepared Statement of George J. Weise
    Mr. Chairman and Members of the Committee, I would like to thank 
you for this opportunity to appear before you today to discuss the 
issue of prison-made goods in the People's Republic of China. Regarding 
China, Customs has been primarily involved with two issues -- 
preventing the importation of prison-made goods and investigating and 
acting against violative trade practices such as textile transhipment, 
intellectual property rights, and antidumping matters. These issues are 
complex and sometimes present challenging obstacles. Today, at your 
request, I will focus on the 1992 Memorandum of Understanding (MOU) and 
the 1994 Statement of Cooperation (SOC) between the United States and 
the People's Republic of China.

Legal Background

    The issue of enforcing the laws and regulations prohibiting the 
importation of convict-made goods is one of U.S. Customs national trade 
enforcement priorities.
    Section 1307 of Title 19 of the United States Code prohibits the 
importation of prison made goods. The prohibition in section 1307 
covers merchandise mined, produced, or manufactured wholly or in part, 
in any foreign country by convict, forced, or indentured labor under 
penal sanctions. In addition, the statute provides that the prohibition 
concerning forced and indentured labor does not apply to the extent 
that the merchandise is not produced in the United States in such 
quantities to meet consumptive demands in the United States.
    Section 1761 of Title 18 of the United States Code criminalizes the 
knowing transportation and importation of prison-made goods. The 
penalties for the willful violation of this statute are 2 years in 
prison and/or a fine of $50,000.
    The implementing regulations to section 1307 are contained in 19 
CFR 12-42et sec. The regulations provide authority for the Commissioner 
of Customs to issue withhold release orders (detention orders) when the 
information available concerning importation of goods produced by 
convict labor ``reasonably, but not conclusively'' indicates the 
subject merchandise falls within the purview of the statute. 
Furthermore, if the Commissioner of Customs, with the approval of the 
Secretary of the Treasury, determines that the merchandise falls within 
the purview of the statute, a finding to that effect is published in 
theFederal Registerand in theCustoms Bulletin.
    Customs has interpreted the term ``reasonably, but not 
conclusively,'' the standard used to issue detention orders, to mean 
reasonable suspicion. The evidentiary standard used to issue findings 
has been determined to be probable cause.
    Under Customs regulations, merchandise imported in violation of 
section 1307 can be detained and may be exported at any time before it 
is deemed to have been abandoned. In addition, the importer, within 3 
months after the merchandise is imported, may produce evidence to show 
that the merchandise does not fall within the prohibition of the 
statute. Merchandise determined to be inadmissible shall be excluded 
from entry and may be reexported. An inadmissible determination can 
also be protested under 19 U.S.C. 1514.
    Merchandise imported in violation of 18 U.S.C. 1761 or 1762 can be 
seized and subject to forfeiture as an importation contrary to law, 18 
U.S.C. 545.
    China has had regulations of its own since 1990 banning the 
exportation of prison-made merchandise.

Memorandum of Understanding and Statement of Cooperation

    With regard to the trade and commercial aspects of the prison labor 
problem, the Administration has taken the initiative to prevent the 
importation of prison-made products into the United States. For its 
part, the Customs Service has taken steps to identify and prevent the 
importation of products produced by prison labor. We have done so by 
actively pursuing leads which have resulted in seizures, detention 
orders, findings, and criminal prosecutions. Leads have come from a 
variety of sources including the importer community, the LAOGAI 
RESEARCH FOUNDATION and other human rights organizations, and 
individuals.
    Our history with China related to prison made goods dates back to 
1990. In March 1990, U.S. Customs initiated operation LAO-GAIDUI, which 
targeted companies alleged to be importing prison labor-made products 
from China into the United States. Our first detention order against 
Chinese products was issued October 3, 1991.
    In 1992, the State Department negotiated a Memorandum of 
Understanding with China relating to their exportation of prison labor-
made products to the United States. This agreement, signed in August 
1992, provided the framework for the prompt investigation of 
allegations that imports from China were produced by prison labor. 
Specifically, the MOU provides the United States with a procedure by 
which it may request that the Chinese government conduct investigations 
of facilities ``based on specific information'' that a facility is 
``suspected of violating relative regulations and laws.''
    The major difficulty in implementing the MOU arose from the lack of 
specific procedures for the verification process. As a result, the 
Statement of Cooperation was subsequently negotiated and signed by 
China and the United States on March 14, 1994.
    Together, these agreements provide procedures to be used to request 
investigations of suspected prison labor facilities which are alleged 
to be exporting their products into each respective signatory's 
country. The agreements state that the Customs Service can request an 
investigation of such suspicions by either the host country or by a 
personal visit to a suspected prison labor facility by U.S. Customs 
personnel. When the Customs Service requests a visit to a suspected 
prison labor facility, China is responsible for arranging a visit to 
that facility within 60 days of the request. Both types of requests are 
required to be in writing and should provide specific information 
justifying the investigation. Written reports are required within 60 
days of the completion of each investigation/visit.
    Although we experienced a period of success in requesting and 
having investigations conducted by the Chinese government and with U.S. 
Customs personally visiting suspected prison labor facilities after the 
signing of the MOU, problems again became evident.

The Chinese Penal System

    Persons imprisoned by the courts on relatively serious charges are 
sent either to prisons or to labor reform camps, depending on the 
length of their sentences. Petty criminals, or others whose behavior is 
deemed ``anti-social,'' may be assigned by the police or nonjudicial 
administrative boards to reeducation camps for up to 3 years. Suspects 
awaiting trial are held in detention centers. The maximum length of 
pretrial detention under Chinese law is 5 and 1/2 months. Convicts 
sentenced to less than 1 year can be retained in detention centers. 
Persons may be required to remain in prison camps if they are deemed 
not to have reformed.

Prison Labor

    The Chinese consider prison labor an integral part of the reform 
process. The Chinese government says prisoners work about 6 hours per 
day and have political study for 3 hours per day. They receive labor 
protection and health care equivalent to workers in state corporations; 
wages, however, are generally minimal. Prison laborers include those 
jailed for ``counter-revolutionary offenses.'' We have not seen 
evidence that prisoners in pre-trial detention are required to work.

Prison Exports

    Last year U.S. Customs processed over 16 million import entries and 
collected about $22 billion in customs duties on nearly $800 billion of 
trade. Our imports from China in 1996 totaled over $51 billion. It is 
impossible to determine how much of that figure came from prison labor 
facilities.
    1990, the Chinese Justice Ministry officials gave us conflicting 
figures ranging from as low as $300 million to as high as $1 billion 
for the value of goods produced by prison farms and factories. Some 70 
percent, they say, is consumed within the prison system with the 
balance sold domestically.
    However, the 1989 China Law Yearbook stated that China exported 
$100 million worth of goods produced within the prison system. Like 
most written information we have about the Chinese prison and labor 
reform systems, these reports on exports are dated and no current 
figures are available.
    Further clouding the situation are factories that the Chinese tell 
us are associated with prisons, but do not employ prison labor. These 
so-called ``worker enterprises'' employ relatives of prison employees 
and ex-convicts who remain near the prison after release. We are told 
that there are about 400,000 workers in such units separate from the 
prisons. These enterprises are specifically exempted from the 
government rules banning export of goods from the prison system. 
Chinese officials have shown us one such family member enterprise and 
asserted that these institutions account for the $100 million of prison 
system exports the government has acknowledged.
    Another practice complicating our enforcement efforts is that 
Chinese manufacturers use a network of middlemen, including trading 
companies in China and Hong Kong, leaving the source very difficult to 
trace. Importation documents usually list the names of these trading 
companies whose representatives heretofore have not been forthcoming in 
providing information about the manufacturers they represent.

Scope of Problem

    China is currently by far the country most frequently associated 
with the export of prison labor-made goods to the United States. The 
Former Soviet Union, Japan, Mexico and other countries have also been 
the subject of prison labor allegations. Of the 21 detention orders 
presently in effect, 20 pertain to China. Of the six findings in 
effect, four pertain to China. China was the subject of three more 
detention orders and two more findings that have been revoked. 
Additionally, of the 76 investigations involving prison labor currently 
open within Customs, 69 pertain to China.
    Customs opened an office in Beijing in October 1993, largely to 
deal with prison labor matters. Two special agents were assigned to 
Beijing. Foremost on their agenda was the investigation of accusations 
of prison labor made products being imported into the United States.
    To date, the Customs Service has requested 58 investigations of the 
Chinese government, and 52 have been conducted. We have also requested 
20 visits to suspected forced labor camps, 13 of which have been 
granted (including two which we did not request). We revoked four 
detention orders and two findings as a result of our visits.
    In our opinion, the investigation process has not fully satisfied 
our requirements and needs. Although Customs has had some intermittent 
success, we have had lengthy periods where we were not able to visit 
any facility. To illustrate, on April 25, 1995, Customs agents were 
allowed to visit the Shandong Laiyang Heavy Duty Machinery Factory. In 
May 1995, it was announced that Taiwan's President Lee Teng-hui was 
going to visit the United States. China's angry reaction, including 
recalling its ambassador had a chilling effect on Customs as well. On 
October 13, 1995, U.S. Embassy officials in Beijing met with Chinese 
officials to discuss lack of activity relating to prison labor 
investigations. Subsequent meetings were held on November 2, 1995, 
December 6, 1995, and December 22, 1995. In December 1995, I drafted 
letters to both the Assistant Secretary of State for East Asian and 
Pacific Affairs, and to the U.S. Trade Representative, detailing the 
difficulties Customs was having in gaining China's adherence to our 
MOU/SOC.
    On March 11, 1996, the Chinese Ministry of Justice notified the 
Customs Attache that she would be allowed to visit the Shanghai Laodong 
Machinery Factory. (The request to visit this factory was first made by 
the Attache in November 1992, and was rerequested again in March 1993 
and September 1994.) The Attache was finally allowed to visit the 
facility on April 24, 1996. She found no evidence of forced labor at 
the facility. Customs subsequently revoked the existing detention order 
on the company.
    Problems with Chinese cooperation continued even after the April 
1996, visit to the Shanghai Laodong Machinery Factory. The new 
Assistant Attache, who arrived in July 1996, was given the prison labor 
program. He quickly sought to introduce himself to his counterparts in 
the Chinese government. He was rebuffed. In fact, he was not even 
allowed to meet with Ministry of Justice officials until February 3, 
1997. At that meeting the Assistant Attache presented a request asking 
China to conduct two investigations for us in accordance with our MOU. 
Chinese officials agreed. On March 31, 1997, they provided the results 
of the two investigations. On April 22, 1997, Customs requested a site 
visit to the Beishu Graphite Mine and the Nanshu Graphite Mine. Those 
requests are pending at this time (China has 60 days from the date of 
the request to arrange this).

Conclusion

    In recent months, Chinese cooperation on prison labor cases has 
improved. This improvement is due to various reasons, among which 
include Secretary Rubin's personal involvement. The Secretary raised 
the issue in his bilateral with Vice Premier Qian Qichan in April in 
Washington.
    Whether this improvement is permanent is difficult to say. I would 
like to close with some assurances as to Customs efforts and intentions 
on the Chinese prison labor issue. Customs is offering classes on the 
subject of forced labor to our special agents and import specialists. 
Six of these classes have been scheduled for this Fiscal Year.
    Customs will continue to pursue any and all allegations brought to 
our attention relating to the prison labor statutes and regulations. We 
do, however, recognize the constraints of being unable to obtain the 
necessary proof to apply them without the consent of the alleged 
violator. We simply do not have the tools within our present arsenal at 
Customs to gain the timely and indepth verification that we need. 
Presently, we believe that we are only seeing part of the picture.
    Customs will, however, continue to prohibit the entry of 
merchandise produced from prison labor in accordance with U.S. law and 
relevant international agreements. I look forward to working with 
Congress, the Administration and the Chinese government to accomplish 
this goal.
    Mr. Chairman, this concludes my statement. Thank you for this 
opportunity to address this issue.

    Senator Thomas. I appreciate your being candid.
    Let me interrupt just a second to recognize the Senators 
that have joined us. The Senator from Missouri, do you have any 
comments, sir?
    Senator Ashcroft. I want to thank you for holding this 
hearing.
    As you know, the cooperation of China or lack of 
cooperation is relevant and has been cited in decisions by the 
administration in terms of shaping our relationship with China. 
This important set of considerations I think is something we 
need to know about and learn about, and I am eager to 
participate in the hearings with that in mind.
    Senator Thomas. Thank you.
    For your information, the chairman is tied up on the floor 
and I am pinch-hitting a little. I think he will be here later. 
Our Ranking Member, Senator Biden?
    Senator Biden. Mr. Chairman, thank you very much. I 
apologize for being late.
    I would ask unanimous consent that my entire statement be 
placed in the record, but I would like to just make two brief 
comments.
    I apologize to Mr. Bader for interrupting the beginning of 
his comments.
    There is little doubt about what China's obligations are, 
and there is little doubt that they have been uncooperative. 
There is little doubt some progress has been made, but there is 
little doubt that China continues to obstruct our 
investigations, even though all we have to do is suspect a 
violation of our agreements--not determine what is reliable or 
unreliable information--to request an inspection.
    The obvious question is how are we going to deal with this 
issue. Some say the best way is to cutoff all trade. This is 
going to add to the MFN debate. This is going to be a major 
piece of that. I think it does go to the question of whether 
China can be trusted to keep any of its agreements, and so it 
will have some impact with me and with other people. In 
general, though, I prefer a more discriminating approach in how 
to deal with China and her actions.
    Behind the influence that we have through diplomacy, lies 
the strength of our free market and our consumers. I would 
suggest that separate and apart from the agreements that China 
is obviously not keeping, that with accurate information at the 
command of consumers, they will take care of a lot of this 
themselves.
    Notwithstanding the fact that China is being transformed by 
the economic marketplace, it is also being transformed by its 
exposure to ideas. It is kind of ironic that maybe even 4 years 
ago, but clearly 5, 6, 7 years ago, we would not even be having 
this hearing because China had not even begun to discuss any of 
these issues with us. We would not even have had such an 
agreement, granted, one they are not keeping, but we would not 
even have had such an agreement.
    But I am of the view, Mr. Chairman--and I will cease with 
this--that using the marketplace of ideas is our best weapon, 
not our diplomacy. We have to match our diplomacy with 
patience, China's transition with patience, but patience alone 
is not going to do this. Let me just cite an example.
    It would not be a violation of any existing trade agreement 
if we permitted all American companies who sold textiles, sold 
finished products, if they wished to, to attach a label that 
said ``not made with child labor, not made with prison labor.'' 
We would not rely on saying it could not come into the country. 
Rather, if we had accurate information to suggest it was 
manufactured free from such unfair trade practices, we could 
set up a standard by which American companies could use a label 
like the ``Dolphin safe'' label.
    When I came up with that idea years ago, everybody thought 
that was a crazy idea, but I knew every kid in America would 
stop his mother from buying tuna--you think I am joking. I am 
not joking. Every company in America said this is a dumb idea. 
Within 6 months, after the Heinz Company affixed the label 
saying ``Dolphin safe,'' every other company in America said, 
whoa, wait a minute. They are buying that stuff even though it 
is more expensive.
    I think the way to deal with China, is to keep the 
diplomatic route going but also go another route, come up with 
standards by which companies can affix labels. They do not have 
to affix the label. They can sell it without the label. You 
watch. If we start down that route, people will not buy even 
cheaper products made in China with prison labor or child 
labor.
    At any rate, I ask unanimous consent my whole statement be 
put in the record.
    Senator Thomas. Without objection.
    Senator Biden. I have questions for the witnesses when we 
get to that.
    I thank you, Mr. Chairman, for allowing me to interrupt.
    [The prepared statement of Senator Biden follows:]
                  Prepared Statement of Senator Biden
    Mr. Chairman, today we are examining how to enforce our ban on the 
importation of goods produced by convict labor in China. In a larger 
sense, though, we are examining how to deal with China, an emerging 
great power that at times will have interests that diverge from our 
own. The answer may lie in the marketplace--the powerful influence of 
the American consumer and the irresistible lure of the American ideals 
of democracy and personal liberty.
    The issue of prison labor is not by any stretch of the imagination 
the most difficult challenge we will face with China. But our success 
in resolving this issue satisfactorily will be one indication of our 
likely success or failure in advancing other critical U.S. interests 
with China. That is why this hearing is important, and I commend the 
Chairman for holding it.

Poor Chinese cooperation

    Despite two bilateral agreements designed to stop Chinese prison 
labor exports to the United States, exports reportedly continue and our 
enforcement efforts still lack teeth. This is outrageous. The American 
consumer doesn't want to buy goods produced under brutal conditions by 
forced labor in China.
    Some knowledgeable observers, including Customs Commissioner George 
Weise who appears before the committee today, have suggested that China 
may have no intention of abiding by the terms of its agreements. I 
would like to believe otherwise, but China's leaders are testing my 
patience and that of the American people. We must make it clear for 
Beijing to hear and understand: We intend to hold Chinese leaders to 
the letter and spirit of their word.

Clear obligations

    There can be little doubt about what China's obligations are. In 
1994, China and the U.S. set forth detailed procedures and guidelines 
to govern the investigation of suspected prison labor exports. The 
language is plain; the process is clear. Among other things, China has 
agreed to allow U.S. diplomats to visit facilities suspected of using 
prison labor within 60 days of a request for a visit.
    Unfortunately, Beijing has raised objections to U.S. inspections. 
In all of 1996, China granted U.S. authorities access to only one 
suspected prison labor facility. This level of cooperation is 
unacceptable.
    China has complained that our information comes from ``unreliable'' 
sources--by which they mean their critics, including some of our 
witnesses today. Even if that were true, it would be irrelevant. We 
need only have a ``suspicion'' that merchandise is tainted to request a 
visit.

    Promoting our core interests with China.

    How then should we deal with this issue? Some say that the best way 
to proceed is to cut off trade with China altogether. Revoke MFN. Well, 
that's certainly one way to ensure that no Chinese prison labor goods 
make it to our shores. Cut off all trade. The problem with this 
approach is that it is like spreading a powerful herbicide on your lawn 
to kill crab grass and then learning that you've also killed your prize 
roses. It won't work, and it doesn't make sense.

Empowering the consumer

    In general, I prefer a more discriminating approach that empowers 
the American consumer. Of course we must do everything we can eliminate 
the gruesome practices we will hear about today. However, diplomacy can 
go just so far. Our regulations cannot reach into China and transform 
the way they do business.
    But behind the influence of our international diplomacy lies our 
real strength--our free market economy. We should put that market power 
to use.
    We should let American consumers know about the sources of the 
products they buy. These hearings are one important voice in that 
campaign, but other voices, from American consumer advocates to 
international human rights organizations, must be part of this 
campaign, as well.
    With accurate information at their command, I am absolutely 
convinced that American mothers will stay away from products made with 
child labor, that American workers will refuse to spend their paychecks 
on products tainted by the use of prison labor or unsafe environmental 
practices. These products will pile up on the docks while American 
consumers spend the wages of their free labor on the products that 
reflect their values, their true ``bottom line.''
    Eventually, with their products shut out of the biggest market in 
the world, countries and companies will change their ways or go the way 
of other failures in a truly free market, where consumers--equipped 
with complete information--are sovereign.

Combining purpose with patience

    China is being transformed not only by the economic marketplace, 
but also by the marketplace of ideas. I believe that is why we must 
combine purpose with patience to foster a more democratic China that 
upholds human rights and is a responsible member of the global 
community.
    Some patience is not unwarranted. Sometimes we forget that five or 
ten years ago we wouldn't have been here fretting about China's failure 
to comply adequately with the provisions of our prison labor 
agreements. We didn't have any. In fact, until very recently, China 
would have refused even to discuss the issue.
    Since the introduction of Deng Xiaoping's reforms almost 20 years 
ago, China has evinced increasing accommodation to international norms. 
Some have dismissed this trend as mere ``tactics'' designed to win 
access to western markets and technologies.
    I believe they are mistaken. They misunderstand the profound 
changes China has undergone since the end of Mao's ``cultural 
revolution.'' Perhaps only in a Chinese historical context measured in 
dynasties and centuries could a consistent policy of two decades be 
dismissed as ``tactics.''

Using the marketplace of ideas

    But our patience is not limitless, and patience alone will get us 
nowhere. We must use the marketplace of ideas. Diplomatic contacts and 
educational and cultural exchanges--some supported by congress through 
organizations like the East-West center in Hawaii--will play a role. 
Chinese students educated in the united states are shaping China's 
future. The protesters in Tiananmen Square did not build the ``Goddess 
of Liberty'' and quote the words of Thomas Jefferson by chance.

Radio Free Asia

    There is more we can do. The key is to use tools that work. 
Democracy is built on ideas. That is why I am proud to be the author of 
legislation that created Radio Free Asia. Modeled on the Radio Free 
Europe/Radio Liberty broadcasts that helped spur democratic movements 
in the Soviet Empire, Radio Free Asia is already having an impact in 
China.
    The Dalai Lama is an avid listener, and he reports that Tibetans 
value the broadcasts, which provide more news on Tibet than other 
shortwave programming. I am delighted that House Speaker Gingrich 
recently suggested expanding Radio Free Asia so that more people in 
China can receive its broadcasts--especially in areas where repression 
is greatest and the access to reliable information most precarious.
    We must complement programs on the airwaves with programs on the 
ground. The congressionally-funded Asia Foundation recently launched an 
innovative program combining voter education with outside monitoring of 
village elections. This experiment in democratic governance is a first 
for China, and it shows how we can nudge China along the right path.

Welcome to witnesses

    Finally, I wish to welcome our distinguished witnesses today and 
express my hope that they will not confine their remarks to the 
brutality of China's prison labor system and our current efforts to ban 
prison labor imports. I hope they will also suggest ways in which we 
can deal more effectively on this and other issues with China--
including ways we can enlist the American consumer and the power of the 
American market place to help us.

    Senator Thomas. We have also been joined by Senator Robb. 
Any comments, sir?
    Senator Robb. Thank you, Mr. Chairman. No. I will pass on 
the opening statement. I look forward to hearing from our 
witnesses.
    Senator Thomas. Thank you very much.
    Let me just comment that I think that is one of the 
reasons--Senator Biden's comments--why this hearing is 
particularly important, that it does give some insight into how 
we can deal with the lack of conformity with agreements on an 
individual, more specific basis than the broad Most Favored 
Nation of a thing I believe.
    Mr. Bader, I am sorry we set you back a little, sir, but 
now we would like to hear from you.

 STATEMENT OF JEFFREY A. BADER, DEPUTY ASSISTANT SECRETARY FOR 
    EAST ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF STATE

    Mr. Bader. It is good to see you again, Mr. Chairman.
    Senator Thomas. Thank you.
    Mr. Bader. Mr. Chairman, I also will excerpt my statement.
    I am pleased to appear before the committee to provide an 
update on our efforts to prevent Chinese products of prison 
labor from entering the United States. U.S. law prohibits the 
importation of all goods produced in any foreign country by 
convict or forced labor.
    Early efforts to obtain information about illegal PRC 
prison labor exports were not successful, in part, because we 
were unable to visit the facilities in question. Accordingly, 
the U.S. sought agreement with the PRC on cooperative 
procedures for prompt investigation of allegations that imports 
into the U.S. were produced by prison labor. As a result, 
former Under Secretary of State Arnold Kanter and Chinese Vice 
Foreign Minister Liu Huaqiu signed a memorandum of 
understanding on trade and prison labor products on August 7, 
1992. The MOU provides for prompt investigation of suspected 
violations relating to trade in prison labor products and the 
prompt facilitation of visits to relevant facilities.
    Initial implementation of the MOU was spotty. In order to 
improve it, after several months of discussion, the Department 
of State and Chinese Ministry of Justice signed a statement of 
cooperation in Beijing in March 1994 that established clearer 
guidelines for implementation of the MOU.
    Under the statement, both sides agreed to provide reports 
of investigation within 60 days of request from the other side. 
Requests for visits to suspected prison labor facilities must 
also be arranged within 60 days, and following the visit, the 
requesting side has 60 days to provide the receiving side with 
a report of the visit.
    I would underline it is to China's detriment if it fails to 
comply. Detention orders on suspect goods remain in effect 
until Customs is able to make a clear determination that the 
facility in question does not utilize prison labor in the 
production of exports.
    The signing of the statement fostered a somewhat more 
productive relationship between Customs and the Ministry of 
Justice. Between March 1994 and April 1995, Customs was 
permitted to visit five facilities. This more cooperative 
spirit exhibited by the Ministry, however, did not extend to 
two areas: Access by Customs to facilities for which the 
Ministry of Justice claimed there was insufficient evidence and 
access to reeducation through labor facilities, so-called 
laogai.
    Cooperation on prison labor issues took a general downturn 
in the spring of 1995 following the visit of Taiwan President 
Lee Tenghui to the U.S. Cooperation came to a virtual 
standstill during that summer with the arrest and deportation 
of Harry Wu by the Chinese authorities.
    In an attempt to reinvigorate cooperation, embassy 
officials met with Ministry of Foreign Trade and Economic 
Cooperation officials in October 1995.
    In December 1995, the State Department's Deputy Assistant 
Secretary for East Asian Affairs, Kent Wiedemann, met with 
Ministry of Justice officials during a visit to Beijing to 
stress the need for prompt access to prison labor facilities, 
and later that month embassy officials reiterated Wiedemann's 
concerns in a follow up meeting with the Ministry of Justice.
    The arrival of Ambassador Sasser in Beijing in February 
1996 induced a thaw in the beginning of resumed cooperation. 
Embassy officials stressed in February to both Ministry of 
Justice and Ministry of Foreign Trade officials that prison 
labor exports were a major concern to the Ambassador. Shortly 
after, the Ministry of Justice granted Customs access to a 
facility for which Customs had initially requested access in 
1992.
    Embassy officials from State and Customs met with Ministry 
of Justice officials in February of this year to request an 
investigation of two alleged cases of prison labor exports. In 
March, within the 60-day statement time limit, the Ministry of 
Justice responded to the investigation requests.
    Most recently, as Jim Johnson noted, Secretary Rubin raised 
the issue of cooperation under the MOU during his meeting with 
Vice Premier Qian Qichan during Vice Premier Qian's visit to 
Washington in April. Qian agreed that improved overall 
cooperation was essential, including enhanced cooperation on 
prison labor export issues.
    Implementation of the 1992 MOU has never been smooth or 
straightforward. As in many other issues in China/U.S. 
relations, the decentralization of authority within China has 
hampered prompt enforcement of the agreements. Chinese 
cooperation has also often been a function of the state of 
bilateral relations.
    We have taken steps, including the negotiation of the 
statements and raising the issue at high level meetings, to 
address the problem of implementation. Chinese cooperation is 
essential to successful performance and enforcement. Improved 
cooperation is most likely to result from steady, determined 
diplomacy and engagement by the embassy, solid investigations 
by Customs, and the relationships our officials develop on the 
ground with Chinese counterparts.
    Mr. Chairman, in conclusion, I wish to assure you that the 
administration will continue to actively pursue President 
Clinton's commitment to implement this agreement effectively.
    Thank you very much.
    [The prepared statement of Mr. Bader follows:]
                 Prepared Statement of Jeffrey J. Bader
    Mr. Chairman, Members of the Committee, I appreciate the 
opportunity to appear before this committee to provide an update on our 
efforts to implement the Memorandum of Understanding (MOU) between the 
U.S. and China Prohibiting Import and Export Trade in Prison Labor 
Products.

