[Senate Hearing 117-285]
[From the U.S. Government Publishing Office]
S. Hrg. 117-285
FIGHTING FORCED LABOR: CLOSING
LOOPHOLES AND IMPROVING CUSTOMS
ENFORCEMENT TO MANDATE CLEAN SUPPLY
CHAINS AND PROTECT WORKERS
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
MARCH 18, 2021
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
______
U.S. GOVERNMENT PUBLISHING OFFICE
47-802-PDF WASHINGTON : 2022
COMMITTEE ON FINANCE
RON WYDEN, Oregon, Chairman
DEBBIE STABENOW, Michigan MIKE CRAPO, Idaho
MARIA CANTWELL, Washington CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland RICHARD BURR, North Carolina
SHERROD BROWN, Ohio ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania TIM SCOTT, South Carolina
MARK R. WARNER, Virginia BILL CASSIDY, Louisiana
SHELDON WHITEHOUSE, Rhode Island JAMES LANKFORD, Oklahoma
MAGGIE HASSAN, New Hampshire STEVE DAINES, Montana
CATHERINE CORTEZ MASTO, Nevada TODD YOUNG, Indiana
ELIZABETH WARREN, Massachusetts BEN SASSE, Nebraska
JOHN BARRASSO, Wyoming
Joshua Sheinkman, Staff Director
Gregg Richard, Republican Staff Director
(ii)
C O N T E N T S
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OPENING STATEMENTS
Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee
on Finance..................................................... 1
Crapo, Hon. Mike, a U.S. Senator from Idaho...................... 2
WITNESSES
Wrona, Joseph, Local 135L member, United Steel, Paper and
Forestry, Rubber, Manufacturing, Energy, Allied Industrial, and
Service Workers International Union (USW), Buffalo, NY......... 4
Vandenberg, Martina E., J.D., president, Human Trafficking Legal
Center, Washington, DC......................................... 5
Hughes, Julia K., president, U.S. Fashion Industry Association,
Washington, DC................................................. 7
Bonanni, Leonardo, Ph.D., founder and CEO, Sourcemap Inc., New
York, NY....................................................... 9
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Bonanni, Leonardo, Ph.D.:
Testimony.................................................... 9
Prepared statement........................................... 39
Responses to questions from committee members................ 40
Crapo, Hon. Mike:
Opening statement............................................ 2
Prepared statement........................................... 42
Hughes, Julia K.:
Testimony.................................................... 7
Prepared statement........................................... 42
Responses to questions from committee members................ 46
Vandenberg, Martina E., J.D.:
Testimony.................................................... 5
Prepared statement........................................... 50
Responses to questions from committee members................ 56
Wrona, Joseph:
Testimony.................................................... 4
Prepared statement........................................... 59
Responses to questions from committee members................ 61
Wyden, Hon. Ron:
Opening statement............................................ 1
Prepared statement with attachments.......................... 63
Communications
Center for Fiscal Equity......................................... 71
McKinney, Sheridan S............................................. 72
National Association of Foreign-Trade Zones...................... 76
Tony's Chocolonely............................................... 77
United States Council for International Business................. 81
FIGHTING FORCED LABOR: CLOSING
LOOPHOLES AND IMPROVING CUSTOMS
ENFORCEMENT TO MANDATE CLEAN SUPPLY
CHAINS AND PROTECT WORKERS
----------
THURSDAY, MARCH 18, 2021
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10 a.m.,
via Webex, in the Dirksen Senate Office Building, Hon. Ron
Wyden (chairman of the committee) presiding.
Present: Senators Menendez, Carper, Cardin, Brown, Bennet,
Casey, Warner, Whitehouse, Cortez Masto, Warren, Crapo,
Grassley, Cornyn, Thune, Cassidy, Lankford, Young, Sasse, and
Barrasso.
Also present: Democratic staff: Sally Laing, Senior
International Trade Counsel; Virginia Lenahan, International
Trade Counsel; and Joshua Sheinkman, Staff Director. Republican
staff: Gregg Richard, Staff Director; and Mayur Patel, Chief
International Trade Counsel.
OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM
OREGON, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The Finance Committee will come to order.
This is our third hearing of the week, and the attendance among
members has been terrific on both sides of the aisle. And I see
Senator Crapo here, and I appreciate all his efforts to get
members on both sides involved.
This morning we are going to focus on the issue of forced
labor. We understand in our country, we have a lot of economic
and political muscle, and our country should use that muscle to
fight for American jobs and our workers. It should also use
that muscle, wherever possible, to improve the lives of
powerless people around the world. It is not every day you have
an opportunity to talk about accomplishing both of those goals
at once.
Today is one of those days, with the Finance Committee
meeting to discuss stamping out forced labor, which is modern-
day slavery, around the globe. Now, it is going to take hard
work, even in 2021, to live up to a moral standard that says
the U.S. will not profit from slave labor. And yet it still
goes on in many places around the world, including in places
that are part of our global supply chain. The hard work to
fight forced labor is absolutely essential.
A government ought to use every available tool to root out
the practice of forced labor and address its causes. That
includes diplomacy, efforts to alleviate poverty, sanctions, or
any other means within the jurisdiction of the Finance
Committee. The government has to use every tool in the trade
toolbox to keep forced labor products out of our market.
The Federal ban on imports made with forced labor goes back
to 1930. It is known in trade law as section 307. It gives
Customs the authority to stop products made with forced labor.
However, there was a loophole in that Federal ban that applied
to products that are not made within the United States, and it
persisted for decades.
Senator Brown, who has led on this issue for years, and I
wrote an amendment that closed the forced labor loophole in
2016. Since then, enforcement action has increased, but so have
glaring examples of the scourge of forced labor, especially in
China.
Two U.S. administrations have now concluded that what the
Chinese Government is doing to the Uyghur people in the
Xinjiang region in western China constitutes genocide. The
Chinese Government and Chinese companies are using forced labor
from that region to produce a variety of products.
For example, the U.S. took action to block the import of
cotton and tomatoes picked by slave labor in Xinjiang. The
Finance Committee is going to hear today from Joseph Wrona,
whose good-
paying union job in the production of silicon metal was shut
down, in part due to forced-labor competition from China.
Forced labor is a problem in other countries too, including
in India, Burma, and Malaysia. As I indicated, Senator Brown
and I have been pushing for U.S. trade enforcers to do work on
a variety of fronts, including taking action against the import
of mica, palm oil, and cocoa produced with forced labor.
The bottom line is, the continued existence of forced labor
is morally repugnant, and when American workers have to compete
with forced labor, everybody loses. We want to make sure that
Customs and Border Protection has the tools and resources it
needs to step up enforcement. And like so much of what we are
doing, this is another crucial area for bipartisanship. Ending
forced labor is morally just. Raising the bar for labor
standards around the world will help protect high-skill, high-
wage jobs here in the United States.
So this is an important hearing, and we look forward to our
witnesses.
[The prepared statement of Chairman Wyden appears in the
appendix.]
The Chairman. Senator Crapo?
OPENING STATEMENT OF HON. MIKE CRAPO,
A U.S. SENATOR FROM IDAHO
Senator Crapo. Thank you, Mr. Chairman.
This is a very important hearing. The International Labor
Organization estimates nearly 25 million people in the world
are victims of forced labor. The criminals behind this tragedy
reap nearly $150 billion in profits every year. As horrifying
as that is, nearly 30 percent of the victims are also victims
of forced sexual exploitation and generate $99 billion, or two-
thirds of those profits that I just referenced.
The fight against forced labor is not a Democrat issue or a
Republican issue. It is an issue that unites all Americans.
That is critical to remember. Americans, including consumers,
workers, and businesses, are all committed to this fight and
doing everything possible to combat this scourge.
The problem lies not with them, but with foreign autocrats
and individuals who lack all sense of basic humanity. Our fight
is with them. For example, as the chairman just mentioned,
China's Government has pressed nearly 100,000 Uyghurs and other
Muslim minorities into forced labor, while euphemistically
calling it ``poverty alleviation.''
As the Newlines Institute for Strategy and Policy explained
in a report last week, China's treatment of the Uyghurs meets
every criteria of genocide under the United Nations Genocide
Convention. That report's findings joined declarations by
foreign legislatures, including Canada and the Netherlands, and
track with a similar determination made by the State Department
during the Trump administration.
Accordingly, Senators like Marco Rubio and Jeff Merkeley
and many others are showing leadership on this issue through
their proposed Uyghur Forced Labor Prevention Act. Their
efforts should be matched by the current administration.
The U.S. Secretary of State and National Security Advisor
are meeting today in Alaska with their Chinese counterparts.
Forced labor is among the rights' issues they need to press
with them.
Critically, this all reinforces that we need to broadly
empower Americans and other good citizens of the world to be
able to more effectively respond to this challenge. This
includes effectively utilizing technology to identify where
goods made with forced labor can enter the supply chain.
It means our laws and regulations must be transparent and
provide informative and thoughtful guidance so Americans know
how to avoid importing such goods. It means we need to know
about the ongoing efforts of our businesses so that government
can help leverage them in the fight against forced labor.
Many of them have developed best practices to stamp out
forced labor from their supply chains. We need to leverage
their experience and expertise.
Finally, it means we must partner with civil society to
raise awareness on this important issue. The witnesses we have
today can speak to each of these points. Their expertise and
knowledge will help this committee address this important
matter.
Mr. Chairman, I am glad this is an issue which we both care
deeply about, and thank you for organizing this hearing. I look
forward to hearing the testimony from our witnesses.
[The prepared statement of Senator Crapo appears in the
appendix.]
The Chairman. Thank you very much, Senator Crapo. Let me
now introduce our witnesses.
Mr. Joseph Wrona of Buffalo, NY is a United Steelworkers
member. He is a former employee of Globe Specialty Metals. They
produce a critical input for semiconductor chips and solar
panels, and they are based in Niagara Falls, NY. Globe
Specialty Metals shuttered its factory in 2018 due to intense
competition from underpriced Chinese products, as well as
shifts in global demand driven in part by Chinese product that
was produced with forced labor. He now works for another firm.
Ms. Martina Vandenberg of Washington, DC will be next, the
founder and president of the Human Trafficking Legal Center, an
important organization established in 2012. It is a
nongovernmental organization dedicated to the eradication of
forced labor.
Ms. Julia Hughes of Washington, DC is president of the
United States Fashion Industry Association, which represents
brands, retailers, importers, and wholesalers based in the
United States that do business globally.
And Dr. Leonardo Bonanni of New York is the founder and CEO
of Sourcemap, a supply chain transparency company. They track
the supply chains for more than 50 raw materials.
We welcome all of them, and we will make your prepared
remarks a part of the record. And let's begin with you, Mr.
Wrona.
STATEMENT OF JOSEPH WRONA, LOCAL 135L MEMBER, UNITED STEEL,
PAPER AND FORESTRY, RUBBER, MANUFACTURING, ENERGY, ALLIED
INDUSTRIAL, AND SERVICE WORKERS INTERNATIONAL UNION (USW),
BUFFALO, NY
Mr. Wrona. Chairman Wyden, Ranking Member Crapo, members of
the committee, my name is Joe Wrona, and I am a member of the
United Steelworkers and a maintenance mechanic at Sumitomo Tire
Plant in Tonawanda, NY. Thank you for the opportunity to
testify today on the important topic of how to fight forced
labor and improve our supply chains.
Connecting my life in Buffalo to global supply chains and
forced labor is, unfortunately and surprisingly, too
straightforward. While I have worked at the tire plant for the
last couple of years, my previous job was at Ferroglobe's
Niagara Falls, NY, plant. I worked there for 10 years roughly,
with 100 other union members and management.
The Ferroglobe facility, which I will call Globe, used to
produce metal silicate by taking quartz, wood chips, and coal
and cooking them in an electric arc furnace until the quartz
was reduced into silicon metal. Metal silicate is a product
that we made 24/7 at the plant. It is a product you interact
with every day in a variety of ways, from strengthening
aluminum, to the caulking that seals your home, or even
cosmetics.
Silicon metal is everywhere. It is also a base component to
the production of polysilicon, which is vital to solar panel
production. Expecting that strong demand for solar power would
boost metal silicate demand, in 2009 Globe planned a $35-
million upgrade to convert its metallurgical grade silicon into
4,000 tons of upgraded metallurgical grade silicon each year--
enough to produce 500 megawatts of solar power.
Our company, in an investor report in 2016, highlighted the
opportunity to see demand grow as SolarCity, a solar panel
company connected to Elon Musk, was supposedly in the final
stages of construction. However, that vision fell apart for the
workers at Globe in 2018 when the plant was closed because of
lack of demand.
Globe has been fighting illegal trade practices in metal
silicate for decades now. The first trade enforcement case
against dumped and subsidized metal silicate from China started
30 years ago in 1991. But, while tariffs on metal silicate
helped to defend our jobs at Globe, they could not stop
products further up the supply chain, like solar panels or
those produced with forced labor.
The growth of China's industrial capacity is well
documented. Chinese companies in polysilicon produced over 80
percent of global polysilicon in 2020. This has effectively
locked the U.S. out of the growing solar demand, and over-
capacity in China destroys nearly any ability of U.S. companies
to compete.
But for my brothers and sisters who make good wages at
Globe, between $70,000 and $100,000 a year, they were victims
not only of unfair trade practices, but also forced labor in
China. About 45 percent of the world's supply of solar grade
polysilicon comes from Xinjiang. The news about human rights
abuses there is unacceptable. According to economic experts, 10
million Muslim minorities in the region are under lockdown
control, and over 1 million Uyghurs and others have allegedly
disappeared into internment camps.
One study estimates that more than 80,000 Uyghurs were
transferred out of Xinjiang to work in factories across China
between 2017 and 2019. There should be no debate: eliminating
forced labor from our country's supply chain should happen
today. And companies that have benefited should be held
accountable.
It was a good step when Customs and Border Protection
issued a Withhold Release Order against cotton and tomato
products produced by Uyghurs. We should act immediately to do
the same for products like solar panels that contaminate the
supply chain with forced labor.
We also need to act urgently to defend American workers and
foster the domestic solar industry here. This means direct
investment in metal silicate plants like my old facility in
Niagara Falls or the plants in Alloy, WV, where my union
brothers and sisters work.
Thank you for the opportunity to testify today, and I look
forward to answering any questions you may have.
Finally, working with my union, I have included additional
materials with my written testimony.
[The prepared statement of Mr. Wrona appears in the
appendix.]
The Chairman. Thank you very much, Mr. Wrona.
We will next have Ms. Vandenberg.
STATEMENT OF MARTINA E. VANDENBERG, J.D., PRESIDENT, HUMAN
TRAFFICKING LEGAL CENTER, WASHINGTON, DC
Ms. Vandenberg. Thank you so much, Chairman Wyden, Ranking
Member Crapo, and distinguished members. It is an honor to
appear before you today to address the issue of forced labor,
global supply chains, and the Tariff Act. I lead the Human
Trafficking Legal Center, a human rights organization dedicated
to the eradication of forced labor.
In 2020, we joined a coalition of nongovernment
organizations to petition Customs and Border Protection to
block all imports of Xinjiang cotton into the United States.
CBP issued a region-wide Withhold Release Order in January
2021.
China has been much of the focus of CBP enforcement, but
forced labor is a global issue. We once assumed we could
prosecute our way out of forced labor, but we were wrong.
Prosecutions are practically nonexistent. According to the
State Department's 2020 Trafficking in Persons report, there
were just 1,024 forced labor prosecutions in the entire world
in 2019. And the United States is no exception.
According to the Department of Justice, Federal prosecutors
indicted just 12 forced labor cases in the entire country in
fiscal year 2019. And although extraterritorial jurisdiction
has existed since 2008 to prosecute forced labor cases in
global supply chains, Federal prosecutors have never brought
even one forced labor supply chain case that invoked
extraterritorial jurisdiction.
So what is the result of this enforcement vacuum? Impunity,
complacency, and immense human suffering. We now live in a
world where migrant workers must pay for their jobs. They must
buy their jobs. They do not pay to play; workers pay to work.
And because they cannot afford to pay the recruitment fees
outright, workers must borrow.
Many find themselves trapped in forced labor and debt
bondage. And until recently, these workers had few remedies.
The closing of the U.S. Tariff Act's consumptive demand
loophole in 2016 changed the game. That move catapulted section
307 from a statutory relic to a valuable tool to combat forced
labor. We still have a long way to go.
We can analogize to the Foreign Corrupt Practices Act. In
the 1970s, bribery was ubiquitous, just as forced labor is
today. That all changed when the Department of Justice started
prosecuting companies and individuals under the FCPA. Suddenly,
bribery allegations went straight to the C Suite. So what had
changed?
It was risk, the advent of risk. We are a long way from
FCPA anti-bribery enforcement levels for forced labor, but
Customs and Border Protection's section 307 enforcement under
the Tariff Act is bringing us closer.
According to data recently released by CBP, in the first
quarter of fiscal year 2021 the government detained 90
shipments of cargo covered under different WROs. The value of
that cargo was $20.8 million. In fiscal year 2020, CBP detained
a total of 324 shipments valued at $55 million. So it looks
like CBP is poised to shatter the fiscal year 2020 detention
record in fiscal year 2021, which is a welcome development.
So we applaud this progress, but there are gaps. Issuing a
WRO is only the first step. Robust and swift enforcement must
follow. CBP announced that, despite the region-wide WRO on all
Xinjiang cotton, the agency would focus only on direct imports
from the region. The agency termed this a ``scalpel'' approach
to enforcement.
We believe that this is inadequate. The WRO should be
enforced broadly. And we also see now a backlash against Tariff
Act enforcement, with lawsuits filed by corporations against
nongovernmental organizations and researchers.
These retaliatory legal actions have a chilling effect on
NGOs, which we can only surmise is their intent. Sime Darby, a
Malaysian palm oil producer subject to a WRO, filed a lawsuit
in U.S. Federal Court against the director of Liberty Shared,
seeking extensive discovery of confidential investigation
materials. And Chinese corporations have filed a suit in China
against Adrian Zenz, a U.S.-based human rights researcher, who
has documented widespread forced labor in Xinjiang.
Facing universal outrage, Sime Darby dropped their lawsuit
just a week after filing. But increasingly loud corporate
voices seek to dismantle section 307's enforcement regime.
Couched in the language of calls for ``due process,'' these
critics come to bury section 307, not to praise it.
My written testimony has extensive recommendations, but I
will focus on just four.
Number one, include workers and unions in all remediation
plans. CBP should ensure that affected workers and their unions
have a role in enforcement and remediation.
Two, create emergency worker funds for workers harmed by
WROs.
Three, punish companies that retaliate against workers or
petitioners.
Four, disclose shipments detained under a WRO.
CBP should also release enforcement updates on each WRO
each quarter. Forced labor is a feature, not a bug, in global
supply chains. There should be no safe harbor for goods made
with forced labor anywhere in the world.
I welcome your questions.
[The prepared statement of Ms. Vandenberg appears in the
appendix.]
The Chairman. Thank you. Very good.
Next will be Ms. Hughes.
STATEMENT OF JULIA K. HUGHES, PRESIDENT, U.S. FASHION INDUSTRY
ASSOCIATION, WASHINGTON, DC
Ms. Hughes. Thank you, Chairman Wyden, Ranking Member
Crapo, and members of the committee. I thank you for the
invitation to appear today.
I am president of the U.S. Fashion Industry Association,
and I appreciate the chance to talk about the industry and the
fight against forced labor, and how to improve enforcement to
reach our shared goal of the elimination of forced labor.
A little background about USFIA. We represent apparel
brands, retailers, importers, and wholesalers based in the
United States and doing business globally, including many of
the iconic brands worn and loved by everyone participating in
this hearing.
Global trade, and ethically sourced trade, is essential for
American brands and retailers to be successful and reach
consumers around the world. Because we are a global industry,
we know that forced labor exists in many parts of the world.
For several decades, USFIA member companies have maintained
codes of conduct and strict requirements for supply chain
partners that ban the use of forced labor. Companies maintain
an extensive network of contracts, audits, verifications,
training, and direct engagements with suppliers. But we
recognize that there remains more action needed to guarantee
that forced labor is not in the supply chain for fashion
products. So what are we doing to root out forced labor from
the supply chain?
Even before the very public media reports about forced
labor in the past year, our Industry Association's USFIA,
working with our friends at the American Apparel and Footwear
Association, National Retail Federation, and Retail Industry
Leaders Association joined together to create an ad hoc forced
labor working group to facilitate the sharing of information
and the sharing of resources among the industry.
The task is not easy, to put it mildly. My personal belief
is that to eliminate forced labor, we need to go beyond what
companies can do on their own, and go beyond an emphasis on
punitive measures, to use multi-stakeholder approaches, the
combination of civil society, NGOs, companies, governments, and
international institutions, to reach our goal.
In my written statement, I shared a few examples of how
this has worked. I am especially pleased to mention the Cotton
Campaign--which for more than a decade brands and retailers
have been a part of--focused on eliminating the government-
sanctioned use of forced labor in the cotton fields of
Uzbekistan, and today moving forward with reasoned responsible
sourcing agreements with cotton growers, cooperatives, and
brands looking to the future.
Another approach that is just at the beginning is Yarn
Ethically and Sustainably Sourced (YESS). This is an initiative
to eliminate forced labor with a pilot program based on OECD
due diligence guidance that has wide industry support.
There are also pilot programs recently funded by the
Department of Labor that will focus on developing solutions to
forced labor that bring together technology tracking in the
supply chain and awards to Verite that will support a project
based in India. ELEVATE Limited will be looking at supply
chains for cotton in Pakistan and cobalt in the DRC.
But even with all these initiatives, we know we need more,
and we need to work with the executive branch and with the
Congress to eliminate forced labor.
In my remaining time, I want to just briefly focus on the
executive branch aspect. We support a coordinated effort to
engage with our trading partners to eradicate forced labor from
the supply chain, working together with the State Department,
U.S. Trade Representative's office, Labor, Commerce, NSC, and
USDA, to make this a priority for a whole-of-government
approach.
We especially want to talk about the important role of the
U.S. Customs and Border Protection to implement this
enforcement strategy. U.S. companies are partners with CBP on
enforcement. The policy of informed compliance and the
participation of companies in CBP's trusted trader programs
means there already is a shared approach to enforcement. But we
believe what will help even more is more transparency in the
process, and more of a shared approach.
What does that mean in practice? Two recent GAO reports
highlighted some of the issues, and it boils down to
transparency and objective criteria being essential for
success. We do not think success is measured by the number of
detentions. Success will be measured by the degree to which we
all work together to effectively reduce and eliminate forced
labor around the world.
Transparency is key for this. We hope to work with CBP and
the committee, and I thank you again for the opportunity to
speak today. Fashion brands and retailers have zero tolerance
for forced labor. We believe working together to eradicate
forced labor from global supply chains will be good for
American workers, American consumers, and the world. And we
stand ready to work with members of the committee and the
Congress to achieve this goal.
[The prepared statement of Ms. Hughes appears in the
appendix.]
The Chairman. Thank you very much, Ms. Hughes.
Dr. Bonanni?
STATEMENT OF LEONARDO BONANNI, Ph.D., FOUNDER AND CEO,
SOURCEMAP, INC., NEW YORK, NY
Dr. Bonanni. Chairman Wyden, Ranking Member Crapo,
distinguished members of the committee, thank you for the
opportunity to speak with you today.
I am the founder and CEO of Sourcemap, a leading provider
of technology for supply chain transparency. As this committee
has underscored in bipartisan fashion, forced labor is endemic
to many supply chains. At the same time, no company can afford
to audit every supplier every day. Business needs a scalable
solution.
I founded Sourcemap at MIT with the goal of leveraging the
reach of the Internet to monitor global supply chains to a
degree that was never before possible. Let me describe how it
works.
First, we set up a unique social network to help companies
identify all of the actors in their supply chain, down to the
names and addresses of every mine, every farm, every factory,
and every warehouse.
Second, companies use this network to regularly collect
data from all of the actors in the supply chain, which our
software then analyzes to detect patterns that indicate the
presence of forced labor. We can even collect data in remote
supply chains where there is little to no Internet access,
using a Smartphone app that works online and offline.
Third, and most importantly, we never take the information
that has been provided at face value. Instead, we continuously
analyze data from suppliers for errors and omissions, for
patterns of fraud, waste, and abuse. To do this, we use the
best available techniques, including satellite imagery, mobile
device tracking, machine learning, and artificial intelligence.
The demand for this level of supply chain transparency is
growing. Sourcemap is used today by some of the largest
companies in the U.S., companies responsible for tens of
billions of dollars in U.S. imports. Thousands of their
suppliers log into Sourcemap from every corner of the globe to
share extensive information on their supply chains. And that is
because supply chain transparency is a very small price to pay
for access to the U.S. market.
For the first time in the history of globalization,
companies can have a map of their global supply chain that is
verified and up-to-date. It is not transparency for
transparency's sake. This map is the foundation for identifying
and remediating forced labor in the end-to-end supply chain, so
that one day everything arriving in the U.S. can have a clean
bill of health.
Is it a panacea? No. But it represents a step change in the
degree of supply chain transparency businesses and governments
can expect in support of their ongoing fight against forced
labor.
Mr. Chairman, supply chain transparency is good for
business in many other ways. It reduces risk. It saves money.
It helps to secure hard-to-get materials. It helps to monitor
for quality, counterfeiting, environmental conditions, health,
and safety.
This committee has an important role to play. This hearing
itself sends a message that you expect action from all
stakeholders. Mr. Chairman, I know that you have been working
with Senator Brown on the new tools to empower Customs and
Border Protection. I encourage you to put supply chain
transparency technology at the center of those efforts.
Supply chain transparency needs to become the norm. At a
minimum, companies should disclose the names and addresses of
their direct and indirect suppliers. This evidentiary standard
will establish the U.S. as the leader in combating forced labor
in supply chains, while saving companies and Customs Protection
millions of dollars.
Setting a simple standard for supply chain transparency
will help create a level playing field for all companies
importing goods into the U.S. It is not just the right thing to
do for our values; it is the smart thing to do for U.S.
business and for U.S. workers.
Thank you for the opportunity to testify. I look forward to
your questions.
[The prepared statement of Dr. Bonanni appears in the
appendix.]
The Chairman. Thank you very much, Dr. Bonanni. I think you
have a land speed record for impressive content delivered very
quickly.
Now let me start with you, Mr. Wrona, because I want to ask
the question that really frames this whole discussion. To what
extent did imports produced by forced labor contribute to your
plant closing and you and your co-workers losing your jobs?
Mr. Wrona. To what extent did it effect all of us?
The Chairman. Yes.
Mr. Wrona. Well, we lost our jobs. We lost our livelihood.
You know, we have rent to pay, mortgage to pay, car payments,
food, college, you know? And these jobs in western New York are
not that easy to fill--or replace, I should say.
The Chairman. I asked it the way I did because I wanted to
give you a chance to really lay out, as you did, just how
serious the consequences were. I was looking at the record and
I thought, well, maybe there would be other factors, but you
basically said that imports produced by forced labor was the
ball game. That is what took that livelihood away from you? Is
that right?
Mr. Wrona. Yes, and we cannot, as American companies or
employees, compete with that.
The Chairman. Right.
Let me go on to you, Ms. Vandenberg. You said that an
increase in Customs and Border Protection forced labor
investigations and enforcements since 2016 was helpful--that
there was an increase, and it took place when Congress closed
the loophole in the forced labor ban.
While this is obviously progress, speak, if you would, to
the scope of the problem that remains, and the difficulties in
obtaining sufficient evidence for Customs and Border Protection
to issue additional Withhold Release Orders.
Ms. Vandenberg. So the scope of the problem is enormous. I
want to thank you for your leadership, and Senator Brown for
his leadership in closing the loophole. It has made an enormous
difference.
As Senator Crapo pointed out in his opening remarks, the
ILO estimates that there are more than 25 million people held
in forced labor around the globe. So we are barely, barely
touching the surface of the problem here.
In terms of evidence provided by CBP, this is an enormous
problem, and we would like to see more self-initiated
investigations by Customs and Border Protection. At this point,
nongovernmental organizations send in petitions to Customs and
Border Protection requesting Withhold Release Orders. It
requires enormous, enormous effort by these nongovernmental
organizations. It requires enormous risk as well, with
witnesses on the ground providing testimony of forced labor--
many of them in fear of retaliation.
So I do not think the system is perfect. We have a lot of
work to do on this, but we are delighted to see additional
enforcement.
The Chairman. Ms. Hughes, a question for you. The Customs
statute charges importers to exercise reasonable care to comply
with Customs requirements when importing goods. And I guess
there is a kind of process, a risk management process, which
your members take to make sure that they are exercising
reasonable care.
Could you just briefly touch on that?
Ms. Hughes. Sure. Thank you so much for the question, and
absolutely. Brands and retailers--this, by the way, is not just
since TFTEA and the change in section 307, but long before
that--had an extensive process of audits, and investigations,
and review of documents, because we know we are the ones on the
ground. We are on the front lines to make sure that we can, if
we see a problem, that companies will take the care that is
needed and be able to show what they have done to remediate, if
remediation is possible. And if remediation is not possible,
then of course companies will take action to cut ties.
The Chairman. Okay. I just want to give a quick kind of
summary of what this panel really has outlined to me.
Mr. Wrona was very, very blunt. He made it clear that
imports produced by forced labor were the bad guy when it came
to destroying the livelihood that he and his colleagues
enjoyed. And Ms. Vandenberg said we had better up the
enforcement efforts. And Ms. Hughes said the private sector
wants to cooperate. And to me, what it tells me as we start
this discussion, is protecting American jobs against imports
made with forced labor, and still going to bat for workers
exploited around the world, are not mutually exclusive. We can
save the jobs of people like Mr. Wrona, and we can help address
exploitation around the world.
We have a lot of colleagues interested in this issue, and
we have a new administration, and it is time to step up our
game and do the work you are talking about. And I thank our
excellent panel.
We are now going to turn to Senator Crapo.
Senator Crapo. Thank you very much, Mr. Chairman.
