[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
EXPLOITATION AND ENFORCEMENT: EVALUATING
THE DEPARTMENT OF HOMELAND SECURITY'S
EFFORTS TO COUNTER UYGHUR FORCED LABOR
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT, INVESTIGATIONS,
AND ACCOUNTABILITY
OF THE
COMMITTEE ON HOMELAND SECURITY
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
OCTOBER 19, 2023
__________
Serial No. 118-34
__________
Printed for the use of the Committee on Homeland Security
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
56-220 PDF WASHINGTON : 2024
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COMMITTEE ON HOMELAND SECURITY
Mark E. Green, MD, Tennessee, Chairman
Michael T. McCaul, Texas Bennie G. Thompson, Mississippi,
Clay Higgins, Louisiana Ranking Member
Michael Guest, Mississippi Sheila Jackson Lee, Texas
Dan Bishop, North Carolina Donald M. Payne, Jr., New Jersey
Carlos A. Gimenez, Florida Eric Swalwell, California
August Pfluger, Texas J. Luis Correa, California
Andrew R. Garbarino, New York Troy A. Carter, Louisiana
Marjorie Taylor Greene, Georgia Shri Thanedar, Michigan
Tony Gonzales, Texas Seth Magaziner, Rhode Island
Nick LaLota, New York Glenn Ivey, Maryland
Mike Ezell, Mississippi Daniel S. Goldman, New York
Anthony D'Esposito, New York Robert Garcia, California
Laurel M. Lee, Florida Delia C. Ramirez, Illinois
Morgan Luttrell, Texas Robert Menendez, New Jersey
Dale W. Strong, Alabama Yvette D. Clarke, New York
Josh Brecheen, Oklahoma Dina Titus, Nevada
Elijah Crane, Arizona
Stephen Siao, Staff Director
Hope Goins, Minority Staff Director
Sean Corcoran, Chief Clerk
------
SUBCOMMITTEE ON OVERSIGHT, INVESTIGATIONS, AND ACCOUNTABILITY
Dan Bishop, North Carolina, Chairman
Marjorie Taylor Greene, Georgia Glenn Ivey, Maryland, Ranking
Mike Ezell, Mississippi Member
Dale W. Strong, Alabama Shri Thanedar, Michigan
Elijah Crane, Arizona Delia C. Ramirez, Illinois
Mark E. Green, MD, Tennessee (ex Yvette D. Clarke, New York
officio) Bennie G. Thompson, Mississippi
(ex officio)
Sang Yi, Subcommittee Staff Director
Lisa Canini, Minority Subcommittee Staff Director
C O N T E N T S
----------
Page
Statements
The Honorable Dan Bishop, a Representative in Congress From the
State of North Carolina, and Chairman, Subcommittee on
Oversight, Investigations, and Accountability:
Oral Statement................................................. 1
Prepared Statement............................................. 3
The Honorable Glenn Ivey, a Representative in Congress From the
State of Maryland, and Ranking Member, Subcommittee on
Oversight, Investigations, and Accountability:
Oral Statement................................................. 4
Prepared Statement............................................. 11
The Honorable Bennie G. Thompson, a Representative in Congress
From the State of Mississippi, and Ranking Member, Committee on
Homeland Security:
Prepared Statement............................................. 12
Witnesses
Ms. Kimberly Glas, President and CEO, National Council of Textile
Organizations:
Oral Statement................................................. 13
Prepared Statement............................................. 15
Mr. Peter Mattis, President, Jamestown Foundation:
Oral Statement................................................. 25
Prepared Statement............................................. 27
Ms. Louisa Greve, Director of Global Advocacy, Uyghur Human
Rights Project:
Oral Statement................................................. 29
Prepared Statement............................................. 31
Mr. Michael Stumo, CEO, Coalition for a Prosperous America:
Oral Statement................................................. 36
Prepared Statement............................................. 38
For the Record
The Honorable Dan Bishop, a Representative in Congress From the
State of North Carolina, and Chairman, Subcommittee on
Oversight, Investigations, and Accountability:
Article, Reuters, September 1, 2023............................ 48
The Honorable Glenn Ivey, a Representative in Congress From the
State of Maryland, and Ranking Member, Subcommittee on
Oversight, Investigations, and Accountability:
Statement of Doreen P. Greenwald, National President, National
Treasury Employees Union..................................... 5
Article, NPR, February 1, 2023................................. 61
EXPLOITATION AND ENFORCEMENT: EVALUATING THE DEPARTMENT OF HOMELAND
SECURITY'S EFFORTS TO COUNTER UYGHUR FORCED LABOR
----------
Thursday, October 19, 2023
U.S. House of Representatives,
Committee on Homeland Security,
Subcommittee on Oversight, Investigations,
and Accountability,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 p.m., in
room 310, Cannon House Office Building, Hon. Dan Bishop
[Chairman of the subcommittee] presiding.