Legal Principles

    To briefly summarize, U.S. law [Section 307 of the Tariff Act of 
1930 (19 U.S.C. 1307)] prohibits the importation of ``all goods, wares, 
articles and merchandise mined, produced, or manufactured wholly or in 
part in any foreign country by convict labor or/and forced labor or/and 
indentured labor under penal sanctions.'' Regulations issued by the 
U.S. Customs Service establish procedures for detaining, investigating, 
and excluding goods believed to violate this section.
    The U.S. Government does not challenge the principle of employing 
prisoners; we too expect prisoners to work. Our opposition is to prison 
labor exports to the U.S. and is predicated on fair trade and human 
rights concerns. We oppose the use of forced/indentured labor to 
produce prison labor exports and the unfair price advantage gained by 
such labor in an open economy. Section 307 cited above is intended 
primarily to protect U.S. producer, consumer, and worker rights. In 
addition, we have concerns regarding labor by prisoners who were tried 
without due process protections meeting international norms; and we 
have concerns regarding the possible export of products made by their 
labor. Goods and services produced in U.S. federal prisons can only be 
sold to U.S. Government agencies in the U.S. However, there are no 
regulations against exporting state prison-made goods to any country 
which will legally accept them.
    The U.S. Government has devoted great effort to preventing prison 
labor exports from entering our country. The State Department works 
closely with the U.S. Customs Service to support law enforcement both 
at our borders and overseas. With specific regard to China, the problem 
of Chinese prison labor exports entering the U.S. first came to our 
attention in 1989. In response to growing concern that China was 
compelling political prisoners to produce goods for export, the State 
Department and Customs began an intensive campaign to investigate the 
importation of Chinese prison labor products. Since that time, we have 
worked aggressively to ensure that goods made with Chinese prison labor 
are not exported to the U.S. in violation of our laws.

History of U.S. Efforts: MOU

    Early efforts to obtain more information about illegal PRC exports 
were not successful, in part, because we were unable to visit the 
facilities in question. In 1991, in an attempt to allay our concerns, 
the Chinese issued in public form their existing law prohibiting the 
export of prison labor products. Continuing concerns, however, prompted 
the U.S. to seek agreement with the PRC on cooperative procedures for 
prompt investigation of allegations that imports into the U.S. were 
produced by prison labor.
    As a result, U.S. Under Secretary of State Arnold Kanter and 
Chinese Vice Minister Liu Huaqiu signed a Memorandum of Understanding 
(MOU) on trade in prison labor products on August 7, 1992. This was a 
significant step forward in strengthening compliance with both U.S. and 
Chinese laws and regulations prohibiting trade in prison labor 
products.

The MOU on prison labor exports provides for:

   prompt investigation of suspected violations of the laws and 
        regulations of either side relating to trade in prison labor 
        products;
   exchanges of information on law enforcement efforts;
   meetings between officials and experts of the two sides;
   the furnishing of evidence that can be used in judicial or 
        administrative proceedings against violators; and
   the prompt facilitation of visits to relevant facilities 
        upon the request of either party.

    Initial implementation of the MOU was spotty. The Chinese were slow 
to respond to our requests for investigation, and the responses, when 
provided two to three months later, often lacked detail. The Chinese 
were even slower to respond to our requests for visits to suspect 
facilities.

History of U.S. Efforts: Statement of Cooperation

    Accordingly, the U.S. sought to establish specific guidelines for 
implementing the MOU. After several months of discussion, the U.S. 
Department of State and the Chinese Ministry of Justice signed a 
Statement of Cooperation (SOC) in Beijing on March 13, 1994 that 
established clearer guidelines for implementation of the MOU.
    Under the SOC, both sides agreed to provide reports of 
investigations within 60 days of request from the other side. Requests 
for visits to suspected prison labor facilities must also be arranged 
within 60 days. Following the visit, the requesting side has 60 days to 
provide the receiving side with a report of its visit. Visits to other 
suspected facilities will only be arranged if the visit to a previous 
facility has ``completely ended,'' and a visit report has been 
submitted. In addition, the Chinese agreed to reinvestigate and, if 
necessary, arrange follow-up visits to sites if the U.S. provides new 
information about a previously investigated facility. It is to China's 
detriment if they fail to comply. Detention orders on suspect goods 
remain in effect until Customs is able to make a clear determination 
that the facility in question does not utilize prison labor in the 
production of exports.
    The signing of the SOC fostered a more productive relationship 
between Customs and the Ministry of Justice and accelerated the pace of 
implementation under the MOU. Between March 1994 and April 1995, 
Customs was permitted to visit the following five facilities: the 
Guangzhou Flower City Enterprise, the Guangdong Reform through Labor 
(laogai) Bureau, the Zhejiang Number Four Prison Factory and its 
associated Hangzhou Wulin Machinery Works and Hangzhou Superpower Hoist 
Works, the Shanghai Number Seven Reform through Labor Detachment, and 
the Shandong Laiyang Heavy Duty Machinery Factory.
    This more cooperative spirit exhibited by the Ministry of Justice, 
however, did not extend to two areas: 1) access by Customs to 
facilities for which Ministry of Justice claimed there was 
``insufficient evidence,'' and 2) access to ``reeducation through 
labor'' facilities (laojiao).
    Chinese justice officials have questioned the credibility of our 
evidence, claiming it is outdated or unreliable. Despite repeated 
explanations that U.S. law requires Customs to consider all reasonable 
information from sources on prison labor exports, Chinese stated 
skepticism about U.S. sources has made the implementation of the MOU 
more difficult. Much of our preliminary evidence comes from Chinese 
publications, including provincial yearbooks, commerce and industry 
enterprise directories, catalogs of export facilities, and studies of 
reform through labor (laogai) and reeducation through labor (laojiao). 
In some cases, government publications and business directories are 
dated and may include exaggerated or misleading claims about a 
company's activities. Still other allegations are based on a 
combination of evidence, including testimony, statements, documents, 
and videotapes. For example, human rights activist Harry Wu's Laogai 
Research Foundation has provided initial information on a number of 
Customs cases of suspected prison labor exports from China.
    Access to ``reeducation through labor'' facilities has been a topic 
of disagreement with the Chinese since the first negotiations on the 
MOU took place. It emerged as an issue in early March, 1995 when the 
Ministry of Justice refused a request to visit the Guangzhou Number One 
Reeducation through Labor Camp, claiming that it was beyond the scope 
of the MOU. However, later that month, embassy officials met with 
Ministry of Foreign Trade and Economic Cooperation officials who 
concurred that ``reeducation through labor'' facilities were covered by 
the MOU and who indicated they would try to persuade the Ministry Of 
Justice to grant us access. Although the Ministry of Justice did 
provide an initial investigative report on this camp, the issue was 
never fully resolved, and the detention order against the Guangzhou 
Number One Reeducation through Labor Camp remains in effect. Customs 
has not, to date, visited any reeducation camps.
    Cooperation on prison labor issues took a general downturn in the 
spring of 1995 following the visit of Taiwan President Lee Tenghui to 
the U.S. and the subsequent recall of the Chinese ambassador in 
protest. Cooperation on prison labor issues came to a virtual 
standstill during that summer with the arrest and deportation of Harry 
Wu by the Chinese authorities on espionage charges. The State 
Department worked vigorously to secure the release of Mr. Wu who was 
arrested while attempting to enter China to gather evidence on prison 
labor facilities. Subsequent repeated requests for visits to suspected 
facilities were denied.
    In an attempt to reinvigorate cooperation, embassy officials met 
with Ministry of Foreign Trade and Economic Cooperation officials in 
October 1995 to express concern over the slowdown in implementation of 
the MOU. The Chinese acknowledged the significance of the problem and 
agreed to arrange an interagency meeting to include officials from the 
embassy, the Ministry of Foreign Affairs, the Ministry of Foreign Trade 
and Economic Cooperation, and the Ministry of Justice in order to 
address the problem.
    In November 1995, embassy officials met with Ministry of Foreign 
Trade and Economic Cooperation and Ministry of Justice officials in an 
attempt to gain access to several prison labor sites. The Ministry of 
Justice complained that Customs had not provided conclusive reports on 
previous site visits and that current allegations lacked credibility.
    In December 1995, State Deputy Assistant Secretary for East Asian 
Affairs Kent Wiedemann met with Ministry of Justice officials during a 
visit to Beijing to stress the need for prompt access to prison labor 
facilities and for getting the 1992 MOU back on track. Later that 
month, embassy officials reiterated Wiedemann's concerns in a follow-up 
meeting with Ministry of Justice Foreign Affairs Office Deputy Director 
Wang Rongkang.

Recent Improvements

    The arrival of Ambassador Sasser in Beijing in February 1996 
finally broke the deadlock with the Ministry of Justice. Embassy 
officials stressed in February to both Ministry of Justice and Ministry 
of Foreign Trade and Economic Cooperation officials that alleged prison 
labor exports were a major concern of the Ambassador. Shortly after, 
the Ministry of Justice granted Customs access to a facility for which 
Customs had initially requested access in 1992. No other investigation 
requests were sent to the Ministry of Justice by Customs in 1996.
    Embassy officials from both State and Customs met with the Ministry 
of Justice officials on February 28 of this year to request an 
investigation of two alleged cases of prison labor exports and to 
introduce the new Customs officer handling labor issues. On March 3 1, 
well within the 60-day Statement time limit, the Ministry of Justice 
responded to the investigation requests. Based on the information 
provided by the Ministry of Justice, Customs was able to close one case 
and is currently, at the request of the Ministry of Justice, pursuing 
information on the other case through the Ministry of Foreign Affairs.
    On April 22, Customs submitted to the Ministry Of Justice via 
letter a formal request to visit the Beishu/Nanshu Graphite Mines in 
Shandong Province. The initial investigation request on this case was 
submitted by Customs in February 1994, but this was Customs' first 
request to visit the facility. Just last week, on May 15, Customs 
submitted a request to visit and review sales records from the Hangzhou 
Qianjing Hardware Tools Plant, also known as Hangzhou Shenda Tool 
Factory, and associated with prison facility Zhejiang Number 2 Prison. 
The Ministry of Justice has 60 days, per the SO, in which to respond to 
these visit requests.
    Most recently, Secretary Rubin raised the issue of cooperation 
under the MOU during his meeting with Vice Premier Qian Qichen in April 
in Washington. Qian agreed that improved overall cooperation was 
essential, including enhanced cooperation on prison labor export 
issues.

Results; Future Directions

    By Customs calculations, it has made 58 referrals to the Ministry 
of Justice for investigation since the signing of the MOU in August 
1992, of which the Ministry of Justice has responded to 52. Customs has 
formally requested to visit 20 facilities suspected of exporting prison 
labor products and has been allowed to visit 13. Since 1991, Customs 
has issued 27 detention orders of suspected prison labor imports from 
China, six of which were subsequently revoked after Customs determined 
that the facility in question did not utilize prison labor. The 
remaining detention orders, dating as far as back as 1991, are still in 
effect due to the lack of any contradicting information which would 
allow Customs to revoke the order. The suspect goods cannot enter the 
United States and represent a financial loss to the exporters. Customs 
has also issued six findings banning importation of suspect goods from 
China, two of which were subsequently revoked.
    Implementation of the 1992 MOU prohibiting import and export trade 
in prison labor products has never been smooth or straightforward. 
Cooperation from the Ministry Of Justice has been erratic. There are 
certain facilities to which the Chinese government has been reluctant 
to give Customs access, perhaps because they present national security 
concerns or are in sensitive locations. As in many other issues in 
Sino-U.S. relations, the decentralization of authority within China has 
hampered prompt enforcement of our agreement. Ministry of Justice 
officials have sometimes attributed a lack of more rapid progress on 
investigations and visits to the intransigence of local officials. In 
addition, inadequate record keeping by prison officials has not 
facilitated investigation. Also, Chinese cooperation has often been a 
function of the state of bilateral relations.
    We have taken steps--beginning with negotiation of the SOC to 
raising the issue at high level meetings--to address the problem of 
implementation under the MOU. Chinese cooperation is essential to 
successful performance and enforcement. We need to conduct site visits 
and have direct access to information since we lack means of 
independent verification. We will continue to explore ways to enhance 
Chinese willingness to cooperate. This willingness is not something 
which can effectively be written into an agreement. Rather improved 
cooperation is more likely to result from steady, determined diplomacy 
and engagement by the Embassy, solid investigations by U.S. Customs, 
and the relationships our officials develop on the ground with Chinese 
counterparts.
    At present, it appears that the Ministry of Justice may be prepared 
to improve cooperation on this sensitive issue. We believe the best 
strategy is to regularly send investigation/visit requests to clear up 
the current backlog of cases. U.S. Customs will continue to present new 
cases to the Chinese as we develop information. We will also continue 
to raise the issue of cooperation and the importance of effective MOU 
implementation at every appropriate opportunity.
    Mr. Chairman, in conclusion, I wish to assure you that the 
Administration will continue to actively pursue President Clinton's 
commitment to implement this agreement effectively. Our goal is to 
ensure that no goods produced by prison labor enter this country in 
violation of U.S. law.
    Thank you, Mr. Chairman.

    Senator Thomas. Thank you, sir.
    Senator Wellstone, welcome. Glad to have you join us.
    Senator Wellstone. Thank you, Mr. Chairman.
    Senator Thomas. Do you have any comment or shall we go to 
questioning?
    Senator Wellstone. I have questions, but let us go to 
questions. I appreciate it.
    Senator Thomas. Why do we not do a 5-minute round and then 
we will go around again if we still need to do that.
    Mr. Bader, the State Department's human rights report this 
year and last year contained almost identical language. This is 
it. ``Although the signing of the SOC initially helped to 
foster some more productive relationships with the authorities, 
cooperation has been limited recently''--that's this year's 
report--``or stalled since mid-1995.'' That's last year's 
report. Both reports said, ``Repeated delays in arranging 
prison site visits called into question Chinese intentions 
regarding the implementation of the MOU.''
    Let us kind of cut through the bureaucratese there. Is 
China complying with the obligations under the MOU?
    Mr. Bader. They are not complying to the degree that we 
would like to see. We have had----
    Senator Thomas. Are they complying with the obligations?
    Mr. Bader. I think we would have to look at the numbers, 
Mr. Chairman, to make a judgment on that. There have been some 
60 some odd requests for information, and they have responded 
in about 50 of those cases. There have been about 20 requests 
for visits to facilities and about 13 of those have been 
facilitated. So, there has been a degree of cooperation but not 
the degree of cooperation that we would like.
    Senator Thomas. So, if we ask then a logical question, is 
China breaking U.S. law, what would be your answer?
    Mr. Bader. I do not think that China is breaking U.S. law. 
I would say we believe there are facilities that may be 
exporting products of prison labor to the United States. That 
would be a violation of U.S. law. That would be a violation of 
Chinese law, but that would be the action of the entity 
concerned that would be a violation of the law.
    We need Chinese cooperation in order to identify those 
facilities and that cooperation, as I say, has not been what we 
would like.
    Senator Thomas. In your prepared testimony, in March 1995, 
U.S. and China agreed that reeducation through labor facilities 
was--those were covered under the MOU. However, then you say 
that Customs has not to date visited any reeducation camps. 
Also this year's human rights report which covers 1996 again 
repeats, ``Chinese authorities assert that the facilities are 
not prisons and have denied access under the 1992 MOU.''
    Does China allow Customs to visit reeducation labor 
facilities?
    Mr. Bader. Thus far, as I understand it, Customs has not 
been permitted to visit any reeducation through labor 
facilities.
    Senator Thomas. Mr. Weise, on December 7, 1995, you wrote 
both Assistant Secretary Lord and Trade Representative Kantor 
to tell them that in your opinion--and I quote--``it is the 
U.S. Customs Service view that the MOU and SOC's are not 
working at this point and there is nothing more U.S. Customs 
can do to make it work.''
    What response did you get on your letters to Secretary Lord 
and Trade Representative Kantor?
    Mr. Weise.  I did not receive a written response to that 
letter.
    Senator Thomas. Did the State Department follow up on your 
comment in any way?
    Mr. Weise.  My understanding is the State Department took 
some actions vis-a-vis the Chinese, but I didn't get a report 
directly until preparation for this hearing.
    Senator Thomas. How about the U.S. Trade Representative?
    Mr. Weise.  No, Senator.
    Senator Thomas. Mr. Johnson, the Department of the Treasury 
has supervisory and policy responsibility for the Customs 
Service. Is that not correct?
    Mr. Johnson. That is correct, sir.
    Senator Thomas. What efforts did Treasury make to address 
the difficulties Customs is having in enforcing the MOU?
    Mr. Johnson. Well, there have been several. Primarily the 
issues have been raised by Secretary Rubin at the highest 
levels with the Chinese Government at the JEC last November and 
recently in a bilateral meeting in April of this year.
    Senator Thomas. You know, we hear a lot about your 
difficulties and I guess I sympathize. But when we have 
something that is fairly clear in terms of MOU's and statements 
of cooperation, does simply raising the issue up enforcement 
represent a success? Is raising the issue enough to make us 
feel as if we have accomplished our task?
    Mr. Johnson. Raising the issue or engaging in dialog, when 
we do not get the results, does not feel as if we have 
accomplished our task, but we continue to press those issues 
and intend to continue to use whatever lever we can.
    Senator Thomas. Is raising the issue the only remedy?
    Mr. Johnson. At a policy level, that is one of the 
remedies. On the ground, the agreements themselves provide a 
limited ability for enforceability, and that would be this. 
When the Customs Service wants to visit a facility because they 
have a basis for believing that the goods in question have been 
manufactured in a prison facility, Customs can impose a 
detention order and keep that order in place until they are 
granted access to that facility. That is a limited means of 
enforcing----
    Senator Thomas. What does the detention order mean?
    Mr. Johnson. A detention order? A detention order means 
that there is a reasonable suspicion--I believe that is the 
standard--that the goods in question were produced with prison 
labor.
    Senator Thomas. Are they held or restrained at all?
    Mr. Weise.  If I may, Senator. What that does is put a 
burden on the importer who is bringing that product in to 
demonstrate to our satisfaction that the goods that are before 
us were not produced by prison labor.
    Senator Thomas. And if you make that finding, what happens?
    Mr. Johnson. Then the product will not be let in unless the 
importer within a 3-month period satisfies the burden that he 
has demonstrated to us that goods that we have before us were 
not actually produced in prison.
    Senator Thomas. In the meantime, they cannot be moved?
    Mr. Weise.  In the meantime, the products cannot enter the 
commerce of the United States.
    Senator Thomas. Senator Biden.
    Senator Biden. Thanks, Mr. Chairman.
    Mr. Weise, how many detention orders have you issued?
    Mr. Johnson. We have issued a total of 27. There are 
currently 20 outstanding--21 outstanding, 20 of which are 
China. There was one other country.
    Senator Biden. 20 Chinese detention orders.
    Mr. Weise.  That is correct.
    Senator Biden. Have any of them resulted in inspections?
    Mr. Weise.  Inspections?
    Senator Biden. Well, there is a detention order.
    Mr. Weise.  Right.
    Senator Biden. With a detention order, you have to have the 
importer prove to you that it is not made with, in this case, 
prison labor. The only way I assume you can be satisfied that 
they are telling you the truth is to inspect the facility where 
the product was made. I assume. Right?
    Mr. Weise.  We have had 20 requests for visits that we have 
made to Chinese prisons.
    Senator Biden. Let us back up here. Let us make this real 
simple. I am not with the State Department or Customs. I am 
just a plain old Senator. OK? I know you are not State, but you 
are talking like a State guy.
    Here is what I want to know. Let us just be real basic so I 
can understand it and everybody at home can understand it.
    Somebody comes to you and says, either our Government or 
out of Government, the product that is being brought in by XYZ 
Importers was made with prison labor. You have a reasonable 
suspicion that that is true. You or somebody in the Federal 
Government says, XYZ Importer, you cannot bring that product 
off the dock or off the ship. You cannot put it in the U.S. 
market until you satisfy us that that product was not made with 
prison labor, and here is why we think it was made with prison 
labor.
    You have done that 20 times. Now, of the 20 times you have 
done that, how many times has somebody said to you, OK, I can 
prove it to you? Come with me. I will show you where it was 
made.
    One of the reasons for the detention order and the reason 
why Mickey put it in was to get you access. Now, how many times 
has it gotten you access to facilities you had otherwise not 
gotten access to or gotten access in the first instance at the 
first request?
    Mr. Weise.  We have only had access 13 times out of the 20.
    Senator Biden. Out of the 20 you have issued. Let us be 
real precise. OK? 20 detention orders, 20 requests that flow 
from the detention orders, 13 requests granted. Right?
    Mr. Weise.  That is right.
    Senator Biden. Now, what happened to those 13 requests that 
were granted? Was it confirmed or was it left ambiguous or what 
was the result?
    Mr. Weise.  There was no instance where we confirmed both 
the fact that the product was being produced within the prison 
by prison labor and that the product had been exported to the 
United States. We have had instances where we have confirmed 
that indeed there was a product as described to us that was 
being produced in that prison, but we were not able to prove 
the connection that that product was then exported to the 
United States.
    The thing I need to clarify, Senator, is that more often 
than not, the process does not begin with an importation in 
front of us. The process generally begins with an allegation 
that a particular kind of product was being produced in a 
prison. That is when we then look at the evidence. We look at 
the information that is provided to us, and if we have a 
reasonable suspicion that there is something there, that is 
when a detention order is issued. Usually we do not have a 
shipment at our docks when this process begins.
    Senator Biden. No, I got that, but it could be at your 
dock.
    Mr. Weise.  It could be at our dock.
    Senator Biden. It could be at your dock, could be on its 
way, or it could be in the future.
    Mr. Weise.  That is right, but once a detention order is in 
place, we try working on both ends. We immediately get word out 
to all of our field operations to be on the lookout for this 
product coming from this place. Meanwhile we start working the 
other end to try to get into the facility to see if we can 
confirm, as I said, the two elements, both the fact that the 
product is produced there and some evidence that it indeed has 
been shipped to the United States.
    Senator Biden. Let me ask State and Treasury. Do we know 
how many reeducation camps there are in China? Do we have an 
estimate of what we think there are? How many?
    Mr. Bader. We have an estimate of how many people are 
detained in such facilities. The number runs about 200,000.
    Senator Biden. 200,000 people. Now, can you estimate the 
value of goods produced in these camps? Do you have any idea? 
Not whether or not they are importing to the United States. Do 
we have any sense of the value of goods produced in these 
reeducation camps?
    Mr. Johnson. Senator, I do not.
    Senator Biden. Well, not you. Does anybody who works with 
you? I know you are smart, but there may be somebody else who 
knows something you do not. Do you have any idea? Does anybody 
in the Federal Government have any idea?
    Mr. Johnson. That would be something that I would want to 
get back to you on, Senator.
    Senator Biden. The answer is you do not know. Right?
    Mr. Johnson. That is correct, Senator.
    Senator Biden. I am not trying to put you on the spot. I 
just want straight answers. OK? If you do not know, you do not 
know.
    Now, my time is about up. Let me--my time is up.
    Senator Thomas. Saved by the bell.
    Senator Biden. Fortunately.
    Senator Thomas. The Senator from Missouri.
    Senator Ashcroft. Thank you, Mr. Chairman.
    Mr. Bader, I think I heard you say that Chinese compliance 
is a function of the state of bilateral relations. Does this 
mean that Chinese choose to comply at some times and not to 
comply at others and they disregard the agreements based on the 
way they feel about the U.S. at a particular time?
    Mr. Bader. Yes, I would say that is what it means, Senator. 
During periods when the relationship has been going through 
difficult times, Chinese cooperation has either halted or been 
grudging.
    Senator Ashcroft. Is this true about more than the 
agreements about prison labor things? Would that explain, for 
instance, the willingness of the Chinese to repudiate by their 
conduct the missile technology control regime and things like 
that?
    Mr. Bader. Senator, looking back over the last few years, I 
think we have seen on the missile technology side less 
scrupulous behavior by the Chinese during periods when 
relations have been bad. That is my view, yes.
    Senator Ashcroft. So, in general, agreements with China are 
honored when they sort of feel like it and feel good toward us 
and dishonored when they do not feel good toward us.
    Mr. Bader. I would say that the Chinese are more prone to 
exploit gray areas in their favor during periods when relations 
are difficult. Yes.
    Senator Ashcroft. You seemed to suggest that these goods 
might be imported but it wouldn't be a responsibility of the 
Government, that these were actions by the entity concerned. 
What did you mean by the entity concerned as opposed to the 
Government?
    Mr. Bader. I am not a lawyer, but I was making what I hoped 
was a narrow legal point, that if there is a violation of U.S. 
law, it would be by the facility that was producing the product 
and that the law I think would not implicate the Chinese 
Government.
    Senator Ashcroft. Which facilities are these? Are these 
prison facilities?
    Mr. Bader. Well, the facilities in question, some are 
prison facilities, yes, and some are corporate entities with 
relations with prisons and some are not.
    Senator Ashcroft. So, a product that is once removed from 
the prison and either packaged by another entity or----
    Mr. Bader. That is right. You might have a state-owned 
enterprise or a private enterprise with a relationship with a 
prison facility.
    Senator Ashcroft. The 200,000 individuals that are part of 
these laogai. Have these individuals been tried and convicted 
of a crime?
    Mr. Bader. No, they have not. They have been sentenced to 
up to 3 years by administrative proceedings by local 
authorities. They have not gone through the Chinese justice 
system.
    Senator Ashcroft. For what purpose have they been 
sentenced?
    Mr. Bader. There is a whole range of offenses, Senator. I 
would have to get back to you with the specifics on that.
    [The following material was subsequently supplied for the 
hearing record by Mr. Bader.]

    According to a 1982 State Council internal communique to 
the Public Security Bureau, suspects thought to be ``counter-
revolutionary elements, anti-party and anti-socialist 
elements'' are among those who may be sentenced to ``laogai.''