I will go first to you, Ms. Hughes. As I alluded in my
opening statement, U.S. businesses are partners in combating
forced labor. It seems imperative to me that Customs and Border
Protection should develop an enforcement strategy that works
with reliable American businesses to focus on unscrupulous
actors.
What elements would you look for in such a strategy?
Ms. Hughes. Thank you so much for that question. You know,
I think that is at the heart of the discussion today.
First, we are looking for more transparency. We want to be
partners with CBP, particularly those companies that are
trusted traders and have already been fully vetted and provided
extensive details about their supply chain to Customs and
Border Protection.
We think that we can do more working together than working
separately, and looking at enforcement actions--the real
actions that will get to the perpetrators of the crime, which
is not the U.S. companies that are good corporate citizens.
Senator Crapo. Thank you. And continuing on that line, some
of the businesses in your association have developed supplier
codes of conduct.
Ms. Hughes. Yes.
Senator Crapo. They sort of rely on international
instruments like the Universal Declaration of Human Rights,
some of them, the International Labor Organization's
conventions, and it is positive that American companies are
striving for these high ethical standards.
My question is, what do you view as some of the minimum
elements that an effective code of conduct should contain? And
what can CBP do to help reinforce those efforts?
Ms. Hughes. Thank you so much. You know, the basic thing is
no forced labor in our supply chain, period. And there is no
question that in the code of conduct for every company that is
a basic.
But how can CBP work with us on this? Part of that is
sharing of information so that when they have gathered
information, as other speakers have mentioned, and we have
gathered information, that we can share that information
together to focus on eliminating the practices that already
exist.
Senator Crapo. Well, thank you.
And that leads to a question for you, Dr. Bonanni. It
appears that we are actually under-utilizing the potential of
technology in combating forced labor imports.
What can be done at CBP to expedite the adoption of the new
technologies?
Dr. Bonanni. I think that is right, Ranking Member Crapo.
We are fighting these bad actors with technology from the last
century. And rather than use such blunt instruments as banning
imports from an area, we need to move towards the real use of
supply chain transparency technology, which many industry
members are already using today. What I mean by that is, we
need to grow the scale at which Customs can enforce these
issues. Remember, it is not just the areas that have been
identified as being at high risk for forced labor, because as
soon as an area has been identified that way, the bad actors
will try to move the products to areas that are considered low-
risk.
And so we need to have transparency on both those high-risk
and low-risk sourcing areas to make sure that we can stamp out
forced labor and any path that it might take to market.
I would also urge Customs to set a very simple standard for
the kind of company data that should be collected, so that
companies can confidently import goods into the country.
And then--I know I only have a little bit of time to
explain what is a relatively complicated technology to address
a very complex problem, but we are very open to, and in fact
are already working with the government, including having been
selected to provide traceability for the Department of Labor's
recent project to trace goods of child labor in India.
And so I welcome your questions, but also further questions
from the committee on how we can help to set that data standard
and really go big, so that all of the companies are pushing
transparency to the same degree and tackling the problem
together.
Senator Crapo. Well, thank you.
And, Ms. Vandenberg, I have read that your research
indicates that many countries lack the political will to
criminally prosecute forced labor. That is deeply troubling. It
is simply not enough to stop goods made with forced labor from
entering the United States. Forced labor is a crime against
humanity, and perpetrators must be punished.
What can we do to incentivize countries to bring such
prosecutions?
Ms. Vandenberg. That is an excellent question, but I think
we need to start at home. I think it is highly troubling that
the United States has not brought any cases whatsoever in their
jurisdiction to prosecute global supply chain forced labor in
the U.S. Federal courts.
And what we have seen instead are civil cases brought by
plaintiffs and victims themselves in U.S. courts, using
strategic litigation. I think that the Trafficking in Persons
report issued by the State Department should focus very deeply
on this area to prosecute forced labor around the world. It
does now, but I think it should emphasize that even more.
Senator Crapo. All right; thank you.
My time has expired. Thank you, Mr. Chairman.
The Chairman. I thank my colleague.
Senator Cantwell is next.
Senator Cantwell. Thank you, Mr. Chairman. I appreciate the
hearing.
The United States Department of Justice led an interagency
Task Force on Human Trafficking in Fishing in International
Waters and issued a report just this January. It made specific
recommendations about combating forced labor in fishing on the
high seas.
The U.S. Government promoted the industry effort to help
due diligence in the global supply chain. And among other
actions, the task force reported that they recommend
strengthening the capacity to collect, fuse, and analyze data
from multiple sources to human trafficking in international
waters. And it notes that more data from the fishing industry
regarding this issue of human trafficking, or the risk of it,
would be useful. And I fully agree with that.
I want to ask Dr. Bonanni if he thinks technology might
help in the traceability of the seafood problem, or promote
more transparency so that we could use that on a global scale?
And I would also like to ask Ms. Vandenberg if she could
comment on Customs and Border Protection and enforcing laws to
prevent seafood and other products tainted by forced labor from
entering the United States.
Dr. Bonanni. Thank you, Senator. You know, the problems you
describe are tragic and occur in that industry on a huge scale.
There is absolutely the need to install the same kind of
tracking that we do for land-based industries: factories,
warehouses, mines, farms. There is absolutely the need to
install that technology on fishing vessels and to track them,
because of the fact that they can in fact operate extra-
jurisdictionally.
And so I would urge that the same traceability approaches
that we have seen the leaders of industry implement today for
land-based assets be deployed and be part of the required
tracking of vessels, which is required for many other reasons.
And I would urge that we do it under the same auspices as
one of the other programs that we support that Customs has in
place, the Customs Trade Partnership Against Terrorism, the so-
called CTPAT, which again, for the same reasons, uses that and
mandates a level of tracking and tracing of goods for a
different reason. But the same technology could be used in this
way to ensure the abolition of forced labor on fishing vessels.
Senator Cantwell. So Customs and Border Protection should
take the lead on that?
Dr. Bonanni. I am not versed in policy well enough to tell
you that.
Senator Cantwell. Okay; all right.
Ms. Vandenberg?
Ms. Vandenberg. Yes, Senator Cantwell; thank you for that
question.
CBP has actively enforced WROs on individual fishing
vessels, looking largely at long-line tuna fishing vessels
flagged in Taiwan. Many of those petitions have been put in by
Greenpeace. The problem that we have is that the Seafood Import
Monitoring Program, SIMP, which tracks seafood coming into the
United States, only covers 13 varieties of fish and seafood.
That is only about 40 percent of the fish coming into the
United States. I would have to admit, we are way behind the
Europeans, because Europe, at this point, tracks 100 percent of
seafood coming into their markets.
And so we would strongly suggest that Congress increase the
scope of the Seafood Import Monitoring Program run by NOAA so
that it covers all seafood coming into the United States. One
of the great problems that we have as NGOs filing petitions
with CBP is that we do not have to just file evidence of forced
labor, we also have to show that it is coming into the U.S.
markets, which, without seafood tracing at a 100-percent level,
is extremely difficult.
Thank you.
Senator Cantwell. And so how are the Europeans doing it?
Are you saying they put the resources behind it?
Ms. Vandenberg. I do think that this is a resources issues.
And a number of NGOs that focused on fishing and illegal
fishing have suggested that this program, the SIMP program,
could be extended with just additional resources here in the
United States.
Senator Cantwell. Well, thank you.
Mr. Chairman, I really do believe--as we have said at other
hearings related to USMCA and others--that capacity building
and enforcement go hand in hand. So if we do not have the
capacity--and so we will certainly work at this. We will take
that charge back to NOAA.
Is there anything else they need to do with Customs and
Border Protection in a resource way, or the Coast Guard, to
make this work?
Ms. Vandenberg. I do think that there is a problem with
interagency communication, and interagency cooperation. And so
we would push very hard for Customs and Border Protection to
work more closely with the Department of Labor and with ILAB.
They are already working with NOAA, so I think that is
progress. The limitation is in the number of seafood varieties
they track.
Senator Cantwell. Okay. Well, let's get them all tracked.
So, anyway, thank you so much.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Cantwell. It is important
for the country, and it is especially important for the people
who give us an election certificate in the Pacific Northwest,
and I thank you for doing that.
Next will be Senator Grassley.
Senator Grassley. Thank you, Mr. Chairman, for holding this
hearing. We need fairness in our trade, and we need to level
the playing field. And you are hitting that very hard with this
hearing.
I want to lead into a question with Ms. Hughes this way:
the Australian Strategic Policy Institute in January of last
year said around 600 ethnic minority workers from Xinjiang were
employed at a shoe manufacturer whose primary customer is Nike.
These workers were mostly Uyghur women who at night were
required to study Mandarin and sing the Chinese national
anthem. New evidence from a Nankai report--a Chinese academic
publication with information from public government sources--
shows that the primary aim of what the Chinese call ``labor
transfers'' are not economic but political and demographic. The
report, which was made public in English by the Victims of
Communism Memorial Foundation, details the state's campaign of
cultural and demographic genocide.
In your testimony, you said you want to look at the role of
the U.S. CBP to implement enforcement so that no products with
forced labor reach the United States. So my question: would you
be supportive of holding companies accountable by having
Customs and Border Protection issue Withhold Release Orders on
products that were manufactured with forced labor?
Ms. Hughes. Thank you very much for the question.
Obviously, this is one of the most critical issues facing us
today when we talk about forced labor. And absolutely, speaking
on behalf of the fashion industry and all of those products,
there is no room for forced labor in our supply chains.
And we did not oppose the Withhold Release Order on
products from XPCC, or products from the XUAR region that are
made with forced labor. We recognize this is a critical issue.
We have read the reports that have come out, and companies have
responded strongly to eliminate any of those products from
their supply chain to the best of their ability, where they
have the transparency in the supply chain. And we continue to
support those efforts.
That is why we want to work closer with CBP, if we can, to
eliminate the forced labor.
Senator Grassley. Could you speak to what American
companies like Nike are doing to eliminate forced labor from
their supply chains?
Ms. Hughes. I wouldn't put myself forward to represent
Nike, because I know they can speak well for themselves. But
what I do know is that companies such as Nike, and many other
of the global brands and retailers, have already taken action
in their supply chain.
They have taken action, and we certainly can respond after
the hearing with specifics, you know, from the company level.
But I am very confident that they are not doing any business in
the XUAR region, nor are the other brands and retailers that we
represent.
Senator Grassley. Okay.
To Dr. Bonanni, I am going to skip a lead-in to your
question and get immediately to the question, because time is
running out. With the technology that you have developed at
Sourcemap, are you able to know how many factories in China use
forced labor from Uyghur Muslims? And I was talking about
Uyghur Muslims in my opening, which I skipped to use the time
efficiently.
Dr. Bonanni. Of course. Thank you, Senator. And we all
recognize how important this issue is. With our technology, we
are able to provide to our customers, to leading brands in the
U.S., importers, the data that they need to know whether they
can confidently rely on a supplier, whether that supplier is
direct or is a supplier of a supplier, or a supplier of a
supplier of a supplier.
The main issue we have when we are collecting data from
Xinjiang is the lack of willingness to share. And for a company
like us--we are a transparency platform. So as soon as there is
no more transparency, then the risk becomes absolute, and our
customers will typically choose to vote with their feet and
look elsewhere for sourcing.
Senator Grassley. Okay. I have just 10 seconds left, so one
other quick question. Are you able to track which goods were
produced at factories using forced labor in China?
Dr. Bonanni. We are absolutely able to give our customers
the confidence to know which factories have a very high chance
of using forced labor.
Senator Grassley. Okay. Thank you, Mr. Chairman.
The Chairman. Very good.
Our next panel member will be Senator Menendez, and Senator
Crapo is going to chair because I have to run to the Senate
floor and speak briefly. And we thank Senator Crapo, and
recognize Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman.
Ms. Vandenberg, in your testimony you referenced a recent
GAO report that found that, as a result of a September 2019
order that blocked the importation of rubber gloves from
Malaysian producers, many workers at the company were
terminated, increasing their risks of further exploitation.
We should all be able to agree that our enforcement of the
laws against forced labor should not have the perverse effect
of making the victims of forced labor even more vulnerable. You
suggest creating an emergency fund for workers to help mitigate
these efforts.
How do you envision that fund working? And what would be
the best way to pay for it?
Ms. Vandenberg. Thank you, Senator Menendez. We have talked
a lot today about Withhold Release Orders. We have not talked
about fines and penalties. Because bringing goods made with
forced labor into the United States is forbidden, the importers
should pay fines. Those fines should then be used to fund an
emergency fund.
There has been only one finding issued by Customs and
Border Protection, and only one penalty so far that has been
initiated against a company. It was a $575,000 fine against
PureCircle for bringing in shipments of stevia, the artificial
sweetener that was subject to a Withhold Release Order.
So what we would like to see is that money for fines go not
to the Treasury, and not to the General Fund, but see that
money go to an emergency fund for workers. The ability to
create this emergency fund is really predicated on greater
enforcement by CBP and higher fines. So that is the idea, but
we look forward to working with you to put flesh on the bones
of the proposal.
Senator Menendez. Well, I appreciate you offering a
potential solution. As we work to reauthorize the Trafficking
Victims Protection Act in the Senate Foreign Relations
Committee, I look forward to working with you more on this idea
and seeing if we can put it into action.
In my role as chairman of the Foreign Relations Committee,
we have been particularly focused on goods and services source
information sharing by U.S. companies, ranging from computer
terminals and other high-tech goods, to cotton used in the
manufacturing of textiles and apparel. Last year I wrote to
then-Commerce Secretary Ross asking him to establish clear and
transparent standards of procurement and requirements for
additional labor and human rights vetting for any goods or
services that are manufactured in Xinjiang.
My colleagues Senators Murphy and Rubio have introduced
bipartisan legislation, the Uyghur Forced Labor Prevention Act,
that would do this and more, including authorizing the use of
sanctions on individuals knowingly facilitating forced labor.
And I look forward to having a markup, in some form in the near
future, of that type of approach.
So let me ask, Dr. Bonanni, in your experience, how
widespread is the problem of forced labor in Xinjiang, and are
there specific companies, big or small, that you have seen
knowingly disregard human rights for the sake of profit?
Dr. Bonanni. You know, Senator, I think--I think the extent
of the problem is widely documented. In fact, companies come to
us, to Sourcemap, because they are looking to make completely
certain that they are not buying anything from Xinjiang. But
let me back up a little bit.
There are 155 goods identified by the Department of Labor
from 77 countries at risk of forced labor and child labor. So
the problem extends far beyond Xinjiang. The neighboring
region, or even China as a country, I think needs to be tackled
on a global basis. And not the least of which, the problem is,
as soon as one region becomes marked at high risk, those goods
will find their way to markets through other regions.
And so we have to apply the data collection--the
transparency as we call it--we have to apply it uniformly
across supply chains, or else goods will find their way to
market one way or another, and it will be nearly impossible.
I do want to underscore the complexity here. A
multinational company has thousands of suppliers, maybe tens of
thousands, and they have not, by and large, identified all of
the actors in the supply chain yet. So by setting a clear
standard for what Customs can do, it makes it very easy for
companies to obtain that baseline level of visibility to know
who the actors are--not just direct, but indirect; and not just
in high-risk regions, but in low-risk regions as well where
product is likely to be smuggled.
Senator Menendez. The Finance Committee was debating Trade
Promotion Authority legislation in 2015. It passed my amendment
that barred fast-track procedures for any trade agreement with
a country on Tier 3 of the State Department's Trafficking in
Persons report, which essentially are the countries whose
governments do not expend even a minimum effort to fight forced
labor or sex trafficking.
Ms. Hughes and Ms. Vandenberg, how have these disciplines
worked out so far? And how should we be looking to improve
forced labor standards in future agreements?
Ms. Hughes. Thank you so much. I will go first. We think it
is essential that those provisions are included in our trade
agreements. We need the support from, not just the U.S.
Government that we have been really focused on during the
hearing, but also our international trading partners, to
eliminate forced labor in the supply chain.
So we very much support that approach and look forward to
continuing to work to that end.
Ms. Vandenberg. And I would completely agree. It is our
view that all trade agreements that are negotiated need to have
provisions that ban the importation of goods produced by forced
labor.
And the reason is clear why we need this. It is because
goods brought into the U.S. market that are blocked by a
Withhold Release Order can simply be trans-shipped. And we have
evidence that goods are being trans-shipped to Canada and to
other markets.
And so all of the markets need to have this importation
ban.
Senator Menendez. Thank you, Mr. Chairman.
Senator Crapo [presiding]. Thank you, Senator Menendez.
I do not see another Senator on camera right now. Senator
Thune is next. Senator Thune, are you here?
[No response.]
Senator Crapo. All right, I have--I do see Senator
Whitehouse. Senator Whitehouse, would you like to proceed?
Senator Whitehouse. I would be delighted to. Thank you very
much. And I want to, first of all, thank you, Senator Crapo,
and our chairman for this hearing. And I want to thank Chairman
Cantwell for her remarks and focus on fisheries. And I want to
follow up on her questioning there.
One of the things that we have been trying to do has been
to get the U.S. military to share its information better with
our efforts at enforcement against pirate fishing in the open
oceans. Our first effort to get the Navy to do this was met
with the response that we should go pound sand. It was not
their job. So we came back, and in the following NDAA got the
Coast Guard roped into it. And there is a lot of information
that the Navy and the Coast Guard have access to about the
travel of ships on the high seas.
So as we are dealing with NOAA, with the Department of
Labor, and with Customs and Border Protection folks on this,
there is also this overlay of military and security
intelligence that we should have.
I want to thank the Pew Trusts, and Vulcan, and other
groups that have been really active in this space. Vulcan
describes what it calls a ``devastating and corrupt criminal
conspiracy at the heart of the seafood industry,'' and it is
not just a question of forced labor, it is a question of actual
slavery.
And of course if you are shipping stuff illegally around
the globe, it is just as easy to put arms, or human trafficking
victims, or other contraband in with the fish as well. So
cleaning up this abuse of the high seas, I think is a real
priority. And I wanted to ask Ms. Vandenberg what you see
happening with this, and how we can work better together to
combine all of the different assets and eliminate, once and for
all, this problem.
A lot of things, like vehicle monitoring systems, are
useful for providing data, but that presupposes that the
fishing vessel is legitimate enough to install a vessel
monitoring system, and not corrupt enough to flip it off as
soon as it gets out of the territorial waters of its home
country.
And it is really pretty gross stuff. I mean, you have
people living in cages. You have stories of people who, when
they got sick, were thrown overboard because it was too much of
a pain to go and get them treatment.
I am sure it is a pretty brutal criminal conspiracy out
there, and I am glad that Chairman Cantwell brought attention
to it, and I hope we will keep that as a focus of this. It
combines all the worst elements of forced labor, slavery,
piracy, and international crime.
Ms. Vandenberg, your reaction.
Ms. Vandenberg. Senator Whitehouse, I could not agree with
you more. If you look at the reporting, for example, that is
done by Ian Urbina and the publication of his book, ``The
Outlaw Oceans,'' we are talking about modern-day slavery on the
high seas in a way that is outside the reach of law, unless
countries choose to prosecute. And so murders that are
committed against workers and fishermen on these ships are
unpunished and are treated with total impunity.
I would just add a footnote to your comment on the Coast
Guard. Several years ago we learned that a fisherman had been
handing notes to Coast Guard officers boarding vessels. Those
notes said, ``Please help me.'' We are not certain at this
point what the Coast Guard's protocol is when a fisherman on a
boat cries out and asks for help because they are being held in
forced labor.
So I would ask that the Coast Guard's protocol be clear
about what they do, and how the U.S. Government will intervene
when it finds forced labor on a vessel.
Senator Whitehouse. Well, under the new NDAA provisions
that we got put in, they are going to have to do more reporting
on this. And we will be sure to add that to the questions that
we have in our scrutiny of all of this.
The only thing I would add, Mr. Chairman, is that while
they are not an outright pirate fleet, the Chinese fishing
fleet is behaving in extraordinarily aggressive ways, both as
regards crewing, picking people off of other countries and
taking their papers and putting them into effective servitude,
and also in terms of violating other countries' sovereignty--
and even in the case of one instance in Indonesia, sending a
Chinese military vessel into Indonesian waters to forcibly take
back from Indonesian coastal authorities a Chinese pirate
fishing vessel that it had seized and was going to sink, having
seized it.
So it was basically an act of war, but the Indonesians do
not want to tangle with the Chinese on that level. But in my
trips, particularly with Senator McCain across the Pacific
region, country after country after country raised concerns and
complaints about the improper pressure of the Chinese fishing
fleet against their sovereignty.
So I think it is an area where we can make some real
friends in the region, if we are seen as being active
supporters. I flag that for my colleagues, and thank you for
recognizing me.
Senator Crapo. Thank you, Senator Whitehouse. And those are
very appropriate observations.
Next will be Senator Cortez Masto. And I should also say to
the other Senators that I know we have a lot of Senators who
are trying to shuffle a lot of actions today, but we need you
to start coming back for the hearing.
Senator Cortez Masto?
Senator Cortez Masto. Thank you. Thank you, Ranking Member
Crapo.
Ms. Vandenberg, I would like to start with you. And thank
you for this conversation today. I so appreciate the work that
you have been doing, providing legal representation to
survivors of human trafficking. This is an area that I have
worked in previously as the Attorney General of the State of
Nevada.
As you mentioned in your testimony, Federal prosecutors in
the United States indicted just 12 forced labor cases in the
entire country in the year 2019. So what would you say are the
biggest barriers that prevent traffickers from being prosecuted
in the United States?
Ms. Vandenberg. Focusing on the global supply chain piece,
so on the international cases, I think that there has been a
tremendous reluctance at the Department of Justice to use the
extraterritorial jurisdiction tools that Congress delivered in
2008. I think that is partly a resources problem. I think that
the U.S. Attorneys' offices are reluctant to spend the
resources required to do international investigations.
I think we need international investigators who are
competent and trained to do the sort of investigations that
would be required to bring these cases into a U.S. Federal
court.
Again, looking into the FCPA, as an example, many of those
cases are brought because companies self-report. Companies go
to DOJ with evidence and white papers of their own and inform
DOJ of bribes that have been paid before they get caught.
We do not have that same tradition with forced labor.
Forced labor is currently treated as just a corporate social
responsibility issue, which is enormously problematic.
Senator Cortez Masto. Yes, I cannot agree more with you. To
me, any type of human trafficking we need to aggressively
enforce, and make sure we are doing everything we can. And I
just so appreciate you having this conversation.
Let me ask you--with respect to forced labor, can you talk
a little bit about how well the different Federal departments
and agencies have coordinated around this strategy and tactics
to meet this common goal? What should we be doing in Congress
to help facilitate, if that is not happening?
Ms. Vandenberg. I think that it is improving. And certainly
the GAO has recommended increased interagency cooperation
across the board.
One of the issues that we have is that Customs and Border
Protection investigations are criminal investigations, and so
there are legitimate reasons why it is not possible to share
all of the evidence.
The increased cooperation that we are seeing, and that we
welcome, is increased cooperation between Customs and Border
Protection, ICE, and the Department of Justice. Because the end
game here has to be prosecution of forced labor in global
supply chains. And so that criminal justice alliance is what
will lead to those prosecutions.
Senator Cortez Masto. And can you touch a little bit on why
prosecutions are so important? Just in general for people to
understand, why does this make a difference?
Ms. Vandenberg. On the forced labor side of the house, it
sends an incredibly strong message that forced labor is not
tolerated. Again, I have dealt with agents on forced labor
cases where the agents have essentially pooh-poohed the case
and said, ``Well, this is just a dispute between an employer
and an employee. This is not worthy of the Federal attention.''
The reality here is that we have people who are facing
threats of deportation, threats of violence, physical violence,
sexual violence, in order to compel them to work. These cases
are worthy of Federal attention, and it will be a much greater
deterrent if we can say to corporations and perpetrators, ``If
you commit these crimes, the U.S. Government will prosecute
you.''
Senator Cortez Masto. Thank you very much.
Thank you, Mr. Ranking Member.
Senator Crapo. Thank you.
And next we will have Senator Brown.
Senator Brown. Well, thank you, Mr. Chairman; thank you,
Senator Crapo. I thank Chairman Wyden for holding this hearing
today. He and I have done a lot of work together to close the
consumptive demand loophole to combat forced labor and child
labor. I am excited. This is the first hearing that the Finance
Committee is doing in the trade space this year.
I have two questions. According to a GAO report issued
earlier this month, CBP has issued 29 Withhold Release Orders
since February 2016. Five of them cover a type of good produced
in a specific location or region, such as cotton in Xinjiang,
China, which produces 80 percent of Chinese cotton for apparel
production in China.
The Center for Global Policy issued a report that suggests
more than a half-million Uyghurs and other Muslim minority
people in Xinjiang have been forced into picking cotton.
Chairman Wyden and I wrote to the previous administration
urging them to do more to enforce the law and stop importing
products made by state-sanctioned forced labor. We clearly must
do more.
Ms. Vandenberg, you have recommended we strengthen
enforcement of the existing regional WRO on cotton and cotton
products in Xinjiang. Can you elaborate on your
recommendations, please?
Ms. Vandenberg. Absolutely. I work with a coalition of
nongovernmental organizations, the Tariff Act Advisory Group
(TAAG), and we have actually submitted concrete recommendations
to CBP that I referenced in my written testimony, encouraging
them to robustly enforce region-wide WROs, and particularly the
region-wide WRO on cotton and tomatoes in Xinjiang.
So very specifically, just three points.
Number one, there needs to be greater transparency. We do
not have any insight at this point into shipments detained
under the region-wide WRO that banned Xinjiang cotton and
tomatoes. So we need more insight to see what is coming into
the country.
Secondly, this is a very narrow approach. Looking only at
goods coming directly from Xinjiang ignores the fact that has
been raised in this hearing that goods will be trans-shipped,
not just to other countries, but also from other regions in
China. Brenda Smith of Customs and Border Protection's trade
office has said herself that China itself tracks cotton down to
the bale level. And so we need to also be tracking goods down
to that level.
The last point I would make is just to reference the
testimony from Scott Nova from the Worker Rights Consortium
before the House Ways and Means Committee. He pointed out, and
I think it is true, that at this point, companies should simply
not be in Xinjiang. There is no reason to be there anymore. And
this rebuttable presumption that goods coming from the region
are made with forced labor, I think must stand.
Senator Brown. Thank you so much, Ms. Vandenberg. I thank
you for devoting your professional life to such important work.
My other question is for Mr. Wrona. Thank you for your
advocacy on behalf of organized labor and the steelworkers. I
wear a pin I've worn through most of my congressional career;
it's a pin designed and stamped by United Steelworkers, so,
thank you for that.
One of the big themes that seemed to come across today's
testimony is a need for additional transparency and better
coordination among the CBP, other government entities, and
stakeholders.
GAO has recommended CBP strengthen its communication with
stakeholders and make a description of its WRO revocation and
modification process publicly available. Several people today
have recommended that CBP expand its collaboration and
communication with other agencies like USTR--and we are
thrilled with the 98-0 vote for the new U.S. Trade Rep--ILAB,
the State Department, as well as nongovernment organizations.
So, Mr. Wrona, my question for you: what additional
transparency would help unions and other worker support
organizations protect workers who find themselves at risk of,
or impacted by forced labor? And as you answer that, I ask you
to answer this question, too: how does greater transparency
around CBP decisions of ongoing investigations help protect
workers at risk, as well as U.S. workers who are impacted by
this?
Mr. Wrona. Well, Senator Brown, to your first question, I'm
a maintenance worker in a plant, and I don't have that much
knowledge on the transparency issue. But I do know that if I am
at work and I have a job to do, it gets checked, whether by
quality, by management, by whoever.
So I think it should be our government's job such that
everything that is coming into this country can be stopped if
they are products from forced labor. And greater transparency
will help stop illegal goods and keep corporations that are
honest in our supply chains. Thank you.
Senator Brown. Okay; thank you, Mr. Wrona.
Mr. Chairman, thank you for the time, and I appreciate it.
Thanks for doing this.
Senator Crapo. Thank you, Senator Brown.
Next is Senator Thune, and then Senator Warren.
Senator Thune. Thank you, Mr. Chairman.
Ms. Hughes, in your written testimony you state that member
companies of the Fashion Industry Association have made, and I
quote, ``extensive progress toward removing links with forced
labor in their supply chains.'' While forced labor is deeply
wrong wherever it occurs, there is increasing evidence of
Uyghur Muslim forced work in cotton fields and factories in the
Xinjiang region of China.
What actions have your member companies taken to help
ensure the goods they are selling are not from forced labor in
China? And what is the most important thing that the U.S.
Government can do to help, in your mind?
Ms. Hughes. Thank you so much. I want to be very clear to
the members of the committee that brands and retailers have
taken action to not have any links to trade from the XUAR
region and the Uyghurs.
You know, even before the Withhold Release Order was
issued, it was clear from the information that was publicly
available that there were problems and concerns in the region,
and particularly with the pandemic where there was no ability
for anyone to actually visit a facility to look for themselves.
I think it is clear that companies have cut off those ties with
the region.
So what could we really use? You know, I think the big
takeaway from the hearing today is that more resources are
needed overall for dealing with this issue. And for our
industry in particular, we continue to look for more
transparency--you know, release of names of bad actors, when we
know who they are, release of best practices. When we see
those, what is working--which may be tracking, transparency,
technology solutions--more resources are definitely part of
what we are looking for. And we look forward to working more
with you and the committee.
Senator Thune. Let me, just as a follow-up, talk a little
bit about those Withhold Release Orders against Chinese
entities----
[Loss of audio].
Senator Thune. In November, CBP issued a Withhold Release
Order on cotton products from Xinjiang, and 43 shipments valued
at more than $2 million. CBP is doing excellent work. But in
your estimation, how can the Withhold Release Order process be
made more effective?
And perhaps on a related theme, what new technologies
should CBP be considering to detect where supply chains are
most susceptible to forced labor?
Ms. Hughes, do you want to start with that? And if others
have comments, that would be great. Thanks.