Present: Representatives Bishop, Ezell, Strong, Ivey,
Thanedar, and Ramirez.
Mr. Bishop. The Committee on Homeland Security,
Subcommittee on Oversight, Investigations, and Accountability
will come to order. Without objection, the Chair is authorized
to declare the committee in recess at any point.
The purpose of today's hearing is to receive testimony from
an expert panel on efforts to prevent goods made with Uyghur
forced labor in China from entering the United States.
Without objection, so ordered.
I now recognize myself for an opening statement.
Good afternoon, and welcome to this hearing of the
Subcommittee on Oversight, Investigations, and Accountability
titled, ``Exploitation and Enforcement: Evaluating the
Department of Homeland Security's Efforts to Counter Uyghur
Forced Labor.''
Today's hearing will look at the Department's on-going
efforts to enforce the Uyghur Forced Labor Prevention Act.
Enforcing the UFLPA carries with it not only U.S. economic and
competitive interests, but also a moral issue to prevent forced
labor.
For the better part of the last decade, the Chinese
Communist Party has waged a ruthless and inhuman campaign of
repression and genocide against the Uyghur minority population
in the Xinjiang region of western China, sending more than 1
million people to internment camps, and denying basic liberties
through religious persecution, forced sterilization, and other
human rights abuses.
The Chinese Government operates an extensive system of
forced labor to produce key manufactured products, including
textiles and electronics. Research has shown that the products
of this forced labor system are deeply imbedded in global
supply chains.
For example, this one region is responsible for over 85
percent of China's cotton production, and around 20 percent of
the global cotton supply. Nearly 2 years ago, Republicans and
Democrats in Congress worked together and passed the Uyghur
Forced Labor Prevention Act. This law recognized the reality
that any imports produced in Xinjiang or by entities with close
ties to forced labor in the region, should be presumed to be
made with forced labor and banned from entry until proven
otherwise.
The Department of Homeland Security enforces UFLPA through
U.S. Customs and Border Protections inspections of cargo
entering the United States and through the Department's
leadership of the Forced Labor Enforcement Task Force. The
FLETF is responsible for publishing a list of entities that the
U.S. Government determines to be complicit in the CCP's system
of forced labor in Xinjiang. The UFLPA is a significant
bipartisan measure to counter the CCP's unjust and predatory
exploitation of forced labor.
But a law is only as good as its enforcement. Sixteen
months after the UFLPA went into effect, the evidence shows
that goods made with forced labor in Xinjiang continue to enter
the U.S. homeland. Earlier this year, CBP conducted isotopic
testing on clothing samples, and found that 15 percent of the
items tested positive for cotton from Xinjiang.
Meanwhile, even though 2022 U.S. textile and apparel
imports totaled $153.2 billion under UFLPA, CBP only detained
less than 1,000 shipments worth $39 million from June 2022 to
the present in the textile and apparel sector. Of those
detentions, only $8 million worth were denied entry.
The Department needs to take a more proactive approach to
enforcing the UFLPA. For starters, the Department has been slow
to expand the UFLPA entity list, adding only 7 entities to the
list in the past year. Additionally, CBP should significantly
expand its use of isotopic testing and other supply chain
tracing technologies to identify cotton sourced from Xinjiang,
as well as for other trade enforcement issues.
Small, low-value, de minimis shipments also pose a growing
obstacle to CBP's enforcement capabilities, undermining CBP
ability to interdict not just goods made with Uyghur forced
labor, but also narcotics, such as fentanyl. Shippers of de
minimis goods face less CBP scrutiny and can ship directly to
consumers. More than 60 percent de minimis shipments come from
China, including from direct-to-consumer clothing retailers
that face scrutiny over their supply chain's risk of using
forced labor in Xinjiang.
De minimis shipments have doubled in the past 5 years
alone, rising from $500 million in fiscal year 2019 to over a
billion in the past year. That appears on the chart that is
directed behind me. Acting CBP Commissioner Troy Miller
admitted just last month, that the record volume of de minimis
shipments makes, ``screening these shipments and ferreting out
contraband incredibly challenging''.