    Senator Ashcroft. So, they are sentenced for offenses, but 
they have not really been tried.
    Mr. Bader. They have not gone through a trial with due 
process through the Chinese justice system. That is right.
    Senator Ashcroft. Are they free to leave these facilities?
    Mr. Bader. No, they are not.
    Senator Ashcroft. And are they required to work in these 
facilities?
    Mr. Bader. Yes, they are.
    Senator Ashcroft. And there is this category of facilities 
where 200,000 people are detained and we have no access 
whatever to those facilities under our agreement?
    Mr. Bader. Our interpretation of the agreement is that 
these are prison or forced labor products and that we should 
have access. The Chinese have not granted us access to date. 
That is right.
    Senator Ashcroft. So, we have no access. We interpret 
ourselves as having the right of access. So, we have the 
potential without the right of inspection now, at least by the 
Chinese, of 200,000 people being forced to manufacture items 
which might come into our country, and we have no ability to 
even ascertain whether or not that is----
    Mr. Bader. That is correct, Senator. Just one or two brief 
points on that.
    Recently the Chinese have agreed to respond to a request 
for information on a laogai case, although they have not 
granted access to the facility.
    The other point is, as Jim Johnson pointed out, we can put 
the detention order on the product if we believe it is from a 
laogai facility. But you are right. We have not been able to 
inspect such facilities.
    Senator Ashcroft. Is it your view that we have never had 
adequate information to ask the Chinese in any of these 
situations to cease behavior related to a specific case?
    Mr. Bader. I am not sure I am the best member of the panel 
to address that question. Customs might be in a better position 
to judge the adequacy of information.
    Senator Ashcroft. Is that your way of saying you do not 
know or do not have a view?
    Mr. Bader. Well, the information we get is usually spotty, 
and that is why we have this process for investigation.
    Senator Ashcroft. At least the agreement has not provided 
us with access to these 200,000 individuals.
    Mr. Bader. That is correct.
    Senator Thomas. Senator Robb?
    Senator Robb. Thank you, Mr. Chairman.
    Mr. Johnson, on page 3 of your testimony you indicated 
there are ``recent indications from our embassy that the 
Chinese Ministry of Justice is expected to improve cooperation 
over the coming months.'' Could you tell us exactly what are 
those recent indications?
    Mr. Johnson. Those would be the two cases that--allegations 
that they have agreed to assist us to look into.
    Senator Robb. So, it's simply an expressed willingness to 
look into allegations that have been raised.
    Mr. Johnson. That is correct within recent months.
    Senator Robb. I am not sure which one of the three 
panelists might know the answer. I do not remember at this 
point which one of the three or if all three of you accompanied 
the Vice President on his recent visit to China. But do you 
know if this question of prison labor was specifically raised 
and discussed in his conversations with the appropriate 
officials one way or another?
    Mr. Bader. I do not know.
    Mr. Johnson. No, I do not know, sir.
    Mr. Weise.  I do not know.
    Senator Robb. Were any of you on that trip? I met with him 
briefly. Some of us did, but I did not take a look at who all--
--
    Mr. Johnson. No, sir, I was not. I do not believe anyone 
was.
    Senator Robb. Mr. Bader, if I may, the U.S., as I 
understand, has issued six findings actually banning the 
importation of goods. There were some 20 detentions, 13 access, 
if I understand all this and the relationship. First of all, I 
gather, for again the laymen to understand, that a detention 
might be something on the order of an indictment in a criminal 
proceeding and a finding would be a conviction and an access 
would be a trial or whatever the case may be. In other words, 
is that a logical sequence of events?
    Mr. Weise.  If I may, Senator, it is not quite analogous to 
that. A detention order basically results when we have what is 
called a reasonable suspicion that an allegation has been made 
and there is something to it.
    Senator Robb. Well, then a warrant issued for an arrest 
perhaps would be a better analogy.
    Mr. Weise.  The finding actually is something where we have 
found that there is--when we say probable cause that the 
allegation is accurate, and then we would take a more 
restrictive action. We would, in effect, prohibit. These goods 
just could not be imported until we could resolve that matter 
completely once we got to a finding state.
    Senator Robb. Given the difficulties that we are 
encountering at the moment with lack of access that were raised 
by Senator Ashcroft, would that indicate that a new memorandum 
of agreement or understanding ought to be entered into at this 
point?
    Mr. Weise.  As far as U.S. Customs is concerned--and we 
have the responsibility for enforcing and administering this--
we feel that the basic terms of the memorandum of understanding 
allow us to do our work. What the frustration has been is the 
Chinese apparent unwillingness to abide by the terms of the 
memorandum of understanding as supplemented by the supplemental 
agreement of 1994.
    For example, under the terms of that, when we make a 
request to visit a facility, within 60 days after that request 
is made, we ought to be able to visit that facility. If they 
were complying with the terms of the current understandings, I 
think we could do a more effective enforcement job. The problem 
is not so much with what is not in those understandings and 
agreements, it is that they are not being carried out.
    Senator Robb. Given the fact that there appears to be 
progress on the IPR front, are there any lessons to be drawn 
from this in terms of how we might approach the prison labor 
question? Mr. Bader, that is probably best directed to you.
    Mr. Bader. Well, I think as the Commissioner said, the 
statement of cooperation and the memorandum do have what we 
need. I am not sure what changes would result in better 
implementation.
    I think the key point here is the ability of Customs to 
slap a detention order on products so that puts the burden on 
the Chinese to satisfy us. We can take another look and see if 
there are other ways to assure better implementation. But right 
now, the way it is structured, the Chinese have an incentive to 
cooperate. In the case of the IPR agreement, we were dealing 
with illegal facilities in China producing products and the 
Chinese Government was asked to shut them down and 
substantially has. In this case, of course, we are dealing not 
with illegal facilities, but we are dealing with violations of 
Chinese law, as well as American law.
    Senator Robb. Let me ask just one final question and that 
is how other nations in Asia and Europe are responding to the 
concerns that we are addressing here about prison labor. Is 
there support for the U.S. position either rhetorically or----
    Mr. Bader. Sorry, Senator. There has been interest in the 
subject of prison labor in Europe, and I think a member of your 
next panel, Harry Wu, deserves a good deal of the credit for 
raising consciousness in Europe on that subject. I am not aware 
of to what degree European laws or European actions have 
paralleled our own, but there is a consciousness.
    Senator Robb. Are you aware of any European country that 
has attempted to deal with the situation the way we have?
    Mr. Bader. I personally am not. I do not know if the 
Commissioner is. I can get back to you with a formal answer on 
that, but I personally am not.
    [The following material was subsequently supplied for the 
hearing record by Mr. Bader.]

    The U.S. and EU share the common goal of integrating China 
into the international community. We have consistently conveyed 
to the EU the need for a common approach to China on human 
rights, non-proliferation, and other concerns.
    U.S. officials have raised the specific issue of prison 
labor in China with EU officials. The EU supports strengthening 
provisions for monitoring ILO conventions on core labor 
standards. However, the EU has no agreement with China on the 
use of forced labor. European Commission Vice President Sir 
Leon Brittan has stated that the EU would not withdraw GSP from 
China as a result of allegations of the use of forced labor 
there even if the International Confederation of Free Trade 
Unions or other body were to present a formal petition in this 
regard.
    On separate occasions, government officials from the United 
Kingdom, Germany, Canada and Australia have indicated that 
Chinese prison labor exports are not an issue of concern in 
their bilateral relations with China.

    Senator Robb. My time is expired. Thank you, Mr. Chairman.
    Senator Thomas. Senator Wellstone.
    Senator Wellstone. Thank you, Mr. Chairman.
    I will wait for Mr. Wu's testimony, but a recent CRS report 
stated, ``Evidence suggests that China may be utilizing forced 
labor on a large scale in order to boost its exports, a large 
portion of which may be targeted in the United States. In 1991, 
the Library of Congress expert estimated that over 50 percent 
of the prison-made goods in China are exported.''
    What I am having a little bit of trouble understanding is 
this--I am a kind of lay person to this, but I was following 
closely the questions on this whole issue of access. What is 
the procedure again? What do you call it when you stop 
something? You call it a----
    Mr. Weise.  A detention order.
    Senator Wellstone. A detention order.
    Mr. Weise.  And then a finding.
    Senator Wellstone. I am just trying to figure out exactly 
how this works. Why would China give you access to forced 
prison labor camps? They are not going to do that. What does 
access really mean? You go where they want you to go and 
nowhere else. Correct?
    Mr. Weise.  Well, in practicality that perhaps has been the 
way it has worked out, but they have entered into this 
memorandum of understanding of 1992 where they have agreed to 
give us access on our request when we have an allegation, and 
in the follow up agreement of 1994, they have even agreed 
within a set timeframe, within 60 days, of our request they 
would allow us access.
    Senator Wellstone. And you think you are getting that 
access?
    Mr. Weise.  We have been into 13 facilities, but the 
problem has been that there has been a long delay from the 
point where the initial request has been made before we have 
actually gotten into some of these facilities.
    Senator Wellstone. What reason in the world would we have 
to believe--I mean, they are not stupid. They are not going to 
take you onsite and give you the smoking gun and let you take 
pictures of people in forced prison labor camps. I just do not 
understand.
    Mr. Weise.  Senator, they have never denied that they have 
prisoners producing products. The issue really is are the 
products that they produce being exported to the United States.
    Senator Wellstone. That is correct.
    Mr. Weise.  And they have a law, or at least a regulation, 
since I guess it was 1991 that under Chinese law prohibits the 
exportation of these products to the United States.
    The issue is whether we can find evidence that the products 
that were produced--and we have seen directly these products 
being produced by prisoners, but we have not yet seen any 
evidence that those products were exported directly to the 
United States based on our visits.
    Senator Wellstone. And I am saying I doubt whether or not 
they are going to provide you with the smoking gun for you to 
do that. They do not seem to be me to be stupid. They do seem 
to me to commit monstrous violations of human rights of 
citizens in the country.
    I guess my question, Mr. Chairman, is I look at the recent 
CRS report and I hear from Customs and State today that 
certainly the People's Republic of China is not fully complying 
with this MOU on prison labor. I do not see, therefore, what is 
the alternative. How are we going to in fact make sure that our 
law is not violated and in fact there is some living up to 
this?
    Mr. Fiedler, AFL-CIO, in his prepared statement, Mr. 
Chairman, urges that Customs, based on credible information, 
ban entire categories of products from China if it is found 
that forced labor products of the same type are being sent to 
the United States. I guess my question for Mr. Johnson and Mr. 
Weise is, do you agree that this should be done? Why do we not 
come up with something?
    We know full well they are not fully complying. Some of us 
think they are not complying really at all. We know what our 
law of the land says. We know the President made MFN 
conditional upon living up to this agreement. Why not this 
alternative? What are we going to do to make this serious?
    Mr. Weise.  The first thing I would say, if I may, is that 
under current law, as our counsel has interpreted it, we are 
not permitted to take the kind of action you have suggested. If 
we were going to do that, the law would need to be changed to 
permit Customs to take that kind of action, and then it becomes 
a policy question as to whether the Congress and the 
administration feel that is the right approach.
    Obviously, there would be an awful lot of people who are 
dealing in legitimate business who would be potentially 
adversely impacted by that and products that were actually not 
produced in prisons would be impacted by that. But that is a 
policy question for----
    Senator Wellstone. Customs could only take this action 
based upon credible information. Would you agree that this 
would be an alternative that would make sense since what we are 
doing right now, clearly we do not have anything close to full 
compliance of our memorandum of understanding?
    Mr. Weise.  It is difficult. It is a policy issue. As the 
Commissioner of Customs responsible for enforcing law and not 
for making policy, I would defer to the State Department and 
the Treasury Department on making a policy judgment on that.
    Senator Wellstone. Mr. Johnson?
    Mr. Johnson. With respect to the issue of credible 
information, are we talking about information that currently is 
not being considered in the process that is in place now, not 
the MOU process but in the detention order process.
    The difficulty that we have had with detention orders is 
precisely what we are talking about, lack of credible 
information. So, I am not certain how efficacious--if we impose 
a regime that was contingent upon us getting credible 
information, I do not see how, given our difficulty in getting 
information, that would solve the problem. I think the 
detention order and then the regime that we have in place, 
contingent as it is on our getting information, would work 
better if we were able to get more information, which is just 
the frustration that the investigators and Commissioner Weise 
have been talking about.
    Senator Wellstone. Mr. Chairman, I will not go any further 
right now. I think if I could just make one quick point.
    The issue of operational definition of credible information 
is out there, but on the other hand, we are talking about 
Customs then really banning entire categories of products from 
China. We are talking about rather sweeping action. I grant you 
this is a challenge, but I think we ought to be thinking about 
something more serious that will lead to some real enforcement 
because right now this is a charade.
    Senator Thomas. Senator Feingold.
    Senator Feingold. Thank you, Mr. Chairman. I want to thank 
the witnesses and the chair for holding this hearing.
    I have some questions that I would like to submit for the 
record but we are only given limited time here, and given the 
significance of this subject, I am going to use my time to 
simply help try to send a message, the kind of message that 
Senator Wellstone was just sending, by making a statement about 
my feelings on this.
    Unfortunately, for those of us who are concerned about 
human rights issues in China, there are just an awful lot of 
areas we can focus on, a lot of choices. General freedoms that 
most Americans take for granted are not guaranteed in China. 
Freedoms of speech, of assembly, of association, of religious 
practice, as we learned at a hearing last week with regard to 
Tibet, and of privacy are severely restricted and massive human 
rights abuses continue throughout China.
    The forced use of prison labor is another issue that should 
concern us, and I think it's interesting to note. Unlike some 
of the other ones where people say, well, this is about 
religious practices or about other issues, this actually does 
have to do with trade. This does have to do with goods that 
come into this country.
    Since the Communist Chinese Party took power in 1949, 
reform through labor has been a key component of the party's 
effort to maintain its monopoly on power. Previously in the 
time of Chairman Mao Tse-tung, the Communist regime forced 
intellectuals and dissenters to toil at labor camps as a way to 
humiliate them and break their spirit. Harry Wu, who will 
testify later on, knows this system firsthand. Over the course 
of his 19-year imprisonment in China, Mr. Wu was forced to work 
on farms, in steel mills, and in coal mines.
    The condition of these prison labor camps has always been 
horrendous. According to reports by Human Rights Watch-Asia, 
prisoners are routinely denied proper food and medical care. 
Some, particularly political prisoners, are subject to 
beatings, electric shocks, and other forms of torture. On top 
of this, many are forced to do back-breaking labor for as much 
as 14 hours a day.
    Today prison labor is still being used as a means of 
political control in China. With the Chinese leadership 
determined to boost economic growth, prison labor has also 
become a means of increasing China's exports. As many as 20 
million people are estimated to be working in Chinese labor 
camps, many producing products specifically for export.
    As you know, Mr. Chairman, the United States and the 
People's Republic of China did sign this memorandum of 
understanding in 1992 whereby China agreed not to export goods 
made with prison labor to the United States. China has failed 
to live up to the agreement. Since 1992, our Customs Service 
has had to confiscate shipments of nearly 2 dozen types of 
products, including hand tools, artificial flowers, and even 
diesel engines, after it was discovered these goods were being 
made using forced prison labor.
    Most observers of this problem estimate that only a tiny 
fraction of prison goods are actually detected and the 
majority, potentially billions of dollars worth, every year 
appear on store shelves in the United States. As with so many 
human rights issues, the Chinese leadership has chosen a path 
of deception rather than openness. According to the State 
Department's 1996 report on Human Rights, Chinese authorities 
granted U.S. Customs inspectors access to only one prison labor 
facility in the entire year of 1996.
    In short, Mr. Chairman, Chinese compliance with the 1992 
MOU and subsequent agreements has been a joke. The continued 
human rights abuses in China's prison system and the use of 
forced labor is just one of many reasons why I oppose extending 
China's Most Favored Nation trade status. The United States 
should not grant trade privileges to nations which attempt to 
dump into our markets products made in appalling safety and 
health conditions by prisoners forced to work virtually all of 
their waking hours. What makes the situation even more 
deplorable is that fact that under Chinese law people can be 
sentenced to up to 3 years of hard labor without any kind of 
trial.
    Mr. Chairman, I believe this hearing is already shedding 
some light on the true situation in China's prison labor camps. 
I hope more light is shed, but this is obviously a matter that 
is of increasing interest on both sides of the aisle and is a 
message that I think should be sent straight across to the 
People's Republic of China. We are deeply concerned that these 
practices continue.
    Thank you, Mr. Chairman.
    Senator Thomas. Thank you, Senator.
    Senator Feinstein.
    Senator Feinstein. Mr. Chairman, I would ask unanimous 
consent that my remarks be included in the record.
    Senator Thomas. Without objection.
    [The prepared statement of Senator Feinstein follows:]
                Prepared Statement of Senator Feinstein
    Mr. Chairman, thank you for calling this hearing today. I want to 
welcome our witnesses here to discuss the important problem of 
enforcing our agreements with the People's Republic of China relating 
to prison labor.
    Prison labor is not a new issue, neither in general nor for 
Congress. Prison labor is widely practiced in various forms around the 
world, including in the United States. But, Congress has always had the 
concern that the United States should not import goods produced by 
prison labor overseas, especially from non-democratic countries, whose 
prisons are more likely to be abusive.
    So 67 years ago, as part of the Tariff Act of 1930, Congress passed 
a law banning the import of any item ``mined, produced, or manufactured 
wholly or in part in any foreign country by convict labor or/and forced 
labor or/and indentured labor.'' This act remains the law of the land 
to this day, and some have raised concerns about whether it is 
sufficient to deal with the problems presented by today's global 
economy.
    In the case of China, there have been serious concerns that the 
United States has not been able to prevent the importation of prison 
labor goods. These concerns led to the Memorandum of Understanding of 
1992 and the Statement of Cooperation of. 1994. These agreements, if 
properly enforced, give the United States the ability to screen prison 
labor products through information-sharing and site visits.
    The focus of this hearing, I hope, will be on whether these 
agreements have been adequate mechanisms for keeping Chinese prison 
labor goods out of the United States. If the answer is no, then the 
next question must be, what additional tools do we need to achieve this 
goal? I look forward to hearing our witnesses answers to these 
questions.
    More broadly, I think it is important to take note of how far we 
have come on this issue, and its implications for U.S.-China 
cooperation across the board. Reaching agreements with China on the 
issue of prison labor is an impressive achievement, which could not 
have been reached several years ago. Now, as is often the case with 
China, we need to work with them to establish an acceptable level of 
implementation of the agreements.
    Undoubtedly there are some who would conclude from our problems 
implementing these agreements that we have no choice but to throw up 
our hands and say, ``We cannot do business with the Chinese.'' Well, I 
believe that would be the wrong conclusion.
    We have every right to expect China to live up to agreements it 
signs. But we must understand that the rule of law is only beginning to 
take root in China, after 5,000 years of the rule of man.
    The application of the rule of law is still uneven. On the one 
hand, we have very positive developments, like the news this week that 
China has sentenced four people to lengthy prison terms for smuggling 
AK-47 assault weapons to the United States. That is an extremely 
positive sign. There are also very encouraging reports that China is 
now enforcing our intellectual property rights agreements with genuine 
vigor.
    But on the other hand, there are significant gaps. The subject of 
today's hearing may well be one of those gaps, as are many of China's 
human rights practices.
    It seems to me that the solution to this problem, the way to bridge 
these gaps, is to work even more closely with China and insist that 
agreements be upheld and that commitments be kept. The first step in 
any negotiation is to reach an agreement, and we should not 
underestimate the accomplishment these prison labor agreements 
represent. Now we must continue to press China for meaningful 
implementation of these and other agreements -- but we can only do that 
if we remain engaged.
    In this regard, I want to take this opportunity to express my 
strong support for President Clinton's wise decision this week to 
extend China's Most Favored Nation status for another year. Some people 
have expressed frustration with various Chinese policies, and have 
concluded that the only solution is to punish China by depriving it of 
MFN.
    Well, not only would ending MFN punish ourselves more than the 
Chinese, but it would also be counterproductive to every issue that has 
been raised as a concern. If we want to make any progress on human 
rights in China, if we want to make any progress on non-proliferation, 
if we want to protect the rights of the people of Hong Kong, and yes, 
if we want to make progress on the issue of prison labor, we only can 
only do so if we are fully engaged with China, as we only can be with 
MFN in place.
     Thank you, Mr. Chairman. I look forward to today's testimony.

    Senator Feinstein. I do not agree--and I very much respect 
my colleague from Wisconsin--that shutting down MFN is the way 
to deal with this. I think that would only isolate China and 
certainly would not in any way, shape, or form change the 
conditions that we are talking about here.
    I just read the memorandum of understanding and, Mr. Bader, 
let me address these questions to you. It sets forward a pretty 
straightforward process to be entered into by both sides. 
Treasury has said, well, 20 sites under this process have been 
pointed out and the United States has been given access to 13 
of them. Now, that leaves seven of those sites.
    What have we done to bring to the attention of the highest 
levels of the Chinese Government the problems that we believe 
exist in these seven sites, and what response have we had to 
that?
    Mr. Bader. Senator, we have raised the issue of prison 
labor generally at the highest levels of the Chinese 
Government, as was mentioned earlier, with Vice Premier Qian 
Qichan during his visit.
    As for the specific cases, I do not recall discussion of 
specific cases at the highest levels. The way that the cases 
that you are mentioning now are handled is through detention 
orders. If we cannot satisfy ourselves that there are no prison 
labor products coming from these facilities, detention orders 
can remain in effect.
    Senator Feinstein. Well, just for whatever it is worth, my 
experience once again is that very often--and this was true in 
the IPR problem--the highest level of the Chinese Government 
does not know what some of the ministries are doing with 
specifics. If we accept the fact that both the statement of 
cooperation and the memorandum of understanding were entered 
into in good faith and if we accept the fact that there are 
violations and that we want to change those violations, it 
would seem to me that a State Department policy, respectfully, 
should be to bring the specific camps or laogais or laogias, 
whatever you want to say they are, to the attention of the 
highest level with names and dates and places.
    I found out that in the IPR, once the 30-plus specific 
factories which the Governor of Guangdong Province had said 
were closed were not closed, were brought to the attention of 
the highest levels of the government, they were closed.
    I would only suggest that--I hear the instant condemnation 
here, and yet I also hear that the specifics have never been 
brought to the highest levels of the government. I would 
respectfully submit that I think that should happen.
    I would furthermore request copies of any letters that have 
been sent by the State Department or any other Department, 
Treasury, Customs, to high level government officials pointing 
out an abrogation of this MOU or the SOC be given to this 
committee. I intend to follow up and see what specifics have 
been brought to their attention. I think this is the signal 
lapse in our policy of engagement, following up on specifics in 
precise ways.
    If you would like to comment on that any further, any of 
you, I would appreciate it.

    Neither the United States nor China has abrogated the MOU or the 
SOC. The State Department has consistently raised the issue of prison 
labor exports with Chinese authorities, both orally and in writing. 
Embassy officials also reference specific cases as the situation 
warrants.
    With specific regard to senior administration officials, Deputy 
Assistant Secretary of State for East Asian Affairs Kent Wiedemann met 
with Ministry of Justice officials during a December 1995 visit to 
Beijing to stress the need for prompt access to prison labor facilities 
and for getting the 1992 MOU back on track.
    Most recently, Secretary Rubin during his April meeting with Vice 
Premier Qian Qichen raised the issue of cooperation under the MOU in 
Washington. Qian agreed that improved overall cooperation was 
essential, including enhanced cooperation on prison labor export 
issues.

Attached:

   June 1997 letter from U.S. Ambassador to China James Sasser 
        to Chinese Minister of Justice.
   September 1994 letter from Minister-Counselor for Economic 
        Affairs to Ministry of Justice Bureau of Prison Management 
        Deputy Director.
        [GRAPHIC] [TIFF OMITTED] T7725.001
        