Ms. Hughes. Thank you so much. When we look at the data for
what had been detained, what you see is that those were
obviously small shipments, probably from smaller producers. So
we go back to, CBP needs to work with trusted traders--that is,
the companies that have already been vetted and provided that
information on their supply chains--and be able to focus their
energies more on the bad actors.
The folks who are not part of trusted trader programs and
are probably not the large importers to the United States, I
think that that is one way to kind of use the resources that we
do have more effectively.
Senator Thune. All right; anybody else quickly on that?
Ms. Vandenberg. I would just like to add, very briefly,
that we are very concerned about the process for modification
and revocation of these WROs. It is not just their issuance, it
is also how they are removed over time.
And it is very important that workers be at the table to
actually articulate and determine whether the remediation that
the company claims it has done has actually been achieved.
We are seeing reimbursement of recruitment fees being
completed over a period of months, rather than in a lump sum,
which basically means that workers are loaning corporations
money, which is not acceptable. So workers really need to weigh
in on the validity of remediation plans that are submitted.
Senator Thune. Let me just quickly shift to the labor
audits. There was a Wall Street Journal report in September
that said at least five auditing firms say they will not offer
supply chain inspections in China's Xinjiang region. There was
a U.S. Government report last year that stated the supply chain
auditors had reportedly been detained, threatened, or stopped
by Chinese authorities in the region.
As American companies look at their supply chains, are they
finding it more difficult to find independent labor audit
inspections in Xinjiang? And given the lack of access for
independent auditors, how are companies adapting their supply
chains from the area? And I only have about 20 seconds left.
Ms. Hughes. If I can jump in, just briefly, that is why
companies are not doing business in the region. If you cannot
audit--and we follow the example of the Better Cotton
Initiative or the Fair Labor Association--many of the
organizations that our members work with were not doing
business in the region for exactly that reason.
Senator Thune. Okay. I see I am out of time. I would love
to get others' comments on that, but maybe they could supply
them for the record.
The Chairman. Very good.
Senator Warren?
Senator Warren. Thank you, Mr. Chairman. I appreciate it.
And thank you for having this hearing.
The use of forced and trafficked labor in China and too
many other places around the world ranks as one of the worst
abuses of basic human rights. We have a moral obligation to
stamp out these despicable violations and to protect workers,
regardless of where they are in the world. This is about our
values, but it is also about consequences here at home.
American consumers are unwittingly buying products made
with forced labor at their local clothing stores. American
workers are being placed in the impossible position of
competing against forced labor and child labor. And big
American corporations who have spent decades moving jobs
overseas are taking advantage of forced labor to improve their
profitability.
Mr. Wrona, are corporations doing enough themselves to
scrutinize their own supply chains for forced labor?
Mr. Wrona. No. The answer is, absolutely they are not.
Senator Warren. That pretty much answers it.
So let's talk about what corporations are doing. Apple,
Nike, Coca-Cola, companies that are as American as apple pie,
are just a few of the brands that are suspected of relying on
suppliers that use forced labor. And they have spent huge
amounts of money, and deployed armies of lawyers and lobbyists,
trying to water down legislation that would make them take more
responsibility for their supply chains.
So, Mr. Wrona, how do you reconcile these companies'
actions with their strong public statements against forced
labor? Do you--or let me ask it another way. Do you think they
are likely to take meaningful steps to clean up their supply
chains voluntarily?
Mr. Wrona. No, I don't think they will. That is why I
believe the government has a role to protect our American
workers from forced labor. Corporations making voluntary
changes has been talked about for decades, of course, but this
topic was--my father brought this topic up when I was a
teenager. We talked and talked and talked about it, and not a
lot gets done about it. It needs to stop now.
Senator Warren. Yes. Well, I appreciate your point about
how this has been going on for a long time, and it is just more
talk. You know, there is a lot we need to do across government
to end forced labor, and it starts with holding corporations
that profit from forced labor accountable.
And that means corporations should not be allowed to hide
behind cheap talk or opaque audit processes. They need to show
us that their supply chains are clean, and to face meaningful
consequences if they are not.
We also need to pass meaningful anti-corruption legislation
to prevent corporate lobbyists from sabotaging efforts to put
our core values ahead of corporate profits. Under no
circumstances should our supply chain support the repression of
workers' right overseas, or undercut workers' rights and
workers economic security here at home.
It is long past time that corporations are held to account
for their complicity in forced labor.
Thank you, Mr. Chairman. I yield back my time.
The Chairman. Thank you, Senator Warren. You and I both saw
that Mr. Wrona set the all-time record for succinctness. And we
have appreciated that.
Senator Warren. And that is because there is no ambiguity
on this point. As he said, we have been talking about that
since we were all teenagers. We have understood this problem,
and Mr. Wrona is ready to go on it.
The Chairman. Well stated.
Senator Carper?
[Pause.]
Senator Carper. Can you see me?
The Chairman. Yes.
Senator Carper. Can you hear me? Tommy, can you hear me?
Tommy, can you see me? Apologies to The Who. [Laughter.]
Here we go. First I want to thank you for holding this
hearing, Mr. Chairman, Ranking Member. I do appreciate the
witnesses joining us as well.
I want to--and we are here to--discuss the challenges that
we are facing when it comes to forced labor in our supply
chain. It is a timely topic, and one that is important.
Throughout my time in public service as Treasurer,
Congressman, Governor, and Senator, and Naval officer before
that, I have tried to live by a few guiding principles. And
some of them may sound familiar to all of you. One of them is
The Golden Rule, the idea that we ought to treat other people
the way we want to be treated.
And another one comes out of Bible study, later today.
Barry Black, the Senate Chaplain, always reminds us to show up,
and we have about seven, or eight, or nine of us who show up,
for those who need the most help in the U.S. Senate, and he
always reminds us of a verse of scripture, Matthew 25, about
the least of these, that we need to care for the least of these
among us.
And I want to live up to this. I think we have a moral
obligation to those in need. We cannot turn a blind eye with
respect to this obligation.
I have been heartened to see that the U.S. Customs and
Border Protection has increased its forced labor enforcement
actions, including, I am told, nearly 30 Withhold Release
Orders in the past 5 years--30 Withhold Release Orders in the
past, I guess it is the past 5 years.
I know there is still a good deal more we can do to ensure
that our laws forbidding forced labor are not just words on a
piece of paper, but that they really are enforceable. This
means working with a number of entities, Federal agencies for
one, private-sector businesses large and small, and
nongovernmental organizations, consumers alike, to increase
transparency in our supply chains.
The question, if I could, for Ms. Hughes and Ms.
Vandenberg, is, could you share with us one or two
recommendations for Customs and Border Protection and how that
agency, that entity, can improve its communications with key
stakeholders on forced labor, including industry and
nongovernmental organizations? Please, Ms. Hughes, Ms.
Vandenberg?
Ms. Vandenberg. Thank you very much. As I know I have said
multiple times today, this enforcement is the critical way that
brands and retailers can guarantee that we are maintaining
clean supply chains, and making sure that there is not forced
labor in our supply chains.
So we specifically have been asking Customs and Border
Protection--and we have been meeting with them regularly--for
additional transparency on the findings that they do have, so
that we are able to take action faster against the bad guys,
and also to work with us to guarantee that there are other
resources to--there is a lot of additional enforcement that we
have talked about today, but we clearly need to beef up the
resources that are available to CBP and to other agencies to
deal with a globally difficult issue like forced labor.
Senator Carper. All right. Ms. Hughes?
Ms. Hughes. I would just add that communication has
improved immensely, and CBP now meets with----
Senator Carper. Over what period of time have you observed
that?
Ms. Vandenberg. In the last, I would say year, they have
started meeting with the NGO community quarterly. And what we
would like to see is much more informal back and forth. Some of
that happens--I will give you a good example.
Greenpeace has done a great deal of work to get the
Withhold Release Orders on vessel-level forced-labor fishing
vessels. Those vessel-level Withhold Release Orders, we
believe, should be expanded to fleet level, since that forced
labor on one vessel would actually infect the entire fleet,
because it is probably going on throughout the fleet.
So those kinds of communications with CBP, those informal
communications, are extremely important. But it is also
important for petitioners to know when CBP plans to take action
on a petition. And it is also important for petitioners to know
when CBP plans to revoke or modify a petition so that we can
see whether the remediation on the ground is adequate.
Senator Carper. And I have one follow-up question, if I
could. This deals with improving the release order process--Ms.
Vandenberg, if you would.
Recently, GAO, the Government Accountability Office, issued
several reports that concluded that CBP faces challenges in
implementing its Withhold Release Order process. At this time,
CBP, as far as I know, has not shared its criteria process for
revoking or modifying these Withhold Release Orders. And
although the number of forced labor investigations has risen in
recent years, CBP has struggled to collect sufficient data to
set performance standards.
My question, Ms. Vandenberg, is, in your view, how can the
WRO process be improved? And what additional might CBP need in
order to bolster its enforcement authority?
Ms. Vandenberg. So CBP has actually provided the revocation
process documents and fact sheets on how the system works. But
I do think that there is a need for additional resources to
deal with the system-wide issues. Again, one of the things that
we frequently say is that forced labor is a feature and not a
bug. And so dealing with these issues as one-off attacks on
individual bad guys is not going to work. CBP needs to work
with unions and with workers' rights organizations in order to
make sure that we are systemically eliminating forced labor.
Senator Carper. Thank you, ma'am. I expect my time has
expired. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Carper.
The next two in line are Senator Portman and Senator Casey.
Senator Portman, are you there? Or, if we do not hear from
Senator Portman, we will go to Senator Casey and get Senator
Portman later.
Senator Casey?
Senator Casey. Mr. Chairman, thanks very much. And I want
to thank you for this hearing.
I just have one question for Mr. Wrona regarding some of
the material covered today, but also referencing a hearing we
had earlier this week. We had a hearing on Tuesday about
American competitiveness in the context of manufacturing.
And I know that your experience at Ferroglobe tells the
other side of the story. That means illegal subsidies, forced
labor, and over-capacity have been devastating for U.S.
production and manufacturing. It is not simply a matter of
providing better incentives. We have to have strong, iron-clad
trade enforcement. Because if we do not, we will continue to
lose foundational industrial capacity.
So we know in the United States we can make it here with
good-paying jobs, family-wage jobs, $70,000 and up, all the way
up to $100,000 or more. But we have heard a lot from this panel
today, rightfully, on the impact of forced labor in foreign
countries, but there are impacts here at home.
Forced labor anywhere--anywhere--harms workers everywhere.
Illegal subsidies anywhere harm workers everywhere. So whether
it is forced labor or illegal subsidies, can you talk about the
impact that this has had on you and your family when you lost
your job because of forced labor?
Mr. Wrona. When at Globe, and quite frankly, when American
Axle closed, it impacted my family severely. I mean, I look at
both of my children's student debt. If these manufacturing
factories were still here, their debt would not be as
substantial as it is, or at all.
Senator Casey. Anything else you think we should know about
what is the best policy here for us?
Mr. Wrona. I think American workers and American companies
that manufacture here--it needs to be a fair playing field.
There are certain things we just cannot compete with. Not only
cheap labor, but slave labor is impossible for anybody to
compete with.
Senator Casey. A level playing field.
Well, I promised one question. Mr. Chairman, I will yield
back more than 2 minutes. Thank you.
The Chairman. I thank my colleague. Members have pretty
hectic schedules, so we are going to Senator Young, and then
Senator Warner. And I hope others who would like to ask
questions will let us know.
Senator Young?
Senator Young. Thank you, Mr. Chairman. My home State of
Indiana is the most manufacturing-intensive State in the
country and employs over a half-million Hoosiers. Despite our
excellence and success, we have not been immune to job losses
because of offshoring, as companies seek cheap inputs from
China.
A supply chain that is dependent on China is plagued with a
number of issues. Intellectual property theft, disruptions, and
forced data transfer are among them. And unsurprisingly, China
is guilty of using forced labor to facilitate this dependence
on their inputs in our supply chain.
Dr. Bonanni, in your testimony you explain how your
technology can help businesses identify the use of forced labor
in their supply chains. What are some barriers that might
prevent a company from seeking your services?
Dr. Bonanni. Thank you for the question, Senator. The real
problem here is that there is not a clear standard across the
board. So we have companies that have already gone to the
trouble of mapping their supply chains down to the raw
materials, and have also extricated themselves from parts of
the world where they felt the risk as simply too high to
continue operating.
However, the standard is not evenly distributed.
Transparency is not the norm. It is still the exception. And
companies today need to be aware that identifying the actors in
the supply chain, monitoring them continuously, and rooting out
fraud, waste, and abuse are totally doable. These are things
that are being done. They have been done now for years--that
is, on the private-sector side, on the technology side.
On the Customs and Border Protection side, we just need a
very clear standard for what kind of data companies need to
collect regularly, and keep up to date and keep fraud-free, in
order to be ensured that their shipments can enter the U.S. and
be confident that those shipments do not touch forced labor.
And again, that standard needs to be applied across the
board.
Senator Young. Sure. So you have indicated that is an
appropriate role, as you see it, for the Federal Government.
Customs and Border Patrol needs to come up with a coherent and
consistent standard for the private sector.
Are there other roles that the Federal Government should
fill in deterring the use of inputs or products at the hands of
forced labor, to your mind?
Dr. Bonanni. I think that it is very clear that the
diplomatic pressure that the government applies is
extraordinarily useful and essential to rooting out forced
labor. But in order to apply it effectively, we are going to
have to look at not just those goods that are traced to the
XUAR, we are going to have to look at all factors that could be
used to pass through goods from the XUAR.
So the standard does need to be applied uniformly to
effectively enact this diplomatic pressure. It also needs to
look at other countries and other regions of China where these
goods might be passing.
Senator Young. Very good. Well, relatedly, I am working on
a piece of legislation that, among other things, would require
the disclosure of whether materials, goods, or services from
areas such as Xinjiang were made utilizing forced labor. While
I am skeptical that we can ever trust the information provided
by Chinese companies, do you believe that such disclosure
requirements would be helpful at the time of production and/or
purchase of these goods?
Mr. Bonanni. Absolutely. Look, supply chain transparency is
a new thing. Until just a few years ago, the technology did not
exist to even implement that, how you communicate effectively
with thousands of suppliers, tiers upon tiers upon tiers of
supply.
Now that that technology exists, now that we can monitor
that data for accuracy, we can cross-reference. We can look at
satellites. We can look at third-party databases. We can audit
the auditors. There is a tremendous wealth of technology
available to companies that want to do this and do it the right
way.
Senator Young. And, yes or no, if possible, would I be
correct to assume that you would agree that public companies
that make profits off the back of those in forced labor camps
should be forced to disclose their utilization of supply chains
that run through Xinjiang?
Dr. Bonanni. I think the disclosure of all suppliers,
direct and indirect, should be a norm that all U.S. companies,
and all foreign companies doing business in the U.S., should be
held to.
Senator Young. Okay. Very good. I will be following up with
some questions for the record to you, Doctor, about how
blockchain technology can help tackle forced labor issues
embedded within our global supply chain.
Dr. Bonanni. Happy to work with you.
The Chairman. Thank you, Senator Young. We are going to go
to Senator Warner, and then Senator Cassidy. We are trying to
go back and forth as much as possible.
Senator Warner?
Senator Warner. Thank you, Mr. Chairman. Thank you for
holding this hearing.
I want to build on so many of my colleagues' comments, but
I do want to say one thing as we talk about China. I am very
concerned about forced labor, and I am very concerned about the
situation with the Uyghurs.
You and I serve on the Intelligence Committee, and we have
raised concerns about China's technology and unfair competition
in a series of areas. But I do think something I have tried to
be sensitive to, literally over the last couple of years, is,
when we talk about China, we constantly reference the fact that
our beef is with the Communist Party of China. It is with the
policies of Xi Jinping. It is not with the Chinese people. We
stand with the Chinese people in Hong Kong who are trying to
fight for freedom.
And too often, particularly accentuated by the former
administration, this current blasting of China has translated
into anti-Asian American hate activities. We see the tragedy
that took place in Georgia yesterday. And I know from talking
to my Asian American community, but particularly the Chinese
American community in Virginia, that it is important that we
make this distinction about our beef being with the Communist
Party of China and Xi Jinping, which again has mistreated not
only the Uyghurs, but I point to the people of Hong Kong.
Ms. Vandenberg, can you talk a little bit about which kind
of product lines, and where we are seeing Uyghurs in forced
labor in our supply chains? Because I think there is a general
perception that it is chiefly low-end textiles and other
things, but I think that it has proven not to be simply those
lower-end things.
Ms. Vandenberg. You are absolutely correct, Senator Warner.
It is across the board. It is high-end goods that are
electronic goods that we purchase. So it is high-end goods. It
is also garments, clothing that is either produced in Xinjiang
or in other parts of China, or in Vietnam and other countries
where they export the cotton.
So I think that cotton and tomatoes are a good start for
the WRO, but it is so much broader than just those two
categories.
Senator Warner. I would agree. As a matter of fact, there
is a recent report by the Horizon Advisory Group that has shown
that, in Xinjiang, a number of solar companies have actually
moved in. We all want to move towards greater solar panel
production, but when that production includes forced labor, it
has to be of huge concern.
And I simply--in the effort to try also to cede back time,
I just want to make one last comment, Mr. Chairman. That is, I
echo some of the concerns that Senator Young has raised. I
think we need more transparency on the global supply chain.
I think for a long time we have looked at the lowering of
the prices that have come from the global supply chain, but
with the opaqueness of that supply chain in this last year with
COVID, we have seen the downside to that supply chain.
We have seen where we are dependent for the supply of our
pharmaceuticals and raw materials coming disproportionately
from China. We have seen single points of failure. We have
seen--one of my concerns is that the Chinese Community Party
seeks an economic model whereby they allow competition in their
domestic market, and some of that competition can be brought
about by using forced labor. You always will then have a
Chinese company win the Chinese domestic market--75 to 80
percent in the case of a Huawei. That translates into 20, 25
percent of the global market.
And then when China can bring enormous economic heft behind
that Chinese champion, it puts any company, American or
otherwise, at an economic disadvantage.
So I hope we can work on more transparency. I think Senator
Young has some good ideas around that global supply chain. And
I will close with this, simply, that we need to go after forced
labor, but I think it really is important that we note that our
beef is with the Community Party and their policies, not with
the Chinese people.
And for the first time, Mr. Chairman, ever, I may be
yielding back 41 seconds.
The Chairman. And I very much share your views, Senator
Warner, with respect to who the real beef is with. It is not
with the people who are working hard and trying to play by the
rules; it is with that government. So I thank you for that.
We are now going with Senator Cassidy, followed by Senator
Portman. We are trying to go back and forth with members, but
it is kind of getting hard to keep track of everybody.
Senator Cassidy?
Senator Cassidy. Dr. Bonanni, thank you for being here. I
am very interested--Senator Young finished up by mentioning
blockchain. It does seem like a distributed public ledger would
help us follow many things.
Can you comment upon its potential usefulness in this
situation?
Dr. Bonanni. Senator, thanks for the question. I absolutely
think there are many places where a distributed ledger could be
extremely effective and help to standardize exactly what I was
talking about in my testimony, which is the disclosure of
suppliers in the supply chain uniformly for high-risk and
lower-risk regions alike. I will say that our company
specializes in tracing supply chains from the retail all the
way back to a small farm, or even an artisanal mine--operations
that are completely off the grid, sometimes record-keeping is
only done on paper, if at all. And we do need to look at a
suite of technologies that does not leave out those parts of
the supply chain where implementing a distributed ledger would
right now represent a barrier to entry. We need a solution. And
we have solutions that have been proven to work, and they work
today for monitoring forced labor even in contexts where, until
recently, all record-keeping was done on paper.
So while there is a place for blockchain, there is also a
place for general use of the cloud and mobile technology,
especially in emerging markets where smartphone adoption is
taking off.
Senator Cassidy. Got you. Now let me just explore that a
little bit, because I was so pleased Senator Young spoke to
that, because I have been thinking about it as well.
Recognizing what you say, that from the factory door back down
to the small farm, you need a different mechanism. But from the
factory door all the way to the end retailer, it may be that a
distributed ledger works.
And just for the context, we know that all the parties are
able to look at the ledger, and they can monitor whether or not
something has been done appropriately or not and if there is an
alteration or attempt to forge a record to make it appear
different than it really is, or at least as it was originally
posted.
Is that a fair kind of a summary of the potential of the
technology?
Dr. Bonanni. You know, the technology has that potential. I
do want to caution. The ways that it is used are very subtle,
and some of that data of course cannot be shared in a public
blockchain because of antitrust concerns.
So there is a great deal of data that will have to be
collected using existing techniques and technologies. I also
want to add that once something is in the blockchain, it may
not be changed. But fraudulent data can be written to a
blockchain at any time.
And so we still need verifiable raw data to be collected at
the source. And that means that the data has to exist in
multiple places and be scrutinized by many pairs of eyes. And
so we, for example, even when we have an auditor going through
a factory, we track that the auditor is actually in the place
where they are supposed to be. Before they had to use the
smartphone to conduct the audit, we saw a lot of audits being
completed from home or from the office.
And so we recognize that very high-tech solutions are
beneficial, and especially for very sophisticated players in
the supply chain. But we also need to make sure that we look
for bad actors at every stage; that we do not just take data
that has been declared by suppliers as being true.
Senator Cassidy. Got it. With that, Mr. Chairman, I will
yield the floor to whomever is next.
The Chairman. Thank you very much, Senator Cassidy.
Senator Portman?
Senator Portman. Thank you, Mr. Chairman. And thank you for
making this possible, with all of our schedules. I want to
thank you for the hearing too, you and Ranking Member Crapo.
This is a really important one.
Ms. Vandenberg, I appreciated your views this morning and
your work more generally on this issue. You clarified that
forced labor involves a lot of different sectors of our
economy.
Ms. Hughes, I appreciate what you said in your testimony
about how success should be measured by a reduction of forced
labor. And we appreciate your company's work in that regard.
I have to tell you, I was surprised last year when I saw
this investigation by The New York Times on what is happening
during the pandemic in the Xinjiang region of China. This of
course is where the Uyghurs are experiencing so many human
rights abuses, and one of course is forced labor.
I learned that, with regard to personal protective
equipment, PPE, there were only four companies prior to the
pandemic that were producing PPE. Yet, by June that number had
increased to 51 companies; 17 of those companies were known to
utilize Uyghur forced labor.
While not all of these were for export--I acknowledge
that--the principle still stands: instead of meeting the demand
for PPE with products produced by forced labor in China, what
we should be doing, obviously, is incentivizing the return of
PPE production to the United States--just one more reason.
And one way we can do that is by issuing these long-term
contracts. What we have found is, the companies in the United
States--and I spoke to some as recently as yesterday--they do
want to produce more products here, textiles in general, but
specifically PPE, but they need to know there is going to be a
market for it. And specifically, it frustrates me that our
Federal Government will not give them long-term contracts with
some predictability and some certainty. And it seems to make
sense, frankly, for the U.S. Government as well; otherwise, the
reshoring is not going to occur.
So in our proposal called the Make PPE in America Act, we
simply add a Berry Amendment requirement to strengthen these
supply chains.
Mr. Wrona, I am going to turn to you because I have not
seen you answer a question recently--I am sure you were busy
earlier--but can you explain how doing this, diversifying the
supply chains and reshoring manufacturing, can help reduce
reliance on forced labor?
Mr. Wrona. Well, I think if the government would spend some
money on our factories, and some investment--you know, Globe
itself has spent millions and millions and millions of dollars
fighting cheap Chinese products. If they were to spend that
money on our factories, they would run more efficiently and
maybe we would still be open.
We need some type of fair playing field to help us out. And
if the country wants to go solar, wants to go green, but we are
going to rely on 80 percent of our solar-grade silicon to come
from China, so then we rely on China to go green? That does not
make sense to me. I do not know how we can let that happen.
Senator Portman. Yes. And it also helps with regard to the
forced labor in China if we can have that PPE, as an example,
be made here.
Mr. Wrona. Right.
Senator Portman. So the general principle stands.
Another issue we talked about was this blockchain, the
distributed ledger idea. And I found that a really interesting
conversation with Senator Cassidy.
Dr. Bonanni, I think there is an opportunity here to use
artificial intelligence better. I am chair of the caucus here
in the Congress on this, and I led a letter with Senator
Warner, actually last year, to Secretary Pompeo about the AI-
enabled facial recognition technology the Chinese Party is
using to surveil Uyghurs. And also other authoritarian regimes
are increasingly using artificial intelligence. So it is
certainly being used in a negative way.
But I also think that artificial intelligence can play a
helpful role in combating forced labor. Researchers
successfully used machine learning, as an example, to identify
fishing vessels using forced labor by recognizing patterns that
were unique to those vessels.
Your company uses technology in this regard. Are you
interested in this? Are there forced labor signatures within
supply chains? How can AI make it easier to identify those
signatures which might not be readily apparent?
Dr. Bonanni. Absolutely. Look, I am an MIT guy at heart, so
I think of this as a fight that we have against supply chain
hackers. They are using modern technology to misrepresent the
origins of goods to get them into the U.S., and we are still in
many cases using last century's technology to monitor supply
chains. And we need to bring that level of technology that we
use in enforcement much higher than the hackers. It is not that
sophisticated what they are doing. We just need to detect
fraud.
And what we do ranges from very simple things like making
sure a farm produced the right amount to be expected for the
area, to making sure that the audits are conducted blindly and
with lots of supporting documentation. And all of that, you can
think of it like a credit card company scanning your
transactions to look for anomalies to put up red flags early,
to help companies immediately detect a problem in their supply
chain months before they even receive the goods.
So artificial intelligence, machine learning, those are
absolutely essential to monitoring those supply chains once we
have transparency.
Senator Portman. Thank you, Mr. Chairman.
The Chairman. Senator Cardin?
Senator Cardin. Thank you, Mr. Chairman. And thank you very
much for this hearing. It is incredibly important.
I want to ask Ms. Vandenberg and Dr. Bonanni a question in
regards to what we can learn from our experiences in the
trafficking world. In dealing with human trafficking, we have
been able to get the global community to enact very strong
laws. We talk about transparency and the need to deal with
supply chains and forced labor, but we have strong laws dealing
with trafficking. We have put resources behind those laws in
order to get the facts. We do not have to just rely on
transparency if we have capacity to know what countries are
doing in regards to fighting human trafficking.
And then we have global recognition, through the
Trafficking in Persons report, as to what every country is
doing in dealing with this issue. And lastly, there are
consequences if you do not meet certain standards. There are
consequences in those regards.
And I can tell you that when I meet with representatives
from other countries, they know about our Trafficking in
Persons report. They know how they are rated. And that document
has received widespread support, and of course it gets
visibility every year when the report is released.
So my question to the two of you is, is there something we
can take out of what we have been able to do with trafficking
which also deals with forced labor and trafficking in labor?
Are there lessons that we can learn in order to strengthen the
transparency and global cooperation in rooting out the unfair
human rights violations of forced labor?
Ms. Vandenberg. So I would answer, briefly, with two
points: one, end complicity; and two, be skeptical.
Number one, it is very difficult for the United States to
complain about forced labor in supply chains when the end-
importers of those forced-labor goods are U.S. companies and
there is no enforcement against the U.S. companies and Customs
and Border Protection enforcement is against suppliers on the
ground in other countries.
So I think we need to make sure that we are holding
American companies accountable for importing goods made with
forced labor. One fine, one penalty is not enough.
The second point I would make is skepticism. The State
Department learned over time that it needed to be very
skeptical about self-reporting from those countries, about how
many prosecutions and what enforcement they had done. They
needed to be very skeptical that those countries were, for
example, taking credit for work that was actually done on the
ground by nongovernmental organizations, rather than with state
funding or with state programs.
That skepticism from the Trafficking in Persons world
should be focused like a laser beam on auditors. Because what
we see with this audit industrial complex is exactly what Dr.
Bonanni referenced: audits that are fake, audits that are
bogus. I will just give you one example to close.
There was a factory that had a third-party auditor, and it
was unannounced. So everything seemed utterly kosher. But when
the unannounced auditor arrived at the door, the owner of the
factory simply changed the music to a different song, which in
the factory was the well-known sign to all the children to run
out the back door.
So we have to be very skeptical of what is coming in about
whether or not these supply chains are clean, because the
auditors are not independent.
Dr. Bonanni. Let me just add two points on my end. The
resounding lesson of the past year has been that Customs and
Border Protection sent a signal that was heard around the world
with WRO enforcement. It is leading, frankly, the world in this
approach, and it has spurred a lot of companies to implement
transparency, traceability, verification of their supply chain,
in a way that they were not doing before Customs and Border
Protection.
So I applaud CBP for doing this. And I think you should
recognize just how powerful that signal has been to a variety
of industries.
And the second is the same skepticism that I want to
underscore, which is with that enforcement, with that will to
enforce, there needs to be a commensurate collection, analysis,
verification of data that can be used to definitively prove
that a supply chain is up to par, but also to definitively
exclude supply chains in which there is not sufficient
transparency to have the confidence that there is not forced
labor, and so that we can know and companies can know exactly
who to do business with and who to avoid.
Senator Cardin. I would just underscore that I agree with
what was said, that in the trafficking review, we review all
countries, including the United States, and destination
countries have strong responsibilities in regards to stopping
trafficking. And we rate countries on how well they do as
destination countries, not just transit countries and countries
of origin.
So your point is very well-taken. We need that
transparency, and we need enforcement.
Thank you, Mr. Chairman. I appreciate this.
The Chairman. I thank my colleague very much.
I see our friend Senator Crapo is back. I believe there are
no further members, Senator Crapo, and I thought I would
deliver perhaps a 2-minute wrap-up of the week. Is there
anything that you would like to say at this point?
Senator Crapo. No; thank you, Mr. Chairman. I think this
was a very needed hearing and a very helpful hearing, and I
look forward to your wrap-up comments.
The Chairman. And I would only say that today these are
exceptionally serious issues with respect to China's use of
forced labor. It poses a threat to Chinese workers, American
workers like Mr. Wrona, but it also is going to affect our
ability to address the climate crisis in a meaningful and
expeditious way. And to that end, I would like to introduce for
the record two articles addressing concerns with the use of
forced labor in polysilicon and solar panels.