With such a flood of less scrutinized shipments arriving at
U.S. ports of entry every day, the openings for banned imports
and smuggled drugs to slip through CBP inspection are
plentiful. This raises a question of the design of the relevant
statute.
The exploitation of Uyghur forced labor enriches Chinese
industry at the expense of American manufacturers and workers.
The domestic textile industry is critical for supplying
equipment and clothing to our military and hospitals, as well
as to our population. Rigorous enforcement of the UFLPA
counters China's predatory trade practices, and supports
American manufactures while keeping the CBP's forced labor
system in Xinjiang from profiting off access to the U.S.
market. This is an important issue that warrants Congressional
attention as we carry out our responsibility to ensure that the
laws passed by Congress enjoy robust and effective enforcement
by Federal agencies.
I want to thank our witnesses here today, and I look
forward to hearing your testimony.
[The statement of Chairman Bishop follows:]
Statement of Chairman Dan Bishop
October 19, 2023
Good afternoon, and welcome to this hearing of the Subcommittee on
Oversight, Investigations, and Accountability, titled, ``Exploitation
and Enforcement: Evaluating the Department of Homeland Security's
Efforts to Counter Uyghur Forced Labor.'' Today's hearing will look at
the Department's on-going efforts to enforce the Uyghur Forced Labor
Prevention Act (UFLPA). Enforcing the UFLPA carries with it not only
U.S. economic and competitive interests, but also a moral issue to
prevent forced labor.
For the better part of the past decade, the Chinese Communist Party
has waged a ruthless and inhumane campaign of repression and genocide
against the Uyghur minority population in the Xinjiang region of
western China, sending more than 1 million people to internment camps
and severely restricting basic liberties through religious persecution,
forced sterilization, and other human rights abuses. The Chinese
government operates an extensive system of forced labor to produce key
manufacturing products, including electronics and textiles. Research
has shown that the products of this forced labor system are deeply
embedded in global supply chains. For example, this one region is
responsible for over 85 percent of China's cotton production and around
20 percent of the global cotton supply.
Nearly 2 years ago, Republicans and Democrats in Congress worked
together and passed the Uyghur Forced Labor Prevention Act. This law
recognized the reality that any imports produced in Xinjiang or by
entities with close ties to forced labor in the region should be
presumed to be made with forced labor and banned from entry until
proven otherwise. The Department of Homeland Security enforces the
UFLPA through U.S. Customs and Border Protection's inspections of cargo
entering the United States and through the Department's leadership of
the Forced Labor Enforcement Task Force (FLETF). The FLETF is
responsible for publishing a list of entities that the U.S. Government
determines to be complicit in the CCP's system of forced labor in
Xinjiang. The UFLPA is a significant bipartisan measure to counter the
CCP's unjust and predatory exploitation of forced labor. But, a law is
only as good as its enforcement.
Sixteen months after the UFLPA went into effect, the evidence shows
that goods made with forced labor in Xinjiang continue to enter the
U.S. homeland. Earlier this year, CBP conducted isotopic testing on
clothing samples and found that 15 percent of the items tested positive
for cotton from Xinjiang. Meanwhile, even though 2022 U.S. textile and
apparel imports totaled $153.2 billion, under UFLPA, CBP only detained
less than 1,000 shipments worth $39 million from June 2022 to the
present in the textile and apparel sector, and of those detentions only
$8 million worth were denied entry.
The Department needs to take a more proactive approach to enforcing
the UFLPA. For starters, the Department has been slow to expand the
UFLPA Entity List, adding only 7 entities to the list in the past year.
Additionally, CBP should significantly expand its use of isotopic
testing and other supply chain tracing technologies to identify cotton
sourced from Xinjiang.
Small, low-value de minimis shipments also pose a growing obstacle
to CBP's enforcement capabilities, undermining CBP's ability to
interdict not just goods made with Uyghur forced labor but also
narcotics such as fentanyl. Shippers of de minimis goods face less CBP
scrutiny and can ship directly to consumers. More than 60 percent of de
minimis shipments come from China, including from direct-to-consumer
clothing retailers that face scrutiny over their supply chains' risk of
using forced labor in Xinjiang. De minimis shipments have doubled in
the past 5 years alone, rising from 500 million in fiscal year to over
1 billion in the past year.
Acting CBP Commissioner Troy Miller admitted just last month that
the record volume of de minimis shipments makes quote--``screening
these shipments and ferreting out contraband incredibly challenging.''