        [GRAPHIC] [TIFF OMITTED] T7725.002
        
        [GRAPHIC] [TIFF OMITTED] T7725.003
        
        [GRAPHIC] [TIFF OMITTED] T7725.004
        
    Mr. Bader. I certainly take your point, Senator. I think it 
is a good point. I have absolutely no quarrel with it. We will 
get back to you with the documentation.
    In my statement I noted one of the problems in 
enforcement--and there are numerous problems in this area--but 
one has been the decentralization of authority in the Chinese 
system in recent years, like the IPR issue that Senator Robb 
alluded to. So, sometimes you have an intention to cooperate at 
the center but you have resistance in the field. So, the kind 
of approach that you are talking about might help shake loose 
that kind of resistance.
    Senator Feinstein. See, my view is once anybody can commit 
documentation that the specifics have been brought to the 
attention of the leadership--the leadership--in Beijing and 
Beijing does nothing to correct it, then I think we must take 
action rapidly. What I want to see is those specifics. When I 
have looked through, I have looked for those specifics and 
maybe others testifying shortly will bring some of those 
specifics forward. But what is important to me is that those 
specifics get to the high level leadership. If there is no 
response, then we take action. But it sort of goes around in 
this never-never land of kind of--I will not say low level but 
mid-level diplomatic, vague discussion and we never really get 
down to the specifics.
    I thank the chair.
    Senator Thomas. Thank you, Senator.
    It appears that there is still more interest in 
questioning, so we can go around again. Maybe we can do it a 
little more rapidly.
    Let me just make the observation that it seems to me, 
particularly as we enter into the Most-Favored-Nation debate, 
that the alternative to pursuing an MFN cut-off is to enforce 
these more specific actions or sanctions and that we keep 
talking about. We know that things are going on there we do not 
like.
    The question is why does what we are doing not work better? 
And why, having had your experience, gentlemen, has there not 
been some suggestion that doing what we are doing is not going 
to work? Unless we change what we are doing, the results are 
going to stay the same. So, I get a little bit impatient that 
we do not accept that we ought to be doing something a little 
different.
    Mr. Weise, in your testimony you referred to almost a 4-
year delay in the Shanghai Laodong Machinery Factory. Customs 
made a request in 1992, renewed again in 1993 and 1994. The 
request was finally granted in 1996.
    Mr. Bader, your testimony referred to the case and used 
this as evidence of recent improvements. Now, do you suggest 
this case is compliance with the MOU?
    Mr. Bader. Well, that would not be in compliance with the 
MOU since the statement of cooperation specifies a 60-day 
response time.
    Senator Thomas. You cited it as a recent improvement.
    Mr. Bader. Yes, I did but I would not say it is in 
compliance, no. The record you just pointed out clearly is not 
in compliance.
    Senator Thomas. As a result of the visit, Customs withdrew 
the detention order against the products, pipe fittings. Did 
Customs make the request to visit this on the basis of credible 
information?
    Mr. Weise.  Well, again, in order to have a detention 
order, we had a reasonable suspicion. We had information 
provided to us. When we actually finally got into the plant, we 
did not see any evidence of prison labor producing the product.
    Senator Thomas. Well, after 4 years of having suspicion, 
would you expect to be successful?
    Mr. Weise.  Well, that raises the obvious question, what 
had happened in the intervening 4 years. Had we gotten in a 
timely fashion within 60 days, would we have observed something 
differently than we saw 4 years later, and we can only 
speculate on that. But when we finally got into the plant, what 
we observed was they were not prisoners. This was not a prison 
facility and, on the basis of what we observed, we removed the 
detention order.
    Senator Thomas. I guess I would go back then to my first 
inquiry about your letters to the State Department and to the 
Trade Representative saying, in effect, that this is not 
working and there is nothing more you can do. What did you 
anticipate? What did you expect? What did you hope would happen 
as a result of those letters?
    Mr. Weise.  Well, it was our expectation and our hope--this 
is a bit frustrating when we are the Customs Service. Our 
primary mission is here on the main part of the United States, 
but we have attache offices around the world. We have an 
important responsibility in China, but we are not the 
organization that typically interacts at senior levels within 
foreign governments. We depend a great deal on the embassy 
there and the State Department.
    We were hoping, as a result of our letter, that we would 
have at a much higher level--as suggested by the Senator, 
brought to the attention of senior levels of the Chinese 
Government and that we would see some progress made in our 
working level carrying out our enforcement responsibilities.
    Senator Thomas. Have you made any suggestions to Treasury 
or anyone as to how this system might be made to work better?
    Mr. Weise.  Well, we have had many discussions with the 
Treasury Department and the Secretary, as the Assistant 
Secretary has indicated, has at every opportunity raised this 
when he has had the opportunity when meeting with the Chinese.
    Frankly, the frustration we have is that if we are going to 
be successful ultimately in proving a case to the satisfaction 
of a U.S. court of law, we really have to be able to have some 
evidence that would be upheld in a U.S. court of law. So, it is 
difficult for me to see how we in the United States can mandate 
a foreign nation to do what is expected of them other than 
through protocols and through interaction at very senior levels 
between our Government and theirs in terms of consequences for 
lack of carrying out their responsibilities.
    Senator Thomas. So, you are basically saying this system 
does not work and has little chance of working. Is that right?
    Mr. Weise.  What I suggested in my opening comments is I 
would not be able to sit before you today and say that we, as 
far as the Customs Service in terms of our responsibility for 
carrying out this very important responsibility, feel that it 
is working as it was intended. It needs to be improved.
    Senator Thomas. Well, it seems to me what we do is we have 
these things that do not work, and instead of seeking to fix 
them, then we turn to something broader to try and find a 
remedy and that does not work.
    Senator Biden.
    Senator Biden. I will pass but I will say only one thing. I 
think the last point you just made is absolutely accurate. The 
alternative to not enforcing this is going to be you are going 
to have trouble getting MFN.
    I yield.
    Senator Feinstein. Could I ask one quick question?
    Senator Thomas. Sure.
    Senator Feinstein. The letter, Mr. Chairman, that you just 
referred to, to whom was it addressed?
    Senator Thomas. The letter was addressed from Customs to 
our friend, Ambassador Lord, and also to U.S. Trade 
Representative Mickey Kantor. It said basically--and I quote--
``It is the U.S. Customs Service view that the MOU/SOC is not 
working at this point and there is nothing more U.S. Customs 
can do to make it work.''
    I presume the gentleman was asking for some remedy, some 
change, some authority because what we are doing ain't working.
    Senator Feinstein. Then the question would be, well, what 
has our side done about it, and maybe Mr. Bader might, if you 
would allow him, respond.
    Senator Thomas. Sure.
    Mr. Bader. If I could give a brief additional comment to 
what the Commissioner said. Thank you, Senator.
    Because we were aware of the concerns that Customs had at 
the time, we took advantage of a trip by my predecessor, Deputy 
Assistant Secretary of State Wiedemann, to Beijing at that time 
to raise at higher levels than had been raised before our 
concerns over non-implementation of the memorandum. This, you 
will recall, Senator, was at a time when we were getting no 
cooperation at all. It was in late 1995 when our relationship 
was in generally terrible shape.
    Mr. Wiedemann got not a completely forthcoming answer but 
indications that the Chinese were prepared to resume 
cooperation, and then we followed up 2 or 3 months later at 
working levels and we began to--well, in 1996 we had the first 
clearing up of an old case that we had had for over a year.
    So, again, I am not defending this as remotely satisfactory 
in terms of implementation, but we did take seriously the 
Commissioner's letter and tried to do something about it.
    Senator Feinstein. Could I just ask what the result of that 
was?
    Mr. Bader. In 1996, after a year break, the Chinese did 
clear up one outstanding case, and in 1997, as was indicated in 
the testimony, we have had two more cases presented to the 
Chinese to which we have gotten responses.
    Senator Feinstein. Thank you, Mr. Chairman.
    Senator Thomas. Senator Robb?
    Senator Robb. Mr. Chairman, I am interested in hearing the 
next panel, so I just have one brief question with respect to 
this panel. Mr. Bader I think would be the appropriate person 
to ask.
    Obviously our bilateral relationships with the PRC involve 
multi-dimensional, multi-faceted issues. Where would you say 
that the question of prison labor ranks in terms of importance 
vis-a-vis IPR, Hong Kong reversion, PRC/Taiwan relations, 
security relationships, missile technology control, nuclear 
proliferation? Where does it come on the chart in terms of the 
relative importance in terms of the advancement of our 
bilateral relationship?
    Mr. Bader. The first point, Senator, is it involves 
enforcement of our laws. So, therefore, obviously we take it 
very seriously.
    In terms of issues with the PRC, typically in our 
conversations over the last year or 2, there have been five 
issues that have recurred over and over because of their 
importance, and they are Taiwan, nonproliferation, trade 
issues, human rights, and most recently Hong Kong.
    Additionally, we have regularly, including at senior 
levels, raised law enforcement issues. We see law enforcement 
as an area where we should be cooperating more, and in that 
context prison labor is one of the law enforcement issues that 
has been raised.
    As you are correctly implying, Senator, when you have a 2-
hour meeting with the Chinese once every 3 months or 6 months 
at a senior level, it is very difficult to get through your 
entire agenda, and that is one of the reasons why I think it is 
essential that we have a deeper and broader engagement with the 
Chinese so that we can deal with the whole range of issues and 
not have to have this kind of triage of priorities when you 
have got an hour-and-a-half or 2-hour meeting.
    Senator Robb. ``Triage'' is perhaps an appropriate way to 
describe some of the negotiations.
    Thank you, Mr. Chairman.
    Senator Feinstein. Just one quick observation, and this is 
just my opinion based on what I know but the SOC is signed by 
relatively low levels, on our side, the economic counselor at 
the U.S. Embassy in Beijing. I would assume, although I am not 
familiar in Chinese with the name on the document, it is a 
correspondingly low level. For something this sensitive, to 
have agreements that are signed by essentially low level people 
is a huge mistake. It may work in other countries, but in China 
I do not believe it does. I think the imprimatur really of the 
highest levels of the Government have to be on sensitive 
documents and particularly when they point out a whole path, 
step by step, of a process that has to be followed. So, I will 
just leave you with that for whatever it is worth.
    Senator Thomas. Senator Wellstone.
    Senator Wellstone. Mr. Chairman, one comment because we 
have a debate on some amendments and some of us have to go down 
on the floor, and I do want to hear from Mr. Wu and others. 
This is just a quick comment, just a place where we may 
respectfully disagree, my colleague from California and I.
    I am under the impression that when it comes to forced 
prison labor conditions and exporting of products, that the 
central Government of China is fully aware of what is going on. 
I do not have any illusions that this is happening at the local 
level and somehow people in the higher positions of authority 
just are not aware of it. I think they are quite well aware of 
it.
    Senator Thomas. We have a law against the importation of 
those things, you know.
    Maybe I will just ask one more and then we will change. Mr. 
Weise, with respect to the Beishu graphite mine, Customs 
learned I believe about that in June 1995. The President of the 
importer admitted on national TV he knew the source was a 
prison camp. What is the status of that investigation?
    Mr. Weise.  Mr. Thomas, I have information that we did 
begin this process, we first became aware of this in 1994. We 
drafted a detention order effective in mid-1995. Part of our 
information was provided by the Laogai Research Foundation. 
After a legal review by our chief counsel, it was determined 
that even though it was clear that Beishu was a prison labor 
facility, that Customs could not reasonably conclude that the 
graphite would likely be imported into the United States.
    Although we withdrew the detention order, we continued to 
follow up on this and as recently as April of this year, our 
attache in Beijing requested a visit to Beishu and we are 
awaiting reply on that request.
    Senator Thomas. So, even though the importer indicated that 
that was the case, then there does not seem to be satisfactory 
evidence to do anything about it.
    Mr. Weise.  We are still looking to try to get better 
evidence of that allegation.
    Senator Thomas. Gentlemen, thank you. We appreciated very 
much having you here. I hope that we can find some ways to 
cause this process to be a little more workable.
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Bader. Thank you.
    Senator Thomas. If we could call the next panel please. Mr. 
Harry Wu, Executive Director of the Laogai Research Foundation; 
Mr. Jeffrey Fiedler, President, Food and Allied Service Trades, 
AFL-CIO; Ms. Maranda Shieh, Associate, Laogai Research 
Foundation; and Mr. Fu, a dissident from New York.
    Well, thanks to all of you for being here. We want you to 
say what you came to say, but try to keep it concise. Why don't 
we start with Mr. Wu please.

  STATEMENT OF HARRY WU, EXECUTIVE DIRECTOR, LAOGAI RESEARCH 
                FOUNDATION, MILPITAS, CALIFORNIA

    Mr. Wu. Mr. Chairman, the honorable Senator, it is my great 
honor to be here again. It happened first in 1991. This is 6 
years later. We are still talking about the forced labor 
products coming from China. I want to make some comments before 
I get into my testimony.
    First of all, in so-called reeducation through labor camps, 
the number of the prisoners Mr. Bader says is 200,000. This is 
incorrect. Chinese recent information says it should be 1.78 
million. This is according to Chinese information.
    My appearance today has only one purpose: To show that the 
Chinese Government has repeatedly lied about its efforts to 
stop the trade in Chinese forced labor products. There can be 
no denying the facts. Although I have been disappointed by the 
American Government's resolve in the past, I remain hopeful 
that our efforts here today will result in a new commitment to 
the prevention of the trade in forced labor products from 
China.
    You can see today we present all of these products right 
here that are found in the United States. It is only a part of 
it. Some of them are too large. For example, the diesel engine 
and stamping machine I do not think we can bring over here. All 
these products we found. Not the Customs Service. Not the 
American State Department.
    I think in August 1992 the Bush administration negotiated 
the memorandum of understanding of prison labor products with 
the Chinese Government, the so-called MOU, as a way to get the 
documents from the Chinese Government and to gain access to the 
labor camps to make a positive identification. I would like to 
say this is a terrible idea.
    Does anyone think the Chinese will willingly provide 
evidence that proves the export of forced labor products to the 
U.S.? The labor camp system is the darkest place in that 
communist system. They really do not want you to see it.
    But after the MOU was signed, the laogai products continued 
to come to the United States.
    In May 1993, President Clinton made the MOU as a must-do 
condition in the extension of MFN for 1994. It was a public 
stance that I supported at the time. President Clinton said, 
unless the Chinese follow the agreement, then MFN status will 
end in spring 1994.
    But the Chinese still sent the laogai products to the U.S. 
The Customs Service found four more laogai products come to the 
United States between August 1992 and March 1994. Even 
Commissioner George Weise said in November 1993 in testimony 
before the House of Representatives, ``We have substantial 
concerns about ongoing implementation and Chinese compliance 
with the letter and spirit of the agreement.''
    At that same hearing, Assistant Secretary Winston Lord 
repeated the pledge to end MFN if the MOU was not followed by 
the Chinese Government.
    All evidence showed the Chinese did not follow the MOU, but 
President Clinton did not go through with his threat. Instead, 
the American Government gave the Chinese Government a way out. 
Officials from the State Department and Treasury Department 
went to Beijing in late 1993 to negotiate a second binding 
agreement, a so-called SOC.
    Then Secretary of State Warren Christopher deceived all of 
America for the Chinese. He said because the Chinese Government 
signed a new agreement, they had complied with the old 
agreement. So, they met the must-do condition and deserve MFN. 
President Clinton delinked MFN and the MOU and rewarded the 
Chinese lie. I know the Chinese did not deserve our favor. They 
still do not deserve our favor.
    Since then the forced labor continue to come into our 
country. For example, in 1993 officials of Columbus McKinnon 
Company located in Buffalo admitted a long-term relationship 
with the Zhejiang Wulin Machinery Plant for the manufacture of 
chain hoists. In 1994, we visited the camp and brought back all 
the videotapes, and I want to show you the slides.
    [Slides shown.]
    Mr. Wu. This is entrance of Wulin. The Customs Service was 
supposed to have a visit, but there was no result. Under this 
watch tower, more than 2,000 prisoners, forced to labor, make 
the chain hoists, sell it to Europe and also sell it to United 
States.
    This is the chain hoist, but when it comes to the United 
States, put on a CM brand, not the Chinese brand.
    On the back door, you will see there is another sign board. 
This time they will tell you the nature. This is No. 2 Prison 
of Zhejiang Wulin.
    Just last week, a couple of days ago, Customs issued 
another detention order against hand tools which we learned 
involved a Houston company called Cosmo Trading knowingly--I am 
pretty sure Customs has that evidence that can prove that Cosmo 
knowingly imported Diamond brand hand tools from the Zhejiang 
No. 2 Prison.
    Particularly in 1994, I visited the camp and I want to show 
you. This is the entrance, just like a normal factory. The sign 
board says Zhejiang Hand Tool and Hardware Factory, but you 
look at it carefully. At the entrance before there. One is a 
policeman and the other is a prisoner.
    In the back yard there is another sign board, Zhejiang No. 
2 Prison. I do not think Customs can see that kind of sign 
board if they got agreement to visit Chinese prison camp.
    This is the picture we took. This is the real workers, 
forced to labor, no pay, and make the products that come to the 
United States.
    Now, recently the central government make a decision, all 
the labor camps have to set up another entrance. This is the 
same entrance for the Zhejiang hand tools manufacturing. A new 
name, a new design, a new entrance. They can invite you to see 
that.
    I think Customs did not tell you another example from 
Yunnan Province No. 1 prison. The American importer sued 
American Government. Because they were supported by the Chinese 
Government, they filmed the sanitized facility and submitted a 
tape to the court to prove this is not a prison. American 
representatives visited the sanitized prison and did not see 
anything. But around the area the representative interviewed 
many, many common Chinese. They told the truth, it is a prison 
system.
    My research into laogai shows that both the number of the 
camps and the population of the camps is increasing. The State 
Department representative just said that so-called reeducation 
through labor category--their information say there is 200,000 
people. This is not true. The recent Chinese information said 
in 1996 in this particular categories, so-called reeducation 
through labor, the number is 1.78 million. We do know in 1979 
when Deng Xiaoping come to power in this category, almost a 
couple hundred, very small. Under Deng Xiaoping, 20 years, this 
number increased to 1.78 million.
    In China they have a special term, so-called prison 
economy. This has never happened in any country in the world, 
only in the People's Republic of China. Before that, they 
called it laogai economy. Right now they are using the term 
``prison economy.''
    What is that? Does America have a prison economy or Japan 
have a prison economy? Only in China because all these 
prisoners are forced to labor, not only engaged in labor in the 
desert, in the construction site, building a highway, railway, 
but also to make products.
    Chinese information said--central government information 
said there are 200 different kinds of products qualified to 
export to the foreign countries. We only identify a few of 
them.
    I want to give you another example. This is a document we 
obtained from China. The document is a Prison Work Newsletter 
issued by Guangdong Provincial Prison Bureau, 1996, June. It is 
particularly talking about one prison camp close to the Special 
Economic Zone, Shantou. A new facility.
    In 1992, it was a very small camp growing tea, fruits, 
something like that. Expanding. Last year the prisoners' number 
increased to almost 3,900. So, they needed a new facility. They 
moved down close to the special economic zone. The information 
said this prison camp cooperates with Hong Kong businessmen 
making mineral water and also exporting artificial Christmas 
trees.
    We have a very brave woman, Maranda Shieh, and we recently 
made an investigation for this prison camp because according to 
Chinese information, this facility arranged more than 1,500 
prisoners making garments.
    Senator Biden. Making garments?
    Mr. Wu. Yes. Ms. Shieh later will give you detailed 
information. She has it firsthand. She went to China a couple 
of times with her camera.
    The laogai is the largest forced labor system in the world 
today. It is growing and the money is supporting this system.
    I want to introduce another brave man sitting here today, 
Peter Levy. He will tell you the story how he found the 
products in the United States processing by the female 
prisoners.
    Particularly today I want to talk to you about one case. If 
your automobile is having problems, if you send your automobile 
to a Midas Muffler, here is the brake made in China, Shanxi 
Province No. 3 Prison Camp. We find one purchase order include 
the other parts, 160,000 pieces sell it to United States. Also 
the parts sell it to Beijing Jeep, Cherokee Jeep. It means 
cooperate with Chrysler in Beijing.
    In this particular case, these products were brought into 
the United States by a Chinese Government-owned trading 
company, Minmetals. They sell the products to the American 
company and the Americans sell the products to the secondary 
market, including Midas Muffler.
    Later I will introduce you to another brave young man over 
here, Mr. Fu Shenqi. He is a prominent Chinese dissident. He 
would be in the jail many times, and he will tell you his 
experience in his labor camp about the Christmas lights.
    Senator Thomas. Can you begin to sum up please so that we 
can----
    Mr. Wu. Yes.
    I believe no American wants to buy Christmas lights or 
artificial Christmas trees if made by blood and tears.
    Mr. Chairman, we must stop this trade. If the law is 
broken, then it must be fixed. If the Chinese continue to 
violate our sovereignty, then we must act without them.
    Thank you.
    [The prepared statement of Mr. Wu follows:]
                     Prepared Statement of Harry Wu
        U.S. Implementation of Prison Labor Agreement with China
    Thank you for the opportunity to express my concerns on the import 
of forced labor products from China. Thank you, Mr. Chairman, for your 
steadfast commitment to improving the lives of the Chinese people.
    My appearance today has only one purpose: to show that the Chinese 
government has repeatedly lied about its efforts to stop the trade in 
Chinese forced labor products. There can be no denying this fact. 
Although I have been disappointed by the American government's resolve 
in the past, I remain hopeful that our efforts here today will result 
in a new commitment to the prevention of the trade in forced labor 
goods from China.
    The Senate Foreign Relations Committee in 1991 was the first body 
in the world to hear about the Laogai - China's forced labor camp 
system- as an important sector of the Chinese economy. I presented the 
photos and the official Chinese documents which showed the vital role 
the export of forced labor goods played in funding the Laogai.
    The United States has had a law banning the import of forced labor 
goods since 1932, so my revelations caused a swift reaction by the 
American government. The Customs Service used its authority to identify 
Laogai products and ban their entry into the United States. Despite 
official Chinese statements that denied the export of Laogai goods, the 
Customs Service between October 1991 and August 1992 banned seventeen 
different Laogai products from the US. One American company, E.W. Bliss 
of Michigan, was brought to court on criminal charges, pled guilty and 
was fined $75,000. Another American company, China Diesel Engines of 
California, sued the US government in the Court of International Trade 
to have the ban on its goods removed. The Court agreed with the 
government in 1994 and those Laogai diesel engines were removed from 
the country.
    In August 1992, however, something changed. The US government 
lowered its guard against the Chinese government and the Laogai and its 
blood-stained products. At that time, the Bush Administration 
negotiated the Memorandum of Understanding on Prison Labor Products 
with the Chinese government. A certain level of evidence is needed in 
US courts to convict American companies importing the Laogai goods. The 
US wanted a means to identify the origins of suspected products. So the 
MOU was meant as a way to get documents from the Chinese government and 
gain access to the Laogai camps to make a positive identification. This 
was a terrible idea. Does anyone think the Chinese would willingly 
provide the evidence that proved they exported forced labor goods to 
the US? The MOU was doomed to failure.
    After the MOU was signed, the Laogai products continued to come to 
the United States. In May 1993, President Clinton made the MOU a must-
do condition in the extension of MFN for 1994. It was a public stance 
that I supported at the time. He said unless the Chinese followed the 
agreement, then MFN status would end in spring 1994.
    But the Chinese still sent Laogai products to the US. The Customs 
Service found four more Laogai products coming to the US between August 
1992 and March 1994. The president of the Columbus McKinnon Company of 
New York admitted to having a long- term import relationship with a 
Laogai camp. The Chinese denied American requests for visits or tried 
to deceive the Customs Service. Even Commissioner Weise said in 
November 1993 in testimony before the House of Representatives, ``We 
have substantial concerns about ongoing implementation and Chinese 
compliance with the letter and spirit of the agreement.'' At that same 
hearing, Assistant Secretary Winston Lord repeated the pledge to end 
MFN if the MOU was not followed by the Chinese government.
    All evidence showed the Chinese did not follow the MOU. But 
President Clinton didn't go through with his threat. Instead, the 
American government gave the Chinese government a way out. Officials 
from the State Department and Treasury Department went to Beijing in 
late 1993 to negotiate a second binding agreement. This agreement, the 
Statement of Cooperation on the Implementation of the MOU (SOC), was 
signed in March 1994. The SOC set a 60 day time limit for answers from 
the Chinese government as well as other adjustments to the MOU. Then 
Secretary of State Warren Christopher deceived all of America for the 
Chinese: he said because the Chinese government signed the new 
agreement, they had complied with the old agreement, so they met the 
must-do condition and deserve MFN. President Clinton delinked MFN and 
the MOU and rewarded the Chinese lies. I know the Chinese didn't 
deserve our favor. They still do not deserve our favor.
    Since then, the forced labor products law has had no commitment by 
either government, the MOU and SOC have proved worthless and Laogai 
products still, come into the United States.
    In May 1993, officials of the Columbus McKinnon Company admitted to 
a longterm relationship with the Zhejiang Wulin Machinery Plant for the 
manufacture of chain hoists. The Customs Service had evidence showing 
Wulin is in fact the Zhejiang No. 4 Prison. Customs investigated Wulin, 
banned its chain hoists, and turned the case over to the Justice 
Department for prosecution. And nothing happened.
    In 1993, we learned that a Houston company called Cosmo Trading 
knowingly imported ``Diamond'' brand hand tools from the Zhejiang 
Province No. 2 Prison. We presented our findings to the Customs Service 
for investigation. And nothing happened.
    In December 1994, the Chinese denied access to a 'reeducation 
through labor' camp, where a prisoner is given a three-year sentence 
without trial and is forced to labor, which the Customs Service 
identified as shipping artificial flowers to the US. The Chinese denied 
access by saying reeducation-through-labor camps were not part of the 
MOU and cannot be investigated under its rules. And nothing happened.
    In May 1995, the president of Asbury Graphite of New Jersey 
admitted on the NBC national news broadcast that his company got 
expandable graphite from the Shandong Province Beishu Prison mine. And 
nothing happened.
    The 1996 State Department Human Rights Report for China said about 
the MOU, ``cooperation has stalled since mid-1995. As of the end of 
1995, the authorities had not granted access to a prison labor facility 
since April 30 (1995).'' And nothing happened.
    The Chinese allowed a visit in 1996 to a camp first investigated in 
1991. Customs went to the camp and removed the detention order on the 
Laogai product. Other requests first made in 1992 have been ignored. 
But nothing happened.
    The 1997 State Department Human Rights Report for China said, 
``Repeated delays in arranging prison labor site visits called into 
question the Government's intentions regarding the implementation of 
the MOU and SOC.'' But nothing happened.
    Not only are we allowing the Chinese government to ignore the 
binding agreements, we are failing to enforce our own laws.
    My research into the Laogai shows that both the number of camps and 
the population of the camps is increasing. The Chinese government views 
the prisoner as simply a production unit; the Laogai has the lowest 
cost labor in China. This labor is exploited to the profit of the 
state. And the Laogai is using the profits from its trade to get 
bigger. According to Chinese statistics, which are never complete, 
there were 1.4 million prisoners in the reform-through-labor camps in 
1997 and 1.78 million in the reeducation-through-labor camps in 1996. 
These numbers do not include the local detention center prisoners or 
the forced-job-placement personnel, laborers who have finished their 
sentence but are still forced to labor at the camps. All indications 
show that the Chinese jails and labor camps are filled to capacity. We 
believe there are between six and eight million prisoners forced to 
labor in the Laogai today. New facilities are being built with the 
profits, especially new reeducation-through-labor camps.
    The Chinese government calls this their Prison Economy. It is a 
stated policy of the government to turn all camps into profitable 
enterprises. I'll give you one example, from information dated June 
1996. I will submit the original document with translations for the 
record. A conference was held on April 8, 1996 to discuss the economic 
development policy of Jieyang Prison in Guangdong Province. The 
attendees all gave speeches about the need to improve production and 
earnings in the various production units at the prison. This Laogai 
camp initially was a farm growing tea and fruits and it operated a 
quarry. In 1982, its population was 700. By 1986, it had grown to 
1,800. By 1990, it was 2,100. At the end of 1995, this camp had nearly 
3,900 prisoners. The review of the conference states, ``The proportion 
of prisoners working indoors has grown from 20% in 1989 to the current 
80%. Economic benefits have also risen markedly.'' The prison turned a 
profit for the first time in 1994 and had earnings of US$14,000 in 
1995. How did it become profitable? By making products like chinaware, 
rosaries, watchbands, mineral water, artificial Christmas trees and 
garments for the domestic and international markets. There are 1,500 
prisoners committed to producing garments like these for the 
international market. The profits will be put to good use: the warden 
says he wants to build seven more prisons with the earnings.
    The Laogai is the largest forced labor system in the world today. 
Trade is crucial to the growth of the Laogai and thus the growth of the 
Chinese communist dictatorship., The Laogai Research Foundation wants 
to see an end to the Laogai. We feel one way of achieving this is to 
stop the trade of the products and the ability of the Laogai to gain 
hard currency. The Laogai Research Foundation has monitored the system 
and the trade in its goods. We have recently finished investigations 
that show that Laogai products continue to come to the United States in 
violation of the MOU, SOC and American law.
    In the case of Jieyang Prison, the prison's own documents 
identified the legitimate companies that act as their pipeline to the 
business world. The brochure names the Jixiang Knitting Factory in 
Shantou, Guangdong as one of the plants that has established a long-
term contract with the prison. We recently sent someone to the Jixiang 
factory to confirm the connection between Jieyang Prison and Jixiang 
Factory. In taped conversations the plant officials confirmed that they 
sub-contracted work to the prison. They even quoted us the price of 
goods made by the prison as being one-third less than other textiles. 
We also learned that Jixiang has contracts from a number of Hong Kong 
companies to manufacture clothes. These companies include the Sam Wing 
Garment Factory, World Wise Industries Ltd., the Roxy Garment Factory 
and Chaifa Holdings Ltd. Chaifa Holdings holds the exclusive license to 
manufacture clothes under the Garfield, Arnold Palmer and Playboy brand 
names. In addition, Jixiang Factory provided samples of their work for 
the Esprit name brand. The Jixiang facility is very small with perhaps 
one-hundred workers, but they were able to sign a contract for a large 
quantity of product in a very short time. The contract we signed is 
still valid, and if we executed it, we would receive finished garments 
that came from the Jieyang Prison to the US market.
    There is a brave man sitting here today, Mr. Peter Levy. Mr. Levy 
will tell you about how a competitor that sources its products at a 
female Laogai camp in China is taking over the market and threatening 
legitimate business. Mr. Levy is the first businessman to conduct his 
own investigation of the Laogai and I want to thank him for his 
efforts.
    The company that is illegally selling forced labor imports is 
called Officemate International Corporation, or OIC, of New Jersey. The 
President of OIC has created a company in Nanjing, China named Allied 
International Manufacturers or Ainico. These binder clips are assembled 
by women prisoners at the Nanjing Detention Center Women's Division for 
hours a day. Production output is measured to assess labor attitude and 
performance in accepting reform; one former prisoner said the silver 
clips were inserted into the black pieces until her fingers bled. This 
is terrible labor. These laborers cost only a quarter of the normal 
worker in China. Shipping documents show that OIC received 79,500 
kilograms of binder clips from Amico in the month of February 1997 
alone. News reports said that OIC has around one-third of the domestic 
market for binder clips. OIC sells these forced labor products to 
office supply stores around the country, including Staples, Boise 
Cascade Office Products and BT Office Products.
    This company knowingly uses forced labor and then profits from the 
suffering of the Chinese prisoners. Staples should stop buying OIC 
products. The Customs Service should immediately seize all binder clips 
shipped to OIC by Amico and ban the products. The American government 
should investigate this company.
    The Laogai Research Foundation has learned of two California court 
cases about a forced labor auto parts plant in Shanxi Province that was 
importing its products to the United States. Excel Industries, an 
American company, bought brake rotors from a company called MM Rotors 
in California. MM Rotors is a US-based subsidiary of China National 
Minerals & Metals Corporation, known as Minmetals. The President of MM 
Rotors and Minmetals Inc. LA is Su Hailin. The Vice-president of MM 
Rotors is Li Bai. Buyers from Excel Industries were brought to China in 
1993 by Su Hailin and Li Bai to inspect the source factories of 
products sold by MM Rotors and Minmetals. Mr. Li Xiang, an official of 
Excel Industries, is a Chinese man who said in his sworn testimony that 
Minmetals brought them to the Shanxi Province Number 3 Prison in 
December 1993. This Laogai, using the name Shanxi Linfen Automobile 
Manufacturing Plant, made brake rotors for MM Rotors for export. Mr. Li 
states in his deposition that he read the signpost at the Linfen 
factory that identified it as a prison and saw armed guards, walls and 
electric fences surrounding the compound. He was told that Mimnetals 
was buying most of the brake parts made by the Shanxi Linfen prison 
factory.
    Directories of Chinese manufacturing published by the China State 
Planning Publishers in 1991 and 1996 provide extensive information on 
Shanxi Linfen. The 1991 entry for brake discs made at Shanxi Linfen 
show that the annual output at 12,500 units is 100% for export for use 
as ``American automobile parts.'' The 1995 entry for brake discs made 
at Shanxi Linfen shows that the annual output had grown to 300,000 
units with 100% for export and use in the ``Beijing Cherokee, (and) 
Shanghai Santana.'' Chrysler manufactures the Cherokee at a joint-
venture in China called Beijing Jeep. Volkswagen manufactures the 
Santana at a joint-venture in Shanghai called the Shanghai Volkswagen 
Automobile Manufacturer. We call on both Chrysler and Volkswagen to 
stop buying brake parts from Shanxi until they can determine the 
origins of the suspect parts.
    The financial reporting company Dun & Bradstreet has also research 
Shanxi Linfen. In its 1995/96 Directory of Key Manufacturing Companies 
in P.R. China, D&B gives production output of RMB12,254,000 and sales 
of RMB12,084,000.
    MM Rotors receives tons of auto parts from China annually. In one 
shipment in February 1994, MM Rotors received 161,500 brake drums, hub 
rotors and brake discs from China Mimnetals. Commercially available 
shipping records show that MM Rotors received 561 metric tons of auto 
parts from China in 1995 and 612 metric tons of auto parts from China 
in 1996. In a ``Defective Parts List'' dated July 22, 1996, MM Rotors 
lists 81 companies that bought its products between 1993 and 1996. This 
list includes such large auto parts companies as Autocraft, Midas 
Muffler Co., and Monroe Motor Parts. We don't know how many brake parts 
manufactured at Shanxi Linfen were imported to the US by MM Rotors or 
how many were eventually sold by American retailers.
    MM Rotors, a company owned by the Chinese government operating 
freely in the United States, is importing forced labor goods. This 
company should be investigated and its license to operate in the US 
should be revoked. MM Rotors knowingly imported auto parts from the 
Shanxi Province Number 3 Prison. All other subsidiaries of the state-
owned China National Minerals & Metals Corporation should be 
investigated for other products from the Laogai. This is further 
evidence that the Chinese government has no intention of preventing the 
export of Laogai goods.
    Mr. Fu Shenqi is a prominent Chinese dissident who has been jailed 
many times for his public stance promoting democracy in China. He is an 
eyewitness to the manufacture of Christmas lights inside a Laogai 
factory . There is no market for Christmas lights inside China, a 
country where Christians are targeted and arrested for their beliefs. 
Christmas lights are for export. The US is almost 40% of China's export 
market, so it is reasonable to say that at least 40% of the Christmas 
lights are for America. We do not know under what brand these lights 
are sold. Or in what store the lights are sold. The American government 
must investigate this facility to determine the whole story.
    I believe no American would buy Christmas lights from China if they 
thought they came from the Laogai . I believe no American would buy 
artificial Christmas trees from China if they thought they came from 
the Laogai. I don't want to see any of these blood-stained trees and 
lights taint our holy nights.
    Mr. Chairman, we must stop this trade. If the law is broken, then 
it must be fixed. If the Chinese continue to violate our sovereignty, 
then we must act without them. Our government must commit the time and 
energy to stop the Laogai trade. If we ignore the issue of Laogai 
imports, it means we are ignoring existing American law. If we ignore 
our law, it means we are willing to enjoy the products made by Chinese 
blood and tears. We cannot forget our principles. Americans say again 
and again they don't want these goods. The government must never put 
money ahead of our belief in human rights. If we care only about money 
and not human suffering, then we insult our traditions.
    The Laogai is the Chinese communist dictatorship's primary tool for 
crushing its citizens. The trade makes it grow. The Foreign Relations 
Committee has been concerned with the Laogai since 1991, yet it is 
still growing. We must take action now. Thank you.
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    Senator Thomas. Thank you, sir. Mr. Levy, please.