Without objection, so ordered.
[The articles appear in the appendix beginning on p. 63.]
The Chairman. Let me, if I might--and I see Senator Crapo
here--I have been struck this week. We have had three hearings
in the Senate Finance Committee: boosting American
manufacturing to get more high-skill, high-wage jobs for our
people; improving nursing home care--urgent business after the
national tragedy there of the last year; and now the question
of ending forced labor so we can protect workers like Mr.
Wrona, who spelled out exactly what happened when he lost a job
as a result of forced labor.
And what runs through all of the work we did this week is
the need for more good-paying jobs in America; health and
safety--critical issues for our workers and our well-being; and
transparency and fair treatment. And particularly when Senator
Crapo is here, I want to note we have had exceptional
participation by Democrats and Republicans all week long, when
there were a lot of activities going on here.
I regard this as a good sign. I think there is a lot of
what we discussed this week that can be tackled in a bipartisan
way, with colleagues working together--starting with the
semiconductor issue. Those memory chips drive everything as it
relates to the way we live.
So this has been a great panel, and really a very important
week. Questions for the record on today's hearing are due next
Friday, March 26th, by close of business.
And I thank our guests. You gave us in this third session a
lot of very constructive ideas about, again, what we need to do
in this country to strengthen the ability of Americans to get
high-skill, high-wage jobs, and we can do it in a bipartisan
way.
With that, the Finance Committee is adjourned.
[Whereupon, at 12:01 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Prepared Statement of Leonardo Bonanni, Ph.D.,
Founder and CEO, Sourcemap Inc.
Chairman Wyden, Ranking Member Crapo, distinguished members of the
committee, thank you for the opportunity to speak with you today.
I am the founder and CEO of Sourcemap, a leading provider of
technology for supply chain transparency.
As this committee has underscored in bipartisan fashion, forced
labor is endemic to many supply chains. At the same time, no company
can afford to audit every supplier, every day. Business needs a
scalable solution.
I founded Sourcemap at MIT with the goal of leveraging the reach of
the Internet to monitor global supply chains to a degree that was never
before possible.
Let me describe how it works. First, we set up a unique social
network to help companies identify all of the actors in their supply
chain, down to the names and addresses of every mine, every farm, every
factory and every warehouse.
Second, companies use this network to regularly collect data from
all of the actors in the supply chain, which our software then analyzes
to detect patterns that indicate the presence of forced labor. We can
even collect data in remote supply chains where there is little to no
Internet access using a smartphone app that works on- and offline.
Third and most importantly, we never take the information that has
been provided at face value. Instead we continuously analyze data from
suppliers for errors and omissions, and for patterns of fraud, waste,
and abuse. To do this we use the best available techniques including
satellite imagery, mobile device tracking, machine learning and
artificial intelligence.
The demand for this level of supply chain transparency is growing.
Sourcemap is used today by some of the largest companies in the United
States, companies responsible for tens of billions of dollars in U.S.
imports. Thousands of their suppliers log into Sourcemap from every
corner of the globe to share extensive information on their supply
chains. That's because supply chain transparency is a very small price
to pay for access to the U.S. market.
For the first time in the history of globalization, companies can
have a map of their global supply chain that's verified and up-to-date.
It's not transparency for transparency's sake: this map is the
foundation for identifying and remediating forced labor in the end-to-
end supply chain, so that one day every container arriving in the U.S.
can have a clean bill of health.
Is this a panacea? No. But it represents a step change in the
degree of supply chain transparency businesses and governments can
expect in support of their ongoing fight against forced labor.
Mr. Chairman, supply chain transparency is good for business in
many other ways: it reduces risk, it saves money, it helps to secure
hard-to-get materials, and it helps to monitor for quality,
counterfeiting, environmental conditions, and health and safety.
This committee has an important role to play. This hearing itself
sends a message that you expect action from all stakeholders. Mr.
Chairman, I know that you have been working with Senator Brown (D-OH)
on new tools to empower CBP. I encourage you to put supply chain
transparency technology at the center of those efforts.
Supply chain transparency needs to become the norm. At a minimum,
companies should disclose the names and the addresses of their direct
and indirect suppliers. This evidentiary standard will establish the
United States as the leader in combating forced labor in supply chains,
while saving companies and CBP millions of dollars.
Setting a simple standard for supply chain transparency will help
create a level playing field for all companies importing goods into the
United States.
It's not just the right thing to do for our values: it's the smart
thing to do for U.S. business and for U.S. workers.
Thank you for the opportunity to testify, and I look forward to
your questions.
______
Questions Submitted for the Record to Leonardo Bonanni, Ph.D.
Question Submitted by Hon. Mike Crapo
Question. It appears that we are underutilizing the potential of
technology in combating forced labor imports.
What can be done at CBP to expedite adoption of new technologies?
Answer. Let me underscore that my company welcomes the opportunity
to sit down with CBP and talk about the difference that technology can
make today. We work with the U.S. Department of Labor on supply chain
tracing and engagement methodologies; we have found government actors
to be highly motivated and mission-driven to succeed; and we bring
expertise and best practices from our ongoing work with some of the
largest companies in the United States.
I believe that supply chain transparency technology can be a game-
changer for Customs and Border Protection in its day-to-day activities,
and that it can benefit its relationships with U.S. importers. Supply
chain transparency provides a clear evidentiary standard for the types
of data needed to prove that a shipment or a supply chain is free of
forced labor. The technology we have developed for supply chain
transparency ensures that businesses can efficiently collect this data,
verify it and share it with the authorities. CBP deserves access to the
same technology that companies use so that together they can cast a
wider net to identify risks and alternatives across global supply
chains.
As the committee considers investing in and giving additional tools
to aid CBP in its mission, we would emphasize the technology
opportunity at hand--an opportunity that did not exist 10 years ago.
Today we can take the most complex supply chains, map and verify them,
and keep tabs on them using real-time intelligence to empower companies
and governments to make informed and timely decisions. We want to make
supply chain transparency technology available to more companies, more
NGO's, and more governments, not just as a commercial opportunity, but
because the more supply chain transparency is deployed in more parts of
the world, the harder it is for bad actors to hide in the shadows.
Neither government nor the private sector can do this alone, and the
more companies act, the more entities make clear that supply chain
transparency matters, the more pressure builds on other governments to
act as boldly as the United States.
Question Submitted by Hon. Todd Young
Question. For the average layman, blockchain is associated with
Bitcoin and cryptocurrencies; however, there are several other
applications that can use ledger technology--especially beyond the
field of finance.
Today, humanitarian and tech leaders are actively exploring how
blockchain could revolutionize humanitarian response.
Can you comment on how blockchain can help tackle forced labor
issues embedded within our global supply chains?
Answer. Blockchain is often associated with Bitcoin and non-
fungible tokens (NFTs), but its applications for supply chains are
entirely different: blockchain allows each actor to keep their
commercial data confidential while sharing enough to provide assurance
on a product's chain of custody. It could be an effective way for CBP
to encourage data sharing from U.S. importers to ensure that imported
goods are free of forced labor, without the risk of commercial data
being shared or misused.
However, blockchain technology is ill-suited to the upstream or raw
materials supply chain, where the risk of forced labor is most
pronounced. Blockchain requires that advanced technology be adopted by
all of the actors in the supply chain, yet raw materials often come
from areas with limited Internet access and little or no computerized
inventory management. Most importantly, blockchain does not prevent
fraud: false data can be entered by anyone in the supply chain, and
blockchain is too costly to collect the meta-data that could be used to
verify a supply chain.
Instead, smartphone audit apps together with cloud data validation
are a cost-
effective, proven solution to establishing a clean chain of custody
while continuously monitoring for fraud, waste and abuse. We deploy
this technology in high-risk regions because it casts a much wider net
than blockchain by collecting and corroborating supply chain data using
other information, including business licenses, contracts, receipts,
audit reports, and on-the-ground GPS, photo and video evidence.
______
Questions Submitted by Hon. John Barrasso
congressional proposals on import bans
Question. Since 2009, China has been included on the List of Goods
Produced by Child Labor or Forced Labor. The Bureau of International
Labor Affairs recently added five new categories of products from
Xinjiang to the list. It included gloves, hair products, textiles,
thread/yarn, and tomato products.
In January, the Trump administration issued a sweeping ban on
imports of cotton and tomato products from China due to evidence of
forced labor. There are several congressional proposals aimed at
expanding the administration's authorities to more robustly address
widespread and systematic force labor in China.
What are your views on the proposal to implement a comprehensive
import ban on all goods produced, wholly or in part in Xinjiang?
Answer. It's important for Congress, regulators, and policy-makers
to make decisions on how best to clamp down on the use of forced labor
worldwide, including by recognizing the heightened risk of sourcing
from specific regions and industries. These decisions are critical not
only for business, but as a reflection of American values and
interests. And we believe it's in everyone's interest to make these
decisions and processes transparent so that businesses, NGO's, and
other actors can understand and adopt them as soon as possible.
But I would also highlight a lesson we've learned, sometimes the
hard way: a blanket ban on imports from an industry or a region is a
well-intentioned lever that governments can deploy, but it can lead to
a global game of Whack-A-Mole where banned goods are smuggled through
intermediaries in other regions or countries to make their way to the
U.S. market. That's why deploying supply chain transparency standards
and technology is so important: because it levels the playing field for
all importers and makes it impossible for these abuses to hide ``off
the grid.''
Question. What ways would you recommend the United States take to
enhance import controls and enforcements on goods produced in China?
Answer. Import controls and enforcement are an important way to
impact the supply side of the forced labor challenge; it's important
that companies have the information they need to fight it from the
demand side as well. We have seen companies make significant changes to
their purchasing practices and their global supply chains through
increased supply chain transparency. The same data and technology would
benefit CBP as a way to uniformly and efficiently assess the risk of
forced labor, and detect fraud, across industries and regions. I would
humbly recommend that the committee keep supply chain transparency
technology front and center in discussions about new controls and
enforcement because it provides a common standard for which data can be
collected, verified, and shared, and a proven solution for doing so at
scale. Technology can empower governments to facilitate data sharing
between all stakeholders, including NGO's and companies, to create a
greater awareness of the scale of the challenge, and to empower U.S.
companies to fight forced labor anywhere.
______
Prepared Statement of Hon. Mike Crapo,
a U.S. Senator From Idaho
This is a very important hearing.
The International Labor Organization estimates nearly 25 million
people in the world are victims of forced labor. The criminals behind
this tragedy reap nearly $150 billion in profits every year. As
horrifying as that is, nearly 30 percent of the victims are also
victims of forced sexual exploitation--and generate $99 billion--or
two-thirds of the profits I just referenced.
The fight against forced labor is not a Democrat issue or a
Republican issue; it is an issue that unites all Americans. That is
critical to remember.
Americans, including consumers, workers, and businesses, are all
committed to this fight--and doing everything possible to combat this
scourge. The problem lies not with them, but with foreign autocrats,
and individuals who lack all sense of basic humanity. Our fight is with
them.
For example, China's government has pressed nearly 100,000 Uyghurs
and other Muslim minorities into forced labor, while euphemistically
calling it ``poverty alleviation.'' As the Newlines Institute for
Strategy and Policy explained in a report last week, China's treatment
of the Uyghurs meets every criteria of genocide under the United
Nations' Genocide Convention. That report's findings join declarations
by foreign legislatures, including Canada and the Netherlands, and
track with a similar determination made by the State Department during
the Trump administration.
Accordingly, Senators like Marco Rubio and Jeff Merkely, and many
others, are showing leadership on this issue through their proposed
Uyghur Forced Labor Prevention Act. Their efforts should be matched by
the current administration.
The U.S. Secretary of State and National Security Advisor are
meeting today in Alaska with their Chinese counterparts. Forced labor
is among the human rights issues they need to press with them.
Critically, this all reinforces the need to broadly empower
Americans and other good citizens of the world to be able to more
effectively respond to this challenge. This includes effectively
utilizing technology to identify where goods made with forced labor can
enter the supply chain. It means our laws and regulations must be
transparent and provide informative and thoughtful guidance so
Americans know how to avoid importing such goods.
It means we need to know the ongoing efforts of our businesses so
that the government can help leverage them in the fight against forced
labor. Many of them have developed best practices to stamp out forced
labor from their supply chains. We need to leverage their experience
and expertise.
Finally, it means we must partner with civil society to raise
awareness on this important issue. The witnesses we have today can
speak to each of these points. Their expertise and knowledge will help
this committee address this important matter. Mr. Chairman, I am glad
this is an issue we both care about deeply.
Thank you for organizing this hearing. I look forward to the
testimony from our witnesses.
______
Prepared Statement of Julia K. Hughes, President,
U.S. Fashion Industry Association
Chairman Wyden, Ranking Member Crapo, and members of the committee,
thank you for the invitation to appear today. My name is Julie Hughes,
and I am the president of the U.S. Fashion Industry Association. I
appreciate the opportunity to testify on behalf of the industry about
the fight against forced labor and how to improve enforcement to reach
our shared goal of the elimination of forced labor.
A little background about the United States Fashion Industry
Association (USFIA). USFIA represents apparel brands, retailers,
importers, and wholesalers based in the United States and doing
business globally, including many of the iconic brands worn and loved
by everyone participating in this hearing. Our members are global, with
production, operations, and sales in the United States and around the
world. Our member companies manage supply chains that span the globe.
Global trade, and ethically sourced trade, is essential for American
brands and retailers to be successful and reach consumers around the
world.
More than most types of manufactured goods, the fashion industry
relies on global supply chains. A bale of cotton may be grown in Texas,
shipped to Europe to be made into yarn, shipped to Korea to be made
into fabric, shipped to Vietnam to be made into apparel, and shipped to
the United States to be sold at retail in a store back in Texas. But
even more exciting, those garments made using that supply chain also
might be sold in Singapore, Japan, Dubai, or London.
Because we are a global industry, we know that forced labor exists
in many parts of the world. For several decades USFIA member companies
have maintained codes of conduct and strict requirements for supply
chain partners that ban the use of forced labor. Companies maintain an
extensive network of contracts, audits, verifications, training, and
direct engagement with their suppliers.
But we recognize that there remains more action needed to guarantee
that forced labor is not in the supply chain for fashion products. One
example is the supply chain for cotton products. The growers who
produce this cotton commonly sell to traders, or middlemen, who
intermingle the crops of several farms and regions and send cotton to
ginning facilities all over the world. Indeed, U.S. cotton comprises 38
percent of world exports and a substantial quantity of it is used in
China. China alone imports more than $800 million of U.S. cotton
annually.
Ginning facilities, in turn, send their product to middlemen and
traders, who, again, intermingle their purchases and sell to yarn
spinners all over the globe. Yarn spinners will, at times, outsource
the dyeing portion of their production, before selling their yarn to
fabric producers all over the world. Fabric producers, too, may
outsource their dyeing operations before supplying apparel-producing
customers that are also spread all over the globe.
Retailers and apparel brands are at the end of this supply chain
and, while retailers and brands can effectively ensure that the cut and
sew operations with which they do business are free of forced labor, it
is often a challenge for retailers and brands and their apparel-
producing vendors to ensure that every bit of cotton, or yarn, or
fabric incorporated into the final product is free of forced labor. The
further down the supply chain you get, the more difficult, if not
impossible, it gets to obtain visibility into the origin of the inputs
and the conditions of their manufacture.
While it is difficult, and complicated, this is an important task
for the industry. So, what are we doing to root out forced labor from
the supply chain?
Even before the very public media reports about forced labor in the
past year, fashion industry, apparel, footwear and retail associations
joined together to create an ad hoc forced labor working group to
facilitate the sharing of information and the sharing of resources
among the industry. One of the first tasks was to create an online
resource of initiatives and best practices available, and we continue
those discussions.
As part of this process, the industry is pioneering and
implementing new technologies and innovative approaches to decipher
where supply chains are susceptible to forced labor. Our member
companies have made extensive progress towards removing any
associations with forced labor in their supply chains as they continue
to strengthen measures to identify and eliminate forced labor.
USFIA members have long audited and inspected suppliers to ensure
that their suppliers do not use forced labor (or engage in other
abhorrent labor practices, for that matter). Our member companies
regularly seek certifications that the vendors to their suppliers also
do not utilize forced labor, an effort that was bolstered almost 10
years ago by California's Supply Chain Transparency Act, which requires
apparel brands and retailers to undertake best efforts to audit the
supply chain for forced labor and to inform the public of the results
of the audit. We support adoption of a similar regulation on a national
level to codify our members' efforts and expand to apply to not just
U.S.-based companies, but all companies that sell in the U.S. above a
certain sales threshold.
The task is not easy (to put it mildly). My personal belief is that
to eliminate forced labor we need to go beyond what companies can do on
their own, and go beyond an emphasis on punitive measures, to use
multi-stakeholder approaches. The combination of civil society, NGOs,
companies, governments and international institutions is needed to
reach our shared goal to eliminate forced labor.
I would like to share a few examples. For more than a decade brands
and retailers have been a part of an initiative called the Cotton
Campaign. The Cotton Campaign was created to combat the government
sanctioned use of forced labor in the cotton fields in Uzbekistan. From
the beginning this initiative included NGOs and civil society, as well
as industry associations such as USFIA, and especially brands and
retailers. While it has taken time, this campaign has had an impact.
Today the Uzbekistan Government no longer supports forced labor to
harvest cotton--it is now against the law. And while the ILO monitors
and civil society found that forced labor is not yet fully eliminated
based on last year's harvest, the scale and breadth of forced labor is
tremendously reduced and I think all agree the progress has been
substantial. With the end of state support, the Cotton Campaign is now
moving forward with an innovative concept to develop Responsible
Sourcing Agreements with the cotton growers and the cotton
cooperatives, and brands, to ensure that there is direct engagement and
monitoring for the future. We support this initiative and hope it will
be a successful approach that can be used in other areas.
One other approach that is just at the beginning is
YESSTM: Yarn Ethically and Sustainably Sourced (YESS). This
is an initiative of RSN, an NGO that works to eliminate forced labor
associated with raw material inputs and works to eliminate forced labor
from the textile value chain by building capacity and managing an
assessment of value chain actors' ability to identify, address, and
prevent sourcing cotton produced with forced labor. YESS applies the
OECD Due Diligence Guidance for Responsible Supply Chains in the
Garment and Footwear Sector, which has wide industry and government
support and is a proven method for companies to identify and address
risks over time. With financial support from brands and retailers, and
a program developed by leaders who have been active in the labor
community for decades, the main goals of this project are to:
Build capacity with and empower yarn spinners and textile
mills to implement a due diligence system to identify and address
forced labor involved in cotton production;
Enable brands to make informed sourcing decisions and avoid
sourcing cotton produced with forced labor;
Promote harmonized engagement and assessments of spinners and
textile mills; and
Spearhead an industry-wide, risk-based due diligence approach
to identify, prevent, and mitigate forced labor in cotton production.
There also are two pilot projects funded by the Department of Labor
that will focus on developing solutions to forced labor that bring
together technology, tracking and supply chain. ILAB partners with
international organizations, non-governmental organizations,
universities, research institutions, and others to advance workers'
rights and livelihoods through technical assistance projects, research,
and project evaluations. USFIA welcomes efforts to bolster ILAB's work.
Such efforts leverage existing authorities and expertise at ILAB to
develop and improve supply chain tracing technologies, and promotes
collaboration and shared learnings between the U.S. Government and the
private sector in identifying and deploying reliable, scalable, and
affordable supply chain tracing tools.
Earlier this year the Labor Department funded two $4-million awards
for cooperative agreements to Verite Inc. and ELEVATE Limited to
implement technical assistance projects to increase the downstream
tracing of goods made by child labor or forced labor. The award to
Verite will support a pilot for upstream tracing of raw cotton, thread/
yarn and textiles in India. ELEVATE's award will support pilot tracing
in supply chains for cotton in Pakistan and cobalt in the Democratic
Republic of the Congo. These pilot projects have the capacity to enable
enhanced supply chain tracing tools and methodologies across industry
sectors that are traditionally complex and opaque, improving our
members' ability to fully identify and eliminate forced labor in their
supply chains.
Even with all these exciting initiatives, and a commitment from the
industry, we are committed to do whatever we can to eliminate forced
labor, and we very much want to work with Congress and the executive
branch to eliminate this scourge.
Now, how can the Government help us tackle the challenge of forced
labor in the supply chain?
First, with respect to stakeholders in the executive branch, I
cannot stress strongly enough the need for a coordinating effort to
engage our trading partners to eradicate forced labor from the supply
chain. The State Department, USTR, the Department of Labor, the
Commerce Department, the NSC, and USDA should make it a priority to
execute a ``whole of government'' strategy to eliminate forced labor
from supply chains. Similar to the testimony the committee heard
earlier this week about supply chains, we know that the path to success
will be faster and better if there is a unified approach. We also
strongly support efforts by the administration and the Congress to take
a leadership role on this issue on the international stage. Forced
labor is a global problem--a problem that often involves the active or
tacit blessing of foreign governments--and so calls for a global
solution whenever possible.
We also want to look at the role of U.S. Customs and Border
Protection to implement an enforcement strategy to guarantee that no
products with forced labor reach the United States. U.S. companies are
partners with CBP on enforcement. The policy of informed compliance and
the participation of companies in the CBP Trusted Trader programs means
that there already is a shared approach to enforcement. What we believe
would help improve enforcement is more transparency in the process and
more of a shared approach.
USFIA supports the series of recommendations released this week by
the Commercial Customs Operations Advisory Committee (COAC) Intelligent
Enforcement Subcommittee Forced Labor Working Group, which include:
(1) The recommendation that CBP take a collaborative, multi-agency
approach utilizing the expert resources of all relevant U.S. Government
agencies to develop a synchronized strategy, as well as engage more
extensively in dialogue and priority setting with the trade. This
includes working with the Departments of Homeland Security, Labor,
Treasury and State, as well as Immigration and Customs Enforcement and
the Office of the U.S. Trade Representative;
(2) The recommendation that CBP expand its collaboration and
communication with the trade sectors and industries, identifying and
sharing best practices, including government to industry efforts to
minimize forced labor in supply chains;
(3) The recommendation that CBP develop an objective methodology
to measure the ``success'' of the agency's forced labor informed
compliance, facilitation, enforcement, and risk mitigation that is not
based on enforcement output. Rather, a best developed practice would be
to measure success based on outcome metrics that ultimately focus on
improvement of the communities most impacted by forced labor, as
recommended by the GAO 2020 Forced Labor Imports Report; and
(4) The recommendation that CBP apply the same principles, tools,
guidance, and outreach to forced labor as is the case with the other
Priority Trade Issues, that is, ``world class expertise to design trade
processes and policies that minimize cost and provide certainty,
transparency, security, and predictability to members of the trade
community.''
USFIA also agrees with the conclusion of two recent GAO reports,
which evaluated Customs and Border Protection's process for issuing and
enforcing withhold release orders (WROs) in response to suspicions of
forced labor. Last fall, the GAO recommended that CBP evaluate whether
or not its forced labor division was staffed adequately and with the
right expertise. Then, just a couple weeks ago, the GAO urged CBP to be
more transparent about the criteria and evidence that it uses to modify
and withdraw WROs. CBP apparently agreed with both of these
recommendations.
Very importantly, in addition to the GAO's recommendations, CBP
should work to adopt objective criteria to measure success. Success
should not be measured merely by the number of detentions. Rather,
success should be measured by the degree to which CBP's enforcement
activity is effectively reducing forced labor. To this end, CBP should
adopt a risk-based approach to enforcement, focusing on the worst
actors first and providing as much predictability and certainty to
impacted stakeholders, as possible, to enable them to amplify CBP's
enforcement efforts.
Another area where more transparency is needed is for CBP to share
best practices, and other solutions, when they find them. CBP recently
began a pilot program with a company that may have the capability to
identify the origin of finished cotton products entering the borders of
the United States. We welcome this effort. Any congressional action
should require CBP to report back to Congress and the public on the
learnings from this demonstration pilot, to include actual or potential
shortfalls or gaps in the capability, and enter into pilots with other
vendors to similarly assess alternative capabilities to trace the
origins of finished cotton products and other commodities.
Finally, to build upon tools like the Department of Labor's Sweat
and Toil and Comply Chain mobile applications, and the Xinjiang Supply
Chain Business Advisory issued by the executive branch this summer,
Congress could endorse and fund a ``forced-labor free'' supplier
certification process, similar to the Democratic Republic of Congo
Conflict-Free Smelter certification program developed by the
Responsible Business Alliance. The certificates could serve as proof of
due diligence and admissibility of the product into the U.S. The bill
could charge Labor with developing and administering the program, in
close coordination with CBP.
Thank you again for asking for USFIA's input today. Fashion brands
and retailers have zero tolerance for forced labor. We believe that
working together to eradicate forced labor from global supply chains
will be good for American workers and American consumers, and for
world. USFIA and its member companies stand ready to work with the
members of the committee and with the Congress to achieve this goal.
______
Questions Submitted for the Record to Julia K. Hughes
Questions Submitted by Hon. Mike Crapo
Question. U.S. businesses are partners in combating forced labor.
It is imperative that CBP develop an enforcement strategy that works
with reliable American businesses to focus on unscrupulous actors.
What elements would you look for in such a strategy?
Answer. USFIA agrees that an effective enforcement strategy is
essential to combat forced labor in all its forms. The strategy must be
built on partnership and collaboration between business and U.S.
Customs and Border Protection. We all support the goal for an
enforcement strategy that guarantees that no products with forced labor
reach the United States. The framework already exists for a shared
approach to enforcement--the policy of informed compliance and the
participation of companies in the CBP Trusted Trader programs. The top
priority to improve enforcement is more transparency with respect to
CBP decisions to withhold release and/or subsequently release shipments
and expanding the collaboration for enforcement by working with the
companies that are on the frontlines.
As an overview, USFIA recommends the creation of a public CBP
strategy that is transparent, evidence-based, and risk-based.
Historically that approach to enforcement has been successful.
To achieve that goal, USFIA would like to highlight some of the
recent recommendations from the Commercial Customs Operations Advisory
Committee (COAC) Intelligent Enforcement Subcommittee Forced Labor
Working Group, which include the following:
(1) The recommendation that CBP take a collaborative, multi-agency
approach utilizing the expert resources of all relevant U.S. Government
agencies to develop a synchronized strategy, as well as engage more
extensively in dialogue and priority setting with the trade. This
includes working with the Departments of Homeland Security, Labor,
Treasury and State, as well as Immigration and Customs Enforcement and
the Office of the U.S. Trade Representative;
(2) The recommendation that CBP expand its collaboration and
communication with the trade sectors and industries, identifying and
sharing best practices, including government to industry efforts to
minimize forced labor in supply chains;
(3) The recommendation that CBP develop an objective methodology
to measure the ``success'' of the agency's forced labor informed
compliance, facilitation, enforcement, and risk mitigation that is not
based on enforcement output. Rather, a best developed practice would be
to measure success based on outcome metrics that ultimately focus on
improvement of the communities most impacted by forced labor, as
recommended by the GAO 2020 Forced Labor Imports Report; and
(4) The recommendation that CBP apply the same principles, tools,
guidance and outreach to forced labor as is the case with the other
Priority Trade Issues, that is, ``world class expertise to design trade
processes and policies that minimize cost and provide certainty,
transparency, security, and predictability to members of the trade
community.''
To build on the COAC recommendations, USFIA would like to emphasize
a few recommendations. First, a successful strategy requires CBP to
adopt objective criteria to measure success. Success should not be
measured merely by the number of detentions. Rather, success should be
measured by the degree to which CBP's enforcement activity is
effectively reducing forced labor. To this end, CBP should adopt a
risk-based approach to enforcement, focusing on the worst actors first
and providing as much predictability and certainty to impacted
stakeholders as possible, to enable them to amplify CBP's enforcement
efforts. This builds on the recommendation that CBP work more closely
on this issue and coordinate with Trusted Traders, whose supply chains
are known to CBP.
A focused strategy also depends on CBP sharing best practices with
industry. Whether there are insights gained from the review of supply
chains, or insights gained from pilot programs using technology
solutions, targeting and enforcement will be greatly improved if those
learnings are shared with industry. USFIA also welcomes support from
Congress to require CBP to report back to Congress and to the public on
best practices.
USFIA also recommends that the strategy include specific plans to
assess and take action to ensure that there is adequate staffing and
resources to achieve the strategy. This includes staff with the
appropriate expertise and training to ensure the enforcement team is
fully engaged with complex supply chains.
Question. Some of the businesses in your association have developed
supplier codes of conduct. Some of them rely on international
instruments like the Universal Declaration of Human Rights and some of
the International Labor Organization's (ILO) conventions. It is
positive that American companies are striving for high ethical
standards.
What are some of the minimum elements an effective Code of Conduct
should contain, and what can CBP do to help reinforce those efforts?
Answer. Fashion brands and retailers do business globally--both
sourcing around the world and selling to consumers around the world.
For several decades, USFIA member companies have maintained codes of
conduct and strict requirements for supply chain partners that ban the
use of forced labor. Companies maintain an extensive network of
contracts, audits, verifications, training, and direct engagement with
their suppliers. Companies regularly update their Codes of Conducts to
reflect new risks and best practices to address them. Industry best
practices keep the welfare of workers at the center of remediation.
Some of the minimum elements that are part of an effective Code of
Conduct are: clear descriptions of standards; clear descriptions of
corrective actions and timelines for remediation if a violation is
found; and clear descriptions of practices for which the purchaser has
zero tolerance, practices that always include forced labor and that
also commonly include such things as forced overtime and unsafe working
conditions.
Question. One of the major challenges faced by U.S. businesses is
the Chinese Government's lack of transparency and outright obstruction
of efforts by U.S. businesses to stamp out forced labor from their
supply chains. To put pressure on China, we need to work with allies--
as the Biden administration has indicated it will try to do.
How do you think we can expand our relationship with foreign allies
and foreign companies to push China to end the use of forced labor, and
to stop further harassment of U.S. businesses?