With such a flood of less scrutinized shipments arriving at U.S. ports
of entry every day, the openings for banned imports and smuggled drugs
to slip through CBP inspection are plentiful.
The exploitation of Uyghur forced labor enriches Chinese industry
at the expense of American manufacturers and workers. The domestic
textile industry is critical for supplying equipment and clothing to
our military and hospitals. Rigorous enforcement of the UFLPA counters
China's predatory trade practices and supports American manufacturers
while keeping the CCP's forced labor system in Xinjiang from profiting
off access to the U.S. market.
This is an important issue that warrants Congressional attention as
we carry out our responsibility to ensure that the laws passed by
Congress enjoy robust and effective enforcement by Federal agencies. I
want to thank our witnesses for being here today, and I look forward to
hearing their testimony.
Mr. Bishop. I now recognize the Ranking Member, the
gentleman from Maryland, Mr. Ivey for his opening statement.
Mr. Ivey. Thank you, Mr. Chairman, and thank you for
calling this hearing. I appreciate the fact that you did this.
Just in my review in preparation for this hearing myself,
it appears that additional oversight is going to be important
here. In reviewing the statute, I saw that there are many
reports that are generated, or required to be generated by the
statute, but I don't know that either they are being generated
or we are reviewing them as closely as we should. I think this
is a big step in the right direction, so I greatly appreciate
that.
I want to apologize to the witnesses for the light turnout
in the hearing room today. As you may know, the House is a
little distracted with some internal matters. But I assure you,
it doesn't reflect on the importance of the matter that we're
here to hear your testimony about.
I want to talk in a couple of tranches here. One is with
respect to the Uyghurs. But I also have an interest in the some
of the issues that are going on in Africa. Although, I believe
there are some links there as well with respect to forced
labor. The goods might be a little bit different, but I think
the moral issue and the economic issue is very similar, and the
need for the United States to step in and address it, whether
it's in China or Africa or wherever is important as well.
With respect to this issue, just in reviewing the statute,
there's a couple things that I wanted to raise, and I'll have a
chance to ask you some questions about it, but I'll just flag
it now. The first is, as the Chairman mentioned, I don't know
if there's many prosecutions of these cases as one might
inspect, or the interceptions.
I've got a criminal prosecution background, so I might have
a little bit of a different perspective. You all might need to
give me some guidance on that. But it does appear that there
have been interceptions of shipments where forced labor goods
have been included in those, and the new testing methods, I
think, have reflected that to some extent.
But I do wonder about next steps, whether there's an
effort, or the ability, frankly, to take it beyond that point
with respect to sanctions. Just in reviewing the sanctions
section here, there's language about asset blocking for
example, and I did notice that there are shipments that can be
sent back, I suppose, or not allowed into the country.
But I wasn't clear on whether we had the ability to
actually seize and forfeit what was shipped over because it
would seem to me that if we really want to send a message that
this is unacceptable, seizure is the way to do it as opposed to
just sending it off to some other place where they can then
still make money off the illegal goods.
Second, I know there's issues about the definitions that
allow companies or allow the United States to put some of these
companies on the list, where they get their rebuttable
presumption in making a determination about whether this
specific company is going to get the kind of extra oversight
that it should based on where these goods are coming from.
I thought that was important in two ways: One is, the de
minimis issue that the Chairman just raised. If we are seeing
shipments--and again, this might be my limited understanding of
how this is working, but I believe it's an $800 cutoff. If
we're seeing multiple items that are falling under the $800
amount--and I recognize that there's a limit--I'll come to this
in a moment--limited enforcement capability just from boots on
the ground with respect to funding that Government has on this
front, but if we're finding multiple examples of these de
minimis items, is there a way to aggregate those so that we can
still pursue sanctions against these companies that are
shipping it?
If not--I believe also the de minimis number was raised
from $200 to $800. I understand why. There's a limit to how
much can be inspected and the like, just sheer manpower. But
that might also mean that if there's individual shipping, like
especially by, say, email ordering or electronic requests, that
there's a way to circumvent the law that was put in place
simply by just sending it in smaller amounts. So if that's a
correct reading, I'd like to get your thoughts in how we can
address that.
With respect to the manpower issue, we've gotten a letter
from the National Treasury Employees Union. Doreen Greenwald,
who's the national president sent it, and I'd like to make this
part of the record without objection.
Mr. Bishop. Without objection, so ordered.
[The information referred to follows:]
Statement of Doreen P. Greenwald, National President, National Treasury
Employees Union
October 19, 2023
Chairman Green, Ranking Member Thompson, distinguished Members of
the committee, thank you for the opportunity to provide this testimony.