    STATEMENT OF PETER B. LEVY, PRESIDENT, LABELON/NOESTING 
                 COMPANY, MT. VERNON, NEW YORK

    Mr. Levy. Mr. Chairman, distinguished Members, I appreciate 
the opportunity to appear today to discuss the problem of 
forced labor in China from the perspective of an American 
businessman.
    My name is Peter Levy. I am the President of the Labelon/
Noesting Company, a small manufacturer of paper clips and 
fasteners for the office products industry. We employ 
approximately 20 people in Mt. Vernon, New York, and have been 
in existence since 1913. In addition to our manufacturing plant 
in New York, we also import products from China.
    My adventure sprang from a conversation in the first half 
of 1995 about a competitor who was able to sell a certain 
product, binder clips, which is something that most of us that 
are using paper are using every day, and these are an example 
of binder clips. The competitor we discussed was Officemate 
International of Edison, New Jersey.
    During that conversation I was told that Officemate was 
purchasing their binder clips from a Chinese manufacturer that 
was using prison labor to assemble the product. Since then I 
have learned that the binder clip manufacturer in question is 
Allied International Manufacturers (Nanjing) Stationery Co., 
Ltd., also known as AIMCO Nanjing, which was incorporated as a 
subsidiary of a New Jersey corporation named Allied 
International Manufacturers Co., also known as AIMCO New 
Jersey, by a Mr. Peter Chen. Mr. Chen is listed as Chairman of 
the Board on the 1992 business license issued in China for 
AIMCO Nanjing. Mr. Chen and his wife, Shwu Chen, are listed as 
the major owners of Officemate International.
    In January 1996, before I made the decision to undertake my 
own research, I informally contacted both the Department of 
State and the U.S. Customs Service regarding my suspicions. I 
was told that the State Department did not feel that the 
Chinese Government was living up to the memorandum of 
understanding on prison labor, and I was told by the Customs 
Service that they suggested we petition them as specified in 
section 12.42 of title 19 of the U.S. Code.
    However, the State Department had also told me that the 
Customs Service was not allowed to make unscheduled inspections 
of the camps. It was my opinion that the U.S. Government was 
not in any position to effectively investigate this matter, and 
it was at that time that I made the decision to research this 
matter on my own.
    From import information I obtained from PIERS, which is the 
Port Import Export Reporting Service, I was able to ascertain 
that Officemate International was importing binder clips from 
AIMCO Nanjing. From the name, it was apparent that the plant 
was located in Nanjing, China.
    In March 1996, I made a special stop in Nanjing as part of 
a business trip to China. With the help of a translator, we 
made arrangements for transportation and located the AIMCO 
factory.
    The next day of my visit to Nanjing, we parked outside the 
entrance of the AIMCO Nanjing factory. After a wait of a few 
hours, a large truck left the plant. As the crates on the truck 
were not covered, it appeared that they were transporting 
unassembled binder clip parts and we began to follow the truck. 
At a point where the truck stopped due to traffic conditions, I 
got out of the car and looked into the cartons stacked on the 
truck. I was able to confirm that the truck was transporting 
unassembled parts for the number 20 small binder clip. When the 
traffic cleared, we continued to follow the truck across the 
Yangtze River to what I was told was a Chinese prison camp.
    Now, here is the tape that was taken. Here it shows the 
AIMCO Nanjing factory.
    [Videotape shown.]
    Mr. Levy. Here we are following the truck. Here you can see 
the unassembled binder clip parts. This particular tape was 
just taken last week.
    Again, what we are talking about is here are the bodies and 
here are the handles, and what they are making people do is 
take these and insert them. If you will try it yourself, you 
will see that it is not a very easy task.
    Here we are as the truck is going over the Yangtze River.
    Here you can see the walls of the camp. In that section 
there used to be barbed wire. In other sections there is still 
barbed wire at the top of the fence. Right there is an example 
of the barbed wire on the top.
    This was an edited tape to protect some of the people that 
assisted me in this.
    Now we are going to go by the entrance of the plant, and 
there we have a picture of the sign which says the Nanjing 
Women's Detention and Reform.
    Here we have the truck pulling out and you can see the name 
of the truck which has Allied Nanjing on it.
    This is also the same truck--I have photographs from the 
first trip I made in March 1996 which shows again here you have 
the handles visible on the back of the truck and you have the 
same license plate as on this picture.
    So, again, what we did was we followed the truck from the 
factory in Nanjing. We determined it had unassembled parts 
which were these parts. When the truck came back, we were able 
to get on the truck and determine the parts had been assembled, 
and then we followed it back to the factory.
    Senator Biden. I think you are in the wrong business. 20/20 
could use you.
    Mr. Levy. Well, shortly after my return to the United 
States--this is after my first trip--I contacted a 
representative of the AFL-CIO. My employees happen to be 
represented by a union affiliated with the AFL-CIO. The 
representative there put me in contact with the Laogai Research 
Foundation, and the foundation was able to independently 
confirm that the facility in question was a prison camp.
    Again, I recently made another trip to Nanjing which we 
just depicted on the tape there and went through what I saw on 
that trip.
    During my two visits to Nanjing, I spent only 2 days 
watching for a truck to take parts to the prison camp for 
assembly. Both days the truck was in action and I saw parts for 
three different products move back and forth.
    The laws of the United States address the issue of 
importation and sale of goods manufactured with Chinese prison 
labor in two key areas. First, the U.S. Code title 19 regarding 
customs duties prohibits the importation of convict-made goods. 
The Code of Federal Regulations section 12.42 of title 19 
states that ``if the Commissioner of Customs finds at any time 
that information available reasonably but not conclusively 
indicates that merchandise within the purview of section 307 is 
being, or is likely to be, imported, he will promptly advise 
all port directors accordingly and the port directors shall 
thereupon withhold release of any such merchandise pending 
instructions from the Commissioner.'' To me, this does not set 
such a high standard as what they were talking about during 
their testimony.
    The second key area of the U.S. Code that addresses this 
subject is title 18, Crimes and Criminal Procedure. There are 
two sections that address this matter. Section 1761 refers to 
knowingly. Section 1762, however, sets a much lower standard 
for determining whether or not a crime has been committed, and 
that section makes no reference to the word ``knowingly.'' 
Violation of either section is punishable by a fine of not more 
than $50,000 and, more importantly, merchandise transported in 
violation of this section shall be forfeited to the United 
States.
    I think one of the main points of section 1762 is to 
prevent unsuspecting consumers from having a fraud perpetrated 
on them. Very few people would go into the store and purchase 
merchandise that was marked made in a Chinese prison.
    I did not come here to vilify China today. In 1939 the very 
few members of my family that escaped the Nazi holocaust found 
refuge in Shanghai where they lived until 1948. I think the 
interaction with the thousands of Westerners doing business in 
China helps to move forward the cause of human rights there.
    I have discussed the problem of prison labor with a number 
of my Chinese suppliers. They have all been aware that they are 
not allowed to ship products made with prison labor to the 
United States. They have also told me that while they are aware 
that the practice continues, the Chinese factories shipping 
goods manufactured with prison labor are doing so against the 
dictates of Beijing. If this practice is to be stopped, we must 
continue to push the Chinese central government to exert more 
control at the local level.
    My purpose in testifying today is to present the results of 
my research and to request that the Customs Service and the 
appropriate U.S. Attorney immediately investigate this matter 
to ensure that the laws of the United States are enforced.
    Before I conclude, I should make clear that there is 
absolutely no evidence and absolutely no thought that the 
distributors of Officemate products have any idea that the 
product they are purchasing may have been made in a Chinese 
prison.
    Mr. Chairman, few small businesses can afford to hire 
lawyers and lobbyists to get their point heard. That is why I 
so greatly appreciate the opportunity to speak to you on this 
important matter today. Thank you.
    [The prepared statement of Mr. Levy follows:]
                  Prepared Statement of Peter B. Levy
    Mr. Chairman, distinguished Members, I appreciate the opportunity 
to appear today to discuss the problem of forced labor in China from 
the perspective of an American businessman.
    My name is Peter Levy. I am the President of the Labelon/Noesting 
Company, a small manufacturer of paper clips and fasteners for the 
office products industry. We employ approximately 20 people in Mt. 
Vernon, New York. The company has been in existence since 1913. Some of 
our products are manufactured in China.
    My adventure sprang from a conversation in the first half of 1995 
about a competitor who was able to sell a certain product, binder 
clips, at very low prices. The competitor discussed was Officemate 
International of Edison, New Jersey. During that conversation I was 
told that Officemate was purchasing their binder clips from a Chinese 
manufacturer that was using prison labor to assemble the product. Since 
then I have learned that the binder-clip manufacturer in question is 
Allied International Manufacturers (Nanjing) Stationery Co., Ltd. (also 
known as AIMCO Nanjing), which was incorporated as a subsidiary of a 
New Jersey corporation named Allied International Manufacturers Co. 
(also known as AIMCO New Jersey) by a Mr. Peter Chen. Mr. Chen is 
listed as the Chairman of the Board on the 1992 business license issued 
in China for AIMCO Nanjing. Mr. Chen and his wife, Shwu Chen, are 
listed as the major owners of Officemate International.
    In January 1996, before I made the decision to undertake my own 
research, I informally contacted both the Department of State and the 
U.S. Customs Service regarding my suspicions. I was told that the State 
Department did not feel that the Chinese government was living up to 
the Memorandum of Understanding on prison labor. The Customs Service 
suggested that we petition the Service as specified in Section 12.42 of 
Title 19 of the United States Code. However, the State Department had 
also told me that the Customs Service was not allowed to make 
unscheduled inspections of the prison camps. It was my opinion that the 
United States government was not in a position to effectively 
investigate this matter. It was at that time that I made the decision 
to research this matter on my own.
    From import information I obtained from PIERS (Port Import Export 
Reporting Service) I was able to ascertain that Officemate 
International was importing binder clips from AIMCO Nanjing. From the 
name it was apparent that the plant was located in Nanjing, China.
    In March, 1996 I made a special stop in Nanjing as part of a 
business trip to China. With the help of a translator we made 
arrangements for transportation and located the AIMCO factory.
    The next day of my visit to Nanjing we parked outside the entrance 
of the AIMCO Nanjing factory. After a wait of a few hours a large truck 
left the plant. As the crates on the truck were not covered it appeared 
that they were transporting unassembled binder clip parts and we began 
to follow the truck. At a point the truck stopped due to traffic 
conditions I got out of the car and looked into the cartons stacked on 
the truck. I was able to confirm that the truck was transporting 
unassembled parts for the #20 (small) binder clip- When the traffic 
cleared, we continued to follow the truck across the Yangzte River to 
what I was told was a Chinese prison camp.
    Shortly after my return to the United States I contacted a 
representative of the AFL-CIO. (My employees are represented by a union 
affiliated with the AFL-CIO.) The representative put me in contact with 
the Laogai Research Foundation. The Foundation was able to 
independently confirm that the facility in question was a prison camp.
    I recently made another trip to Nanjing. We again parked ourselves 
outside the AIMCO Nanjing Plant. When we arrived we saw the same truck 
that I had photographed on my previous trip waiting inside the gates of 
the plant. The truck has the name of AIMCO Nanjing on the doors. After 
a short wait the truck pulled out and we began to follow it on the same 
route that it had taken on my previous visit. During a traffic stop I 
was able to inspect the material on the truck. Again it was unassembled 
binder clip parts. This time it was handles for the #50 (medium) binder 
clips and colored bodies for the #20 (small) binder clips. Again we 
followed the truck to the prison camp and waited a short distance from 
the gate. Approximately 2 hours later the truck drove out of the camp 
and we began to follow it again. During the drive back to the factory 
the truck stopped in traffic and I was able to determine that it was 
carrying assembled #20 binder clips. We then followed the truck back to 
the AIMCO Nanjing factory.
    During my two visits to Nanjing I spent two days watching for a 
truck to take parts to the prison camp for assembly. Both days the 
truck was in action and I saw parts for three different products move 
back and forth. I understand from a 1992 letter that AIMCO Nanjing's 
main products are binder clips, staple removers, paper clips, letter 
openers, hole punches and hanging folder frames.
    The laws of the United States address the issue of the importation 
and sale of goods manufactured with Chinese prison labor in two key 
areas.
    First, United States Code Title 19 - Customs Duties prohibits the 
importation of convict-made goods. Code of Federal Regulations Section 
12.42 of Title 19 Customs Duties states that ``if the Commissioner of 
Customs finds at any time that information available reasonably but not 
conclusively indicates that merchandise within the purview of section 
307 is being, or is likely to be, imported, he will promptly advise all 
port directors accordingly and the port directors shall thereupon 
withhold release of any such merchandise pending instructions from the 
Commissioner as to whether the merchandise may be released otherwise 
than for exportation.''
    The second key area of the United States Code that addresses this 
subject is Title 18 - Crimes and Criminal Procedure. Section 1761 makes 
it a criminal offense to knowingly transport in interstate commerce or 
from any foreign country into the United States any goods manufactured, 
wholly or in.part, by convicts or prisoners. Section 1762 states that 
all packages containing any product manufactured, wholly or in part, by 
convicts or prisoners when shipped or transported in interstate or 
foreign commerce shall be plainly and clearly marked so that the name 
and location of the penal institution where produced may be readily 
ascertained on an inspection of the outside of such package. Violation 
of this section is punishable by a fine of not more than $50,000 and 
any merchandise transported in violation of this section or section 
1761 shall be forfeited to the United States. Section 1762 sets a much 
lower standard for determining whether or not a crime has been 
committed. This section makes no reference to the word ``knowingly.''
    One of the points of Section 1762 is to prevent unsuspecting 
consumers from having a fraud perpetrated on them. Very few people 
would go into a store and purchase merchandise that was marked ``Made 
in a Chinese prison.''
    In 1939, the very few members of my family that escaped the Nazi 
holocaust found refuge in Shanghai where they lived until 1948. 1 think 
the interaction with the thousands of Westerners doing business in 
China helps to move forward the cause of human rights there, I have 
discussed the problem of prison labor with a number of my Chinese 
suppliers. They have all been aware that they are not allowed to ship 
products made with prison labor to the United States. They also told me 
that while they are aware that the practice continues, the Chinese 
factories shipping goods manufactured with prison labor are doing so 
against the dictates of Beijing. If this practice is to be stopped we 
must continue to push the Chinese Central government to exert more 
control at the local level.
    My purpose in testifying here today is to present the results of my 
research and to request that the Customs Service and the appropriate US 
Attorney immediately investigate this matter to ensure that the laws of 
the United States are enforced.
    Like most industries, the office products industry is extremely 
competitive. The industry is undergoing a tremendous consolidation. All 
of the manufacturers, particularly the smaller ones like my firm, are 
fighting to survive this shakeout. Products like paper clips and binder 
clips are considered commodities and sold by the lowest bidder. We are 
all looking for a competitive advantage, but the use of prison labor 
goes too far.
    Before I conclude, I should make clear that there is absolutely no 
evidence and absolutely no thought that the distributors of Officemate 
products have any idea that the product they are purchasing may have 
been made in a Chinese prison.
    Few small businesses can afford to hire lawyers and lobbyists to 
get their point heard. That is why, Mr. Chairman and Members of the 
committee, that I greatly appreciate this opportunity to make my voice 
heard.
    Thank you.

    Senator Thomas. Thank you very much. Ms. Shieh.

   STATEMENT OF MARANDA SHIEH, PRESIDENT, GREATER WASHINGTON 
  NETWORK FOR DEMOCRACY IN CHINA AND FRIENDS OF HONG KONG AND 
                       MACAO ASSOCIATION

    Ms. Shieh. Mr. Chairman and distinguished members of this 
committee, my name is Maranda Shieh. I am the President of the 
Greater Washington Network for Democracy in China and the 
Friends of Hong Kong and Macao Association. I also work on 
special projects for the Laogai Research Foundation.
    I am here today to testify about the laogai products that 
can easily be exported to the United States market.
    This March I made a trip to China. The reason for this 
mission was because we wanted to check about what is indicated 
in this magazine. Based on the information from this special 
edition of Prison Work Newsletter, the Chinese Government's 
publication, we decided to take a look at the prison and the 
factory there to get a firsthand knowledge of the garment 
factory.
    Recently under the guidance of the prison economic 
development policy of the Chinese Government, as indicated in 
the magazine, it planned to move its garment factory to the new 
location at Jieyang County and expand its prison labor force 
making garments from 150 to 1,500. Its goals were to reach an 
annual revenue of 8 million RMB, which is about $1 million U.S. 
dollars, by 1996. They also aggressively pursued larger markets 
by way of securing long-term stable relationship with Guangdong 
Shantou Jixiang Knitting Garment Factory--and later I will call 
this Jixiang Factory--and working with businesses in Hong Kong.
    Shantou is one of three Special Economic Zones in coastal 
Guangdong Province. The new Jieyang Prison is about 32 miles 
north to Shantou S.E.Z. Jixiang Factory specializes in 
manufacturing garments with material and patterns provided by 
the buyer and which is also how Jieyang Prison operates their 
garment factory, as indicated in this publication.
    I made my investigation posing as an American 
businesswoman, and I was able to order samples and sign 
contracts with Jixiang Knitting Garment Factory. I also was 
able to arrange for the textile quota with Shantou Textile 
Import and Export Corporation, which is the designated company 
to grant quota for exporting in Shantou area. I also managed to 
order samples to be sent both the United States and France, and 
we do not know if these samples and products came from the 
laogai factory but it is highly possible.
    The contract we signed could be fulfilled once we agree 
upon the price for the textile quota, 338/9S, and pay quota 
charge, and issue a letter of credit to the supplier. Then the 
textile products we ordered would be shipped from Shantou to 
Chicago via Hong Kong. Laogai products can reach the United 
States through the legitimate Jixiang Factory.
    I visited Jixiang Factory four times, and there are several 
observations I made which are all backed up with visual and 
audio records.
    I also made a trip to the prison twice, as is shown here in 
this slide.
    [Slides shown.]
    Ms. Shieh. This is a new location of the prison, and as you 
can see, it has a lot of high rise buildings, and with prison 
forbidden area signs near the entrances, I did not venture in, 
but I was really shocked by the brand new, modern high rise 
buildings in that desolated countryside.
    When I visited the Jixiang Factory, this is the front 
entrance of the Jixiang Factory, I took some pictures of their 
garment facility there and talked to Mr. Lee. I mean, Mr. Lee 
is the one with glasses in the picture here.
    Senator Biden. This is at the factory not at the prison.
    Ms. Shieh. Not at the prison. This is a factory.
    Senator Biden. Got it. Thank you.
    Ms. Shieh. This factory was indicated actually in this 
publication, and the prison admitted that they have a 
relationship with this factory.
    When I talked to Mr. Lee to see if he can actually arrange 
our contracts to be made by the prison, his reply was 
circumspect. Later when I asked if he could make arrangements 
for me to visit the prison, he indicated that he could make the 
arrangements.
    Senator Biden. Why did he think you asked to be able to 
visit the prison? In order to inspect the quality of the work?
    Ms. Shieh. To inspect the quality of the work.
    Senator Biden. To inspect the quality of the work.
    Ms. Shieh. Yes.
    Senator Biden. I see.
    Ms. Shieh. Another information I obtained from Mr. Lee 
clearly indicated that he really knows something about the 
prison factory and had experience of working with them. When I 
asked him how much I could save if the products are made by the 
prisoners, he knew exactly how much, and he said for an order 
of $50, it probably would cost me only $35 per dozen. For an 
order of $60 per dozen, it would probably cost only $40 per 
dozen. But he also indicated that I would probably have to 
spend $8 to $10 per dozen on the bribes to prison officers. He 
said especially for people like me who is from overseas, they 
probably would ask me to buy something for them on my next 
trip.
    When I asked how the prison distributes their profit, Mr. 
Lee said that it would all go to the prison and officers. He 
said sometimes they might reward prisoners if they perform 
well, but he said, ``They are forced to labor, you know. They 
don't have to pay them anything.''
    Also in this publication, it indicated clearly that Hong 
Kong business has some relationship with the prison, as 
indicated in my written testimony.
    According to Mr. Lee, he actually gave me the name cards of 
some companies in Hong Kong, and there are four companies he 
admitted that he deals with them closely. One is Roxy Garment 
Factory, Ltd. Which actually sells Esprit brand products; the 
Sam Wing Garment Factory, Ltd.; and Chaifa Holdings, Ltd., 
which sells Playboy, Garfield, and Arnold Palmer brand 
products; and Worldwide Industrial.
    Senator Biden. These are all Hong Kong distributors?
    Ms. Shieh. Hong Kong companies.
    Senator Biden. Companies that purchase from these 
facilities.
    Ms. Shieh. Yes.
    Senator Biden. Will the fellow with the camera move? Thank 
you. Good idea.
    Ms. Shieh. Probably I should indicate this paragraph is 
stated in this publication, and it indicates that Hong Kong 
businesses want to cooperate with Jieyang in the garment 
project because their representatives saw the advantage which 
we have in management and the labor force. Now, a garment 
project is our first large-scale production and processing line 
where we cooperate with foreign businesses. The orders are 
abundant and our production runs relatively effectively. It is 
a parlor enterprise which will bring economic development at 
the Jieyang Prison.
    In conclusion, there are three major findings from this 
investigation. One, we found out it is extremely easy for 
laogai garments to reach the world market, including the 
American market even with government textile quota restriction.
    Second, the Chinese Government clearly does not show any 
concern or worry about selling forced labor products to the 
world market, and there is no indication they will stop doing 
so.
    And third, we learned that any private enterprise, new or 
old, including those in Hong Kong, can be established and used 
as front companies for the export of laogai products. The 
laogai products can then easily be exported to the American 
market without any trace of the original source.
    Thank you.
    [The prepared statement of Ms. Shieh follows:]
                  Prepared Statement of Maranda Shieh
       U.S. Implementation of Prison Labor Agreements with China
    My name is Maranda Shieh. I am the President of the Greater 
Washington Network for Democracy in China and Friends of Hong Kong and 
Macao Association. I am here today to testify about the Laogai products 
that can easily be exported to the United States market.
    Based on information from this June 1996 special edition of 
bimonthly ``Prison Work Newsletter'', a publication of the Chinese 
government, I took a trip to China this March under the direction of 
the Laogai Research Foundation to investigate the textile products 
exported from China to the United States. According to this 
publication, the Jieyang Prison, Guangdong Province formerly Dongjing 
Labor Reform Detachment, has been in the garment business for 12 years.
    Recently, under the guidance of the prison economic development 
policy of the Chinese government, it planned to move its garment 
factory to the new location at Jieyang county and expand its prison 
labor force making garments from 150 to 1500. Its goals were to reach 
an annual revenue of 8 million RMB, which is about one million US 
dollars, by 1996. They also aggressively pursued larger markets by way 
of securing long-term stable relationship with Guangdong Shantou S.E.Z. 
Jixiang Knitting Garment Factory (later called Jixiang Factory) and 
working with businesses in Hong Kong.
    Shantou is one of three Special Economic Zones (S.E.Z.) in coastal 
Guangdong Province. The new Jieyang Prison is about 32 miles north to 
Shantou S.E.Z. Jixiang Factory specializes in manufacturing garments 
with material and patterns provided by the buyer, and which is also how 
Jieyang Prison operates their garment factory, as indicated in this 
publication.
    I made my investigation posing as an American businesswoman. I was 
able to order samples and sign contracts with Jixiang Knitting Garment 
Factory. I arranged 338/9S quota for the contract signed with the 
Guandong Shantou Textile Import/Export Company, the designated company 
for obtaining textile quota for export in Shantou area. I also managed 
to order samples to be sent to both the United States and Europe. We 
don't know if these samples and products came from the Laogai factory, 
but it is highly possible.
    This contract will be fulfilled once we agree upon the price for 
the 338/9S quota, pay quota charge, and issue a Letter of Credit (L/C) 
to the supplier. Then the textile products we ordered will be shipped 
from Shantou to Chicago via Hong Kong. Laogai products can reach the 
United States through the legitimate Jixiang Factory.
    I visited Jixiang Factory four times, and there are several 
observations I made, which are all backed, up with,visual and audio 
records:

The factory is small. Mr. Lee, the owner, claimed it has I 00 workers 
and monthly production of 50,000 pieces, but I only saw less than forty 
workers on a delivery day. Mr. Lee admitted he sometimes contracts out 
certain types of orders when the order exceeds their capacity. He also 
admitted he had a contract relationship with Jieyang Prison and he had 
gone to the prison himself to oversee the work many times.
Mr. Lee was first asked if he could contract out our order to the 
Prison, his reply was circumspect. Later I asked if he could make 
arrangements for me to visit the Prison and he indicated that he could 
make those arrangements.
When Mr. Lee was asked about how much I could save if products are made 
by prisoners, he knew exactly how much. He said an order at $50 per 
dozen would probably cost only $35 per dozen; an order at $60 per dozen 
would probably cost only $40. He also mentioned the buyer needs to 
spend $8 to $10 per dozen on bribes to prison officers. He said for 
people like me who is from overseas, they will probably ask me to buy 
something for them on my next trip. When asked how the prison 
distribute their profits, Mr. Lee said that all goes to the prison and 
officers. The prisoners sometimes will get some reward if they perform 
well, but he said, ``they are forced to labor, you know, they don't 
have to pay them anything''.