Answer. The State Department, Office of the U.S. Trade
Representative, the Department of Homeland Security, U.S. Customs and
Border Protection, the Labor Department, the Commerce Department, the
Agriculture Department and the National Security Council, should make
it a priority to execute a whole-of-government strategy to eliminate
forced labor wherever it is found. We know that the path to success
will be faster and better if there is a unified approach with the U.S.
Government as well as with key allies. Multilateral action and
engagement by international institutions are needed, as well. We
strongly support efforts by the administration and Congress to take a
leadership role on this issue on the international stage. Forced labor
is a global problem--a problem that often involves the active or tacit
blessing of foreign governments--and so calls for a global solution
whenever possible.
______
Question Submitted by Hon. Todd Young
Question. For the average layman, blockchain is associated with
Bitcoin and cryptocurrencies; however, there are several other
applications that can use ledger technology--especially beyond the
field of finance.
Today, humanitarian and tech leaders are actively exploring how
blockchain could revolutionize humanitarian response.
Unfortunately, for the textile industry, ``Made in China'' products
have a high probability that the cotton was harvested by forced labor.
How is the fashion industry turning to technology--such as blockchain--
to add transparency to the chain of custody in product production?
Answer. Technology is absolutely an essential element in how
companies, and governments, can improve transparency in supply chains.
There are a number of different technologies currently available, with
intense interest in options that focus on tracking and traceability. At
this point, there is no single technology that meets the need for
enforcement. Critical for successful technologies are scalability (the
ability to cover large volumes of trade and many different types of
products) as well as affordability (the ability of small and medium
sized enterprises to use the technology).
Fashion industry companies are using certain technologies today and
there are a number of technologies that are in pilots. As we mentioned
in our testimony, there are some promising pilots that were launched
this year with funding from the Labor Department's Bureau of
International Labor Affairs (ILAB). These are multi-year pilots that we
believe will be important in the long-term efforts to eliminate forced
labor. We know there also have been several pilot projects conducted by
CBP and have asked for updates about what those pilots revealed. In
addition, some brands and retailers are funding their own pilot
projects, such as the YESS pilot, to focus on solutions specifically
developed for fashion products.
The industry also has been meeting with new company-entrants into
this space in order to assess the efficacy of additional technology
solutions that have recently become available. There are companies that
use tracing technology, tracking technology, biome analysis as well as
more traditional blockchain-like technologies that focus on the chain
of custody. If members or staff are interested, USFIA would be pleased
to provide a briefing about the variety of technologies and the
opportunities for technology solutions.
______
Questions Submitted by Hon. John Barrasso
actions taken by businesses
Question. The U.S. Custom and Border Protection's investigation
revealed terrible working conditions in China. It found ``debt bondage,
restriction of movement, isolation, intimidation and threats,
withholding of wages, and abusive living and working conditions.''
On July 1, 2020, four U.S. agencies jointly issued a warning of
``reputational, economic, and legal risks'' for businesses with supply
chains in Xinjiang. Due to forced labor and human rights abuses taking
place there, business were instructed to implement human rights-related
due diligence policies and procedure.
What specific actions are businesses taking to ensure forced labor
is not part of their supply chain?
Answer. Even before the very public media reports about forced
labor, the fashion industry had taken this issue very seriously with
regular member updates, analysis, and webinars focused on this issue in
textile and apparel supply chains. With the initial reports from the
XUAR region, fashion, apparel, footwear and retail associations joined
together to create an ad hoc forced labor working group to facilitate
the sharing of information and the sharing of resources among the
industry. As part of this forced labor-focused initiative, industry
particularly focused on what resources are available for companies to
understand best practices and new initiatives to ensure that forced
labor is not part of the supply chain.
USFIA member companies require suppliers to adhere to strict codes
of conduct and vendor agreements that require suppliers to certify that
they do not use forced labor and that they do not utilize
subcontractors and input suppliers that utilize forced labor. USFIA
member companies regularly audit and inspect their suppliers in an
effort to ensure that suppliers are living up to these commitments. In
addition to the focus on forced labor, these supplier codes of conduct
commonly extend far beyond a prohibition on the use of forced labor and
focus on the full range of worker welfare issues. That includes
prohibitions on other types of reprehensible labor practices, such as
coercive overtime, restrictions on freedom of movement, and unsafe
working conditions.
Question. What challenges are businesses experiencing in
implementing the policies and procedures needed to end this practice?
Answer. While USFIA member companies do not source from the XUAR
region of China and require all suppliers to warrant they do not
utilize forced labor, USFIA cannot stress strongly enough the need for
a coordinated effort to engage our trading partners to eradicate forced
labor from the supply chain. The complete elimination of forced labor
in all forms is the goal that we all want to achieve. U.S. companies
are positioned at the end of complex, lengthy, and non-transparent
supply chains. The State Department, USTR, the Department of Labor, the
Commerce Department, the Department of Homeland Security, and the White
House should make it a priority to execute a whole-of-government
strategy to eliminate forced labor from supply chains. We know that the
path to success and a world with no forced labor will be faster and
better if there is a unified approach with our allies and with
international organizations such as the International Labor
Organization and the United Nations.
From a business perspective, of course, there are many challenges
to gain visibility to every aspect of the supply chain. This is a
collaborative effort with U.S. Customs and Border Protection and we ask
for CBP to adopt a risk-based approach to enforcement, focusing on the
worst actors first and providing as much predictability and certainty
to impacted stakeholders as possible, to enable them to amplify CBP's
enforcement efforts. This builds on the recommendation that CBP work
more closely on this issue and coordinate with Trusted Traders, whose
supply chains are known to CBP. USFIA also supports efforts to use
technology and other initiatives to develop new best practices and
procedures to support company efforts to validate there is no forced
labor in supply chains.
Question. What are your views on congressional proposals creating
due diligence and financial disclosure requirements for companies
operating in Xinjiang?
Answer. USFIA understands that there are various congressional
proposals that would require due diligence and impose financial
disclosure requirements upon companies operating in the Xinjiang region
of China. While USFIA member companies do not source from the Xinjiang
region of China, USFIA stands ready to work with Congress to ensure
that such requirements, should they be enacted by Congress and impact
USFIA member companies, are both administrable and an effective part of
our joint efforts to eliminate forced labor from the supply chain.
congressional proposals on import bans
Question. Since 2009, China has been included on the List of Goods
Produced by Child Labor or Forced Labor. The Bureau of International
Labor Affairs recently added five new categories of products from
Xinjiang to the list. It included gloves, hair products, textiles,
thread/yarn, and tomato products.
In January, the Trump administration issued a sweeping ban on
imports of cotton and tomato products from China due to evidence of
forced labor. There are several congressional proposals aimed at
expanding the administration's authorities to more robustly address
widespread and systematic force labor in China.
What are your views on the proposal to implement a comprehensive
import ban on all goods produced, wholly or in part in Xinjiang?
Answer. USFIA members companies are committed to meet all legal
requirements, including the comprehensive ban on any products with
forced labor. We appreciate the Senate proposals that are currently
under discussion to address systematic forced labor and support the
effort to develop a comprehensive strategy and include the business
community in the enforcement efforts.
Question. What ways would you recommend the United States take to
enhance import controls and enforcements on good produced in China?
Answer. There are several levels of action that the United States
can take, and should take, to eliminate forced labor.
First, there needs to be a coordinated effort to engage our trading
partners to eradicate forced labor from the supply chain. The complete
elimination of forced labor in all forms is the goal that we all want
to achieve. U.S. companies are positioned at the end of complex,
lengthy, and non-transparent supply chains. The State Department, USTR,
the Department of Labor, the Commerce Department, the Department of
Homeland Security, and the White House should make it a priority to
execute a whole-of-government strategy to eliminate forced labor from
supply chains. We know that the path to success and a world with no
forced labor will be faster and better if there is a unified approach
with our allies and with international organizations such as the
International Labor Organization and the United Nations.
From a business perspective, of course there are many challenges to
gain visibility to every aspect of the supply chain. This is a
collaborative efforts with U.S. Customs and Border Protection and we
ask for CBP to adopt a risk-based approach to enforcement, focusing on
the worst actors first and providing as much predictability and
certainty to impacted stakeholders, as possible, to enable them to
amplify CBP's enforcement efforts. This builds on the recommendation
that CBP work more closely on this issue and coordinate with Trusted
Traders, whose supply chains are known to CBP. Close collaboration with
CBP, including greater transparency about who are the ``bad guys'' and
what are the best practices that CBP sees in action will go a long way
to eliminate forced labor in supply chains.
USFIA also supports efforts to use technology and other initiatives
to develop new best practices and procedures to support companies to
validate there is no forced labor in supply chains.
______
Prepared Statement of Martina E. Vandenberg, J.D.,
President, Human Trafficking Legal Center
Chairman Wyden, Ranking Member Crapo, and members of the committee,
it is an honor to appear before you today to address the issue of
forced labor in global supply chains. My name is Martina Vandenberg,
and I serve as president of the Human Trafficking Legal Center, a human
rights non-governmental organization dedicated to the eradication of
forced labor.
That goal, the eradication of forced labor, is a heavy lift.
My colleagues and I frequently say that forced labor is a feature,
not a bug, in global supply chains. The issue requires system-wide
solutions, not just isolated prosecutions against individual bad
actors. Criminal prosecutions have failed to curb forced labor around
the globe, largely because there are almost no prosecutions. According
to the State Department's June 2020 Trafficking in Persons (TIP)
report, there were just 1,024 forced labor prosecutions in the entire
world. Based on International Labor Organization (ILO) global estimates
of forced labor, that is one prosecution for every 20,410 victims held
in forced labor.
The United States is no outlier. According to Department of Justice
data, Federal prosecutors indicted just 12 forced labor cases in the
entire country in FY 2019. And although extraterritorial jurisdiction
has existed since 2008 to prosecute global supply chain forced labor
cases with a nexus to the United States, Federal prosecutors have never
brought even one forced labor supply chain case that invoked
extraterritorial jurisdiction.
The result of this enforcement vacuum? Impunity. Complacency.
Immense human suffering.
A race to the bottom--to markets with the lowest wages--has
cemented these abuses into global supply chains. Forced labor is not an
aberration. It is a direct result of policy--and pricing--decisions
made by corporations around the globe. The COVID-19 pandemic has only
exacerbated the vulnerability of workers to conditions of forced labor.
According to the ILO,\1\ the disparate effects of the global health
crisis will bear most heavily on children held in child labor, victims
of forced labor, and victims of human trafficking, particularly women
and girls.
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\1\ COVID-19 impact on child labor and forced labor: The response
of the IPEC+ flagship programme, https://www.ilo.org/wcmsp5/groups/
public/@ed_norm/@ipec/documents/publication
/wcms_745287.
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pay to work is the norm for migrant workers
We now live in a world in which migrant workers must buy their
jobs. They do not pay to play. Workers pay to work. Because they cannot
afford to pay the recruitment fees outright, workers must borrow. Those
loans wrack up massive interest payments, compounding workers' debts.
And despite corporate ``employer pays'' policies, workers continue to
drown in recruitment fee debts. Many find themselves trapped in debt
bondage.
tariff act--a game changer since 2016
Until recently, corporate actors importing goods made with forced
labor had little to fear. Governments seemed unlikely to prosecute
them. Civil cases brought under the Alien Tort Statute or the private
right of action under the Trafficking Victims Protection
Reauthorization Act (TVPRA) took years to litigate. And the
reputational harm of a forced labor allegation frequently dissipated
after initial bursts of consumer outrage.
The closing of the U.S. Tariff Act of 1930's consumptive demand
loophole in 2016 changed the game.
That amendment catapulted section 307 \2\ from a moribund statutory
relic to a valuable tool to combat forced labor. Finally, the use of
forced labor in global supply chains could trigger meaningful
accountability. Enforcement of the Tariff Act through a Withhold
Release Order (WRO) or a Finding can have significant financial
consequences for a supplier, as well as for an importer. Finally,
corporations are sitting up and taking notice. The Tariff Act has made
forced labor more than a corporate social responsibility issue. Forced
labor is now a serious enforcement issue for corporations. At last,
there is risk.
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\2\ 19 U.S.C. Sec. 1307 states, ``All goods, wares, articles, and
merchandise mined, produced, or manufactured wholly or in part in any
foreign country by convict labor and/or forced labor and/or indentured
labor under penal sanctions shall not be entitled to entry at any of
the ports of the United States, and the importation thereof is hereby
prohibited[.]''
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a recent gao report confirms the impact of section 307 of the tariff
act
The recent Government Accountability Office (GAO) report \3\ on the
Tariff Act underscores these conclusions:
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\3\ Government Accountability Office, Forced Labor: CBP Should
Improve Communication to Strengthen Trade Enforcement, March 1, 2021,
GAO-21-259, available at https://www.
gao.gov/products/gao-21-259.
Officials from Federal agencies, NGOs, and private sector
entities we spoke with generally described section 307 as an
effective mechanism to help prevent the importation of goods
produced with forced labor. According to CBP officials,
importers typically stop trying to import goods subject to a
WRO about a month after it is issued, which demonstrates WROs'
deterrent effect. Additionally, at a meeting with various NGOs,
representatives told us they agreed that section 307 was a
helpful mechanism to eradicate forced labor. Further, according
to State officials, section 307 enforcement is a powerful tool
to advance the U.S. Government's mission to combat forced
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labor.
A private-sector representative said that section 307 is an
effective signal that all companies involved in supply chains
need to address forced labor violations. In addition,
representatives from a private sector entity commented that
section 307 is an important law, in part because it has
intensified companies' focus on forced labor in their supply
chains.
As we pause to review the success and challenges of section 307 of
the Tariff Act, I am reminded of the Foreign Corrupt Practices Act's
(FCPA) evolution. In the 1970s, bribery was ubiquitous across the
globe, just as forced labor is today. In Germany, bribes were tax-
deductible. That all changed when the Department of Justice began
prosecuting companies and individuals under the FCPA. Suddenly, bribery
allegations went straight to the C Suite. What changed? The advent of
risk. Risk compelled corporations to implement robust, comprehensive,
and expensive compliance plans. Bribes were not the stuff of corporate
social responsibility (CSR) backwaters; bribes became the province of
internal investigations, outside counsel, and compliance monitors.
cbp's enforcement surge
We are a long way from FCPA anti-bribery regime levels for forced
labor. But Customs and Border Protection (CBP)'s section 307
enforcement is bringing us closer.
CBP issued 29 WROs between February 2016 and January 2021. In the
prior 80-plus years, CBP had issued just 33 WROs. According to the GAO
Report issued in March 2021:
Twenty WROs covered merchandise from specific manufacturers,
such as hair products produced by Hetian Haolin Hair Accessories Co.,
Ltd., in China.
Five WROs covered a type of good produced in a specific
location, country, or region, such as cotton from Xinjiang, China.
Four WROs covered seafood imports from fishing vessels, such
as seafood from the Taiwan-flagged Yu Long No. 2.
More than half of the WROs (16 of 29) pertained to products
from China.
The remaining 13 WROs pertained to products from Brazil, the
Democratic Republic of the Congo, Malawi, Malaysia, Turkmenistan, and
Zimbabwe and from four fishing vessels.
In October 2020, CBP issued its first Finding for imports produced
with forced labor in 24 years. The agency collected $575,000 in
penalties from PureCircle USA, Inc., for importing at least 20
shipments of stevia powder and its derivatives that were processed in
China with prison labor.\4\ CBP had issued a WRO for these products in
2016.
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\4\ CBP Collects $575,000 from PureCircle U.S.A. for Stevia Imports
Made With Forced Labor, https://www.cbp.gov/newsroom/national-media-
release/cbp-collects-575000-pure-circle-usa-stevia-imports-made-forced-
labor.
And according to data recently released by CBP, in the first
quarter of FY 2021, the government detained 90 shipments of cargo
covered under different WROs. The value of that cargo was $20.8
million. In FY 2020, CBP detained a total of 324 shipments valued at
$55 million. CBP appears poised to shatter the FY 2020 detention
record, a welcome development.
enforcement is welcome, but significant gaps remain
The Human Trafficking Legal Center and our NGO coalition partners
have applauded CBP's increased enforcement. Indeed, non-governmental
organizations are fundamental to this success.\5\ According to public
records, NGOs have filed no fewer than ten petitions since 2016. Some
of those petitions have resulted in Withhold Release Orders, such as
the January 2021 region-wide WRO on Xinjiang cotton. That petition,
filed in August 2020 by 10 non-governmental organizations,\6\ provides
a telling example of the power--and lacunae--in section 307
enforcement.
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\5\ Human Trafficking Legal Center published a practice guide on
how to file petitions to CBP in June 2020. That guide, Importing
Freedom: Using the U.S. Tariff Act to Combat Forced Labor in Global
Supply Chains, has been translated into multiple languages and
distributed to partners across the globe. The guide was authored by
Human Trafficking Legal Center Human Rights and Trade Policy Advisor
Anasuya Syam, https://www.htlegalcenter.org/wp-content/uploads/
Importing-Freedom-Using-the-U.S.-Tariff-Act-to-Combat-Forced-Labor-in-
Supply-Chains
_FINAL.pdf.
\6\ Human Rights Groups Call on U.S. for Regional Ban on Imports
From China Made With Uyghur Forced Labor, https://www.iccr.org/human-
rights-groups-call-us-regional-ban-imports-china-made-uyghur-forced-
labor.
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Two issues relating to this petition raise concerns:
Communication and Transparency
Once the Xinjiang cotton petition was filed, it was unclear how the
CBP investigation was progressing or whether the agency was satisfied
with the information provided by the petitioners. There were rumors \7\
in September 2020 that CBP was ready to issue a regional block on all
cotton from Xinjiang. However, it appears that the announcement was
rolled back soon thereafter. The agency resorted to issuing a narrower
order against cotton imports from one entity--the Xinjiang Production
and Construction Corps (XPCC) in December 2020. The region-wide WRO
against all Xinjiang cotton (and tomatoes) was eventually issued on
January13, 2021. Throughout this saga, the petitioning organizations
were not informed of when the investigation would conclude and a WRO
would issue. This is despite the fact that in a press conference
announcing the XPCC WRO in December 2020, CBP Acting Commissioner Mark
A. Morgan thanked the coalition of non-governmental organizations for
their Xinjiang cotton petition and noted the critical role played by
NGOs in Tariff Act enforcement.
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\7\ U.S. readies bans on cotton, tomato imports from China's
Xinjiang, https://www.
reuters.com/article/us-usa-trade-china-xinjiang/u-s-to-block-cotton-
tomato-product-imports-from-chinas-xinjiang-over-forced-labor-cbp-
idUSKBN25Z29N.
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Capacity to Enforce
As the GAO report pointed out:
Forced Labor Division officials and representatives from
several private-sector entities and NGOs said that difficulty
in tracing supply chains presents a challenge for section 307
investigations and compliance. Forced Labor Division officials
noted that CBP often cannot trace goods produced with forced
labor overseas and imported into the United States because of
the complexity of the goods' supply chains.
Issuing the WRO is only the first step. Robust and swift
enforcement of the order must follow. CBP announced that despite the
prohibition on all Xinjiang cotton, the agency would focus only on
direct imports from the region, reflecting what the agency terms a
``scalpel approach'' to enforcement.\8\ This is especially concerning
considering that direct imports from Xinjiang represent only a fraction
of all imports that contain Xinjiang cotton. Many goods containing the
offending cotton are shipped via third countries. For the WRO to have
the most impact, CBP should enforce the order broadly and without any
limitations. It must cultivate internal capacity to trace these supply
chains through training and use of cutting-edge tracing technology.
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\8\ CBP's Smith says initial focus for Xinjiang WRO is direct
connections, not goods finished elsewhere, https://
internationaltradetoday.com/news/2021/01/28/cbps-smith-says-initial-
focus-for-xinjiang-wro-is-direct-connections-not-goods-finished-
elsewhere-2101280025.
Annually, the United States imports billions of goods at risk of
being produced by forced labor and child labor. However, as mentioned
above, Tariff Act enforcement in the previous financial years have only
netted a very small portion of this figure. It is critical that more
shipments are detained at U.S. ports of entry. Non-governmental
organizations are finding it difficult to assess the impact of WROs
without knowing how CBP is enforcing the order and to what degree. CBP
does not release enforcement data for each WRO. The agency recently
began releasing data on total number of shipments detained each quarter
(under all WROs), but that does not give us the full picture.
the corporate backlash begins
The backlash against Tariff Act enforcement has throttled up in
recent days, with lawsuits filed by corporations against non-
governmental organizations and researchers. These retaliatory legal
actions have a chilling effect on NGOs, which we can only surmise is
the intent. Sime Darby, a Malaysian palm oil producer subject to a WRO,
filed a lawsuit in U.S. Federal court against Duncan Jepson, the
director of Liberty Shared, seeking extensive discovery of the human
rights organization's confidential investigation files.\9\ And Chinese
corporations have filed a suit \10\ in China against Adrian Zenz, a
U.S.-based human rights researcher who has documented widespread forced
labor and crimes against humanity against the Uyghur population in
Xinjiang.
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\9\ Civil miscellaneous case In re Application of Sime Darby
Plantation Berhad, pursuant to 28 U.S.C. Sec. 1782 to conduct discovery
for use in foreign proceedings, Case No. 1:21-mc-00006 (EDVA March 9,
2021).
\10\ Chinese firms seek damages from foreign researcher over forced
labor reports, https://news.trust.org/item/20210309064206-l7inv/.
Corporate response to WROs should include internal investigations,
remediation, and corporate governance reform and internal controls to
prevent forced labor in the future. Instead, some corporate actors have
adopted a ``shoot the messenger'' strategy, seeking to embroil the
petitioner in litigation. Facing universal outrage, Sime Darby dropped
their lawsuit just a week after filing.\11\
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\11\ Sime Darby withdraws lawsuit against activist, https://
www.freemalaysiatoday.com/category/nation/2021/03/16/sime-darby-
withdraws-lawsuit-against-activist/.
Similarly, subtle, but increasingly loud, corporate voices seek to
dismantle section 307's enforcement regime. Couched in the language of
calls for ``due process,'' corporate advocates have suggested that CBP
abandon the section 307 petition regime to move to a tribunal-based
system, such as that used in section 337 enforcement. Rhetorical
condemnation of forced labor notwithstanding, these critics truly come
to bury section 307, not to praise it.
recommendations for robust enforcement of section 307
The NGO community asks that Congress resist calls for a ``grand re-
envisioning'' of the Tariff Act. Instead, there are concrete
recommendations that will increase CBP's effectiveness in implementing
and enforcing section 307. The Human Trafficking Legal Center serves as
the secretariat to the Tariff Act Advisory Group (TAAG), a coalition of
non-governmental organizations dedicated to enforcement under section
307 of the Tariff Act of 1930. Many of the recommendations that I
suggest today are discussed in greater depth in a series of letters
TAAG has provided to CBP and the Department of Homeland Security:
Letter to Secretary of Homeland Security Mayorkas on Effective
Enforcement of the Tariff Act: https://www.htlegalcenter.org/wp-
content/uploads/Letter-to-Secretary-Mayorkas-March-4-2021.pdf.
Letter to CBP on Reimbursement of Recruitment Fees: https://
www.
htlegalcenter.org/wp-content/uploads/Letter-to-CBP-re.-Reimbursement-
September-21-2020.pdf.
Letter to CBP on Effective Enforcement of Section 307 of the
Tariff Act: https://www.htlegalcenter.org/wp-content/uploads/Letter-to-
CBP-re.-Effective- Enforcement-November-19-2020.pdf.
Similarly, one of our partner organizations, Global Labor Justice/
International Labor Rights Forum (GLJ/ILRF) has made important
recommendations in a letter recently submitted to CBP on the
enforcement of another palm oil WRO, this one against FGV. That letter
may also be found online at: https://laborrights.org/publications/
march-9th-2021-letter-cbp-about-enforcement-fgv-wro.
Recommendations for Enforcement:
Uphold freedom of association. Workers' rights and ability to
unionize are central to any effort to eliminate forced labor in supply
chains. Freedom of association is a necessary factor in remediating
forced labor. Workers and worker representatives must be included in
the Tariff Act process. CBP should ensure that affected workers, their
unions, workers' rights organizations, and migrant workers' rights
groups have a role in enforcement. Workers' agency to monitor and
report on their working conditions must be respected and incorporated
as part of an enforcement plan for each WRO.
Create an emergency fund for workers harmed by WROs. Workers can
face dire consequences after the issuance of a WRO. As the March 2021
GAO report pointed out:
ILAB officials told us that, as an unintended consequence of
the September 2019 WRO for disposable rubber gloves produced in
Malaysia, many workers' employment was terminated, which had a
negative effect on workers facing exploitation. The officials
said that it is important that the U.S. Government be prepared
to support workers who are placed in a position of increased
vulnerability as a result of enforcement actions to prevent
forced labor.
The creation of an emergency fund for workers is essential to
mitigate the harm to workers. There is the danger that U.S. companies
will ``cut-and-run,'' abandoning foreign suppliers instead of working
to remediate forced labor. This emergency fund should be financed by
fines levied against importers, as in the stevia case, or by funds
created by the corporations themselves.
Punish companies that retaliate against workers or petitioners. If
a corporate actor retaliates against a petitioner or witnesses, all
negotiations on revocation or modification of the WRO should cease.
Attacks on petitioners should be considered when corporations seek
relief from CBP. Retaliation does not signal good faith efforts to
remediate or eliminate forced labor.
Increase transparency. We agree with the GAO's recommendation that
CBP better ``communicate to stakeholders the types of information they
could collect and submit to CBP to help it initiate and investigate
forced labor cases. . . .'' There is still little clarity on the
standards CBP applies or the evidence required. At a recent meeting,
CBP informed the NGO community that the agency would soon publish
guidance on types of information needed in a section 307 allegation.
CBP should work more closely with the Bureau of International Labor
Affairs (ILAB) and the Bureau of Democracy, Human Rights, and Labor
(DRL) to bring the definitions of forced labor, child labor, and prison
labor used by the agency in line with the International Labor
Organization (ILO) core labor standard definitions.
Disclose shipments detained under a WRO. CBP's recent disclosures
of the number and value of shipments detained in FY 2020 are
encouraging, but these aggregated numbers are untethered to specific
WROs. For example, we have no confirmation or data to indicate that CBP
ever enforced the 2018 WRO against Turkmenistan cotton, although we do
have credible information that imports containing cotton from
Turkmenistan have entered the United States. CBP should release
enforcement updates on each WRO each quarter.
Increase enforcement and penalties. Enforcement of the Tariff Act
should be ramped up with the issuance--and robust enforcement--of more
WROs. U.S. importers that continue to source goods in violation of the
U.S. Tariff Act should face penalties. We hope to see more WROs, more
findings, more monetary penalties (for higher amounts), and criminal
prosecutions for forced labor. We also encourage CBP to press more
aggressively for fines and penalties. Pure Circle, which paid a
$575,000 fine for the importation of stevia manufactured by prisoners
in China, bragged in a press release that this was less than 7 percent
of the fine that CBP had originally sought to enforce.\12\
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\12\ PureCircle and U.S. Customs and Border Protection Resolve 2014
Stevia Sourcing, https://purecircle.com/news/purecircle-and-u-s-
customs-and-border-protection-resolve-2014-stevia-sourcing/.
Prosecute forced labor in global supply chains. The U.S. Government
has never prosecuted a case of forced labor in a global supply chain,
despite the existence of extraterritorial jurisdiction under 18 U.S.C.
Sec. 1596. Victims of forced labor in supply chains have brought civil
suits in the Federal courts under 18 U.S.C. Sec. 1595, but criminal
prosecutions have not followed. We encourage DHS to ramp up
investigations (and prosecutions) under chapter 77 of title 18, the
Trafficking Victims Protection and Reauthorization Act (TVPRA). We are
also concerned that the U.S. Government has not prosecuted even one
case alleging the importation of goods made with forced labor. We urge
the agency to work with the Department of Justice (DOJ) to prosecute
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violators.
Strengthen enforcement of WRO on cotton and cotton products from
Xinjiang. Effective enforcement of this regional WRO is a key tool to
end China's widespread and systematic forced labor and other abuses
against Uyghurs and Turkic Muslims. CBP's recent announcement that
enforcement would be done with a ``scalpel'' raises significant
concerns. The WRO should be enforced broadly.
Diversify Tariff Act enforcement. More than 72 percent of WROs
issued in the Tariff Act's 90-year history have been against goods
produced in China. The Chinese Government's systematic oppression of
the Uyghur peoples and other ethnic minorities is reprehensible. But
China should not be the sole target of Tariff Act enforcement under
section 307. Forced labor continues in many countries in East Asia,
South and Central Asia, Africa, the Americas, the Middle East, and
Europe.
Increase transparency on modifications and revocations. Non-
governmental organizations and unions are left in the dark on the
process leading to a WRO revocation. Without information about
remediation claims, petitioners cannot verify whether conditions of
forced labor have in fact been remediated. NGO/union involvement at
each stage of the Tariff Act process is critical to ensure that workers
affected by a WRO do not remain trapped in forced labor and involuntary
servitude.
Establish cooperation and communication channels with U.S. allies.
Goods made with forced labor--and subject to WROs--are routinely re-
routed from U.S. ports to neighboring countries or other regions. Our
own research has identified transshipment to Canada of goods subject to
WROs in the United States. Mexico, the United States, and Canada should
establish an infrastructure to facilitate cooperation in combating
forced labor, including identification and movement of goods produced
using forced labor (Articles 23.12 (5)(c) and 23.6 of the United
States-Mexico-Canada Agreement).
Incorporate section 307 provisions into all trade agreements. There
should be no safe harbor for goods made with forced labor anywhere in
the world.
conclusion
Section 307 has enormous potential to disrupt forced labor in
global supply chains. The community of non-governmental organizations
stands ready to cooperate with CBP, and with Congress, to maximize the
effectiveness of this tool.
______
Questions Submitted for the Record to Martina E. Vandenberg, J.D.