As president of the National Treasury Employees Union (NTEU), I have
the honor of leading a union that represents 29,000 Customs and Border
Protection (CBP) Officers, Agriculture Specialists and trade
enforcement and compliance specialists who are stationed at 328 air,
sea, and land ports of entry across the United States and 16
PreClearance stations throughout the world.
CBP's mission at the ports of entry includes, but is not limited
to, combating human smuggling, countering illicit drugs, and
facilitating the lawful flow of trade and travel, to ensure our
national and economic security. CBP employees at the ports of entry are
the second-largest collectors of revenue in the Federal Government,
collecting almost $112 billion in duties, taxes, and fees in fiscal
year 2022. In addition, CBP Office of Field Operations (OFO) personnel
are on the front line of illegal narcotics interdiction. CBP seizures
of fentanyl have been escalating for several years, increasing by more
than 200 percent over the last two fiscal years. In fiscal year 2022,
CBP seized approximately 14,700 pounds of fentanyl Nation-wide,
permanently removing these drugs from the illicit supply chain, keeping
them out of our communities and denying drug trafficking organizations
profits and critical operating capital.
Our air, sea, and land ports are in desperate need of more CBP
employees at the ports of entry to reduce wait times for international
travelers and cargo shippers, improve the interdiction of illegal drugs
and illicit goods, and handle the processing of migrants seeking
asylum. According to CBP's most recent publicly-released workload
staffing models, the agency needs to hire at least 1,750 CBP Officers,
250 Agriculture Specialists, and 154 non-uniformed Trade Specialists to
address staffing needs at the ports of entry. These staffing shortages
have led to Specialists longer wait times at border crossings,
increased workloads, overtime for personnel and temporary duty
assignments (TDYs) to Southwest Border ports that exacerbate staffing
shortages at other ports.
Unfortunately, the House fiscal year 2024 DHS appropriations bill
would only provide funding to hire 150 CBP Officers to serve at
Southwest Border ports of entry does not begin to meet the staffing
needs at the ports of entry Nation-wide either to process legal
international trade and travel vital to the U.S. economy or to stop
deadly fentanyl and other contraband from crossing through U.S. ports
of entry. Inadequate funding for these CBP employees shortchanges our
economic growth and our national security.
CBP non-uniformed trade personnel, including Entry Specialists,
Import Specialists, Paralegal Specialists that determine and assess
fines, penalties, and forfeitures, Customs Auditors and Attorneys and
other trade compliance personnel, are the front line of defense against
illegal imports and contraband. These employees enforce over 400 U.S.
trade and tariff laws and regulations to ensure a fair and competitive
trade environment pursuant to existing international agreements and
treaties, as well as stem the flow of illegal imports, such as illicit
opioids, pirated intellectual property and counterfeit goods, and
contraband such as child pornography, illegal arms, weapons of mass
destruction, and laundered money. These CBP employees also collect
revenue--processing more than $3.35 trillion in total import value of
goods and collecting almost $112 billion in total revenue in fiscal
year 2022.
Along with facilitating legitimate trade and enforcing trade and
security laws, CBP trade personnel are responsible for preventing entry
of illegal transshipments; goods with falsified country of origin;
goods that are misclassified; and goods produced by forced labor. CBP
implements Section 307 of the Tariff Act of 1930 (19 U.S.C. 1307)
through issuance of Withhold Release Orders and findings to prevent
merchandise produced in whole or in part in a foreign country using
forced labor from being imported into the United States, as well as the
Uyghur Forced Labor Prevention Act (UFLPA) (Pub. L. 117-78), that
prohibits the importation of goods into the United States manufactured
wholly or in part with forced labor in the People's Republic of China,
especially from the Xinjiang Uyghur Autonomous Region, or Xinjiang.
Since the UFLPA went into effect through May 29, 2023, CBP stopped more
than 4,000 shipments of goods valued at over $1.3 billion for
enforcement action review.
trade enforcement and compliance staffing
When CBP was created in 2003, it was given a dual mission of not
only safeguarding our Nation's borders and ports from terrorist
attacks, but also the mission of regulating and facilitating
international trade. CBP is responsible for collecting import and
antidumping and countervailing duties and ensuring importers fully
comply with all applicable laws, regulations, quotas, Free Trade
Agreement (FTA) requirements, and intellectual property provisions.