    One of the articles in this ``Prison Work Newsletter'' stated:

``Hong Kong businesses want to cooperate with Jieyang in the garment 
project because their representatives saw the advantage we have in 
management and labor force. Our garment project is our first large 
scale production and processing line where we cooperate with foreign 
businesses; the orders are abundant; and our production runs relatively 
effectively. It is the pillar enterprise which will bring economic 
development at Jieyang Prison...''

    According to Mr. Lee, Jixiang Factory has business relationship 
with four companies in Hong Kong. Later we called four companies in 
Hong Kong that admitted they have business relationships with Jixiang 
Factory. They are: Roxy Garment Factory Ltd. (sells Esprit brand 
products); Sam Wing Garment Factory Ltd; Chaifa Holdings Ltd. (sells 
Playboy, Garfield, and Arnold Palmer brand products); and Worldwise 
Industrial Ltd. All of them very active in the international market.
    I went to Jieyang Prison twice to take a look at the facility. With 
``Prison Forbidden Area'' signs near the entrances, I didn't venture 
in. However, I was shocked by the brand-new modem high-rise buildings 
in that desolated countryside.
    In conclusion, there are three major findings from this 
investigation:
    1. We found out it is extremely easy for Laogai garments to reach 
the world market, including the American market, even with government 
textile quota restriction;
    2. The Chinese government clearly does not show any concern or 
worry about selling forced labor products to the world market, and 
there is no indication they would stop doing this; and
    3. We learned that any private enterprise, new or old, including 
those in Hong Kong, can be established and used as front companies for 
the export of Laogai goods. The Laogai products can then easily be 
exported to the American market without any trace of the original 
source.
    Thank you.

    Senator Biden [presiding]. Thank you very much.
    Who is the next witness, Mr. Wu?
    Mr. Wu. Let me introduce a prominent dissident, Fu Shenqi. 
He participated in the democracy movement in the late 1970's. 
The first he was arrested by Chinese Government in April 1981, 
sentenced 7 years to the jail. The second time he was arrested 
again in 1991. He was involved in Tiananmen Square incident, 
and then put in the jail 1 year and 9 months, no trial at all. 
In 1993 he was arrested again in July 1993, sentenced to a so-
called reeducation through labor, and he was released October 
1995. Under American access, he came here last year and is 
granted asylum in the United States today. Senator Biden. Thank 
you very much. Welcome.

STATEMENT OF FU SHENQI, CHINESE DISSIDENT AND LAOGAI SURVIVOR, 
                       NEW YORK, NEW YORK

    Mr. Fu. Mr. Chairman and honorable Senators, it is my 
greatest honor to testify before your committee. Let me begin 
please.
    From January 1983, I was put in jail at the Shanghai 
Municipal Prison because of my political sentiment. The 
government had a system of work points to control the 
prisoners. The prisoners were forced to labor. Work points were 
deducted for failure to meet quotas. Once or twice a week 
prisoners could watch TV. Once a month they could watch a 
movie, buy food, or meet with their family. These benefits were 
deprived for failure to meet quotas or for bad performance in 
reform. Hence, many prisoners were forced to labor overtime to 
maintain the work points. Those who were slower could have only 
3 or 4 hours of sleep a day. I witnessed how the prison built a 
radio assembly shop. As I learned from the other prisoners and 
policemen, the prison also ran a regular print shop and other 
shops.
    From July 1993 to April 1994, I was held at the 2nd 
Company, 3rd Battalion, Shanghai Reeducation Through Labor Farm 
located at Dafeng County, Jiangsu Province. Again my political 
activities were my crime. With the Shanghai No. 18 Knitting 
Mill, the battalion made woven jerseys. Reeducation through 
labor inmates were forced to labor and reform their thinking. 
In the busiest of times, they had to labor nearly 20 hours a 
day. Inmates, while working at machines, often fell asleep. In 
slack season, several hours a day inmates sat on the benches 
studying, writing reports on what they learned from the 
studies. The 1st Company, 3rd Battalion made a shop for making 
teaching slides.
    In April 1994, I was transferred to the 5th Battalion. In 
1994 and 1995 I witnessed how from June to October the 
battalion's 2nd Company made Christmas lights for export for 
the Haiman Lamps Factory and a lamps and lanterns factory of 
Jiangsu Province. Each box consisted of 36, 50, 100, or 200 
lights on a string. The lights I have at hand are similar with 
those made at the 2nd Company. The task was hard. Every inmate 
had to labor overtime, many laboring until 1 or 2 at night. 
Those who failed to meet quotas were punished. Inmates at the 
woolen sweaters mill also often labored overtime. Inmates in 
farming had to labor overtime even more. For instance, inmates 
who planted rice often labored from 7 in the morning till 8 at 
night.
    On laogai farms, inmates were routinely beaten and cursed. 
Government officials cuffed and kicked them at will. Those 
laogai inmates trusted to supervise other inmates beat and 
cursed them even more. I was also beaten by them.
    In China reform through labor and the laogai facilities are 
not common prisons, but the Communist Party's tools for keeping 
its one-party laws. Not only do the camps force prisoners to 
labor for profit, they also force the inmates to accept 
brainwashing. The thought reform makes them surrender to the 
Communist Party.
    Thank you.
    Senator Biden. Thank you very much. Sir?

  STATEMENT OF JEFFREY L. FIEDLER, PRESIDENT, FOOD AND ALLIED 
      SERVICE TRADES DEPARTMENT, AFL-CIO, WASHINGTON, D.C.

    Mr. Fiedler. Mr. Chairman, I would like to enter my remarks 
in the record.
    Senator Biden. Without objection, they will be placed in 
the record.
    Mr. Fiedler. I want to make very clear that the 
legislation----
    Senator Biden. Mr. Wu, why do you not turn that off? That 
would be a good idea for the sound. It would help.
    Mr. Fiedler. Let me back up. The Government testified this 
morning, if you did not even listen carefully, that the MOU 
does not work, the SOC does not work, and that the law has 
higher thresholds for prosecuting Americans, which is 
understandable and necessary and we are not proposing change.
    I think it is fair to say that the Government has not tried 
any alternatives in the face of complete evidence that the MOU 
and the SOC do not work.
    I want to make one thing very clear. This is not a 
discussion of MFN. I do not believe that ending the laogai 
trade, forced labor product trade, should be caught up in MFN. 
It is U.S. law. We should end it and we should take action 
which goes directly to ending the trade, not prosecuting the 
few culpable American citizens in the United States who may be 
engaged in that trade.
    Right now our focus is in the wrong place. We are focused 
on some guilty people, to be sure, but the thresholds for 
prosecution are too high. We know the trade exists. We must end 
it. The Government does not have the current power to do it. 
The Customs Service does not currently have the same power that 
you were discussing, Senator, this morning on IPR.
    If we find that CD's are being produced in Guangdong, if I 
recall correctly, we threatened sanctions that involved shoes. 
A greater innocent you could not find involving IPR. So, we 
have established two things, that we will use sanctions for 
trade and that we will punish or catch innocent, legitimate 
businesses at the same time.
    The only way to give the Chinese Government incentive in my 
view is to empower the Government to ban categories of 
products, and I mean not any other category of products. If 
hand tools are being imported by forced labor, then we can come 
down on hand tools and they will no longer come in from China 
until we are satisfied----
    Senator Biden. Regardless of where they are manufactured.
    Mr. Fiedler. Absolutely, from that point forward. That is 
what is called incentivizing in a free market fashion the 
Chinese Government. That is the same principle that we were 
using in IPR.
    I just want to repeat this. Let us take the MFN discussion 
out of forced labor. The President did what he did. I disagree. 
I even disagree with you on MFN. That is not what we are 
talking about today. We are talking about ending an illegal 
trade, and I think that the proposals that I have in the record 
are the basis.
    Just one thing. I think the President must show his own 
interest in the forced labor issue by setting up a commission 
where we all sit down, Treasury, Customs, State, labor, 
business, and come up with realistic proposals to end this 
trade. The President did this with child labor. He did it with 
apparel. I think that it requires and demands that level of 
visibility, separates it from the political debate, and takes 
us down to what we really want to accomplish, which is end this 
trade in inhuman products.
    Thank you.
    [The prepared statement of Mr. Fiedler follows:]
                Prepared Statement of Jeffrey L. Fiedler
    Mr. Chairman, members of the Committee, thank you for the 
opportunity to appear again before you. My name is Jeffrey Fiedler and 
I am President of the Food and Allied Service Trades Department of the 
AFL-CIO. I also serve as a director of the Laogai Research Foundation.
    We have heard testimony which provides evidence that the Memorandum 
of Understanding on Prison Labor (MOU) negotiated by the Bush 
Administration and the Statement of Cooperation (SOC) negotiated by the 
Clinton Administration have not worked.
    These agreements have not stopped the illegal trade in forced labor 
products from China because the Chinese government has undermined them 
from the start.
    The most fundamental, and fatal flaw in both the MOU and SOC is 
that U.S. efforts to use them to enforce our laws is dependent upon the 
willingness of the Chinese government to provide evidence that is self-
incriminating. No one in America would be expected to do so, and the 
Chinese communists who want to profit from this trade certainly will 
not.
    The reality is that U.S. government attorneys are unwilling to 
prosecute cases against American citizens based upon evidence gathered 
in China. The only exception to this is when another American citizen 
is willing to come forward to provide eyewitness testimony. As a 
result, the Chinese Laogai camps and trading companies continue to do 
business, albeit a little further underground.
    The MOU and SOC are empty diplomatic tools. I believe they were 
originally negotiated to merely give the appearance that the U.S. and 
Chinese governments were intent upon solving the problem, so as to 
diffuse what both governments perceived to be a growing and potentially 
explosive political problem.
    Current U.S. law concerning forced labor products is directed at 
punishing U.S. importers who knowingly import these products. While 
this is certainly justifiable, the real goal should be to end the trade 
in forced labor products. In other words, U.S. law should also be 
designed to punish the mainland Chinese companies which engage in this 
illegal trade. Under current law they escape punishment almost 
entirely. We should establish a series of significant penalties in law 
which would have the effect of forcing the Chinese government to end 
this illegal trade.
    I am not suggesting that the rules of evidence for prosecuting 
American citizens suspected of committing a crime be changed. These 
thresholds should remain high. But, when it comes to providing China 
with access to the U.S. market, different standards are appropriate and 
necessary. This principle is already in practice in such areas as 
intellectual property and textile transshipments.
    We propose that Congress enact new legislation which would:

  1.  Direct the Customs Service, based upon credible information, to 
            ban entire categories of products from China if it is found 
            that forced labor products of the same type are being sent 
            into the United States. For example, if China is found to 
            be exporting brake rotors from a Laogai camp, Customs would 
            have the authority to ban all brake rotor imports from 
            China for a set period of time. We suggest that a three 
            year ban would be an appropriate period to create a strong 
            disincentive. This would address the current problem of 
            China mixing Laogai products with legitimately produced 
            products as a way of hiding the former.
  2.  Direct the Customs Service, based upon credible information, to 
            ban all imports from the Chinese state trading company 
            which cooperates in the illegal importation of forced labor 
            products. For example, if MinMetals is sending in the brake 
            rotors it can no longer do any import business with the 
            United States.
  3.  Direct the State Department and/or the Immigration and 
            Naturalization Service to revoke the business visa of any 
            PRC national working in the United States for a company or 
            any of its subsidiaries which has been found by the Customs 
            Service to be involved in the illegal trade of forced labor 
            products.
  4.  Ban U.S. companies from doing business (buying, selling or 
            establishing joint ventures with) in China with any company 
            or its subsidiaries which has been found by the U.S. 
            Customs Service to be dealing in forced labor products.

    In addition to the changes in the law we are proposing, it would be 
necessary to provide modest additional funding for the Customs Service 
and State Department. We estimate this to be no more than $2 million a 
year. This is a small price to pay for ending U.S. complicity in the 
forced labor products trade.
    Some would object by saying these changes might punish legitimate 
companies in China. But access to the U.S. market is not a right, and 
Congress has the responsibility to determine the conditions under which 
goods and services enter this market. We believe these proposals are 
the best way to create the incentive inside China to end trade in 
forced labor goods.
    Our proposal shifts the negotiating power to the United States in 
dealing with this problem, and replaces an empty diplomatic agreement 
with real tools of enforcement directed at the source of the illegal 
trade. It removes from the process dependence on the Chinese government 
for information implicating themselves, and by narrowly focusing on 
those products which are found to be made by forced labor, provides the 
means to insure these goods do not enter the U.S. market.
    The Administration recently created, with great fanfare, a 
commission focused on labor conditions in the apparel industry. We 
think the time is long overdue to create a similar commission on forced 
labor in China. This commission, which could be composed of officials 
from Customs, Treasury, the State Department, and citizens representing 
business, labor, and the human rights community, should be charged with 
making proposals to deal with forced labor products. The result, I 
believe, would be legislation which would pass both the Senate and 
House by overwhelming majorities.
    Thank you.

    Senator Biden. Let me ask you a question, if I may start 
with you, sir, to make sure I understand. You do not believe 
that based upon what we have heard today that we should deny 
MFN because of the practice----
    Mr. Fiedler. I do not want to get into MFN. I do not think 
we should grant MFN to China. I am separating out this problem, 
the forced labor trade problem, from the general discussion, 
the political discussion, of MFN.
    Senator Biden. Right. But assume this were the only problem 
we had in our bilateral relations with China. It is an 
important point.
    Mr. Fiedler. If it is the only problem that we have in our 
bilateral relationship, I think that my proposals would go to 
solve it.
    Senator Biden. And you would not use MFN to solve it.
    Mr. Fiedler. To solve that particular one by itself? No.
    Senator Biden. I am not trying to get you to endorse MFN. I 
am trying to make sure I understand what you are saying.
    Sir, unfortunately, your names are covered up, but it is 
Mr. Levy?
    Mr. Levy. Yes.
    Senator Biden. Mr. Levy, the chairman was sent a letter 
from your competitor, dated May 20th, saying that ``Officemate 
International Corporation learned earlier this week that one of 
our China suppliers may have utilized convict labor for 
assembling of binder clips sold to us. We are shocked and 
dismayed by the report.''
    Then it goes on. ``We have today suspended all shipments 
from this factory and have dispatched senior U.S. management 
personnel to the factory to investigate this allegation. We 
will not associate or do business with firms or individuals who 
do not share our views regarding convict labor.''
    The reason I bother to mention it is, (A), I think it 
warrants being mentioned since it was sent to the chairman, but 
also, (B), to ask you your opinion as a businessman. If we had 
a labeling process whereby a company could, if it were able to, 
prove by meeting certain standards that the product they were 
selling was either not made with child labor or not made with 
prison labor, that they could put that on their product--now, 
not the alternative, not the Government labeling a product of 
having been made with child labor, but the affirmative, being 
able to assert having met a standard or criteria that was 
real--what is your view based upon your customers, whether or 
not customers would respond and not purchase the lower-priced 
product that could not guarantee that it was not made with, in 
this case, forced labor? As a businessman, what is your view?
    [The letter of Officemate International Corporation 
follows:]
[GRAPHIC] [TIFF OMITTED] T7725.017

[GRAPHIC] [TIFF OMITTED] T7725.018

    Mr. Levy. The first thing I would like to do is respond to 
this letter briefly. As I mentioned in my testimony, the 
factory in Nanjing is owned by a New Jersey corporation. It is 
a subsidiary of a New Jersey corporation, and you have common 
ownership with those two plants and Officemate International. 
So, while I cannot say there is any direct knowledge, again 
there is a common ownership between these three different 
entities.
    Senator Biden. Well, let me put it this way. Your 
photographs at least did one thing, whether they knew or did 
not know, unless they are lying to the chairman and the 
committee, they are no longer going to, at least for the time 
being, import that product.
    Mr. Levy. Right.
    Senator Biden. So, you accomplished something.
    Mr. Levy. Well, I think they have another problem also 
which is now--they admitted that they have used prison labor to 
assemble these parts.
    Senator Biden. No, they did not do that. Just so we make it 
clear. The letter does not do that.
    Mr. Levy. OK.
    Senator Biden. It says--I do not want to get into a 
question of indicting this company or not this company. I 
understand why it is a point you would like to make and you 
have made. But it says that ``We are shocked and dismayed by 
this report.'' We have always been opposed to the practice. It 
says, we have learned earlier this week that our China 
suppliers have utilized prison labor for assembling these 
clips. We have always been opposed to the practice. I guess 
they did admit they have used it.
    Anyway, get to the second question and you can take care of 
your competitor. I think you pretty well have taken care of 
your competitor. But let us move to the second point and the 
more important point from my standpoint and that is would your 
wholesalers, you think, respond?
    Mr. Levy. I think more and more, as this issue becomes--you 
know, as with Kathy Lee Gifford and these different issues that 
have come up, this issue of prison labor and child labor is 
becoming more and more important to people. If no one knows 
about it and they do not know it is an issue, it makes no 
difference, but as you start to educate people as to what the 
problems are and what the issues are and what is at stake here, 
I think people will care and will pay a little bit more to know 
that someone has inspected the plant and knows that it was not 
made with prison labor. So, I think it is a very interesting 
idea you have presented.
    Senator Biden. Let me ask one other question with my 
colleague's permission and then I will yield her all the time 
that she would like.
    Sir, you were in a prison camp. If I may ask, how old are 
you?
    Mr. Fu. Forty-four.
    Senator Biden. Forty-four. You first were imprisoned in 
1983?
    Mr. Fu. Eighty-three.
    Senator Biden. 1983.
    Now, you spoke specifically of the reform through labor 
camps which you were sent to and you indicate that these 
facilities are not common prisons but the Communist Party's 
tools for consolidating its one-party rule. Not only do the 
facilities force prisoners to labor for profit, they also force 
inmates to accept brainwashing. The thought--excuse me. The 
through reform made--excuse me. The thought--I do not 
understand this.
    Mr. Wu. Thought reform.
    Senator Biden. The thought reform made them surrender to 
the Communist Party ideologically and psychologically.
    Now, you make a clear distinction between essentially 
political prison camps and prisons where there are legitimate, 
by any country's standards, thugs, prisoners, people who would 
violate the norm in any society. I am sure there are some in 
China. Not everyone in prison is a political prisoner, although 
I am not suggesting there are not tens of thousands of 
political prisoners.
    My question is this. To the best of your knowledge or 
anyone else's knowledge here, does the government operate, as 
it relates to forced labor, differently with the so-called 
reform through labor prison camps and prisons where the robber, 
the murderer, the arsonist is sent? I mean, is there a 
difference? I am just curious, not that it makes a fundamental 
difference other than determining where these products come 
from. Is there a difference in the labor they force prisoners 
to engage in?
    Mr. Wu. Senator, can I answer?
    Senator Thomas. Please.
    Mr. Wu. Because I do my research many years.
    Laogai, l-a-o-g-a-i, is a Chinese popular word. It means 
labor and reform.
    Senator Biden. Right.
    Mr. Wu. A Chinese official term reform through labor or 
another category, so-called reeducation through labor.
    Senator Biden. Right.
    Mr. Wu. All the prisoners--it does not matter if you are a 
penal criminal or a political criminal--are forced to labor 
through the labor to reform, as you know, brainwashing.
    Senator Biden. So, it is not merely political prisoners who 
go to one camp.
    Mr. Wu. They do not divide it, no.
    Senator Biden. Now, the camp that your colleague was in, 
the prison he was in, is it likely that he may have very well 
been a cell mate or next to someone who was a common thief?
    Mr. Wu. Yes.
    Senator Biden. I see, OK.
    Mr. Wu. I spent 19 years. I was always mixed together with 
the thief or robber, murderer.
    Senator Biden. I see. So, there is no distinction. That 
answers my question. I thank you very much.
    I yield to my colleague. I not only yield her the floor, I 
yield her the gavel because I have to run upstairs to another 
meeting very shortly. If the meeting is still going on, I will 
come back down and follow up.
    But I want to thank all the witnesses. It did take some 
great courage to do what you did, and congratulations to you, 
Mr. Levy.
    Senator Feinstein [presiding]. Thank you very much, 
Senator.
    I think a couple of things are clear. One is, as Mr. Wu 
pointed out in his remarks, since 1932 the United States has 
had a law which prohibits prison labor. It is a law we should 
observe. It is a law that is important. Economically, maybe not 
societally, but economically we are a very strong economy. We 
are also an economy with all of its bumps and rocks and up 
sides and down sides going into a global economy. What Mr. 
Levy's example has pointed out I think is how tough and tight 
competition is in this global economy.
    Therefore, if we do not take some action with respect to 
really enforcing our law, it is going to proliferate. Forced 
labor is going to proliferate and I believe it is 
proliferating. I am not sure China is the only country where 
forced labor exists, but having said that, I do believe it 
exists in China.
    Now, the question really becomes how do we effectively deal 
with it. What is clear that a low level signed memorandum of 
understanding is not going to cut the mustard. It is not going 
to do it and it has not done it.
    I really believe that, Mr. Fiedler, you have in your four 
points really the germ of an important statement, and that is 
to ask our Government to engage in a different agreement and 
that agreement would be at the highest level, to have both our 
Governments make the statement that we will not countenance 
forced labor as a part of our bilateral trade.
    Then second, if it is found that that agreement is not 
adhered to and that in fact products are coming that are a 
product of forced labor--and I think, Mr. Levy, your 
contribution to this is a very careful tracing on videotape 
that is comprehensible and understandable that it does exist. 
Then if it does exist, I think we ought to have the kind of law 
that really takes a broader approach and says we will not 
import from the country any products of the same generic kind.
    Now, I think that is an important step in exerting the kind 
of peer pressure, which is also a part of Mr. Levy's example. 
He is in the same business. This is a competitor. He could not 
understand how he was getting underbid and he went to find out 
and he found out. So, it would exert a kind of peer pressure to 
see that forced labor is not a part of this global competition.
    Then your point number four is really the strong sanction, 
that if it continues, United States companies would be, as a 
part of the sanction, banned from doing business.
    It may well be that, at least in my view, we have to go to 
something like this.
    I do not really want to ask any questions. I think you have 
provided us with some very good food for thought, some very 
specific commentary, and I am very grateful for that.
    But what is crystal clear to me is that an MOU signed by an 
economic counselor, even as much as we might endorse it, does 
not have the stature or the status as having an agreement 
between the highest levels of our Government that we will not 
countenance forced labor.
    Mr. Fiedler, do you want to comment?
    Mr. Fiedler. I just want to make one other comment that 
what is absolutely necessary to the solving of this problem 
which I believe is absent today. Is the will within our 
Government to do something about it. It personally pains me to 
say so. I think we lack the will to use the tools or to gather 
up the tools to end this trade.
    I think it is caught up unnecessarily in the 
administration--and not just this administration, but the 
previous administration's views of the politics of the world. 
This trade must be stopped. We must have the will. The American 
people do not want these products. They are violative of human 
rights. But I think that the Senate's role is to provide the 
administration the will.
    Thank you.
    Senator Feinstein. Well, I think this is an enormously 
complicated area, in response to your comments. I think as Mr. 
Wu pointed out, you point something out, you have a period of 
time before anybody gets there. Clearly it is telescoped that 
there is the thought that there is prison labor in this 
setting, and there is ample time to change the setting. So, I 
do not think the process is very effective in rooting this out.
    I do think that China has to understand that the issue of 
forced labor is very important to us, and it is important to us 
at our highest levels, and that what we are asking is that, as 
equals, it also be important to them.
    I think what Senator Biden said, it is one thing to have 
tags and to have a consumer public that is willing not to buy 
the product. It would be interesting to see how well that 
works. I would hope it would work. I am not really so sure it 
would knowing the competition to get a break in price.
    Having said that, I think the issue is really for high 
level discussion and hopefully we have elevated to that.
    I want to just thank everybody here for bringing your 
commentary and for your work and would like you to know that I 
think there are many members of this committee that would like 
to see us move in a stronger direction.
    Mr. Fu, I can only say I wish I spoke Chinese as well as 
you speak English. Congratulations and thank you for your 
testimony.
    To you too, Mr. Wu, we appreciate it. Mr. Levy, Mrs. Shieh, 
Mr. Fiedler, thank you very much and I will adjourn this 
hearing. Thank you.
    [Whereupon, at 12:29 p.m., the committee was adjourned, 
subject to the call of the Chair.]


                            A P P E N D I X

                              ----------                              

                 United States Department of State,
                                     Washington, DC. 20520,
                                                   August 11, 1997.
The Hon. Jesse Helms,
Chairman,
Committee on Foreign Relations,
United States Senate.

    Dear Mr. Chairman: Following the May 21, 1997 hearing at which 
Deputy Assistant Secretary of State Jeffrey A. Bader testified, 
additional questions were submitted for the record. Please find 
enclosed the responses to those questions.
    If we can be of further assistance to you, please do not hesitate 
to contact us.