Question Submitted by Hon. Mike Crapo
Question. I have read that your research indicates that many
countries lack the political will to criminally prosecute forced labor.
That is deeply troubling. It is simply not enough to stop goods made
with forced labor from entering the United States. Forced labor is a
crime against humanity. Perpetrators must be punished.
What can be done to incentivize states to bring such prosecutions?
Answer. Forced labor must be prosecuted. More than 20 years after
passage of the Trafficking Victims Protection Act, impunity remains the
norm. I would make three recommendations to address this question.
First, the State Department's Office to Monitor and Combat
Trafficking must increase the level of attention and scrutiny on forced
labor around the globe. It was not until 2008 that the State
Department's annual Trafficking in Person's report even broke out
forced labor as a separate category in the report's global estimated
prosecution figures. In that year, the State Department began providing
forced labor prosecution numbers as a parenthetical, alongside the
total trafficking prosecution numbers. Since then, the forced labor
prosecution numbers have remained dismal, never even reaching 1,200 in
any year.
The Biden administration has not yet nominated a new ambassador to
lead the Trafficking in Persons Office at the Department of State. But
once that individual is confirmed, the TIP Office should be tasked with
allocating resources to promote forced labor prosecutions around the
globe. Forced labor should be emphasized in meetings with foreign
governments. In addition, the failure to prosecute forced labor should
be weighed heavily in downgrading a country to Tier 2 Watch List or
Tier 3 in the annual report. Embassy officers filing State Department
annual TIP reporting cables should be required to investigate and
report on the causes of the dearth of forced labor prosecutions in
their jurisdiction.
Second, the United States must lead by example. The U.S. cannot
condemn other countries for failing to prosecute forced labor when our
own prosecution numbers are so abysmal. In the 21 years since passage
of the Trafficking Victims Protection Act, Federal prosecutors have
never brought more than 32 forced labor prosecutions in any given year.
The U.S. forced labor prosecution record is grim, even compared to
similar nations. For example, in FY 2019, Federal authorities
prosecuted just 12 forced labor cases in the entire United States. In
contrast, the European Union prosecuted 106 forced labor cases in 2019.
The Department of Justice must focus not only on prosecution of U.S.
forced labor cases committed on U.S. territory. Prosecutors should also
use the extraterritorial jurisdiction provided by 18 U.S.C. Sec. 1596
to bring Federal trafficking cases for crimes committed by U.S. persons
abroad. When the United States sets this example, other countries will
follow.
Third, states can be incentivized to bring forced labor
prosecutions by prioritizing forced labor in U.S. aid and assistance
programs. The U.S. Government offers multiple fellowship, visitor, and
training programs around the globe. These programs should focus on
forced labor experts, particularly on those with expertise on global
supply chains. Additional resources should be made available to DOL-
ILAB to pursue systemic approaches to eradicate forced labor and child
labor. In addition, the U.S. government should use sanctions regimes,
such as Global Magnitsky sanctions, to punish those using forced labor
in global supply chains. Sanctions can be particularly effective in
targeting the endemic corruption that allows forced labor to flourish
unchecked. Sanctions should be used to punish government officials
profiting from forced labor.
______
Questions Submitted by Hon. John Barrasso
china's human rights abuses
Question. The Chinese Communist Party continues to commit terrible
human rights abuses. The Uyghurs, a religious and ethnic minority in
China, have experienced brutal repression at the hands of the Chinese
Government. They continue to be subjected to torture, imprisonment, and
forced labor. At least 1 million Uyghurs have been put in internment
camps by the Chinese Communist Party. Around 100,000 Uyghurs and ethnic
minority ex-detainees have reportedly been used as forced labor in
textile and other industries in China.
How effective have U.S. actions been at addressing the human rights
abuses and the use of forced labor?
Answer. The United States needs the support of allies to
successfully combat forced labor. If the United States continues to be
the only country blocking the importation of goods made with forced
labor, transshipment to other ports will continue. This blunts the
effectiveness of section 307 of the Tariff Act as a tool to combat
forced labor. In addition to Tariff Act enforcement, the United States
should ramp up use of Global Magnitsky sanctions and increase Federal
criminal prosecutions to address forced labor in global supply chains.
Question. What more should the United States do on transparency and
enforcement?
Answer. The United States should take the following steps to
increase transparency and ramp up enforcement:
Customs and Border Protection (CBP) should inform petitioners
under section 307 of the Tariff Act about the status of their petitions
for Withhold Release Orders.
CBP should communicate with petitioners before revoking or
modifying a WRO.
CBP should involve workers' rights organizations and/or unions
to confirm that remediation plans submitted to CBP by companies to
support a request for modification or revocation of a WRO are
legitimate. For example, CBP should corroborate claims that recruitment
fee reimbursements and back wage repayments to workers have been
carried out.
CBP should provide quarterly data on shipments detained under
each WRO.
CBP should issue additional forced labor Findings.
CBP should levy significant fines against importers that bring
goods made with forced labor into the U.S. market.
The U.S. Government should prosecute forced labor in global
supply chains, relying on extraterritorial jurisdiction provided under
the Federal trafficking statutes, codified at 18 U.S.C. Sec. 1596.
working with allies
Question. In your testimony, you noted the need to create
cooperation and communication channels with our allies to address
forced labor. You explained that goods made with forced labor and
subject to U.S. Withhold Release Orders are re-routed from U.S. ports
to neighboring countries.
How aligned are the U.S. and our allies, such as Canada and the
United Kingdom, on addressing the risk of forced labor-produced goods
entering the global supply chains?
Answer. The United States and its close allies are becoming more
aligned in the fight against forced labor in global supply chains.
However, to date, only Canada has taken concrete steps to address the
risk of forced labor-produced goods entering its supply chains.
In accordance with requirements under the USMCA, Canada enacted a
prohibition on the importation of goods made using forced labor and
prison labor. The publication of Customs Notice 20-23 marked a positive
step forward. The Canadian government recently updated their website to
provide information on how members of the public can submit allegations
of forced labor to Canadian authorities.
On January 12, 2021 Canada and the U.K. announced coordinated trade
restrictions against China over the issue of forced Uyghur labor.
Non-governmental organizations in the United Kingdom have pressed
their government to implement a prohibition on the importation of goods
made with forced or prison labor similar to the Tariff Act. In 2020, a
U.K.-based NGO, Global Legal Action Network (GLAN), and the World
Uyghur Congress filed a petition to Her Majesty's Revenue and Customs
Authority requesting the suspension of imports of cotton goods produced
with prison labor in China. The petition, which relied upon the U.K.'s
Foreign Prison-Made Goods Act of 1897, has not yet received a final
decision.
Question. In what areas does the United States need to work with
our allies to improve and coordinate efforts to address forced labor?
Answer. One fundamental problem facing successful Tariff Act
enforcement is transshipment. Goods subject to a Withhold Release Order
(WRO) can simply be moved to another market. The United States must
press its key allies--the U.K., the EU, Australia, and New Zealand--to
implement legislation similar to the U.S. Tariff Act. The allies should
also share intelligence on forced labor investigations. Only this can
halt transshipment. There should be no safe harbor for goods made using
forced labor.
Canada has already made excellent progress in adopting a Tariff
Act-like regime, as required under the USMCA. The United States should
coordinate with Customs authorities in Canada and Mexico to identify
and track the cross-border movement of goods produced using forced
labor. Goods subject to a Withhold Release Order (WRO) should be
refused entry into Canada and Mexico. The United States should also
support Mexico in implementing its obligations under the USMCA to bar
goods made with forced labor.
push for green energy
Question. In your testimony, you noted: ``Forced labor is not an
aberration. It is a direct result of policy--and pricing--and decisions
made by corporations around the globe.'' I'd like to focus on the
policy side of your statement for just a moment.
President Biden has made decarbonizing the American economy a
policy cornerstone for his administration. To achieve this policy goal,
America will have to significantly increase imports of equipment,
critical minerals, and raw materials from China and other countries
known to use forced labor and child labor--solar panels from Xinjiang,
cobalt mined by children in the Congo.
Do you believe the rapid push for green energy deployment in the
U.S. is the type of policy that will contribute to the problem of
forced labor and child labor?
Answer. The problem of forced labor is ubiquitous. It is a systemic
issue in global supply chains. It is not confined to one product,
industry, or region. The problem is not the rapid push for green energy
development. It is the lack of accountability for forced labor,
resulting in complete impunity. The accountability problem is
compounded by opaque supply chains, dearth of criminal prosecutions for
forced labor, sheer ineffectiveness of corporate self-regulation, and
inadequate implementation of existing labor laws. Increased enforcement
under the U.S. Tariff Act will serve as a deterrent against forced
labor in global supply chains. And, as noted at the hearing, increased
enforcement will also protect U.S. workers. U.S. workers cannot compete
with workers held in forced labor abroad; increased enforcement evens
the playing field.
mineral extraction in china
Question. In 2020, China controlled about 60 percent of the natural
graphite and rare earths produced globally.
To what extent is mineral production or processing in China
associated with the human rights abuses--what the U.S. State Department
has called ``genocide''--against the Uighurs?
Answer. All goods, including mineral and rare earths, from China
should be suspect. Because the Chinese government has forcibly
relocated Uyghurs throughout China to engage in forced labor, raw
materials from all regions, not just Xinjiang, should be scrutinized
for links to forced and prison labor.
Question. Would we be better served safely mining rare earths and
critical minerals in places like Wyoming instead of relying imports
from China or other bad actors?
Answer. The State Department has just confirmed again that the
abuse against the Uyghur population in Xinjiang rises to the level of
genocide. Obtaining minerals from any other source other than Xinjiang
is in the best interests of the United States.
congressional proposals on import bans
Question. Since 2009, China has been included on the List of Goods
Produced by Child Labor or Forced Labor. The Bureau of International
Labor Affairs recently added five new categories of products from
Xinjiang to the list. It included gloves, hair products, textiles,
thread/yarn, and tomato products.
In January, the Trump administration issued a sweeping ban on
imports of cotton and tomato products from China due to evidence of
forced labor. There are several congressional proposals aimed at
expanding the administration's authorities to more robustly address
widespread and systematic force labor in China.
What are your views on the proposal to implement a comprehensive
import ban on all goods produced, wholly or in part in Xinjiang?
Answer. The Human Trafficking Legal Center supports the proposal to
implement a comprehensive import ban on all goods produced, wholly or
in part, in Xinjiang. There should be a rebuttable presumption that
these goods are made with forced labor. There is absolutely no excuse
for any U.S. corporation to be manufacturing goods or importing goods
from Xinjiang.
Question. What ways would you recommend the United States take to
enhance import controls and enforcements on goods produced in China?
Answer. China is currently able to transship goods through third
countries to mask the goods' origin. Customs and Border Protection
(CBP) should use available technology to trace Xinjiang cotton and
other raw materials in finished goods. In addition, CBP should
vigorously scrutinize imports from companies that have buckled to
Chinese Communist Party pressure to source from Xinjiang. Many of these
companies originally denounced forced labor in Xinjiang cotton
production, but have since issued groveling statements indicating that
they will continue to purchase cotton from the region. Companies
issuing such statements on their Chinese-language social media feeds
should be subjected to heightened scrutiny on all imports brought into
the United States.
______
Prepared Statement of Joseph Wrona, Local 135L Member, United Steel,
Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial,
and Service Workers International Union (USW)
Chairman Wyden, Ranking Member Crapo, members of the committee, my
name is Joe Wrona, and I am a member of the United Steelworkers (USW)
and a maintenance mechanic at the Sumitomo tire plant in Tonawanda, NY.
Thank you for the opportunity to testify today on the important topic
of how to fight forced labor and improve our supply chains.
Connecting my life in Buffalo to global supply chains and forced
labor is unfortunately, and surprisingly, too straightforward. While
I've worked at the tire plant for the last couple of years, my previous
job was at Ferroglobe's Niagara Falls, NY plant. I worked there for 10
years, with roughly 100 other union members and management. The
Ferroglobe facility, which I'll call Globe, used to produce metal
silicate by taking quartz, woodchips, and coal and cooking them in an
electric arc furnace until the quartz is reduced into silicon metal.
Metal silicate is a product that we made 24/7 at the plant. It is a
product you interact with every day in a variety of ways. From
strengthening aluminum, to the caulking that seals your home, or even
cosmetics, silicon metal is everywhere. It is also a base component to
the production of polysilicon, which is vital to solar panel
production.
Expecting that strong demand for solar power would boost metal
silicate demand, in 2009 Globe planned a $35-million upgrade to convert
its metallurgical grade silicon into 4,000 tons of upgraded
metallurgical grade silicon each year--enough to produce 500 megawatts
of solar power.\1\ The company, in an investor report from 2016,
highlighted the opportunity to see demand grow as SolarCity, a solar
panel company connected to Elon Musk, was supposedly in the final
stages of construction on the site of a shuttered steel mill.\2\
However, that vision fell apart for the workers at Globe in 2018 when
the plant was closed because of a lack of demand.
---------------------------------------------------------------------------
\1\ https://www.labor.ny.gov/pressreleases/2009/
November24_2009.htm.
\2\ https://www.petrole.gov.mr/IMG/pptx/
session_8_s2___jean_du_plessis_ferroglobe_2_.pptx.
Globe has been fighting illegal trade practices in metal silicate
for decades now. The first trade enforcement case against dumped and
subsidized metal silicate from China started 30 years ago in 1991.\3\
But while tariffs on metal silicate helped to defend our jobs at Globe,
they could not stop products further up the supply chain, like solar
panels or those produced with forced labor.
---------------------------------------------------------------------------
\3\ https://www.usitc.gov/publications/701_731/pub4783.pdf.
The growth of China's industrial capacity is well documented.
Chinese companies in polysilicon produced over 80 percent of global
polysilicon in 2020.\4\ The Chinese Government has used more than $1.6
billion dollars in state subsidies to increase production of
polysilicon from 45 kilotons to 410 kilotons per year. This has
effectively locked the U.S. out of growing solar demand and the
overcapacity in China destroys nearly any ability of U.S. companies to
compete.
---------------------------------------------------------------------------
\4\ https://www.nytimes.com/2021/01/08/business/economy/china-
solar-companies-forced-labor-xinjiang.html.
But for my brothers and sisters who made good wages at Globe
between $70,000 and $100,000 dollars a year, they were victims not only
of unfair trade practices, but also forced labor in China. About 45
percent of the world's supply of solar-grade polysilicon comes from
Xinjiang.\5\ The news about human rights abuses there are unacceptable.
According to academic experts, 10 million Muslim minorities in the
region are under lockdown control, and over 1 million Uyghurs and
others have allegedly disappeared into internment camps.\6\ The
Australian Strategic Policy Institute estimates that more than 80,000
Uyghurs were transferred out of Xinjiang to work in factories across
China between 2017 and 2019.\7\
---------------------------------------------------------------------------
\5\ https://www.bloomberg.com/news/articles/2021-02-10/why-it-s-so-
hard-for-the-solar-industry-to-quit-xinjiang?sref=HEwoTbCT.
\6\ https://fsi.stanford.edu/news/human-rights-crisis-xinjiang-
uyghur-autonomous-region.
\7\ https://www.aspi.org.au/report/uyghurs-sale.
There should be no debate. Eliminating forced labor from our
country's supply chain should happen today, and companies who have
benefited should be held accountable. It was a good step when Customs
and Border Patrol issued a Withhold Release Order against cotton and
tomato products produced by Uyghurs in Xinjiang. We should act
immediately to do the same for products, like solar panels, that
---------------------------------------------------------------------------
contaminate the supply chain with forced labor.
We also need to act urgently to defend American workers and foster
a domestic solar industry here. This means direct investment in metal
silicate plants like my old facility in Niagara Falls or the plant in
Alloy, WV where my union brothers and sisters work.
Thank you for the opportunity to testify today, and I look forward
to answering any questions you may have. Finally, working with my
union, I've included additional materials with my written testimony.
Additional supporting materials related to ``Fighting Forced Labor:
Closing Loopholes and Improving Customs Enforcement to Mandate Clean
Supply Chains and Protect Workers'':
AFL-CIO statements regarding Forced Labor in the Xinjiang
Uyghurs Autonomous Region, China:
https://aflcio.org/about/leadership/statements/ending-forced-
labor-xinjiang-uighur-autonomous-region-china
https://aflcio.org/press/releases/progress-long-awaited-ban-
certain-products-uyghur-region-china
https://aflcio.org/press/releases/afl-cio-applauds-action-ban-
goods-made-forced-labor-linked-xinjiang-production-and
Articles referencing the AFL-CIO letter to Biden administration
urging the blocking of imports of solar products containing polysilicon
from China's Xinjiang region:
https://www.nytimes.com/live/2021/03/15/business/stock-market-
today#the-afl-cio-urges-president-biden-to-ban-solar-products-
from-xinjiang
https://www.reuters.com/article/us-usa-trade-china-
idUSKBN2B806L
https://www.bloomberg.com/news/articles/2021-03-15/afl-cio-s-
trumka-demands- cutoff-of-solar-products-from-xinjiang
Center for Strategic and International Studies on Industrial
Policy in Clean Energy, brief section on Chinese dominance in solar but
not on forced labor:
https://www.csis.org/analysis/industrial-policy-trade-and-
clean-energy-supply-chains
Council on Foreign Relations article:
https://www.cfr.org/backgrounder/chinas-repression-uyghurs-
xinjiang
March 2021 report making comprehensive case that CCP is
practicing systematic genocide in the Uyghur region, including forced
labor:
https://newlinesinstitute.org/wp-content/uploads/Chinas-
Breaches-of-the-GC.pdf
On U.S. importers in solar sector and XUAR forced labor:
https://pulitzercenter.org/stories/us-solar-companies-rely-
materials-xinjiang-where-forced-labor-rampant
https://www.spglobal.com/marketintelligence/en/news-insights/
latest-news-headlines/firms-with-xinjiang-ties-lead-us-solar-
imports-62204298
On allies and EU concerns about solar:
https://www.politico.eu/article/xinjiang-china-polysilicon-
solar-energy-europe/
On support for the Uyghur Forced Labor Protection Act passed in
the House last September:
https://aflcio.org/press/releases/afl-cio-supports-uyghur-
forced-labor-prevention-act
Reintroduced bill in 2021 with special mention of the solar
industry:
https://enduyghurforcedlabour.org/news/us-house-bill-would-
effectively-block-import-of-goods-produced-with-uyghur-forced-
labor/
______
Questions Submitted for the Record to Joseph Wrona
Questions Submitted by Hon. Todd Young
Question. China's unfair actions--like bloated state subsidies--
have had ripple effects throughout the global market, and specifically
the Midwest.
As China's increased industrial capacity grows, we continue to see
predatory trade actions that accompany that effort. As a case study,
Mr. Wrona, you cited the example of solar panels. I would also raise
that Chinese dumping of steel and aluminum is concerning to
manufacturers in my State as well as other members of Congress.
In your testimony, you mentioned that 45 percent of the world's
supply of polysilicon--a key component for solar panels--comes from
Xinjiang. Realistically, how soon can American manufacturers divert
that supply chain from the region given China's strategic control
compared to other markets?
Answer. This should be a key element of the Build Back Better plan.
The U.S. used to be a leader in polysilicon production, but a number of
factors have impacted the industry. These range from insufficient
Federal support for solar supply chain manufacturing to China's
aggressive state support and market consolidation. The dramatic decline
in domestic polysilicon production was a function of multiple factors
but can be directly linked to China's rise in PV manufacturing using
anti-competitive tactics, including--as referenced at the hearing--
forced labor. Establishing new U.S. manufacturing plants for PV solar
would require government support to push back against China's anti-
competitive behavior. Domestic procurement requirements that include
all manufacturing processes with stepped-up timelines could also help
direct federal spending to create a base for a developing the domestic
PV market.
Sources and references worth considering:
1. China's 12th 5-year plan on solar Photovoltaic industry--
https://policy.
asiapacificenergy.org/sites/default/files/chinas-five-year-plan-for-
solar-translation.pdf.
2. 2015 CRS report on PV manufacturing--https://fas.org/sgp/crs/
misc/R42509.pdf.
Question. What implications are most concerning if our domestic
manufacturers are unable to move this supply chain out of the hands of
forced labor?
Answer. As my testimony indicated, U.S. workers suffer when anti-
competitive behavior and illegal forced labor is permitted by state
actors in countries like China. Lost jobs, lost competitiveness, and
declining global leadership are the results when our country's leaders
do not stand against injustice.
International corporations which are not held accountable by our
government for forced labor in their supply chains also unfairly impact
domestic manufacturers. By choosing to allow forced labor to
contaminate their products, corporations risk international sanctions,
decline in consumer trust, potential boycotts by the public and
identification of their brands with forced labor, which is the most
common form of modern slavery.
______
Questions Submitted by Hon. John Barrasso
congressional proposals on import bans
Question. Since 2009, China has been included on the List of Goods
Produced by Child Labor or Forced Labor. The Bureau of International
Labor Affairs recently added five new categories of products from
Xinjiang to the list. It included gloves, hair products, textiles,
thread/yarn, and tomato products.
In January, the Trump administration issued a sweeping ban on
imports of cotton and tomato products from China due to evidence of
forced labor. There are several congressional proposals aimed at
expanding the administration's authority to more robustly address
widespread and systematic force labor in China.
What are your views on the proposal to implement a comprehensive
import ban on all goods produced, wholly or in part in Xinjiang?
Answer. Simply put, this ban on imports from Xinjiang should be
imposed tomorrow. However, there are now significant differences
between the House version of legislation and the Senate version called
the ``Uyghur Forced Labor Prevention Act.'' The ability of
multinational corporations to avoid responsibly or accountability or
for the U.S. government to stop goods at the border which were produced
by forced labor should not be debated or contain loopholes which DC
policy experts say ``you could drive a truck through.'' To discuss the
details on the differences in the legislation in more detail please
feel free to reach out to the USW legislative director Roy Houseman at
(202) 778-4384.
Question.What ways would you recommend the United States take to
enhance import controls and enforcements on good produced in China?
Answer. Prioritizing prevention of forced labor at U.S. Customs and
Border Protection (CBP) is a start. This should be part of a broad
approach that encompasses not just forced labor but all illegal trade
practices. The USW has participated in over 100 AD/CVD cases, and we
have seen the inability of CBP to collect duties or hold importers
accountable for importing goods subject to duties, According to CBP,
$4.5 billion remained uncollected as of May 2019 in well-documented AD/
CVD cases.
Testimony by Martina E. Vandenberg, J.D., president of the Human
Trafficking Legal Center, also provides key recommendations on removing
forced labor from the supply chain. It starts by taking a comprehensive
approach. Quoting her testimony:
For the WRO to have the most impact, CBP should enforce the
order broadly and without any limitations. It must cultivate
internal capacity to trace these supply chains through training
and use of cutting-edge tracing technology.
When manufacturers face risk or accountability they are able to
locate deficiencies in their supply chains. The Takata airbag recall is
instructive. When faced with significant backlash and penalty, the
company traced its supply chain and located the offending subsidiary.
Multinational corporations can and do monitor their supply chains if
properly prompted, but it requires a Congress and an administration
willing to demand 21-century solutions like blockchain tracing to solve
a slavery problem that has existed at least since 3,500 BCE.
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
The United States is a country with a lot of economic and political
muscle. The country should use that muscle to fight for American jobs
and workers. It should also use it, whenever possible, to improve the
lives of powerless people around the world. It's not every day you have
an opportunity to talk about accomplishing both of those goals at once.
Today is one of those days, with the Finance Committee meeting to
discuss stamping out forced labor--modern-day slavery--around the
globe.
It takes hard work, even in 2021, to live up to a moral standard
that says the U.S. will not profit from slave labor. It still goes on
in many places around the world, including in places that are part of
our global supply chains. But that hard work to fight forced labor is
absolutely essential.
Our government needs to use every available tool to root out the
practice of forced labor and address its causes, whether it's through
diplomacy, by alleviating poverty, sanctions, or any other means.
Within the jurisdiction of the Finance Committee, the government needs
to use every tool in the trade policy tool kit to keep forced labor
products out of our market.
The Federal ban on imports made with forced labor dates back to
1930. It's known in the trade policy world as section 307. It gives
Customs the authority to stop products made with forced labor. However,
a loophole in that Federal ban that applied to products that aren't
made within the United States persisted for decades. Senator Brown and
I wrote an amendment that closed that forced labor loophole in 2016.
Since then, enforcement actions have increased, but so have glaring
examples of the scourge of forced labor, most notably in China.
Two U.S. administrations have now concluded that what the Chinese
Government is doing to the Uyghur people in the Xinjiang region in
Western China constitutes genocide.
The Chinese Government and Chinese companies are using forced labor
from that region to produce a variety of products. For example, the
United States took action to block the import of cotton and tomatoes
picked by slave labor in Xinjiang. The Finance Committee will hear
today from Joseph Wrona, whose good-paying union job in the production
of silicon metal was shut down in part due to forced labor competition
from China.
Forced labor is a problem in other countries too, including in
India, Burma, and Malaysia. Senator Brown and I have pushed for U.S.
trade enforcers to look at taking action against the import of mica,
palm oil, and cocoa produced with forced labor.
Bottom line, the continued existence of forced labor in 2021 is a
morally repugnant scourge, and when American workers have to compete
with forced labor, everybody loses. I'm interested in making sure CBP
has the tools and resources it needs to step up enforcement. There is
also bipartisan interest in creating effective new standards and new
enforcement tools to support this effort.
Ending forced labor is morally just. Raising the bar for labor
standards around the world also helps to protect high-skill, high-wage
jobs here in the United States. So this is a vitally important hearing.
I want to thank the witness panel for joining the committee today, and
I am looking forward to our discussion.
______
S&P Global Market Intelligence
October 21, 2020
Human Rights Allegations in Xinjiang Could
Jeopardize Solar Supply Chain
By Michael Copley
The solar industry's growing dependence on China's autonomous Xinjiang
region for a critical raw material poses mounting risks to a wide range
of companies as the U.S. Government moves to confront Beijing over
alleged human rights abuses there.
In 2019, when solar ranked as the world's top source of new power
generating capacity, about one-third of the polysilicon the industry
used to make solar panels came from Xinjiang, according to Johannes
Bernreuter of Bernreuter Research. China as a whole accounts for about
80% of global capacity. With polysilicon makers boosting production in
Xinjiang, Richard Winegarner, a former industry analyst who retired in
late 2019, said the region is poised to become ``even more important''
to the solar market in the coming years.
Those deepening ties come as Washington's scrutiny of labor conditions
in the region intensifies. On the heels of a U.S. Government report
that described rampant abuse of Uighurs and other Muslim minorities in
Xinjiang, the U.S. House of Representatives passed a bill in September
that would ban goods made ``wholly or in part'' in the region unless
the producers were proven not to have used forced labor. The near-
unanimous vote came a week after U.S. Customs and Border Protection
ordered officers to seize certain imports from Xinjiang, including
cotton and computer parts.
Senator Marco Rubio, a Republican member of the Committee on Foreign
Relations who introduced a companion bill to the House legislation,
said in September that the U.S. ``must ensure that goods stained with
forced labor stop entering our supply chains.'' Rubio's bill, which has
19 co-sponsors, including six Democrats, was referred to the Committee
on Foreign Relations in March.
A spokesperson for Joe Biden said in August that the Democrat
presidential nominee believed that the Chinese Government is committing
``genocide'' against Uighur Muslims in Xinjiang.
Beijing denies it is committing human rights abuses.
Red flags
In light of the allegations, human rights advocates are calling for
blanket trade restrictions on Xinjiang like those pushed by Rubio and
the House of Representatives.
``Within the context of labor, a red flag goes up for every single
sector,'' said David Schilling, senior program director of human rights
and resources at the Interfaith Center on Corporate Responsibility.
``It's not just those [industries] that have been called out.''
That echoes an assessment by staff for the Congressional-Executive
Commission on China, a panel of U.S. lawmakers and administration
officials that monitors human rights in that country. The report,
released in March, found that forced labor in Xinjiang is
``widespread,'' and independent audits are impossible to perform.
While human rights advocates have said they are not aware of public
reports directly implicating polysilicon makers in labor abuses,
without independent audits, American solar companies could find they
are unable to meet U.S. requirements.
S&P Global Market Intelligence reached out to more than two dozen solar
consumers, investors, ratings agencies, project developers, polysilicon
producers and equipment manufacturers. Only a handful responded to
requests for comment; none provided detailed information about their
efforts to examine potential exposure to labor abuses in Xinjiang or to
safeguard their supply chains in the region.
In response to questions from Market Intelligence, John Smirnow, vice
president of market strategy at the Solar Energy Industries
Association, the top U.S. trade group for the industry, said the
association is ``strongly encouraging companies to immediately move
their supply chains out of the region.'' The association is also
relaunching an initiative to raise ``awareness and action within the
industry on the importance of ensuring ethical supply chains.''
``The reports of human rights violations out of the Xinjiang region are
reprehensible, and we support efforts in the U.S. Congress to stamp out
these abuses,'' Smirnow said in an emailed statement.
The threat of additional import bans on Xinjiang should worry solar
investors, said Clayton Allen, senior vice president of trade, policy
and geopolitical risk at research firm Height Capital Markets,
``especially in an industry that doesn't have a lot of diversity in its
supply chain already.''
In addition to the political risks, just doing business with Xinjiang
can have reputational costs, Allen said, noting the outcry that The
Walt Disney Co. faced this year over its decision to film part of the
movie ``Mulan'' in the region.
``I have not heard any accusation that Disney was utilizing forced
labor or contributing to human rights violations, [but] just the
relationship with the government was enough to drive this big massive
backlash,'' Allen said. ``And for investors, that's almost as scary,
because you don't want to be doing business with a company that has
that sort of a negative profile.''
The danger of costly disruptions to the solar supply chain are emerging
at a time when many of America's biggest companies are turning to the
industry to help cut their greenhouse gas emissions.
Apple Inc., the top corporate purchaser of solar power in the U.S.,
said in response to an inquiry from Market Intelligence that it is
investigating the materials used in its solar installations.