Customs revenues are the second-largest source of Federal revenues
collected by the U.S. Government after tax revenues, and that revenue
funds other Federal priority programs. NTEU is deeply concerned with
the lack of resources, both in dollars and workforce, being devoted to
CBP's trade functions. Lack of sufficient focus and resources not only
costs the U.S. Treasury in terms of customs duties and revenue loss,
but also costs American companies in terms of lost business to unlawful
imports.
CBP needs sufficient trade personnel to ensure compliance with and
enforce trade laws. In addition to ensuring that there are enough
personnel to manage the growth in trade and complexity, CBP non-
uniformed trade personnel need to be trained and become experts in both
modern business practices and in traditional competencies such as
classification, valuation, compliance, and enforcement.
In fiscal year 2022, CBP added only 65 new positions across its
trade enforcement enterprise to support UFLPA efforts. This included
hiring new CBP officers, import specialists, trade analysts, auditors,
intelligence analysts, investigators, attorneys, and support staff. The
increased enforcement scope of the UFLPA, however, has highlighted
resource gaps for CBP to sustain consistent UFLPA operations across the
328 ports of entry, 10 Centers of Excellence and Expertise, field
offices, and headquarters.
According to CBP's most recent Resource Optimization Model (ROM)
for Trade issued in 2021, there are 2,349 CBP revenue occupations
personnel onboard, 154 positions short of the CBP revenue staff
authorized by Congress. These occupations include Import (937), Entry
(395), Fines, Penalties and Forfeiture (84), National Import (89) and
International Trade Specialists (197), Customs Auditors (321),
Attorneys (111) and Chemists (106).
By law, CBP must submit to Congress its Trade ROM every 2 years. It
is our understanding that CBP has not yet provided its fiscal year 2023
Trade ROM to Congress and NTEU urges the committee to request CBP to
provide fiscal year 2023 Trade ROM to the Committees on Ways and Means
and Finance as soon as possible.
Continuing staffing shortages, inequitable compensation, and lack
of mission focus are the main reason experienced CBP commercial
operations professionals at all levels, who long have made the system
work, are leaving, or have left the agency. Further, more than 25
percent of CBP Import Specialists will retire or be eligible to retire
within the next few years.
When Congress created the DHS, the House Ways and Means and Senate
Finance Committees included Section 412(b) in the Homeland Security Act
(HSA) of 2002 (Pub. L. 107-296). This section mandates that ``the
Secretary [of Homeland Security] may not consolidate, discontinue, or
diminish those functions . . . performed by the United States Customs
Service . . . on or after the effective date of this Act, reduce the
staffing level, or reduce the resources attributable to such functions,
and the Secretary shall ensure that an appropriate management structure
is implemented to carry out such functions.''
In October 2006, Congress enacted the Security and Accountability
For Every (SAFE) Port Act (Pub. L. 109-347). Section 401(b)(4) of the
SAFE Port Act directed the DHS Secretary to ensure that requirements of
section 412(b) of the HSA (6 U.S.C. 212(b)) are fully satisfied. CBP
satisfied this statutory requirement by freezing the number of
``maintenance of revenue function'' positions at the level in effect on
the date of creation of the agency in March 2003. As you know, CBP was
created by the merger of the former U.S. Customs Service, the
Immigration and Naturalization Service, and the Animal, Plant, Health
Inspection Service. In March 2003, the number of commercial operations
employees at the former U.S. Customs Service was significantly less
than prior to 9/11.
In March 2003 when CBP stood up, there were only 984 Import
Specialists on board. That is 265 Import Specialist positions less than
the 1998 base total, and 505 less than the fiscal year 2002 Import
Specialists optimal staffing level. A significant reduction in the
number of ``maintenance of revenue function'' positions had occurred at
the U.S. Customs Service between 9/11 and March 2003 when CBP was
established. Section 412(b) of the HSA reflected Congress' concern
regarding this diminishment in the number of customs revenue function
positions versus customs security function positions at the U.S.
Customs Service and fears that erosion in revenue functions would
continue and be exacerbated in the future by its merger into CBP.
Even though CBP complied with the letter of Section 401 (b)(4) of
the SAFE Port Act, it appears to NTEU that CBP views the ``March fiscal
year 2003 Staff On-Board'' numbers ``maintenance of revenue function''
positions, including vital trade facilitation and enforcement positions
as Entry and Import Specialists, as a staffing ceiling rather than a
floor. CBP did not even achieve that threshold number of Import
Specialists positions in fiscal year 2021. As stated in the fiscal year
2021 ROM, the HSA threshold for import specialists is 984 positions; in
fiscal year 2021, there were only 937 positions onboard.