      Sincerely,

                                    Barbara Larkin,
                                       Assistant Secretary,
                                               Legislative Affairs.
       Responses of Mr. Bader to Questions asked by Senator Helms
    Question 1. Mr. Bader stated, ``Between March 1994 and April 1995, 
Customs was permitted to visit the following five facilities:

   Guangdong Flower City Enterprise
   Guangdong Reform Through Labor Bureau
   Zhejiang Number 4 Prison Factory and its associated Hangzhou 
        Wulin Machinery Works and Hangzhou Superpower Hoist Works
   Shanghai Number 7 Reform Through Labor Detachment
   Shandong Laiyang Heavy Duty Machinery Factory.''

1.1 Please provide summaries of these visits and the details of the 
        cases, including the origins of the cases (i.e. what products 
        were suspected, how Customs obtained the initial complaint, 
        etc.), when the U.S. made its initial request for an 
        investigation, the results of the Chinese investigation, when 
        the Customs Service conducted the visit, the conclusions 
        reached by Customs after the visits and the present status of 
        the investigation.

1.2 For each case, please reply to the question: does the State 
        Department feel the Chinese government complied with the MOU/
        SOC guidelines?

    Answer. The following summaries were provided by Customs:

1.1(a) Guangzhou Flower City Enterprise AKA Red Star Tea Farm

    11/30/91 - South China Morning Post Article reports Red Star Tea 
Farm is a labor reform camp that produces tea which is sold to 
Guangdong Flower City Enterprise.
    12/8/91 - Letter to American Consulate in Guangzhou from Guangdong 
Tea I & E Corp. states Red Star Tea Farm is a labor camp tea farm.
    2/25/92 - Customs issued detention order
    8/25/92 Customs sends referral for investigation to MOFERT.
    10/23/92 Chinese response from Reform Through Labor Bureaus. Tea 
leaves are only for domestic market and not for export.
    11/10/92 Customs sends visit request to MoJ
    3/23/93 Customs sends 2nd visit request to MoJ
    1/19/94 Customs and embassy officers visit Red Star Tea Farm. 
Report that records at site generally support contention by Chinese 
that tea was not for export; however, evidence was obtained which 
indicated that tea sales were made to Guangdong Flower City Enterprise, 
a retail sales and reputed export operation for Guangdong Reform 
Through Labor Bureau Goods. Follow up on this lead was unsuccessful.
    2/7/94 - Customs requests access to records at Guangdong Flower 
City Enterprise.
    3/7/94 - MoJ advise that permission was granted for Customs access.
    4/6/94 - Customs visited Guangdong Flower City Enterprise. No 
evidence found to indicate that tea leaves were sold for export and/or 
exported.
    No other activity found in file

1.2(a) The State Department considers the Chinese government to be in 
compliance with the MOU/SOC in this case.

1.1(b) Guangdong Reform Through Labor Bureau

    2/7/94 - Customs requested an interview with Reform Through Labor 
Bureau officials in connection with the Red Star Tea/Guangdong Flower 
City case.
    3/28/94 - Second request for interview.
    4/20/94 - Customs visited with Reform Through Labor Bureau 
official.

1.2 (b) The State Department considers the Chinese government to be in 
compliance with the MOU/SOC in this case.

1.1(c) Zhejiang No. 4 Prison Factory

    5/18/93 - Laogai Foundation report that Zhejiang No. 4 Prison 
Factory AKA Hangzhou Wulin Machinery is a prison labor facility which 
is exporting chain and lever hoists to U.S.
    6/17/93 - Embassy official sends referral to Wang Mingdi, Deputy 
Director, MoJ Bureau of Reform through Labor
    7/8/93 - Commissioner of Customs disseminates memo to all offices 
to withhold release of hoists made by Wulin Machinery aka Zhejiang No. 
4. Hoists are considered products of prison labor.
    9/7/93 - MoJ respond to referral. Chinese position is that products 
i.e. hoists that were exported were manufactured by ordinary workers 
who were not in the prison system. The workshop that produces the 
hoists is under the administration of the Zhejiang Provincial Machinery 
Industry Bureau. Chinese also stated that Hangzhou Wulin Machinery now 
only produces machinery for the domestic market.
    3/13/94 - CA/BJ sends letter to MoJ requesting visit/access to 
Zhejiang No. 4 Prison Factory.
    5/10/94 - MoJ notify Embassy that Embassy request to visit is 
granted and scheduled for 5/19-5/20.
    5/20/94 - Embassy officer and Consular officer (Shanghai) make 
visit to Zhejiang No. 4 Prison Factory. Per visit, no direct evidence 
of the export of prison labor products to the U.S. by the Wulin 
factory, past or present, was found. Per report, Wulin Factory is a 
prison factory and is the production facility for the Zhejiang No. 4 
prison. Final comment by visiting officers, the factory officials could 
not or would not provide any production records or other evidence which 
would substantiate their claims that exports and domestic products were 
separated/divided such that only ordinary workers produced hoists for 
export.

1.2(c) The State Department considers the Chinese government to be in 
compliance with the MOU/SOC in this case.

1.1(d) Shanghai No. 7 Reform Through Labor Detachment

    9/23/91 - Harry Wu testified before Subcommittee on Human Rights 
and International Organizations that Shanghai No. 7 Reform Through 
Labor Detachment aka Shanghai Laodong Pipe Works is a prison labor run 
factory exporting to US.
    10/3/91 - Detention order on products from above factory issued by 
Customs Commissioner. Commodity involved: hand tools such as adjustable 
monkey wrench, open end spanners and socket wrenches.
    10/21/91 - Request to visit/referral sent by Embassy to MoJ 11/26/
91 - 2nd letter for visit to factory sent to MoJ
    8/25/92 - Letter sent to MOFERT for investigative referral/check if 
above factory is prison labor factory.
    10/23/92 - Response from MoJ ref. referral for investigation. Per 
Chinese, Shanghai Laodong Pipe Factory is a worker's enterprise and not 
a prison factory.
    3/23/93 - Embassy sends letter ref. outstanding request to visit 
above factory. Letter sent to MoJ.
    9/15/94 - MoJ sends letter to Embassy granting visit request to 
factory.
    12/17/94 - Embassy officers make visit to Shanghai Laodong Steel 
Pipe Factory AKA above names. The reporting officers found no direct 
evidence of the export of prison labor products to the U.S. The 
facility is definitely a prison complex and has been one since 1992. 
Prior to 1992, according to officials, the factory was administered by 
the No. 7 Reform Through Labor Detachment but did not employ prisoners 
in production.

    Case now closed.

1.2(d) The State Department considers that, in this case, the Chinese 
government did not violate any legal commitment. The last USG request 
for information/visit was made prior to March 13, 1994, the date of 
entry into force of the Statement of Cooperation which applies only 
prospectively.

1.1(e) Shandong Laiyang Heavy Duty Machinery Factory

    2/24/92 - US Customs issues detention order to withhold release of 
galvanized steel butt-welded pipes believed to be made by forced labor. 
Allegation based on extract from 1989 Shandong Province Yearbook which 
lists high quality products made by labor reform units in Shandong 
Province. The Shandong Laiyang Heavy Duty Machinery Factory is 
identified as a labor reform enterprise that produces galvanized steel 
pipe.
    8/25/92 - Embassy officers meet with representatives of MOFERT 
(Ministry of Foreign Economic Relations and Trade), MoJ (Ministry of 
Justice) and MFA (Ministry of Foreign Affairs) to discuss prison labor. 
Referral for investigation made under the provisions of MOU. Letter to 
same effect sent to MOFERT.
    10/23/92 - MOFERT provides written response to referral to effect: 
factory is a worker's enterprise under the administration of the labor 
reform system. Productions is undertaken entirely by the workers and 
there are no exports to U.S. Info (advertisement) supplied in the past 
was only for publicity. Products for the domestic market were formerly 
produced by prison laborers. Chinese state that they have handled 
investigation properly and according to relevant Chinese regulations.
    11/10/92 - Request by Embassy to visit factory 3/3/93 - 2nd letter 
request to visit factory
    4/12/95 - MoJ approve of Customs visit to factory for last week of 
April.
    4/25/95 - Customs visits factory. Visit disclosed that factory was 
converted to a prison under the Administration of the Yantai Judicial 
Bureau in 1984. A civilian workshop for the production of galvanized 
welded steel pipe was maintained within the prison until 1990. 
Galvanized steel pipe production was not resumed until latter half of 
1994. Visit disclosed no evidence of the export or sale for export of 
galvanized welded steel pipe manufactured with use of prison labor. 
U.S. personnel granted access to all areas of factory. Chinese were 
cooperative.
    Latter half of 1995 - Customs' domestic offices in Cleveland, OH, 
Jacksonville, FL, and San Diego, CA interview three American companies 
alleged to have purchased steel pipe from above factory. Interviews of 
all three companies developed no direct evidence to substantiate 
allegations about the factory.
    1/18/96 - Customs case into factory formally closed.

1.2(e) The State Department considers that, in this case, the Chinese 
government did not violate any legal commitment. The last USG request 
for information/visit was made prior to March 13, 1994, the date of 
entry into force of the Statement of Cooperation which applies only 
prospectively.
    Question 2. Mr. Bader stated, ``The arrival of Ambassador Sasser in 
Beijing in February 1996 finally broke the deadlock with the Ministry 
of Justice ... Shortly after, the Ministry of Justice granted Customs 
access to a facility for which Customs had initially requested access 
in 1992.''

2.1 Please provide a summary of this visit and the details of the case, 
including what products were suspected, origin of the complaint, the 
dates of the requests for investigation and visit, the results of the 
Chinese investigation and the Customs Service visit, and conclusions 
reached by Customs.

2.2 In this case, does the State Department feel the Chinese complied 
with the MOU/SOC guidelines?
    Answer. The following summary was provided by Customs:

2.1 Shanghai Laodong Machinery Plant

    This investigation concerns the Shanghai Laodong Machinery Plant 
which produces band tools. This case originated from information from 
Harry Wu's testimony before the House Foreign Affairs committee that 
this factory utilizes prison labor to produce tools that are imported 
into the United States.
    9/23/91 - Harry Wu testifies before House Foreign Affairs.
    10/3/91 - Withhold release order by U.S. Customs on goods produced 
at plant
    10/18/91 - Withhold release order expanded to include all tools 
with Elephant and Laodong brand and also that all hand tools 
manufactured in the city Shanghai be withheld from release.
    10/21/91 - First request for investigation made. 2/92 - First 
request for visit made.
    2/21/92 - Request approved, along with visits to four others.
    3/10/92 - Visit made by Shanghai consular officers. Results of 
visit were inconclusive.
    4/7/92 - request for second visit made to revisit plant and also 
the #1 labor detachment. Reply from Chinese that #1 labor detachment is 
not open to the public.
    6/24/92 - withhold release order expanded to include Shanghai 
Machinery Import/Export Corp.
    5/18/92 - Another request for visit by Attache.
    11/10/92 - Another request for visit by Attache.
    3/23/93 - Another request for visit by Attache.
    9/19/94 - Attache asks MoJ to renew their efforts.
    3/17/95 - Another request to visit is made.
    3/30/95 - Chinese say cannot visit now because of personnel 
adjustments at the Prison Management Bureau.
    3/27/96 - China MoJ grant visit to prison.
    4/24/96 - visit to Shanghai Laodong Machinery Plant by a Customs 
Attach6 and a Shanghai U.S. Consulate official. U.S. officials were 
given a background on the plant's operation. Plant is state owned and 
led by the Shanghai Administration Bureau for Prisons. The plant has 
680 employees. About 12% of the employees were former prisoners. Plants 
were encouraged to hire released prisoners to keep them from going back 
to a life of crime. Employees were paid on the average about 400 
renminbi a month. Plant official allowed Embassy officials to view 
sales records for last 3 years. Embassy officials were given a tour of 
the factory and were permitted to speak to several employees. Result 
of. visit - there was no direct evidence found to substantiate the 
allegation that this factory utilized prison labor.
    6/21/96 - Report of visit sent to China MoJ.
    10/28/96 - Withhold Release order canceled by U.S. Customs.
    12/6/96 - China MoJ informed that Withhold Release order was 
canceled.

2.2 The State Department considers the Chinese government not to be in 
compliance with the MOU/SOC in this case.
    Question 3. Mr. Bader stated, ``On April 22, Customs submitted to 
the Ministry of Justice via letter a formal request to visit the 
Beishu/Nanshu Graphite Mines in Shandong Province. The initial 
investigation request on this case was submitted by Customs in February 
1994, but this was Customs' first request to visit the facility.''
3.1 Please provide a summary of the investigation report returned to 
Customs by the Chinese, as well as all details in the case including 
what products were suspected, origin of the complaint, the dates of the 
requests for investigation and visit, the results of the Chinese 
investigation and the Customs Service visit, and conclusions reached by 
Customs.

3.2 In this case, does the State Department feel the Chinese government 
complied with the MOU/SOC guidelines?
    Answer. The following summary was provided by Customs:

3.1 Beishu/Nanshu Graphite Mine

    The original information that Beishu Graphite mine was a prison 
labor industry came from a Chinese internal use only journal titled 
``Research on Committing Crime and Reform''. This is published every 
two months by the MoJ Crime Prevention and Labor Reform institute of 
Beijing. This information was sent from Hong Kong on November 7, 1991.
    This request for investigation, one of the original 20 sent forward 
to MoJ of March 1, 1994, is based on information provided by Harry Wu 
to Commissioner of Customs.
    Published Chinese materials claimed that products were being 
exported to U.S.
    The 6/9/94 Chinese response to investigative request states that 
the mine was established in 1954, it produces high, middle, and low 
carbon graphite and expandable graphite. The mine has 500 permanent 
workers and exports 7,000 tons annually. In 1991 the name was changed 
to Qingdao Graphite Mine. Moreover, the mine also provides space for 
2,000 prisoners labor reform and vocational and technical training 
including, mainly fruit and vegetable planting, poultry and pig 
raising, building, brick and tile making as well as low carbon graphite 
production for domestic market and general machinery processing, never 
engaged in the production of export products.
    7/6/94 - U.S. advises that Customs will conduct further 
investigation into Beishu.
    10/6/94 Information from a Consular officer that an interview with 
U.S. businessman who visited Beishu when he was looking for suppliers 
of graphite. Businessman on his visit realized that Beishu appeared to 
be a prison operation and this was confirmed by his guides. Businessman 
stated be would not do business with Beishu because it is a prison.
    ?/2/95 South China Post writer who visited the mine under pretense 
of looking to buy graphite observed that it was a prison. Chinese 
official of Beishu advised that the mine was exporting to United 
Kingdom and Germany.
    5/30/95 - U.S. Customs receives information that NBC will broadcast 
an interview with the Vice President of Ashbury Graphite Co., who 
claims that they were importing graphite from Beishu and that they knew 
it was produced with prison labor.
    Review of import records shows Ashbury graphite came from Nanshu.
    5/31/95 - Vice President of Ashbury Graphite Co. and father 
interviewed by Customs Agents. Father stated that they no longer import 
from Beishu because of the low quality of its graphite. They quit 
between 1976 and 1980.
    6/16/95 - Collateral request to Hong Kong, London, Los Angeles, New 
York, Orlando, Chicago, Cleveland. and Newark from Beijing.
    June 1995 report by Laogai Foundation identifying Beishu/Qingdao as 
a prison labor facility exporting to the U.S.
    6/30/95 - Superior Graphite executive is interviewed. States he 
went to Beishu and saw that it is a prison so he does not buy from 
Beishu. He explains that he must take the word of the Chinese exporters 
that the products are not produced by prison labor.
    6/29/95 - Customs interviews Valencia, CA resident. He explains 
that he visited the mine in November 1993 to observe conditions for 
possible future business dealings. He immediately recognized it as a 
prison.
    7/4/95 - U.S. Customs HK interviews South China Post Writer. He 
states that on his visit to Beishu he was told that there were two 
plants, Beishu and Qingdao, that Beishu uses prison labor and produces 
only for domestic market, Qingdao uses paid workers and produces for 
export. He could see that this was really one plant, not two. He is 
given brochures from Beishu and Qingdao and observes that they have the 
same address, phone numbers, Fax numbers, cable number, and same bank 
account number, and that Shandong Metals and Minerals, Import and 
Export Corporation (MINMETALS) is the state run import/export agent for 
both mines. In a taped interview with a representative of MINMETALS, 
representative said, NN most graphite exported comes form Beishu for 
the last 25 years.''
    8/3/95 SAC/Philadelphia presents case to U.S. Attorneys Office, 
they need information from China concerning exports.
    9/7/95 RAC/Orlando Agents interview representatives from Dixon 
Ticonderoga who state that they don't import graphite from Beishu but 
they do from Nanshu and also buy from Ashbury. And since they use 
freight forwarders they don't know for sure where the graphite comes 
from.
    12/13/95 - results of interview with North American Refractories: 
no indication that they are currently buying from China but they used 
to and had seen Beishu and had observed military guards at the plant.
    12/18/95 - Newark Customs reports interviews with Alumina Trading 
Company who states they stopped importing from Beishu over 5 years ago 
when they learned it was a prison.
    4/3/96 - Report of interview with a representative of China 
Enterprises, New York, his major trade representatives for graphite 
includes MINMETALS. He stopped his business dealings with Beishu when 
he learned it used prison labor. He learned that Beishu changed its 
name to Qingdao Graphite Mill.
    4/22/96 report from Customs Attache/London, U.K. firms Beishu was 
not listed as a supplier but Qingdao Tianxiang Graphite Company Ltd., 
Shandong Metals and Minerals Import and Export Corp. were suppliers.
    Based on the information gained in investigations to date, there is 
strong evidence that Beishu is a prison and that they were exporting to 
the United States and other countries. Also evidence gathered strongly 
indicates that products produced at Beishu are imported into the U.S. 
through trading companies and under the names of other graphite mines 
such as Nanshu Graphite Mine.
    4/22/97 - Visit requested.
    6/19/97 - MOJ sent letter detailing situation at mines. it asserts 
that no prison labor was used for export goods. Defers decision to 
grant access, expresses desire to cooperate pending communication with 
relevant parties.

3.2 The State Department considers the Chinese government not to be in 
compliance with the MOU/SOC in this case.
    Question. 4. Mr. Bader stated, ``just last week, on May 15, Customs 
submitted a request to visit and review sales records from the 
Qianjiang Hardware Tools Plant, also known as Hangzhou Shenda Tool 
Factory and associated with prison facility Zhejiang Number 2 Prison.''

4.1 What was the evidence that caused Customs to investigate this case?

4.2 When was this evidence first obtained by the Customs Service?

4.3 Was the decision to pursue this case at all tied to the hearing of 
this committee on May 21?
    Answer 4.1-4.2. The following information was provided by Customs:
    Qianjiang Hardware Tools Plant, a.k.a. Hangzhou Shenda Tool 
Factory, and associated prison facility Zhejiang Number 2 Prison.
    The original information on this case came from a documented source 
of information and was given to the U.S. Customs office in Hong Kong in 
September 1993. The informant alleged that this factory was utilizing 
prison labor to manufacture adjustable and combination wrenches that 
are marketed through the Zhejiang Machinery and Equipment Import/Export 
Company.
    This was one of the original 20 investigations presented to the 
Chinese March 1, 1994. Harry Wu also identified this factory as 
utilizing prison labor and obtained information that the company was 
exporting to the U.S. to Cosmos Trading Company, Houston, Texas.
    June 9, 1994, China MoJ responds to investigation request by 
stating that ``during the period of 1975 to October 1991 the hand tools 
produced by Hangzhou Qianjiang Hardware Tool Factory were undertaken by 
the workers, no prison labor had ever involved in it. After October 
1991 some prisoners have been engaged in producing Jianxin Brand hand 
tools, but only for the domestic market and has never been exported 
overseas.''
    July 6, 1994, Embassy responds to MOJ letter by stating that in 
this case an importer (Cosmos) has been identified in the U.S. and is 
currently under investigation by U.S. Customs. That depending on the 
results of the investigation of this importer, it may be necessary to 
request additional investigation by MoJ or a visit to facility.
    January 23, 1995, result of Houston investigation reported that 
Customs Agents visited the office of Cosmos Trading on June 23, 1994 
and interviewed the manager. She stated that she had not knowingly 
imported any goods that she knew to be manufactured by prison labor. 
She stated that she was not allowed to visit the factories that 
produced merchandise that she imported and that she had to rely totally 
on the government (PRC) export agents as to the origin of items 
purchased. U.S. Customs Agents checked the Cosmos warehouse, took 
samples of some of the tools in stock and reviewed correspondence 
files. Agents took three files for translation. None of the above 
revealed any indication that Cosmos was importing prison labor made 
goods.
    Question 4.3. Was the decision to pursue this case at all tied to 
the hearing of this committee on May 21?
    Answer 4.3. Customs provided the following information.
    The decision to pursue this case, one of 58 open cases awaiting 
conclusion, was based the reinitiation of dialogue by the Ministry of 
Justice. It was not at all tied to the hearing of this committee on May 
21.
    Question 5. Mr. Bader stated, ``By Customs calculations, it has 
made 58 referrals to the Ministry of Justice for investigation since 
the signing of the MOU in August 1992, of which the Ministry of Justice 
has responded to 52.''

5.1 What constitutes a ``response'' to such a request? Is a refusal to 
answer counted as a ``response?''

5.2 Please provide a list of all facilities for which Customs requested 
investigations by the Chinese government. Please include the date the 
initial request for investigation was made by Customs, the date of the 
``response'' by the Chinese side, the exact language of each Chinese 
``response'', and the conclusion of the Customs Service based on the 
information provided by the Chinese.

5.3 Does the State Department feel that the Chinese have complied with 
the MOU/SOC guidelines in the 'investigation process' in each of the 58 
cases?
    Answer 5.1. The following information was provided by Customs:
    Any information which allows Customs to make a decision in a case 
is considered a response. A refusal is not considered a response.
    Question 5.2-5.3.

5.2 Please provide a list of all facilities for which Customs requested 
investigations by the Chinese government. Please include the date the 
initial request for investigation was made by Customs, the date of the 
``response'' by the Chinese side, the exact language of each Chinese 
``response'', and the conclusion of the Customs Service based on the 
information provided by the Chinese.

5.3 Does the State Department feel that the Chinese have complied with 
the MOU/SOC guidelines in the 'investigation process' in each of the 58 
cases?
    Answer 5.2-5.3. The following summaries were provided by Customs:

Key for compliance answers:

Yes--The State Department considers the Chinese government to be in 
        compliance with the MOU/SOC in this case.

No--The State Department considers the Chinese government not to be in 
        compliance with the MOU/SOC in this case.

**--The State Department considers that, in this case, the Chinese 
        government did not violate any legal commitment. The last USG 
        request for information/visit was made prior to March 13, 1994, 
        the date of entry into force of the Statement of Cooperation 
        which applies only prosectively.
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    The following information was provided by Customs:

6.2.1 Appendix: Guangzhou Number 1 Education Through Labor Camp
    9/27/94 - Fraud investigations Division received report from the 
Laogai Research Foundation indicating that prisoners at a facility 
known as the Guangzhou Number 1 Reeducation through Labor Camp are 
manufacturing artificial flowers for export to the U.S.
    10/5/94 - Above report sent to CA/BJ (Customs Attach6, Beijing) and 
SCR/HK for investigation of Meitak Floral Ltd. a Hong Kong, exporter 
identified as exporting artificial flowers from China to U.S. 
importers.
    10/14/94 - Fraud Division received a fax copy of an unsigned and 
undated document on letterhead stationery of the PRC Embassy in DC that 
states the above mentioned facility did not export its products (hand 
made flowers) and the reform through labor process used in the facility 
is in their words entirely different from that taken in prisons.
    10/24/94 - CA/BJ submitted referral to MoJ.
    1/4/95 - CA/BJ receives letter from MoJ Prison Management Bureau. 
Letter stated that the factory in question only produced flowers for 
the domestic market. No products were exported overseas. In addition, 
an education through labor camp is not the same as a prison and is not 
within the constraints of the Chinese government's ban on export of 
prison labor products.
    2/7/95 - CA/BJ requests visit of factory. Letter sent to MoJ
    3/9/95 - CA/BJ receives letter from MoJ ref. above. Request denied 
by MoJ. They state that factory did not produce products for export and 
factory does not fall under purview of the MOU on prison labor.
    3/17/95 - CA/BJ submits letter to MoJ stating that review of MOU 
indicates that re-education camps fall under the MOU. And that our 
request for a visit still stands. In addition, letter stated that in 
order to maintain progress in the area of prison labor, CA/BJ will 
request MoJ to arrange to visit another facility.
    3/31/95 - CA/BJ submits letter restating opinion of USG that 
education through labor facilities are covered by the provisions of the 
MOU and requesting access to visit factory.
    4/6/95 - MoJ Foreign Affairs Dept. responded that MoJ is of the 
opinion that Guangdong No. 1 Education Through Labor Camp is not 
covered by MOU and there is no way to satisfy request for visit.
    5/30/95 - CA/BJ sent another letter reiterating U.S. position.