U.S. warnings
By 2021, five companies in China and Hong Kong will control two-thirds
of the world's polysilicon market, according to Dennis Ip, an analyst
at Daiwa Capital Markets Hong Kong Ltd.
One of those is Xinjiang-headquartered Daqo New Energy Corp., the only
company in the group with a U.S. stock listing.
Drawn to Xinjiang by cheap electricity from coal-fired power plants,
Daqo started building polysilicon plants in Xinjiang in 2011 as a trade
fight over solar equipment was heating up between Beijing and the Obama
administration.
In recent annual reports to the U.S. SEC, Daqo said it ``enjoys
additional advantages in the costs of electricity'' because the
regional power grid is operated by a division of Xinjiang Production
and Construction Corps, or XPCC, which the U.S. Government describes as
a paramilitary organization.
The U.S. Treasury Department sanctioned the XPCC in July in connection
with ``serious rights abuses.'' Before that, the XPCC was added to a
U.S. Commerce Department ``entity list'' in 2019 after the government
determined that the group was ``acting contrary to the foreign policy
interests of the United States.'' The U.S. departments of State,
Treasury, Commerce and Homeland Security warned businesses in July that
engaging with companies on the Commerce Department's entity list could
trigger law enforcement action.
Analysts said the XPCC's role in Xinjiang's economy underscores the
difficulty companies face trying to ensure their supply chains in the
region are not in jeopardy. ``Even if the company that is producing the
semi-finished product that you're using as an input for your production
of solar panels'' is not implicated in labor abuses, ``you don't know
what's upstream from them,'' Allen said.
The U.S. Government has also provided companies with a list of
``potential indicators of forced labor or labor abuses.'' They include
``any mention of internment terminology'' such as education training
centers ``coupled with poverty alleviation efforts, ethnic minority
graduates, or involvement in reskilling,'' according to an advisory
from the Departments of State, Treasury, Commerce and Homeland
Security.
In an annual report published earlier this year, GCL-Poly Energy
Holdings Ltd., another top polysilicon producer, said it began a
``staff localization plan'' in Xinjiang in 2019 in cooperation with
vocational schools in the area. At the end of 2019, the company said it
employed about 120 people from ``ethnic minority groups.''
GCL-Poly told Market Intelligence that its Uighur employees are
provided with special benefits, including holidays and access to a
halal restaurant.
If the U.S. Government links a polysilicon company to labor abuses,
Customs and Border Protection could seize shipments of solar cells and
panels that contain the raw material from that producer, and under the
Tariff Act of 1930, importers could be criminally investigated. Customs
and Border Protection cited the law in September when it ordered the
seizure of certain imports from Xinjiang and palm oil products and
derivatives from a company in Malaysia.
To make a seizure, Customs and Border Protection only needs information
that ``reasonably'' indicates the use of forced labor.
China watchers see such evidence throughout Xinjiang's economy, and the
U.S. Government has said that to comply with existing law, companies
have few options but to cut Xinjiang out of their supply chains
entirely.
Further complicating matters, the solar industry may not be able to
address Washington's concerns simply by sourcing polysilicon from other
parts of China. Uighurs have been forcibly transferred from Xinjiang to
work elsewhere in the country, according to the Australian Strategic
Policy Institute, which is partially funded by the U.S. Government. And
within the solar industry, polysilicon buyers often mix material from
multiple producers, said Winegarner, making it difficult to trace the
polysilicon in an individual solar panel back to its source.
``If there is some risk of forced labor . . . it's going to be very
hard to identify, and so the question is, are these companies receiving
goods that potentially could be seized?'' said Amy Lehr, director and
senior fellow of the Human Rights Initiative at the Center for
Strategic and International Studies in Washington. ``If they're unable
to confirm the labor conditions in factories they're sourcing from,
that puts them at significant risk.''
``I don't think they're giving it any attention''
Those risks reach beyond solar equipment manufacturers and power plant
developers to some of America's biggest consumer brands.
In 2018, for example, one of Daqo's long-time customers, JinkoSolar
Holding Co. Ltd., landed a blockbuster contract to sell solar panels to
U.S. renewable energy giant NextEra Energy Inc. A year later, in early
2019, Alphabet Inc.'s Google LLC said it agreed to buy electricity from
solar farms built by NextEra subsidiary NextEra Energy Resources LLC.
Google's connection to Xinjiang's polysilicon industry represents the
sort of risk that is drawing more scrutiny in boardrooms and on Wall
Street with the rise of environmental, social and governance investing.
``It's not just the product that lands on the shelf'' that needs to
meet ESG standards, Audrey Choi, Morgan Stanley's chief sustainability
officer, said at a renewable energy conference in September. ``It is
that whole value chain that needs to be aligned.''
As of June 30th, Morgan Stanley was a shareholder in Daqo. When asked,
the firm would not say what, if anything, it is doing to ensure the
polysilicon maker's supply chains are not at risk.
Daqo said there are no human rights issues in the part of Xinjiang
where it operates. ``The cities/region in question are in Southern
Xinjiang,'' the company said in a statement to Market Intelligence.
JinkoSolar COO Zhiqun Xu said in a statement that the company
``condemns the use of forced labor and does not use it in any of its
facilities.'' One of the leading solar panel shippers to the U.S.
during the third quarter, JinkoSolar operates a factory in Xinjiang and
is on the board of the Solar Energy Industries Association, the U.S.
lobbying group.
NextEra did not respond to a message seeking comment.
Google, Amazon.com Inc. and Target Corp., three of the country's
leading corporate purchasers of solar power, also did not respond to
messages seeking comment. Walmart Inc., another top corporate buyer,
said it buys electricity from solar farms rather than the panels
themselves. ``However, we have zero tolerance for forced labor and
protecting the dignity of workers and addressing forced labor is a
priority for Walmart,'' a spokesperson said.
Without pressure from customers and investors, the solar market's ties
to Xinjiang have been overlooked or ignored by an industry that is
laser-focused on cutting costs, said Dustin Mulvaney, a professor at
San Jose State University who teaches courses on energy and
sustainability.
``I think the climate conversation is just such a loud voice that no
one's really interested in playing this story out,'' Mulvaney said. ``I
don't think they're giving it any attention.''
Years of tariffs
U.S. companies are trying to take back some of the polysilicon market
from China, but that alone will not solve the problem America's solar
industry is facing. Even if the U.S. produced enough of the raw
material to meet domestic demand, it does not have the factories it
needs to turn polysilicon into the wafers and cells that ultimately get
assembled into solar panels. Chinese companies dominate those steps of
the supply chain as well.
It is an issue the U.S. has been trying to address, by degrees, for
nearly a decade.
In 2018, the Trump administration imposed sweeping import tariffs to
try to push cell- and panel-makers to set up shop in America. In the
wake of those new taxes, some companies opened U.S. factories to
assemble panels, but they still rely on cells shipped in from abroad.
SunPower Corp. Chairman and CEO Tom Werner told the U.S. International
Trade Commission in 2019 that the country lacks the kinds of incentives
that attracted manufacturers to Asia.
``We definitely are looking into . . . a value chain outside of
China,'' Tore Torvund, CEO of polysilicon maker REC Silicon ASA, said
on an earnings call in July. ``But it will take time to make it.'' The
company is trying to develop a complete solar supply chain in
Washington state.
With its U.S. operations hobbled by a yearslong trade fight between
Washington and Beijing, REC Silicon said polysilicon, which is also
used in semiconductors and batteries, should be viewed as a strategic
material by the U.S. as the country tries to compete with China.
Bradford Ward, former Deputy General Counsel in the Office of the
United States Trade Representative and the lawyer for a group of
American polysilicon companies that is trying to reclaim market share
from China, said he believes that the U.S. Government is ``becoming
aware of the scale of the polysilicon industry in Xinjiang and the
relevance of Xinjiang polysilicon to the global solar value chain and
U.S. solar installations.''
But so far, the solar industry and lawmakers in the U.S. have not found
a way to stand up a supply chain to rival China's.
Tariffs, the tool American policy-makers often turn to when they want
to support domestic industries, are rarely effective, said Paula Mints,
chief solar analyst at SPV Market Research. On October 10th, President
Donald Trump said he was tightening trade restrictions on the U.S.
solar industry, claiming that domestic manufacturers need more help
almost 3 years after his administration imposed tariffs.
``Building up a complete solar value chain in the U.S. could be a
lever'' to guard against potential labor abuses in Xinjiang, Bernreuter
said, ``but I doubt that such an industry would be able to be price-
competitive.''
______
From The New York Times, January 8, 2021
Chinese Solar Companies Tied to Use of Forced Labor
By Ana Swanson and Chris Buckley
A new report shows some of the world's biggest solar companies work
with the Chinese government to absorb workers from Xinjiang, programs
that are often seen as a red fag for forced labor.
In a flat, arid expanse of China's far west Xinjiang region, a solar
technology company welcomed laborers from a rural area 650 miles away,
preparing to put them to work at GCL-Poly, the world's second-largest
maker of polysilicon.
The workers, members of the region's Uighur minority, attended a class
in etiquette as they prepared for their new lives in the solar
industry, which prides itself as a model of clean, responsible growth.
GCL-Poly promoted the housing and training it offered its new recruits
in photographs and statements to the local news media.
But researchers and human rights experts say those positive images may
conceal a more troubling reality--the persecution of one of China's
most vulnerable ethnic groups. According to a report by the consultancy
Horizon Advisory, Xinjiang's rising solar energy technology sector is
connected to a broad program of assigned labor in China, including
methods that fit well-documented patterns of forced labor.
Major solar companies including GCL-Poly, East Hope Group, Daqo New
Energy, Xinte Energy and Jinko Solar are named in the report as bearing
signs of using some forced labor, according to Horizon Advisory, which
specializes in Chinese-language research. Though many details remain
unclear, those signs include accepting workers transferred with the
help of the Chinese government from certain parts of Xinjiang, and
having laborers undergo ``military-style'' training that may be aimed
at instilling loyalty to China and the Communist Party.
The Chinese Government disputes the presence of any forced labor in its
supply chains, arguing that employment is voluntary. The companies
named in the report either did not respond to requests for comment or
denied any role in forced labor.
In a statement, a representative for the Chinese Embassy in Washington
called forced labor in Xinjiang ``a rumor created by a few anti-China
media and organizations,'' adding that all workers in Xinjiang enter
into contracts in accordance with Chinese labor law. ``There is no such
thing as `forced labor,' '' the representative said.
The report adds to a growing list of companies that have been accused
of relying on coerced labor from Uighurs and other ethnic minorities in
China, either in their own factories or those of their suppliers.
The United States and other governments have become increasingly vocal
about forced labor in Xinjiang, including naming and shaming major
corporations that operate in the region. The Trump administration has
imposed sanctions on dozens of companies and individuals for their role
in Xinjiang, including banning some exports from the region, which is
also a major producer of cotton. On December 2nd, it banned imports
made with cotton produced by the Xinjiang Production and Construction
Corps, a paramilitary group that American officials say uses forced
labor.
Congress is also considering sweeping legislation that would ban all
products with materials from Xinjiang unless companies certify that the
goods are made without forced labor.
John Ullyot, the spokesman for the National Security Council, said that
China's campaign of repression in Xinjiang involved ``state-sponsored
forced labor'' and that the United States would ``not be complicit in
modern day slavery.''
``The administration has taken unprecedented actions to prevent China
from profiting off of its horrific human rights abuses,'' he said.
Together, the solar companies named in the report supply more than a
third of the world's polysilicon, which is refined from rock and turned
into the solar panels that end up on rooftops and utility energy
projects, including those in the United States and Europe.
Government announcements and news reports indicate that solar companies
often take in assigned workers in batches of dozens or fewer,
suggesting that the transfers are a small part of their overall work
force. Still, the assertions from Horizon Advisory imply that much of
the global solar supply chain may be tainted by an association with
forced labor. Such charges could hurt its progressive image and risk
product bans from Washington.
GCL-Poly, Daqo New Energy, Xinte Energy and East Hope Group did not
respond to multiple requests for comment.
Ian McCaleb, a spokesman for Jinko Solar, said the company ``strongly
condemns the use of forced labor, and does not engage in it in its
hiring practices or workplace operations.'' He said that it had
reviewed the claims in the Horizon report and ``found that they do not
demonstrate forced labor in our facilities.''
China carries out a vast program of detention and surveillance of
Uighurs, Kazakhs and other minorities in Xinjiang. Up to a million or
more minorities may have been detained in indoctrination camps and
other sites where they are forced to renounce religious bonds, and risk
torture, assault and psychological trauma, Uighurs abroad and human
rights groups say.
The Xinjiang government has promoted the labor transfer programs in
parallel with the re-education camps, efforts that have ramped up
drastically under the current leader, Xi Jinping. The government has
uprooted many from farms to work in factories and cities, in the belief
that steady, supervised work can pull minorities out of poverty and
break down cultural barriers. Workers may have little choice but to
obey local officials who oversee their move to distant towns and
industrial zones to fulfill government-set quotas.
The growing scrutiny of the region has already prompted changes among
some companies whose supply chains are entangled in these programs.
Many textile and apparel companies that use cotton or yarn from
Xinjiang have severed ties, including Patagonia, Marks and Spencer and
H&M.
The solar sector could face similar pressure. The industry has deep
ties to Xinjiang, which accounts for about 40 percent of global
polysilicon production, said Jenny Chase, the head of solar analysis at
BloombergNEF. Xinjiang's polysilicon production increased rapidly over
the past decade, mostly because of cheap electricity from local coal
plants and other government support, Ms. Chase said.
That expansion has helped Chinese companies dominate foreign
competitors, including in the United States. China produced 82 percent
of global polysilicon in 2020, up from 26 percent in 2010, according to
data from IHS Markit, while the U.S. share of production shrunk to 5
percent from 35 percent.
``I am concerned that forced labor may have been used in Xinjiang,''
said Francine Sullivan, the vice president for business development at
REC Silicon, a Norwegian polysilicon manufacturer with operations in
the United States. The company shut a facility in Washington State,
despite surging overall U.S. demand.
Xinjiang is known for low safety and environmental standards, Ms.
Sullivan said, and forced labor ``may be just part of the incentive
package.''
Xiaojing Sun, a senior research analyst at Wood Mackenzie, said solar
companies were starting to investigate their exposure to Xinjiang and
reconfigure their supply chains to avoid the region if possible.
In a note to investors in October, analysts at Roth Capital Partners
said the solar sector faced a ``heightened risk of disruption'' because
of its ties to Xinjiang.
``Investors are getting nervous,'' Ms. Sun said.
The Solar Energy Industries Association, the largest industry
association in the United States, has called human rights abuses in
Xinjiang ``reprehensible'' and strongly encouraged companies ``to
immediately move their supply chains out of the region.''
Since unfettered on-the-ground access to Xinjiang for foreign
journalists and researchers is virtually impossible, the Horizon
Advisory researchers do not provide direct testimony of forced labor.
Instead, they present signs of possible coercion from Chinese-language
documents and news reports, such as programs that may use high-pressure
recruitment techniques, indoctrinate workers with patriotic or military
education, or restrict their movement.
The report documents GCL-Poly accepting ``surplus labor'' from a rural
region of Xinjiang last year. In 2018, according to an article on China
Energy Net, a local news site, one of GCL-Poly's subsidiaries also
accepted more than 60 such workers.
A local subsidiary of Jinko Solar, Xinjiang Jinko Energy Co., received
state subsidies for employing local Xinjiang labor, including at least
40 ``poor workers from southern Xinjiang'' in May, according to a local
government announcement from July 2020 cited by Horizon Advisory.
On its public WeChat account, East Hope Group said that it had
``responded to the national Western Development Call and actively
participated in the development and construction of Xinjiang,''
including constructing a polysilicon project in Changji prefecture in
2016, the Horizon report said.
That same year, according to a Chinese news report cited by Horizon,
Xinjiang's Yarkand County signed a ``labor export cooperation framework
agreement'' with a subsidiary named East Hope Group Xinjiang Aluminum
Company.
Another subsidiary of East Hope, Xinjiang East Hope Nonferrous Metals
Co., ``accepted 235 ethnic minority employees from southern Xinjiang,''
who were given training to make up for ``low educational
qualifications, weak national language skills and insufficient job
skills,'' according to a report on the company's website.
According to Horizon Advisory, several solar companies also have ties
to the Xinjiang Production and Construction Corps, which has been
penalized by the Trump administration. In its 2018 financial report,
Daqo New Energy said its Xinjiang facilities benefited from a lower
cost of electricity because the regional grid is operated by a division
of the Xinjiang Production and Construction Corps.
Amy Lehr, the director of the Human Rights Initiative at the Center for
Strategic and International Studies, said that work programs that draw
on Xinjiang minorities and offer companies subsidies for employing them
are a ``red flag'' for forced labor. These programs may restrict
workers from quitting, traveling or participating in religious
services, pay less than minimum wage, and involve harsh or unsafe work
conditions, as well as the threat of detention, according to Ms. Lehr's
research.
``The concern is that there is a potential for coercion, because of the
level of surveillance and fearfulness,'' Ms. Lehr said. Companies that
source products from the region have ``no way of knowing that you're
not being connected to forced labor,'' she said.
Nathan Picarsic, a founder of Horizon Advisory, said what the firm had
documented was likely ``just the tip of the iceberg.'' If Americans are
buying solar panels made with materials from these Chinese companies,
he said, ``I would say you are complicit in perpetuating this Chinese
industrial policy that suppresses and disenfranchises human beings.''
______
Communications
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Center for Fiscal Equity
14448 Parkvale Road, Suite 6
Rockville, MD 20853
[email protected]
Statement of Michael G. Bindner
Chairman Wyden and the Ranking Member Crapo, thank you for the
opportunity to submit these comments for the record.
Supply chains are global and many nations who have controlled the virus
by shutting down the economy rather than tailored quarantines will
quickly find that many with less robust immune systems will get very
sick when their economies open. There will be a third and fourth waves
in these nations, precisely because there are available vectors who
have not yet gotten sick. The supply chain will be stressed, if not
stopped, even if draconian openings and closings can be imposed in
China.
Draconian measures may be efficient, but they may add a different kind
of fever, one that the regime will likely underestimate. Revolution
kills production lines once people have too much. China, Inc. may not
be as efficient a partner in a post-
revolutionary future. Workers with more freedom to bargain and vote
will want more stuff, which means higher prices here. Higher prices
mean higher wages will be required, but jobs will come back as the
economy changes.
The other issue with China, as well as south Asia and the global south,
is de facto slavery. Boycotting the products of slavery worked in
fighting the Confederacy. The mass migration of slaves had more of an
impact. A boycott of Xinjiang cotton and tomatoes is problematic during
a pandemic, but generally it cannot succeed as a stand-alone action.
Even though it may hurt in the short run, we should still do it.
To make a boycott work, we cannot do it alone. At minimum, Islamic
nations must join in as well and start linking the cause of the Uygurs
to the New Silk Road. The ethnic Turkmen range from modern Turkey to
Xinjiang, so a little solidarity on their part could go a long way. If
we do go this route, the whole effort to interfere in Iran must end. We
cannot be with South Asian Muslims on some things and expect solidarity
with them on others.
On the moral front, I am not sure we have room to talk. We hold
migrants in stark conditions prior to deportation. If you doubt it,
visit Lewisburg Federal Prison. Also stop in the Federal Prison
Industries factory while you are there. Visit any food processing plant
with large immigrant workforces (send people undercover) and see how
many workers were trafficked and how local law enforcement reacts when
they decide they want to leave. Examine the plight of sex workers in
the United States and see how many of their pimps have arrangements
with local police.
Our best weapon is our example. As long as slavery exists in the United
States, our moral voice is compromised. Again, I am not saying to
ignore this situation. I am saying to All In to really fight slavery.
Also, call it slavery. On the same subject, examine the Chinese
treatment of peasant workers at their factories. There is a two-level
society, and American consumers benefit from this. Our commitment to
abolishing slavery cannot live only in the fringes.
This is not to say that loopholes cannot be closed, although we must
stop our own unfair trade practices as well. American food should not
show up in countries just before harvest when doing so depresses the
price of local agricultural products. Poverty begets slavery. Making
others poor is an invitation to exploitation.
Poor farmers can either be individual or tenant farmers who are
essentially peons. The drive for lower food prices for American
consumers comes at a human cost. This is especially true when only one
buyer dominates the market, as is sometimes the case for export to
America (if not often).
Poor factory workers never have access to collective bargaining. This
factor also drives down wages in American factories--often those with
immigrant labor bearing the brunt of bad working conditions, poor wages
and lax enforcement. The major difference is that being blacklisted in
the United States for attempting to organize is rarely deadly, as it
can sometimes be overseas.
Improved enforcement takes money and the willingness to accept higher
food prices. More inspectors with more authority are needed at home and
abroad. Government or third party inspection is vital to make sure work
is safe, fairly compensated and able to organize. We cannot expect
worker protection in China or Guatemala if we do not insist on it in
North Carolina and Alabama.
Existing supply chains must be reexamined and should not privilege big
named brands over smaller importers and suppliers. Citing bad behavior
must be cited. There is no better education than a ticket.
As I commented on Tuesday, the long term solution to labor inequality
is employee ownership at all points in the supply chain. A multi-
national employee-owned firm would provide all workers an equal
standard of living and ownership rights. I would hope this would start
here. The one pebble that will move mountains is allowing market
investors the same exception to capital gains taxes when shares are
sold to a qualified broad-based ESOP (or COOP) that privately owned
companies now receive. A bigger pebble is enacting an asset value added
tax with an internationally agreed upon rate with the same loophole.
Sometimes loopholes can be a good thing.
Thank you for the opportunity to address the committee. We are, of
course, available for direct testimony or to answer questions by
members and staff.
______
Statement Submitted by Sheridan S. McKinney, Adjunct Professor,
American University Washington College of Law
I hereby humbly submit the below comments for inclusion in the public
record related to the hearing convened by the United States Senate
Finance Committee on March 18, 2021 entitled ``Fighting Forced Labor:
Closing Loopholes and Improving Customs Enforcement to Mandate Clean
Supply Chains and Protect Workers.'' Comments have been limited to
issues of enforcement under Section 307 of the Tariff Act of 1930 in
the hope of providing a fresh perspective from a trade litigator and
policy professional with experience with how both domestic producers
and vulnerable communities may seek to avail themselves of the
protections provided by these laws. The views expressed below are
entirely my own and should not be attributed to any client or
organization I am affiliated with.
I. Executive Summary
The Committee can make significant improvements in the efficacy of
existing authorities to reduce the presence of the products of forced
labor in the stream of U.S. commerce via a careful wielding of its
existing oversight authority. Furthermore, even a small amount of
legislation enabling U.S. workers, producers, and watchdog
organizations to effectively augment efforts by regulators would
fundamentally change the game by significantly reducing the resource
limitations inherent to any strictly regulatory activity. Indeed, it is
likely that amending Section 307 of the Tariff Act of 1930 to create a
new labor-based trade remedy for use by domestic interested parties
would all but ensure the eradication of the scourge of forced labor in
U.S. supply chains.
II. Legal Authorities
Section 307 of the Tariff Act of 1930 establishes a clear, simple
mandate:
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 shall not be entitled to entry at any of the
ports of the United States, and the importation thereof is
hereby prohibited. . . . 19 U.S.C. Sec. 1307.
However, in spite of this clear prohibition, the ensuing 85-some-odd
years saw only 39 enforcement actions. Section 910(a)(1) of the Trade
Facilitation and Trade Enforcement Act of 2015 (TFTEA) amended the
legal authority, removing what had proven to be an effective limitation
on its use. The ``consumptive demand'' clause created a carve-out for
goods not produced within the United States in sufficient quantities to
supply the market. This limiting language (below) appeared to take on
additional significance as trade integration blossomed and input goods
were more frequently sourced abroad.
The provisions of this section relating to goods, wares,
articles, and merchandise mined, produced, or manufactured by
forced labor or/and indentured labor, shall take effect on
January 1, 1932; but in no case shall such provisions be
applicable to goods, wares, articles, or merchandise so mined,
produced, or manufactured which are not mined, produced, or
manufactured in such quantities in the United States as to meet
the consumptive demands of the United States. Section 307 of
the Tariff Act of 1930 (as it appeared prior to the 2015
amendment).
Since taking effect on March 10, 2016, the repeal of the consumptive
demand clause has opened the door for CBP to issue some twenty-nine new
findings (and counting).
The statutory authority is implemented via a short list of regulations,
19 CFR Sec. Sec. 12.42-12.44.\1\ Of these, Section 12.42 sets forth the
procedural requirements for a party to raise an issue under Section 307
and the substantive standards that CBP will apply in its investigation.
In brief, in order to trigger an investigation a ``communication'' (as
it is termed in the regulation) must include:
---------------------------------------------------------------------------
\1\ April 1, 2020 Ed.
(1) A full statement of the reasons for the belief;
(2) A detailed description or sample of the merchandise; and
(3) All pertinent facts obtainable as to the production of the
merchandise abroad.\2\
---------------------------------------------------------------------------
\2\ 19 CFR Sec. 12.42(b).
Any communication failing to meet these standards will be returned to
the party that submitted it with, ``detailed written advice as to the
respects in which it does not conform.'' The avenue for this
communication that is mentioned in the regulations is a port director,
though we know from other CBP-published guidance that the e-Allegation
web portal is the preferred filing method.\3\ Beyond conformity with
vague concepts such as ``full statement'' and ``all pertinent facts
obtainable,'' we are left with little criteria against which to
evaluate evidence.
---------------------------------------------------------------------------
\3\ See, e.g., CBP's Forced Labor Resource Page at https://
www.cbp.gov/trade/programs-administration/forced-labor (last accessed
April 1, 2021).
If accepted, a communication then enters a stage where it is evaluated.
At this point, CBP, ``will consider any representations offered by
foreign interests, importers, domestic producers, or other interested
persons.''\4\ As with other terms used in the regulations, we are left
to imagine what might constitute ``representations.'' Furthermore, it
is not clear whether parties will be capable of responding to specific
averments from the other parties, or, indeed whether there even are
other parties at all. As with other portions of the Section 307 regime,
whether or not CBP has a policy or practice in place today is not the
issue. The lack of transparency invites confusion, complacency, and
gamesmanship by the parties--none of which has a place in a functional,
enforceable program to eradicate forced labor in the United States'
supply chain.
---------------------------------------------------------------------------
\4\ 19 CFR Sec. 12.42(d).
The legal standard offered at Section 12.42(e) for evaluation of
evidence in the first instance is if, ``information available
reasonably but not conclusively indicates.'' This language could lend
itself to a broad spectrum of interpretations. As discussed below, it
is exactly one of the legal standards that could be developed through
the publication of decisional output--even decisions that have been
necessarily redacted to protect victims or sources. Such a practice,
whether achieved by regulation, policy, or statute, would benefit any
---------------------------------------------------------------------------
group interested in combating forced labor in the supply chain.
Section 12.42 goes on to discuss a next step that consists of an
official determination, and the issuance of a finding. Unfortunately,
as with many of the other standards referenced in the regulations,
little can be gleaned about the operable standards used to make such a
finding. The lack of transparency with respect to the evaluative
process that CBP uses to make such decisions only further serves to
obfuscate the matter.
CBP has further built upon these regulations with limited guidance in
the form of process maps, presentations for traders, and a smattering
of other procedural guidance. CBP Publication # 2133-0416 is an
illustrative example of guidance intended to help make the Section 307
regime better serve its intended purpose. The content of this
publication makes clear that CBP considers itself chiefly and
investigator and fact finder in administering this regime. Petitions
are filed by outside parties and then investigated by CBP officials--
this appears to be the role CBP views itself as playing, though it does
have the authority to self-initiate investigations under Section
12.42(a). With that in mind, the section below sets forth some ideas of
ways to make the Section 307 regime more accessible and functional for
private and public sector parties interested in either filing petitions
against exploitative traders, or simply making certain that an
enterprise understands what to look out for and avoid in working with
suppliers.
III. Opportunities to Improve the Mechanism
a. Actions under existing oversight authority
i. Policy or practice revisions
1. Publication of decisional output of investigations. Simply
stating the terms of a WRO/finding once issued, as is the practice
today, is not enough. Like any other government decision, and
particularly one with such a sweeping impact as a WRO/finding, the
evidence and analysis should be published. Publication enables traders
and those concerned with protecting laborers to understand the
standards being applied. This base level of transparency is
foundational to our judicial and administrative systems and there is no
reason to make an exception for this process. Where evidence critical
to the decision is deemed proprietary or otherwise sensitive, that
information can be protected under Administrative Protective Order
(APO), as discussed below.
2. Establish clear formal petition procedures while maintaining
the ability to file a complaint anonymously. Currently, CBP can be
alerted to the suspicion that a product is being produced by forced
labor via it's established mechanism, the e-Allegation portal. While
this whistleblower-oriented anonymous process should be maintained, a
more formal procedure should be put in place that makes clear for those
wishing to be helpful, what must be alleged and the types of evidence
that will be expected to open an investigation. At present, coupled
with the lack of published analysis with decisions, parties must engage
in an inefficient iterative process with CBP, with no clear guidelines
as to where it may lead or whether CBP must be responsive and
collaborative. As discussed above, the guidance on how to move CBP to
start an investigation contained in 19 CFR Sec. 12.42 is lacking
critical details on how to formulate a successful petition.
3. Make clear to CBP that under no circumstance is it authorized
to weigh ``consumptive demand'' considerations. CBP Publication # 2133-
0416 ``Repeal of Consumptive Demand Clause--FAQs'' states in relevant
part that the striking of the consumptive demand clause contained in
the TFTEA resulted in CBP no longer being ``legally required to weigh
consumptive demand considerations to process information concerning
forced labor.'' That publication goes so far as to indicate some
ambiguity as to whether the repeal resulted in changes to the WRO
finding process at all. The language referencing legal requirements
seems to suggest that officials feel that they have the discretion, but
not obligation, to weigh consumptive demand considerations when
reviewing petitions. It bears review as to whether Congress intended to
allow such discretion to remain after the repeal.\5\
---------------------------------------------------------------------------
\5\ The Congressional Record appears silent on this question. See,
e.g., H. Rept. 114-376 (December 9, 2015) and H. Rept. 114-18 (February
9, 2015).