Despite the significant investment in forced labor trade
intervention, prevention and enforcement, the number of CBP's non-
uniformed trade personnel has not materially increased since CBP was
established in 2003 even though inbound trade volume multiplied 32
times between fiscal year 2003 and fiscal year 2023.
trade act of 2002 and cbp synthetic opioid interdiction
CBP plays a leading role in addressing the Nation's opioid
epidemic--a crisis that is getting worse, as the deadly chemical
fentanyl is being manufactured in China and is either funneled through
Mexico or sent by mail and express consignment operators directly to
addresses in the U.S. International mail facility (IMF) and express
consignment carrier environments account for approximately 19 percent
of the illicit drug seizures at the ports of entry in fiscal year 2022.
Under Section 343 of the Trade Act of 2002 (Pub. L. 107-210) as
amended, and under the SAFE Port Act, CBP has the legal authority to
collect Electronic Advance Data (EAD) provided by air, sea, and land
commercial transport companies, including Express Consignment Carriers
and importers. In the postal environment, bilateral agreements
regarding EAD between the U.S. Postal Service (USPS) and foreign postal
operators have increased CBP's ability to target high-risk shipments.
Additionally, the Synthetics Trafficking and Overdose Prevention (STOP)
Act (Pub. L. 115-271) requires that DHS prescribe regulations requiring
the USPS to transmit advance electronic information for international
mail to CBP consistent with the statute. Currently, USPS provides EAD
from more than 129 foreign postal services, and CBP utilizes EAD to
actively target international mail shipments at 7 IMFs.
For cargo arriving by aircraft, express consignment operators are
required to provide EAD to CBP prior to the scheduled arrival of
express cargo in the U.S. Express consignment operators accept items
for delivery to the United States at points of sale in foreign
countries and maintain control of items until they are delivered to the
addressees.
Analysis of EAD is one of the tools that helps CBP identify threats
in inbound international express cargo items and includes the sender's
name and address, recipient's/consignee's name and address, contents'
description, number of pieces, and total weight. Express consignment
operators found in violation of these requirements are subject to a
penalty. EAD requirements were to be implemented by CBP in three
phases.
Phase 1 required electronic manifests to CBP for international
travel 4 hours prior to arrival and for Canada, Mexico, the Caribbean,
parts of Central and South America at wheels up. However, every day
these manifests are inaccurate with countless overages, which are
shipments that are not included on the manifest. In other words, an
overage is an un-manifested, unknown shipment which is in violation of
the law. A manifested shipment may have 1 or 500 overages, but the
highest penalty for overages is $5,000, and this penalty is routinely
mitigated to $50 for a first violation and $100 for subsequent
violations.
Phase 2 required express consignment operators to provide quality
shipper/consignee data. These addresses should show that the packages
are received from legitimate businesses/addresses and are delivered to
legitimate businesses/addresses. If not, the express consignment
operator is subject to a penalty.
In 2007, CBP drafted the Phase 3 implementation plan, but to date
has not implemented it. Phase 3 would allow CBP Officers to impose a
monetary penalty for incorrect manifest descriptions and false value
declarations. Without implementation of Phase 3, CBP Officers cannot
penalize carriers for bringing in items manifested as one thing that
turn out to be another. Many of these shipments are not concealed well
and are often simply mislabeled. For example, narcotic chemicals may be
labeled car parts or supplement powder, and CBP cannot impose a penalty
for this type of mislabeling.
GAO reports that express consignment operators have reported that
``they are able to individually scan each item upon arrival, providing
an opportunity to identify and set aside express cargo targeted for CBP
inspection based on EAD.'' (GAO-17-606, page 29). However, CBP Officers
tell NTEU that this is not the case for overages that arrive
unmanifested or for mislabeled packages. These CBPOs report that
express consignment operators rely on Phase 1 electronic manifests to
be accurate when they frequently are not. Also, when first rolled out,
Trade Act violations were required to be reported to HQ. That is no
longer the case.
Also, according to GAO, ``although CBP has been using EAD to target
express cargo for inspection since approximately 2004, it has not
evaluated whether this method results in benefits relative to other
methods of choosing express cargo . . . for inspection'' (GAO-17-606,
page 28.)