    The following summary was provided by Customs:

6.2.4 Appendix: Beishu/Nanshu Graphite Mine

    The original information that Beishu Graphite mine was a prison 
labor industry came from a Chinese internal use only journal titled 
``Research on Committing Crime and Reform''. This is published every 
two months by the MoJ Crime Prevention and Labor Reform institute of 
Beijing. This information was sent in Unclassified #14687 cable from 
Hong Kong dated 11/7/91.
    2/28/94 - This request for investigation, one of the original 20 
sent forward to MoJ of March 1, 1994, is based on information provided 
by Harry Wu to Commissioner of Customs.
    Published Chinese materials claimed that products were being 
exported to U.S. The Chinese response to investigative request dated 6/
9/94 states that the
    mine was established in 1954, it produces high, middle, and low 
carbon graphite and expandable graphite. The mine has 500 permanent 
workers and exports 7,000 tons annually. In 1991 the name was changed 
to Qingdao Graphite Mine. Moreover, the mine also provides space for 
2,000 prisoners labor reform and vocational and technical training 
including, mainly fruit and vegetable planting, poultry and pig 
raising, building, brick and tile making as well as low carbon graphite 
production for domestic market and general machinery processing, never 
engaged in the production of export products.
    7/6/94 - U.S. advises that Customs will conduct further 
investigation into Beishu.
    10/6/94 Information from a Consular officer that an interview with 
U.S. businessman who visited Beishu when he was looking for suppliers 
of graphite. Mr. Beaumont on his visit realized that Beishu appeared to 
be a prison operation and this was confirmed by his guides. Mr. 
Beaumont stated be would not do business with Beishu because it is a 
prison.
    ?/2/95 South China Post writer who visited the mine under pretense 
of looking to buy graphite observed that it was a prison. Mr. Zheng of 
Beishu advised that the mine was exporting to United Kingdom and 
Germany.
    5/30/95 - U.S. Customs receives information that NBC will broadcast 
an interview with the Vice President of Ashbury Graphite Co., who 
claims that they were importing graphite from Beishu and that they knew 
it was produced with prison labor.
    Review of import records shows Ashbury graphite came from Nanshu.
    5/31/95 - Vice President of Ashbury Graphite Co. and father 
interviewed by Customs Agents. Father stated that they no longer import 
from Beishu because of the low quality of its graphite. They quit 
between 1976 and 1980.
    6/16/95 - Collateral request to Hong Kong, London, Los Angeles, New 
York, Orlando, Chicago, Cleveland. and Newark from Beijing.
    June 1995 report by Laogai Foundation identifying Beishu/Qingdao as 
a prison labor facility exporting to the U.S.
    6/30/95 - Superior Graphite executive is interviewed. States he 
went to Beishu and saw that it is a prison so he does not buy from 
Beishu. He explains that he must take the word of the Chinese exporters 
that the products are not produced by prison labor.
    6/29/95 - Customs interviews Valencia, CA resident. He explains 
that he visited the mine in November 1993 to observe conditions for 
possible future business dealings. He immediately recognized it as a 
prison.
    7/4/95 - U.S. Customs HK interviews South China Post Writer. He 
states that on his visit to Beishu he was told that there were two 
plants, Beishu and Qingdao, that Beishu uses prison labor and produces 
only for domestic market, Qingdao uses paid workers and produces for 
export. He could see that this was really one plant, not two. He is 
given brochures from Beishu and Qingdao and observes that they have the 
same address, phone numbers, Fax numbers, cable number, and same bank 
account number, and that Shandong Metals and Minerals, Import and 
Export Corporation (MINMETALS) is the state run import/export agent for 
both mines. In a taped interview with a representative of MINMETALS, 
Mr. Qiang said, ``most graphite exported comes form Beishu for the last 
25 years.''
    8/3/95 SAC/Philadelphia presents case to U.S. Attorneys Office, 
they need information from China concerning exports.
    9/7/95 RAC/Orlando Agents interview representatives from Dixon 
Ticonderoga who state that they don't import graphite from Beishu but 
they do from Nanshu and also buy from Ashbury. And since they use 
freight forwarders they don't know for sure where the graphite comes 
from.
    12/13/95 - results of interview with North American Refractories: 
no indication that they are currently buying from China but they used 
to and had seen Beishu and had observed military guards at the plant.
    12/18/95 - Newark Capstones reports interviews with Alumina Trading 
Company who states they stopped importing from Beishu over 5 years ago 
when they learned it was a prison.
    4/3/96 - Report of interview with a representative of China 
Enterprises, New York, his major trade representatives for graphite 
includes MINMETALS. He stopped his business dealings with Beishu when 
he learned it used prison labor. He learned that Beishu changed its 
name to Qingdao Graphite Mill.
    4/22/96 report from CA/London, U.K. firms Beishu was not listed as 
a supplier but Qingdao Tianxiang, Graphite Company Ltd., Shandong 
Metals and Minerals Import and Export Corp. were suppliers.
    Based on the information gained in investigations to date, there is 
strong evidence that Beishu is a prison and that they were exporting to 
the United States and other countries. Also evidence gathered strongly 
indicates that products produced at Beishu are imported into the U.S. 
through trading companies and under the names of other graphite mines 
such as Nanshu Graphite Mine.
    4/22/97 - Visit requested.
    6/19/97 - MOJ sent letter detailing situation at mines. it asserts 
that no prison labor was used for export goods. Defers decision to 
grant access, expresses desire to cooperate pending communication with 
relevant parties. The following summaries were provided by Customs:

6.2.5 Appendix: Shandong Laiyang Heavy Duty Machinery Factory
    2/24/92 - US Customs issues detention order to withhold release of 
galvanized steel butt-welded pipes believed to be made by forced labor. 
Allegation based on extract from 1989 Shandong Province Yearbook which 
lists high quality products made by labor reform units in Shandong 
Province. The Shandong Laiyang Heavy Duty Machinery Factory is 
identified as a labor reform enterprise that produces galvanized steel 
pipe.
    8/25/92 - Embassy officers meet with representatives of MOFERT 
(Ministry of Foreign Economic Relations and Trade), MoJ (Ministry of 
Justice) and MFA (Ministry of Foreign Affairs) to discuss prison labor. 
Referral for investigation made under the provisions of MOU. Letter to 
same effect sent to MOFERT.
    10/23/92 - MOFERT provides written response to referral to effect: 
factory is a worker's enterprise under the administration of the labor 
reform system. Productions is undertaken entirely by the workers and 
there are no exports to U.S. Info (advertisement) supplied in the past 
was only for publicity. Products for the domestic market were formerly 
produced by prison laborers. Chinese state that they have handled 
investigation properly and according to relevant Chinese regulations.
    11/10/92 - Request by Embassy to visit factory 3/3/93 - 2nd letter 
request to visit factory
    4/12/95 - MoJ approve of Customs visit to factory for last week of 
April.
    4/25/95 - Customs visits factory. Visit disclosed that factory was 
converted to a prison under the Administration of the Yantai Judicial 
Bureau in 1984. A civilian workshop for the production of galvanized 
welded steel pipe was maintained within the prison until 1990. 
Galvanized steel pipe production was not resumed until latter half of 
1994. Visit disclosed no evidence of the export or sale for export of 
galvanized welded steel pipe manufactured with use of prison labor. 
U.S. personnel granted access to all areas of factory. Chinese were 
cooperative.
    Latter half of 1995 - Customs' domestic offices in Cleveland, OH, 
Jacksonville, FL, and San Diego, CA interview three American companies 
alleged to have purchased steel pipe from above factory. Interviews of 
all three companies developed no direct evidence to substantiate 
allegations about the factory.
    1/18/96 - Customs case into factory formally closed.
    The following summaries were provided by Customs:

6.2.6 Appendix: Guangdong Flower City Enterprise AKA Red Star Tea Farm

    11/30/91 - South China Morning Post Article reports Red Star Tea 
Farm is a labor reform camp that produces tea which is sold to 
Guangdong Flower City Enterprise.
    12/8/91 - Letter to American Consulate in Guangzhou from Guangdong 
Tea I & E Corp. states Red Star Tea Farm is a labor camp tea farm.
    2/25/92 - Customs issued detention order
    8/25/92 - Customs sends referral for investigation to MOFERT.
    10/23/92 - Chinese response from Reform Through Labor Bureaus. Tea 
leaves are only for domestic market and not for export.
    11/10/92 Customs sends visit request to Moi 3/23/93 Customs sends 
2nd visit request to MoJ
    1/19/94 Customs and embassy officers visit Red Star Tea Farm. 
Report that records at site generally support contention by Chinese 
that tea was not for export; however, evidence was obtained which 
indicated that tea sales were made to Guangdong Flower City Enterprise, 
a retail sales and reputed export operation for Guangdong Reform 
Through Labor Bureau Goods. Follow up on this lead was unsuccessful.
    2/7/94 - Customs requests access to records at Guangdong Flower 
City Enterprise.
    3/7/94 - Moi advise that permission was granted for Customs access.
    4/6/94 - Customs visited Guangdong Flower City Enterprise. No 
evidence found to indicate that tea leaves were sold for export and/or 
exported.
    No other activity found in file
    The following summaries were provided by Customs:

6.2.7 Appendix: Shanghai Laodong Machinery Plant
    This investigation concerns the Shanghai Laodong Machinery Plant 
which produces band tools. This case originated from information from 
Harry Wuls testimony before the House Foreign Affairs committee that 
this factory utilizes prison labor to produce tools that are imported 
into the United States.
    9/23/91 - Harry Wu testifies before House Foreign Affairs
    10/3/91 - Withhold release order by U.S. Customs on goods produced 
at plant
    10/18/91 - Withhold release order expanded to include all tools 
with Elephant and Laodong brand and also that all hand tools 
manufactured in the city Shanghai be withheld from release.
    10/21/91 - First request for investigation made. 2/92 - First 
request for visit made.
    2/21/92 - Request approved, along with visits to four others.
    3/10/92 - Visit made by Shanghai consular officers. Results of 
visit were inconclusive.
    4/7/92 - request for second visit made to revisit plant and also 
the #1 labor detachment Reply from Chinese that #1 labor detachment is 
not open to the public.
    6/24/92 - withhold release order expanded to include Shanghai 
Machinery Import/Export Corp.
    5/18/92 - Another request for visit by Attach6 11/10/92 - Another 
request for visit by Attache.
    3/23/93 - Another request for visit by Attach6 9/19/94 - Attache 
asks MoJ to renew their efforts. 3/17/95 - Another request to visit is 
made.
    3/30/95 - Chinese say cannot visit now because of personnel 
adjustments at the Prison Management Bureau.
    3/27/96 - China MoJ grant visit to prison.
    4/24/96 - visit to Shanghai Laodong Machinery Plant by a Customs 
Attach6 and a Shanghai U.S. Consulate official. U.S. officials were 
given a background on the plant's operation. Plant is state owned and 
led by the Shanghai Administration Bureau for Prisons. The plant as 0 
employees. About 12% of the employees were former prisoners. Plants 
were encouraged to hire released prisoners to keep them from going back 
to a life of crime. Employees were paid on the average about 400 
renminbi a month. Plant official allowed Embassy officials to view 
sales records for last 3 years. Embassy officials were given a tour of 
the factory and were permitted to speak to several employees. Result 
of. visit - there was no direct evidence found to substantiate the 
allegation that this factory utilized prison labor.
    6/21/96 - Report of visit sent to China MoJ.
    10/28/96 - Withhold Release order canceled by U.S. Customs.
    12/6/96 - China MoJ informed that Withhold Release order was 
canceled.

    The following information was provided by Customs:

6.2.8 Appendix: Qianjiang Hardware Tools Plant, a.k.a. Hangzhou Shenda 
Tool Factory, and associated prison facility Zhejiang Number 2 Prison.
    The original information on this case came from a documented source 
of information and was given to the U.S. Customs office in Hong Kong in 
September 1993. The informant alleged that this factory was utilizing 
prison labor to manufacture adjustable and combination wrenches that 
are marketed through the Zhejiang Machinery and Equipment Import/Export 
Company.
    This was one of the original 20 investigations presented to the 
Chinese March 1, 1994. Harry Wu also identified this factory as 
utilizing prison labor and obtained information that the company was 
exporting to the U.S. to Cosmos Trading Company, Houston, Texas.
    June 9, 1994, China MoJ responds to investigation request by 
stating that ``during the period of 1975 to October 1991 the hand tools 
produced by Hangzhou Qianjiang Hardware Tool Factory were undertaken by 
the workers, no prison labor had ever involved in it. After October 
1991 some prisoners have been engaged in producing Jianxin Brand hand 
tools, but only for the domestic market and has never been exported 
overseas.''
    July 6, 1994, Embassy responds to MoJ letter by stating that in 
this case an importer (Cosmos) has been identified in the U.S. is 
currently under investigation by U.S. Customs. That depending on the 
results of the investigation of this importer, it may be necessary to 
request additional investigation by MoJ or a visit to facility.
    January 23, 1995, result of Houston investigation reported that 
Customs Agents visited the office of Cosmo Trading on June 23, 1994 and 
interviewed the manager. She stated that she had not knowingly imported 
any goods that she knew to be manufactured by prison labor. She stated 
that she was not allowed to visit the factories that produced 
merchandise that she imported and that she had to rely totally on the 
government (PRC) export agents as to the origin of items purchased. 
U.S. Customs Agents checked the Cosmos warehouse, took samples of some 
of the tools in stock and reviewed correspondence files. Agents took 
three files for translation. None of the above revealed any indication 
that Cosmos was importing prison labor made goods.
    The decision to pursue this case was based on the fact that the 
China Ministry of Justice has allowed us to reinitiate a dialogue and 
that this is one of 58 open cases that needs completion.

    The following information was provided by Customs:

6.2.9 Appendix: Zhejiang No. 4 Prison Factory

    5/18/93 - Laogai Foundation report that Zhejiang No. 4 Prison 
Factory AKA Hangzhou Wulin Machinery is a prison labor facility which 
is exporting chain and lever hoists to U.S.
    6/17/93 - Embassy official sends referral to Wang Mingdi, Deputy 
Director, MoJ Bureau of Reform through Labor
    7/8/93 - Commissioner of Customs disseminates memo to all offices 
to withhold release of hoists made by Wulin Machinery aka Zhejiang No. 
4. Hoists are considered products of prison labor.
    9/7/93 - MoJ respond to referral. Chinese position is that products 
i.e. hoists that were exported were manufactured by ordinary workers 
who were not in the prison system. The workshop that produces the 
hoists is under the administration of the Zhejiang Provincial Machinery 
Industry Bureau. Chinese also stated that Hangzhou Wulin Machinery now 
only produces machinery for the domestic market.
    3/15/94 - CA/BJ sends letter to MoJ requesting visit/access to 
Zhejiang No. 4 Prison Factory.
    5/10/94 - MoJ notify Embassy that Embassy request to visit is 
granted and scheduled for 5/19-5/20.
    5/20/94 - Embassy officer and Consular officer (Shanghai) make 
visit to Zhejiang No. 4 Prison Factory. Per visit, no direct evidence 
of the export of prison labor products to the U.S. by the Wulin 
factory, past or present, was found. Per report, Wulin Factory is a 
prison factory and is the production facility for the Zhejiang No. 4 
prison. Final comment by visiting officers, the factory officials could 
not or would not provide any production records or other evidence which 
would substantiate their claims that exports and domestic products were 
separated/divided such that only ordinary workers produced hoists for 
export.

    The following information was provided by Customs:

6.2.10 Appendix: Shanghai No. 7 Reform Through Labor Detachment

    9/23/91 - Harry Wu testified before Subcommittee on Human Rights 
and International Organizations that Shanghai No. 7 Reform Through 
Labor Detachment aka Shanghai Laodong Pipe Works is a prison labor run 
factory exporting to US.
    10/3/91 - Detention order on products from above factory issued by 
Customs Commissioner. Commodity involved: hand tools such as adjustable 
monkey wrench, open end spanners and socket wrenches.
    10/21/91 - Request to visit/referral sent by Embassy to MoJ 11/26/
91 - 2nd letter for visit to factory sent to MoJ
    8/25/92 - Letter sent to MOFERT for investigative referral/check if 
above factory is prison labor factory.
    10/23/92 - Response from MoJ ref. referral for investigation. Per 
Chinese, Shanghai Laodong Pipe Factory is a worker's enterprise and not 
a prison factory.
    3/23/93 - Embassy sends letter ref. outstanding request to visit 
above factory. Letter sent to MoJ.
    9/15/94 - MoJ sends letter to Embassy granting visit request to 
factory.
    12/17/94 - Embassy officers make visit to Shanghai Laodong Steel 
Pipe Factory AKA above names. The reporting officers found no direct 
evidence of the export of prison labor products to the U.S. The 
facility is definitely a prison complex and has been one since 1992. 
Prior to 1992, according to officials, the factory was administered by 
the No. 7 Reform Through Labor Detachment but did not employ prisoners 
in production.
    Case now closed.
    Question 7. Mr. Bader stated, ``We believe the best strategy is to 
regularly send investigation/visit requests to clear up the backlog of 
cases. U.S. Customs will continue to present new cases to the Chinese 
as we develop information.''

7.1 How many requests did the Customs Service make for investigations 
and visits in 1996? How is new information 'developed' by the Customs 
Service or the State Department?
    Answer 7.1. The following information was provided by Customs:
    There was very little dialogue with the Ministry of Justice, Prison 
Labor Division, except for the visit which was made in April 1996 by 
the Customs Attach6 to Shanghai Laodong Machinery Plant. The Customs 
Attach6 attempted to arrange a meeting with the Ministry of Justice to 
introduce the newly arrived Assistant Attach6 several times from July 
1996 through December 1996 and was put off for the reasons that 
officials were out of town, that personnel were being reassigned, and 
that the office was being moved. After several phone calls and letters 
by the Customs Attache and the Embassy Economics section, a meeting was 
finally arranged in February 1997. At this meeting, Customs presented 
two cases for investigation.
    Customs develops new information on prison labor cases in much the 
same way as for any other types of investigations. Information is 
provided by the public, by business people, by Customs Inspectors and 
Import Specialists, and by other sources of information. Currently the 
Beijing Customs office has eighteen open prison labor cases that are 
the result of information developed by Customs domestic offices and 
other foreign U.S. Customs offices.
    Question 7.2. Please provide a list of all laogai camps known to 
the State Department, including reform through labor facilities, 
reeducation through labor facilities, detention centers, and prisons.
    Answer. The State Department does not maintain a comprehensive list 
of laogai camps and related facilities in China. The State Department 
does not have an operational requirement for such a list. However, the 
Embassy in Beijing does maintain a list of several hundred facilities 
based on information from internal Chinese journals. This information 
is dated, and no further issues of the journals have been obtained.
    We also utilize publicly available lists such as those published by 
the Laogai Research Foundation and other human rights NGO'S, as does 
Customs.
    Inquiries with several other US agencies with possible interest in 
such lists revealed that none of them attempts to maintain a 
comprehensive list of prison and labor camps in China.

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    Question 7.3. How does the State Department or Customs identify 
products manufactured at these facilities?
    Answer 7.3. The following information was provided by Customs:
    Customs usually identifies the commodity through the allegation, 
i.e. someone alleges that hand tools are manufactured at prison X in 
China. The name of the commodity is usually provided along with the 
alleged manufacturer. Customs also uses the Laogai Research Foundation 
Handbook, existing files, TECS, etc. to identify products manufactured 
at these facilities.
    Question 8. How many Customs Service officials are committed to 
working on the forced labor issues full time? How many part time?
    Answer. The following information was provided by Customs:
    Customs employs approximately 3,000 special agents within its 
Office of Investigations. About 300 are dedicated to the Fraud program. 
Fraud deals with the importation of merchandise which includes prison 
labor-made products. No fraud agents are specifically assigned to 
prison labor but to the general area of fraud investigations.
    Within Customs, there are about 10,000 inspectors. Again, none are 
specifically assigned to deal with prison labor importations. All, 
however, are made aware of the prohibition and are trained to be on the 
lookout for such merchandise.
    Question 9. How many State Department officials are committed to 
working on the forced labor issue full time? How many part time?
    Answer. There are five State Department officials, in Washington 
and Beijing, who work on forced labor issues part time to varying 
degrees as part of their overall portfolios. There are no State 
Department officials who work on forced labor issues full time.
    Question 10. How many intelligence analysts are committed to 
working on the forced labor issues full time? How many part time?
    Answer. No Department of State analysts work full-time on forced 
labor issues. In the China Division of the Office of East Asia Analysis 
in the Bureau of Intelligence and Research, there are two analysts and 
a Division Chief who address issues such as labor and human rights as 
part of their portfolios.
    This reply does not address the analytic strength in the rest of 
the intelligence community.
    Question 11. What training do Foreign Service officers receive on 
the forced labor products issue?
    Answer. Foreign Service officers are instructed in their 
introductory training that the U.S. government has a policy goal of 
encouraging respect for internationally recognized worker rights, 
including prohibition of forced and compulsory labor. This goal is also 
reiterated in political and economic tradecraft training five years or 
so into an officer's career. Foreign Service Labor Officers receive 
more detailed training in forced and compulsory labor issues, including 
the problem of policing trade in products made with such labor. Ten to 
twelve new Labor Officers are trained each year. To date, no Labor 
Officer position has been established in China and officers assigned to 
China who handle labor issues are briefed as the need arises.
    Question 12. Are the MOU and SOC binding agreements? What is the 
State Department policy to communicate to the Chinese when the MOU and 
SOC are not followed? How many demarches have been sent to the Chinese 
over their noncompliance to the MOU/SOC?
    Answer. The United States considers the 1992 Memorandum of 
Understanding between the United States of America and the People's 
Republic of China on Prohibiting Import and Export Trade in Prison 
Labor Products and the 1994 Statement of Cooperation to be legally 
binding instruments.
    Chinese cooperation has been erratic. We have communicated to 
Chinese officials on numerous occasions, both verbally and in writing, 
our concern that compliance be timely and consistent, and that it not 
be subject to the influence of other developments in our bilateral 
relations. We have indicated to the Chinese, including in a recent 
letter from Ambassador Sasser to the Minister of Justice, that 
satisfactory resolution of prison labor allegations is important to the 
overall health of the bilateral relationship.

                               __________
                         Department of the Treasury
                                      Washington, DC 20220,
                                                      June 24, 1997
Ms. Betty Alonso,
Committee on Foreign Relations,
United States Senate,
SD-450 Dirksen Bldg.,
Washington, DC 20510-6225

    Dear Ms. Alonso:Enclosed are Treasury Assistant Secretary James E. 
Johnson's responses to questions from Senator Wellstone before the 
Senate Foreign Relations Committee's hearing on Prison Labor Agreements 
with China held on May 21, 1997.
    If you have any questions, please feel free to call me at 622-2038.

      Sincerely,
                                      Liam Higgins,
                             Office of Legislative Affairs,
                                          Room 3457, Main Treasury.
    Responses of Mr. Johnson to Questions Asked by Senator Wellstone
    Question 1. Is the Government taking sufficient steps to ensure 
that U.S. businesses are not unwittingly abetting Chinese exports of 
goods produced by forced labor? If not, what measures do you believe 
should be implemented?
    Answer. The most important steps that we can take are the measures 
to enforce the prison labor statutes that were described in the 
testimony. However, the Customs Service has an excellent record of 
engaging in constructive dialogue with private industry to promote 
strong voluntary compliance with the Customs and trade laws. As I 
stated in my testimony, to maximize the value of our law enforcement 
assets, we will strengthen our education and outreach efforts in the 
forced labor area as we have in the areas of narcotics, money 
laundering, and sanctions enforcement.
    As part of this effort, I plan to use the June 27, 1997 meeting of 
the Treasury Advisory Committee on Commercial Operations of the U.S. 
Customs Service, a statutory body which I chair, as a forum to provide 
the business community with an opportunity to more clearly engage with 
us on their recommendations regarding the prison labor problem. I have 
asked the twenty senior U.S. business executives who serve on the 
Committee to share their insights into the nature and extent of forced 
labor production in China 'and its role in export trade and also their 
ideas on involving the U.S. business community in promoting compliance 
with U.S. laws on forced and prison labor. We then can consider 
involving other business groups that may helpful in promoting 
compliance with these important statutes.
    Customs has promoted awareness of these laws in the business 
community by highlighting forced labor enforcement in various 
publications circulated in the trade community including Global Trade 
Talk, the Customs bimonthly publication of the International Trade 
Ombudsman. Customs will review its strategic and annual plans, trade 
pamphlets and similar documents to ensure that the importance we attach 
to forced labor enforcement receives prominent treatment.
    Question 2. Do you believe it is feasible to devise an effective 
system of verifying Chinese compliance with curbs on exports of goods 
made by forced labor. If so, please describe how such a system would 
work?
    Answer. We believe that the system we currently have in place is, 
in principle, an effective system if we can succeed in improving the 
level of cooperation that we are receiving from the Chinese under our 
agreements with them. Under current circumstances where our Embassy has 
indicated an expectation of improved cooperation of the Chinese 
Ministry of Justice in the coming months, we should invest our energy 
in clearing up a backlog of over a dozen cases that require 
investigation in China. In this regard, Ambassador Sasser is initiating 
a strong followup request to the Chinese Government for inspection 
visits to a list of production facilities identified by Customs. Over 
the longer term, in a continuing atmosphere of normal trade relations, 
it ma3rbe possible to secure greater Chinese cooperation in identif34ng 
forced labor facilities from which U.S. importers should not make 
purchases for the U.S. market
    In the interim, we will continue to maximize our usage of 
conventional law enforcement sources and methods including reliance on 
information supplied by responsible competitors of forced labor 
facilities and their customers as well as other reliable business 
sources. Among other matters, we plan a program of debriefing of 
returning business visitors to China as well as emigres and other 
travelers who may possess useful information regarding forced labor 
Facilities.

                               __________

     Responses of Mr. Bader to Questions Asked by Senator Wellstone
    Question 1. Since both State and Customs agree that the PRC is not 
complying with the MOU on prison labor, what measures do you recommend 
to ensure compliance?
    Answer. Chinese cooperation has been erratic. We have communicated 
to Chinese officials on numerous occasions our concern that compliance 
be timely and consistent, and that it not be subject to the influence 
of other developments in our bilateral relations.
    We continue to explore ways to enhance Chinese cooperation and 
encourage full compliance with the MOU. Improved cooperation by the 
Chinese is likely to result from steady diplomacy, solid investigations 
of specific cases by U.S. Customs, and the relationships our officials 
develop on the ground with Chinese counterparts. We have indicated to 
the Chinese, including in a recent letter from Ambassador Sasser to the 
Minister of Justice, that satisfactory resolution of prison labor 
allegations is important to the overall health of the bilateral 
relationship.
    Question 2. Both the MOU and MOU/SOC appear to have been based on 
the premise that we can depend on the PRC to provide information 
regarding prison labor exports to the U.S. and investigate suspected 
prison labor exports destined for the U.S. Since the Chinese government 
is at least complicit, if not culpable, in exporting such goods to the 
U.S. how could we expect Beijing to provide more than token compliance 
with the MOU and MOU/SOC?
    Answer. We would not agree with the premise that the Chinese 
government is necessarily ``at least complicit, if not culpable'' in 
cases of prison labor exports to the U.S. On the contrary, the Chinese 
made a public commitment to cooperate on this issue when they signed 
the MOU and MOU/SOC, the only nation to make such a commitment with 
respect to our laws concerning import of goods made by prison labor.
    Although Chinese cooperation in implementing the MOU has been 
neither satisfactory nor consistent, the solution to the problem is not 
to scrap the existing agreement. We would not be able to conduct 
investigations outside the procedures established in the agreement.
    Chinese cooperation is essential to successful prosecution of 
violators. Information on suspected prison labor obtained from 
informers is often enough to issue a detention order on a suspected 
shipment, but rarely sufficient to sustain a finding of fact or to 
obtain a conviction in U.S. courts.
    The most effective way to get that cooperation is to convince the 
Chinese that it is in their own interest to do so. The agreement, 
backed by patient diplomacy and solid evidence, is the best mechanism 
for getting that cooperation.
    Question 3. When President Clinton issued an executive order in 
1993 presenting conditions for renewal of China's MFN trade status for 
1994, he included PRC compliance with the prison labor MOU as a 
condition for MFN renewal. What role did problems in enforcing the 
prison labor MOU have in the President's subsequent decision to de-link 
human rights issues from renewal of China's MFN status and other trade 
issues?
    Answer. The decision in 1994 to de-link MFN from human rights 
reflected the judgment that, in terms of our overall relationship with 
China, we had achieved as much as we could from the linkage and that 
maintaining it would not be productive either in human rights terms or 
in terms of other significant U.S. interests.
    Question 4. Is the Administration taking actions to encourage key 
allies to curb importation of Chinese goods made by prison labor? If 
so, please describe these actions.
    Answer. The U.S. and EU share the common goal of integrating China 
into the international community. We have consistently conveyed to the 
EU the need for a common approach to China on human rights, non-
proliferation, and other concerns.
    U.S. officials have raised the specific issue of prison labor in 
China with EU officials. The EU supports strengthening provisions for 
monitoring ILO conventions on core labor standards. However, the EU has 
no agreement with China on the use of forced labor. European Commission 
Vice President Sir Leon Brittan has stated that the EU would not 
withdraw GSP from China as a result of allegations of the use of forced 
labor there even if the International Confederation of Free Trade 
Unions or other body were to present a formal petition in this regard.
    On separate occasions, government officials from the United 
Kingdom, Germany, Canada and Australia have indicated that Chinese 
prison labor exports are not an issue of concern in their bilateral 
relations with China.