---------------------------------------------------------------------------
ii. Update regulations
1. Establish clear procedures, guidelines for engagement, and
legal standards. At present, the existing regulations establish little
in the way of either procedure or substance. Documentation provided by
CBP somewhat clarifies certain aspects of its internal process, but
does not establish clear procedural steps, clarify how to engage with
investigatory staff or decision makers, or set forth a clear legal
standard. As an example, the statutory language of Section 307 does not
establish a legal standard for the evaluation of evidence to establish
a product or shipment is produced by use of forced labor. That is done
via 19 CFR Sec. 2.42(e), which states the standard as when
``information available reasonably but not conclusively indicates''
that a product is being produced by forced labor a WRO will be issued.
However, CBP Publication # 0550-0816 states that ``[f]indings require
conclusive evidence, i.e., probable cause that the imported goods are
made with forced labor,''--a statement that appears to create
inconsistencies between the legal standard operative in the regulations
on one hand, and that applied in practice on the other. Such ambiguity
in the legal standard it is applying may well exist only in the minds
of those not working in the investigation units of CBP. However, it
serves neither the interests of traders, nor the interests of exploited
workers to prevent interpretive guidance, or, indeed, jurisprudential
interpretation, from developing around these important standards. As
with the legal standards, practice guidelines that outline what sorts
of input and collaboration CBP welcomes, from whom, and at what stages
of the process should be developed and made public.
2. Establish Administrative Protective Order (APO) procedures to
protect confidential data. Any concerns with respect to proprietary or
sensitive information leaking during a transparent process can be
addressed via the issuance of an APO. A starting point that could serve
as a model for a Section 307 confidential data regime can be those used
by the U.S. International Trade Commission and U.S. Department of
Commerce in trade remedies cases. Currently, the entire process--from
accusation to decision--is completely opaque. Care should also be given
to considering what can be protected under the APO. For example,
parties should remain motivated to affirmatively seek their public
exoneration by proving that they are not engaged in exploitative trade.
On the other hand, where parties vulnerable to retaliation have
provided information in an investigation, that information should enjoy
a reasonable degree of protection.
b. Actions likely to require legislation
1. Provide for interested parties to proactively participate in
the proceeding. Attempting to resolve an issue strictly based on what
resources the government/CBP can marshal at a given time leaves
entirely too much up to chance. Parties with an interest in a given
proceeding should be able to enter an appearance and act as a resource,
making submissions in the deliberative/adjudicative process, where
appropriate. Today, the regulations merely provide for CBP to consider
``representations'' of parties, with no commitment to how iterative or
transparent that process must be. Allowing for complaining parties to
be robustly involved in a deliberative and adjudicative administrative
proceeding creates an incentive for those competing with violating
imports to bring additional resources to bear beyond what portion of
its budget CBP intends to commit to investigations.
2. Provide for the protection of certain types of confidential
information used in the proceeding. A truly confidence-inspiring
approach to protecting confidential data so as to facilitate
transparency would likely require legislation. There should be two
levels of protected data: (1) that information that can be accessed
under APO by parties meeting the standard of outside counsel to an
interested party; and (2) highly sensitive information that only
investigating authorities have access to. As discussed above, there may
be certain types of information that is sensitive to the personal
safety of human beings, whether victims or whistleblowers. Lawmakers
and administrators should be empowered to weigh the equities as to when
such information shall remain inaccessible by interested parties.
Engaging in such protection of information in a proceeding is something
the United States federal government knows well how to do and all
potential parties to a WRO proceeding--whether a complaining party
filing a petition or an importer whose shipments are called into
question--have much to gain from the transparency that such a provision
would facilitate.
3. There should be tight procedural timelines. As is, it is merely
guesswork to come up with an idea of how much time an investigation
leading to a WRO, finding, or exoneration may take. These could be
dealt with via either regulation or placed in statute. The timelines
should contain a reasonable degree of administrative flexibility, as a
practical matter. However, the interests of both the exploited workers
and the entities under investigation are likely best served by
statutorily mandated procedural timelines. As with other proposed
reforms discussed above, the Committee need look no further than the
trade remedies laws for an example of how such a limitation might work
in practice.
4. Make the outcome of investigations appealable to the U.S. Court
of International Trade (USCIT). Currently CBP can seek judicial
forfeiture procedures as a final step, after making formal findings and
seizing goods. However, creating a legal right to relief in federal
courts for aggrieved parties will act as a permanent buffer against
inconsistent interpretations, or a variance in the prevailing degree of
interest in enforcement (i.e., either over- or under-enforcement),
consistent with our legal traditions. Furthermore, creating a body of
jurisprudential interpretations of Section 307 and its enforcement
could only serve to make forced labor in supply chains an ever more
rare occurrence.
IV. Conclusion
In conclusion, the forced labor enforcement regime is, in many ways,
somewhat a work in progress. Although it is a critical law enforcement
tool, there are many opportunities to improve upon the workings of the
Section 307 regime in a way that empowers CBP to play the role it is
most suited for: investigator, fact finder, and frontline enforcer of
our trade laws. As the committee of jurisdiction, the Senate Finance
Committee is well-situated to wield existing oversight authority to
reshape this underutilized regime into a powerful, robust deterrent to
the trafficking of goods whose human costs are high. I humbly submit
the ideas expressed above in the hopes that committee members and staff
may find herein a helpful idea or observation to assist them in this
important work.
______
National Association of Foreign-Trade Zones
National Press Building
529 14th Street, NW, Suite 1071
Washington, DC 20045
202-331-1950
April 1, 2021
U.S. Senate
Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200
Re: March 18, 2021 Hearing on ``Fighting Forced Labor: Closing
Loopholes and Improving Customs Enforcement to Mandate Clean Supply
Chains and Protect Workers''
The National Association of Foreign-Trade Zones (NAFTZ) is pleased to
submit these comments for the record for the March 18, 2021 hearing of
the Senate Committee on Finance on ``Fighting Forced Labor: Closing
Loopholes and Improving Customs Enforcement to Mandate Clean Supply
Chains and Protect Workers.''
The NAFTZ and its members in the foreign-trade zone (FTZ) community
strongly support efforts to end forced labor and other forms of illicit
trade. Preventing products made with forced labor from entering the
U.S. market is a significant challenge for policy makers looking for
effective enforcement mechanisms and companies importing into the
United States looking for viable and manageable options to help meet
their compliance obligations.
The U.S. Foreign-Trade Zones Program is one existing system managed and
regulated by U.S. Customs and Border Protection (CBP) that can help
support better and more effective enforcement and compliance in this
effort. NAFTZ has been working with CBP on a proposal to allow targeted
merchandise subject to a withhold release order (WRO) to be stored
securely in a U.S. foreign-trade zone (FTZ) under Customs supervision
during the pendency of a decision whether the goods may be allowed into
U.S. commerce. While in an FTZ, WRO merchandise would be physically
separated, specifically identifiable, and part of a sufficient record
trail to allow an audit by CBP.
For CBP this proposal would: (1) provide the agency better assurances
that targeted merchandise can be held securely and separately under its
supervision and control; (2) lower the risk that such merchandise
subject to a WRO could enter the U.S. market before a determination on
its forced-labor status has been rendered; and (3) allow for proper
disposition of violative products under FTZ procedures and CBP
supervision.
This proposal will also assist companies in meeting their compliance
obligations by providing them a wider array of cost-effective options
if they choose to contest a WRO on one of their products by presenting
evidence to CBP that the product was, in fact, not produced with forced
labor. Instead of having to rely on a limited selection of high-cost
and privately operated bonded warehouses, companies would have the more
widely available alternative of storing the goods securely and safely
in their or another company's FTZ facility. Finally, because the U.S.
FTZ program imposes more stringent enforcement and compliance
requirements on companies that use the program, CBP views it as a
highly compliant program and an effective model and tool to help reduce
the risk of trade in illicit and forced labor goods.
We urge Members of the Committee to support this sensible, effective,
and straightforward proposal, which could be added to the ``Uyghur
Forced Labor Prevention Act,'' a key piece of bi-partisan legislation
currently before Congress in the fight against illicit trade. We look
forward to working with the Members of the Committee and the Senate on
this important issue.
Background
The National Association of Foreign-Trade Zones is a trade association
of over 650 members and serves as the collective voice of the U.S.
Foreign-Trade Zones program and the community of public and private
stakeholders in the United States who use and rely on the program. The
FTZ program was established by Congress in 1934 during the Great
Depression to encourage the location of manufacturing and distribution
operations in the United States; create and support American jobs; and
promote U.S. exports and competitiveness in the domestic and foreign
markets. FTZs now account for a significant portion of total U.S.
trade. Over 3,300 companies operate within the FTZ program, employing
over 460,000 American workers in all fifty states and Puerto Rico.
Sincerely,
Erik O. Autor
President
______
Tony's Chocolonely
Pazzanistraat 1
1014 DB Amsterdam
Netherlands
INTRODUCTION
Tony's Chocolonely is pleased to submit this statement to the Senate
Finance Committee as part of the record pursuant to its March 18, 2021
hearing on ``Fighting Forced Labor: Closing Loopholes and Improving
Customs Enforcement to Mandate Clean Supply Chains and Protect
Workers.''
We thank the Committee for arranging and holding the hearing. It is
timely as in the chocolate industry child labor and modern slavery
continue to be a huge problem in cocoa and chocolate products sourced
from Ghana and the Ivory Coast. These two nations account for 60
percent of the cocoa produced in the world and recent reports from non-
governmental organizations document the fact that there are today more
than 1.56 million children are involved in cocoa-related child
labor.\1\ Furthermore, an estimated additional 30,000 people are
victims of modern slavery in the two countries.\2\
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\1\ https://www.norc.org/Research/Projects/Pages/assessing-
progress-in-reducing-child-labor-in-cocoa-growing-areas-of-c%C3%B4te-
d%E2%80%99ivoire-and-ghana.aspx.
\2\ https://cdn.minderoo.org/content/uploads/2019/03/06111232/
Cocoa-Report_181016_V15-FNL_digital.pdf.
We understand that much of the Committee's focus centers on policies
created and implemented by the People's Republic of China against its
Uighur Muslim minority. But forced labor and modern slavery is a
worldwide problem. The International Labor Organization (ILO) estimates
that there are more than 152 million child laborers globally with
almost half, 73 million, working under hazardous conditions.\3\ The
Global Slavery Index says there are almost 25 million adults working in
modern slavery regimes.\4\ A great percentage of these come from Asia,
but this societal ill is found on all the continents. We at Tony's
therefore believe there must exist a global solution to the issue
involving all participants in every supply chain. To us, that means
creating an effective human rights due diligence system applicable to
all actions in the supply chain; those who purchase, process, transship
cocoa as well as those who ultimately sell chocolate to the consumer.
---------------------------------------------------------------------------
\3\ https://www.ilo.org/ipec/Informationresources/WCMS_653987/lang-
-en/index.htm.
\4\ https://www.globalslaveryindex.org/2018/findings/importing-
risk/cocoa/.
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ABOUT TONY'S CHOCOLONELY
Tony's Chocolonely, a Netherlands-based international chocolate
company, is a global firm operating in 22 countries around the world
including the United States. We source our cocoa, the key ingredient in
chocolate, from the same West African nations of Ghana and the Ivory
Coast as do the larger and better-known international chocolate
companies such as Mars, Nestle, Hershey, Mondelez and others.
We were founded in 2005 by a Dutch investigative journalist who was
horrified by the depth and breadth of child labor and modern slavery in
the chocolate supply chain. He vowed to create a chocolate product free
of this evil and to work closely with local farmers and local
cooperatives in Ghana and the Ivory Coast on poverty reduction programs
that would enable a living income in order to eliminate the pressure to
use child and forced labor.
This founding impetus means we operate far differently than those with
whom we compete. First, we are an impact company that makes chocolate,
not the other way around. We were founded as referenced above to
eradicate child labor and modern slavery in the cocoa industry. We
believe the way to do that is by selling a profitable product and
serving as an example for others in the chocolate industry.
Second, we have never accepted the argument that the eradication of
child labor and modern slavery in the cocoa industry is anything less
than the full and direct responsibility of the companies that invest in
and profit from the products of these nations. We have raised and
continue to raise global awareness of the inequities caused by current
industry practices, we have created a system to address and overcome
these inequities thereby leading by example, and we use our methods,
tools and results to inspire others to act. It is the roadmap to our
success, and it is a roadmap that others can use.
Third, we accept the international rules and guidances for the
economic, social and ethical activities of transnational corporations
in the 2003 United Nations document ``Norms on the responsibilities of
transnational corporations and other business enterprises with regards
to human rights''\5\ as well as the Organization for Economic
Cooperation and Development's Guidelines for Multinational Enterprises
\6\ and have adopted them into our business model. These are apparent
in and directly applicable to our way of doing business. We believe
that companies have a responsibility for their supply chains and should
comprehensively act to mitigate, find and remediate human rights
violations.
---------------------------------------------------------------------------
\5\ https://old.business-humanrights.org/en/united-nations-sub-
commission-norms-on-business-human-rights-explanatory-materials.
\6\ 2011 edition, http://www.oecd.org/daf/inv/mne/48004323.pdf.
The way we have adapted these overarching principles into our own
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business model can be illustrated by the chart below:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
.epsFourth, we believe that using these guidelines, as well as the
guidelines embodied in the several foreign corrupt practices acts in
the United States and in Europe, provide an appropriate framework for
corporate responsibility and liability and hold the power to spur
action from industry stakeholders.
TONY'S APPROACH TO ENDING CHILD AND FORCED LABOR IN THE COCOA INDUSTRY
The current cocoa trade system turns a blind eye to the origins of
cocoa. ``We do not know'' is all too common an excuse for labor abuses
at the start of the cocoa supply chain in Ghana or the Ivory Coast. A
modest investment in time, technology and direct payments to growers
can overcome both the ignorance that hides exploitive labor systems and
those systems themselves.
Tony's has created just such a system including five requisite
principles for sourcing cocoa beans. These sourcing principles are:
Traceable cocoa beans. All our beans are made traceable by
knowing our suppliers and trading directly with farmers and cocoa
cooperatives.\7\
---------------------------------------------------------------------------
\7\ https://tonyschocolonely.com/nl/en/tonys-beantracker.
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Strengthen farmers by working with them to professionalize their
farming organizations.
Create long-term relationships by signing 5 year contracts for
the supply of cocoa.
Improve agricultural quality and productivity through training
and support.
Pay a higher price so farmers can earn a living income.
All five principles need to be used together to fully address the
issues that plague the cocoa supply chain, but the last point is
perhaps the most neglected in the general state of affairs. The core
cause of child labor and modern slavery is the inhumanely low price
paid to farmers. Current efforts to pay farmers a premium such as that
created by Fairtrade are a good starting point, but do not close the
living income gap. Tony's pays a premium above existing premiums to
help farmers earn a living wage.
The Tony's premium is determined by creating a set ``Living Income
Reference Price,'' a model we created in conjunction with Fairtrade and
integrating best practices and thorough research findings.\8\
---------------------------------------------------------------------------
\8\ https://tonyschocolonely.com/us/en/living-income-model.
This financial investment is backed up by technology and by constant
monitoring. Tony's uses GPS technology to map farms in order to denote
boundaries and to help prevent deforestation or encroachment onto
national parkland. We use outside certification sources, and an
independent assurance from PwC, to let us know how we are meeting our
non-financial key performance indicators, to identify abuses and, when
---------------------------------------------------------------------------
found, to then take remedial action.
We firmly believe that poverty is the root cause of child labor and
modern slavery in the cocoa sector. We certainly believe that is true
in other industries and in other regions.
Our system is unique, but not exclusive. It can be accessed by other
companies and we share it through our Open Chain collaborative
initiative. It is scalable to meet all sourcing needs from a portion of
a producing area, country wide production zone or the entire cocoa
producing region.
PAST EFFORTS TO SOLVE THIS ISSUE HAVE HAD LIMITED SUCCESS AT BEST
As a corporation engaged in the cocoa trade and in the manufacture of
chocolate, we have followed with interest the various attempts to rid
the sector of child labor, forced labor and modern slavery.
Interested parties have taken any one of three approaches to solve our
common problem. The three are:
Voluntary agreements to address the issue;
Court cases relying on existing statutes; and
Trade investigations.
Efforts related to voluntary agreements date back more than twenty
years when the Harkin-Engel Protocol was created in a joint effort by
your former colleague, Senator Tom Harkin and his House of
Representatives counterpart, Representative Elliot Engel.
Enthusiastically embraced by global chocolate companies as an
alternative to direct government oversight, the results have largely
failed. Millions of dollars have been spent with some benefits in terms
of better schooling for children or increased cocoa productivity.
Nevertheless, despite great fanfare, the corporations involved failed
to meet the original target date for eradication of child labor and
failed to meet any subsequent reduced targets even as they extended the
deadline for success. The Harkin-Engel protocol is no longer in force.
Even the corporations involved recognize that voluntary codes of
conduct do not work and in December 2019 most of the leading
international chocolate corporations called for direct regulation of
their supply chains by the European Union and by the U.S.
government.\9\
---------------------------------------------------------------------------
\9\ https://www.washingtonpost.com/business/2019/12/31/chocolate-
companies-ask-taste-government-regulation/.
Interested parties have also filed lawsuits under several U.S. statutes
including the Alien Claims Statute and the Trafficking Victims
Protection Act. One of the suits is now before the Supreme Court of the
---------------------------------------------------------------------------
United States for a decision.
Sadly, these cases take years to adjudicate. In the instance of the
case before the Supreme Court it was first filed in 2005 and has yet to
be decided. During those fifteen years, millions of children continue
to labor in hazardous, forced conditions.
The use of trade law, specifically Section 307 of the Tariff Act of
1930, does allow the government of the United States to prevent
importation of products made with forced labor and while the U.S.
market is one of the largest consuming markets in the world,
application of Section 307 does not affect the ability of a company to
shift imports elsewhere allowing the underlying problem to continue to
exist.
To our mind, each of these solutions fail because they do not focus on
the responsibility of corporations to maintain a due diligence over
their supply chains. The legal cases hit only the corporations named,
not the industry as a whole. Section 307 actions, although a key tool
to address forced labor concerns, do not yet demonstrate the ability to
force underlying systemic change.
CORPORATE RESPONSIBILITY THROUGH CORPORATE DUE DILIGENCE IS KEY
We believe the locus of a solution to the child labor and modern
slavery issue needs to be shifted from that of the farmer, the small
producer or middleman to that of the end purchaser without absolving
governments of their responsibilities. To do that, we suggest entering
into law a comprehensive system of human rights due diligence that
requires corporations to review their supply chains for abuses and to
actively and transparently work to eliminate or remediate them within a
short period of time. Such a system should entail penalties for failure
otherwise it would essentially become nothing more than a reporting
system.
Tony's is not alone in suggesting this approach. Globally, there is an
emerging consensus in favor of supply chain due diligence; a few
nations such as France, the United Kingdom and the Netherlands have
already acted. Additionally, the European Union is gearing up to
propose legislation this year with the European Parliament recently
issuing a report to the European Council to enact legislation as soon
as practicable.\10\
---------------------------------------------------------------------------
\10\ https://www.europarl.europa.eu/news/en/headlines/society/
20210303STO99111/companies-should-be-held-accountable-for-their-
actions-say-meps.
Focusing on corporate responsibility in the area of human rights due
diligence is neither a new nor a radical departure from existing norms
and laws. In both Europe and the United States there exists a framework
governing corporate responsibility for international business dealings
embodied in the several foreign corrupt practices acts. Further, both
the United States and Europe have laws governing corporate due
diligence over ethical and safe workplace conditions as embodied in
occupational health and safety acts. The Organization for Economic
---------------------------------------------------------------------------
Cooperation and Development has likewise addressed both issues.
The foreign corrupt practices acts were created because bribery is
considered a deviation from globally accepted business norms that
confers an advantage upon the entity doing the bribing. Failing to
provide a safe place to work and the means to protect workers from harm
is considered a deviation from globally accepted business practices
that likewise confers a cost advantage to the entity failing to act to
ensure the health and safety of its workers. Global corporations accept
these norms and accept being held accountable to them.
It is exactly the same in the area of human rights due diligence in the
supply chain. Utilization of child and forced labor provide cost
advantages to the end user and in doing so, they violate globally
accepted human rights norms and standards.
ENSURING A LEGALLY CREATED HUMAN RIGHTS DUE DILIGENCE SYSTEM WILL
CREATE AMERICAN JOBS
We believe creating a system to implement human rights due diligence is
the right thing to do. Companies should be a force for good and not a
force that perpetuates old and harmful ways of doing business. That is
why we do what we do; it is engrained in our nature and it is part of
our mission. But we are not the only company undertaking such efforts.
In the United States there are literally hundreds of chocolate
companies seeking to source cocoa and other chocolate inputs in a
sustainable and ethical manner. They are small businesses, and like
small businesses everywhere, they are community oriented and create
jobs and income for their towns and cities.
It does cost money to undertake supply chain due diligence and those
corporations that do not have due diligence processes in place enjoy a
cost advantage over those who do. Thus, creating such a global system
will help level the economic playing field for these small companies
allowing them more opportunities to grow and to create jobs across the
50 states.
CONCLUSION
Today, the West African cocoa trade relies on child labor and modern
slavery. The biggest chocolate companies have profited from this model
for decades and continue to do so. What is true in our industry is also
true in so many other industries. Just as no chocolate bar is sweet
enough to cover or dismiss the bitter truth of modern day child labor,
forced labor and slavery, no product offered to the consumer deriving
from such a system can be worth its purchase price.
For these reasons, we deeply hope that not only does the Committee move
to improve enforcement by the U.S. Customs and Border Protection but it
also closes supply chain loopholes by instituting an effective,
comprehensive human rights due diligence system that requires corporate
action and penalizes those entities that fail to act.
______
United States Council for International Business
1212 Avenue of the Americas
New York, NY 10036-1689
212-354-4480 tel
212-575-0327 fax
www.uscib.org
U.S. Senate
Committee on Finance
Dirksen Senate Office Building
Washington, DC 20510-6200
March 24, 2021
Dear Chairman Wyden and Ranking Member Crapo,
USCIB proposes amending the regulations that implement Section 307 to
include a framework that is workable and effective at identifying and
eliminating forced labor in supply chains. With supply chains spanning
the globe over a wide range of commodities, products and sectors, these
comments from the United States Council for International Business
(USCIB) and its members focus on implementation of the forced labor
import prohibition, contained in Section 307 of the Tariff Act of 1930,
as amended. We applaud the bipartisan commitment within the Congress to
ensure effective implementation, and the overall desire to achieve
effective and efficient enforcement of Section 307 by U.S. Customs and
Border Protection (CBP). However, we believe that greater transparency
by CBP upon initiation of an investigation will result in the trade
community becoming a partner with CBP to address forced labor, prevent
the importation of goods made with such, and more immediately address
workers' needs. This is an outcome that can be achieved through updated
regulations in this area.
USCIB and its members share the objectives to prevent, identify and
eradicate forced labor globally. USCIB joins the U.S. Government in
recognizing the UN Guiding Principles on Business and Human Rights
(UNGPs) as the globally agreed framework for advancing human rights as
they relate to business. The UNGPs recognize the value and importance
of company efforts to support remediation.
USCIB promotes open markets, international trade and investment,
competitiveness and innovation, sustainable development and corporate
responsibility, supported by international engagement and regulatory
coherence. Our members include primarily U.S.-based multinational
companies and professional services firms spanning every sector of the
economy with global operations touching every region of the world.
Member companies generate $5 trillion in annual revenues and employ
over 11 million people worldwide. As the sole U.S. affiliate of the
International Chamber of Commerce (ICC), the International Organization
of Employers (IOE) and Business at OECD, USCIB provides business views
to policy makers and regulatory authorities in the U.S. and worldwide.
USCIB member companies are deeply committed to eradicating forced
labor, in any form, from their supply chains and devote significant
resources to ensuring forced labor and other violations of core,
internationally recognized labor rights are not present in their supply
chains. Many USCIB member companies have been working for decades to
establish and execute operational due diligence and other corporate
programs targeting and eliminating the use of forced labor, and many
have been recognized for their innovative efforts. USCIB and its
members actively support the development of effective laws, regulations
and policies to eliminate forced labor linked to supply chains. As the
recognized representative of U.S. employers to the International Labor
Organization, USCIB and its members are at the table with governments,
workers' representatives, and other global employers to negotiate
legally binding international labor standards.
Eradicating Forced Labor in Partnership with CBP by Advancing Clear,
Predictable, Effective Enforcement
It is with this background and in this context that we believe USCIB
has a unique perspective, experience and capacity to inform and support
U.S. policy makers on matters related to customs, trade and forced
labor.
USCIB and its members support compliance consistent with the import
prohibition of Section 307, working cooperatively with CBP.
Regrettably, the current position of CBP is that as soon as they
initiate an investigation, it becomes an enforcement action and
therefore, they will not notify any entities that may be involved
because CBP ``may'' take action to detain imported goods. CBP
effectively creates a ``black box'' from which all companies are
excluded. We want to partner with Congress and CBP on this process to
use Section 307 as a mechanism to: (1) combat forced labor in the
global supply chain; (2) prevent unfair pricing affecting U.S. workers;
and (3) ensure a values-based trading system. The way the process is
currently set up does not fully serve these goals and is damaging to
the U.S. economy and to impacted forced laborers.
USCIB's proposal speaks to the following:
Section 307 regulations were created in 1963 and they are not
adequate for 21st-century supply chains. A regulatory framework based
on objective standards that will be predictable, transparent and
workable is needed. This proposal will help eliminate forced labor and
support U.S. foreign policy and global development goals, rather than
resulting in companies adopting a cut and run approach to suppliers
that are identified as using forced labor as currently frequently
happens.
Increased engagement and transparency by CBP with all impacted
parties, including the business community, as part of any investigation
into allegations of forced labor, to include appropriate U.S.
government agencies (e.g., the Office of the U.S. Trade Representative,
the Department of Labor and the Department of State), foreign
governments and the broader trade community, through (1) direct
confidential outreach to companies at the outset of an investigation,
and (2) engagement with business associations able to speak for
businesses, in general, regarding investigations. Input from importers
or other interested persons are currently required to be considered by
CBP when an investigation is warranted, but the existing process does
not include such input. Customs is currently assuming that when it
initiates an investigation, that the result is possible violative
imports that will result in enforcement action, therefore, they are not
involving either the concerned exporting entity, country or importer as
required under regulation.
Specifically, USCIB proposes amending the current process by which CBP
issues Withhold Release Orders (WROs) as a multi-stepped approach:
1. Announce the initiation of a review based on allegations deemed
to merit investigation to the importers that may be impacted according
to objective and transparent standards. When allegations are against a
company or set of companies, or if a company may be importing from a
region, a country or an industry product subject to the allegations,
CBP or the appropriate member of the interagency Task Force should
alert both the U.S. importer (while maintaining confidentiality) and
the foreign government. CBP should provide companies with at least 60
days to refute, provide information that may be critical or useful to
the investigation or, in appropriate circumstances, remediate the
allegation.
2. Issue a preliminary determination within no less than 60 days
of initiating an investigation, and provide at least a 60-day comment
period, without repercussions to the importer other than
inadmissibility of the goods, and/or for a remediation period by the
trading community.
3. Make a final determination not earlier than 120 days after
initiating the investigation, if CBP has determined after investigation
and consultation with the Task Force that such WRO is merited. Involved
parties should have at least 60 days to submit a remedy.
4. Issue final notification of a WRO.
CBP currently accepts allegations from a wide range of stakeholders
through various means of transmission regarding forced labor, but it
does not request, pre-WRO, any information from foreign governments, or
importers on the subject merchandise. Though CBP is required to
consider such information under existing regulations [19 CFR 12.42
(d)], in practice, it excludes any potentially involved entities. CBP
prioritizes collaboration with the trade community as required under
the Customs Modernization Act, but in the case of WRO enforcement has
fallen short of this goal. This omission of input hinders establishing
a transparent and predictable process to determine if in fact there is
potential forced labor and if so, engaging the trade community to
remove the offending behavior by the manufacturer and eradicate
possible forced labor. This lack of coordination between CBP and the
trade community could also have a direct impact on workers' well-being
because importers are not made aware and thus cannot help resolve CBP's
concerns with their suppliers until a WRO is issued, often many months
or years from the time the concerns were first raised.
We believe that improving the current process could address direct and
indirect impacts to the U.S. economy. A WRO is not definite proof of
forced labor, yet results in increased, lengthy, and even unrelated
detentions in some instances.
Improperly detaining a shipment for just 5-6 days in a bulk commodity
storage facility could cost the importer $1M or more. USCIB has
examples of importers who have had substantial portions of their total
inventory incorrectly detained for weeks. Such delays can threaten the
existence of small to medium sized businesses, and delayed shipments to
facilities in the U.S. could lead to full or partial shutdown of
manufacturing, potentially impacting bothU.S. and foreign jobs. We look
forward to providing additional content in future dialogues.
We strongly agree that CBP must modernize, update and align its
regulations, policies and procedures to address the evolving threat of
forced labor in supply chains in partnership with the trade community.
In our view, the process outlined above will create a reasonable,
transparent and--most importantly--effective process for assisting in
effective implementation of the law while fostering greater
collaborative engagement with the trade community in combatting forced
labor in international supply chains.
USCIB believes that cooperation between the government, stakeholders,
and the trade community is the most effective path to block imports of
goods made with forced labor. USCIB would like to be a resource in the
process to design an updated path forward for CBP to implement the
import prohibition for goods made with forced labor while encouraging
responsible business practices and avoiding unnecessary disruption of
trade and supply chains.
For further information, contact Norine Kennedy, United States Council
for International Business, at [email protected]. We look forward to
working with the Committee on this important matter.
Respectively submitted,
Norine Kennedy
Senior Vice President, Policy and Global Strategy