For these reasons, NTEU recommends that Congress direct CBP to
provide a report on an annual basis on the individuals and companies
that violate the Trade Act to the Senate Committee on Ways and Means
and Finance. This report should include the violator's name; the
violation committed; the port of entry/location through which the items
entered; an inventory of the items seized including description of the
item and quantity; place of origination including address of the
violator; the amount in penalties assessed by CBP for each violation by
violator name and port of entry/location; the amount of penalties that
CBP could have levied for each violation by violator name and port of
entry/location and the rationale for negotiating down the penalty for
each violation by violator name and port of entry/location.
Congress, by requiring CBP to report this useful information on
violators and violator penalty assessments, would enhance CBP's
interdiction of prohibited items from entering the United States
through express consignment operators.
Last, even though accurate and reliable advance information is
critical to CBP's targeting efforts to ascertain legitimate shipment
transactions from those involved in illegal and illicit business
transactions utilizing the U.S. Postal Service and private carriers,
the ability to assess penalties for violations of Section 343 of the
Trade Act is equally important. Penalties are routinely mitigated to a
fraction of the full penalty and are just considered the cost of doing
business.
For example, at one express consignment port of entry where
penalties had previously been mitigated to 1 percent of the maximum
penalty, they have recently been mitigated to 10 percent. In 2023 to
date, 97 penalties were assessed at that port for a total of
$1,821,098. Of these 97 penalties, 42 were Trade Act violations. But
many ports do not have as robust a penalty effort as this express
consignment hub because of staffing limitations. It is unclear to what
extent the original Trade Act penalties were mitigated from the
original penalty amount and how much could have been collected in
penalty if not mitigated. A penalty is not an effective deterrent if it
is mitigated to a token amount that is just seen as the cost of doing
business.
recommendations
The more than 29,000 CBP employees represented by NTEU are proud of
their part in keeping our country free from terrorism, our
neighborhoods safe from drugs, and our economy safe from illegal trade,
while ensuring that legal trade and travelers move expeditiously
through our air, sea, and land ports. These men and women are deserving
of more resources to perform their jobs better and more efficiently.
Therefore, NTEU urges the committee to:
support fiscal year 2024 funding for additional CBP
Officers, Agriculture Specialists, and non-uniformed CBP trade
operations personnel;
support legislation to authorize increased funding for much
needed non-uniformed CBP trade operations personnel;
support legislation to authorize increased funding through
appropriations for critically short-staffed CBP Officers at the
ports of entry;
support implementation of the Uyghur Forced Labor Prevention
Act;
support a requirement for CBP to provide a report on an
annual basis on the individuals and companies that violate the
Uyghur Forced Labor Prevention Act and the Trade Act of 2002 to
the House Committee on Ways and Means and Senate Committee on
Finance; and
support legislation to end the mitigation of Trade Act
penalties.
Thank you for the opportunity to submit this statement for the
record to the committee on their behalf.
Mr. Ivey. This raises issues about staffing, frankly. The
issue here is--I'll just read a couple of it. We can come back
to this when we get to the questioning, but that the increase
in trade has been significant. I'll just read this paragraph,
``Despite the significant investment in forced labor trade
intervention, prevention, and enforcement, the number of CBP's
non-uniformed trade personnel has not materially increased
since CBP was established in 2003, even though inbound trade
volume multiplied 32 times between fiscal year 2003 and fiscal
year 2023.''
I wanted to get a sense--and this might not be your inside
information. We might have to ask the CBP about it, but is that
what you're seeing? You know are they understaffed? Are there
things that we need to do as Congress to provide additional
resources so that they have the bodies to do the work?
Then with respect to the process. I noticed here there's a
Forced Labor Enforcement Task Force, and this is the group
that's tasked with sending the reports to Congress, I think,
and the making determinations about who goes on this entity
list is my sense of it. I was kind-of wondering if--because
we're hearing that that might be too many cooks in the kitchen,
I guess, is a way to put it.
Normally in a criminal prosecution, you have the people
that do the investigation work, and they bring it to
prosecutors who then make a decision about whether there's
enough evidence to move forward or not. Doing this by a
committee of 7 might be a little large. Also I'm worried that
if there are too many people making this determination, maybe
we're getting fewer enforcement actions than we should.
I say that in part because I see this rebuttable
presumption language that's in the statute, which one would
think would make it much easier to pursue these sorts of
enforcement actions than in a typical court circumstance.
Normally, the Government would have the burden of showing that
you had materials in here that had slave labor included. But at
least in this particular context, there seems to be a
rebuttable presumption that shifts the burden to the people who
are sending the items here to the United States.
It seems like that would be a heavy burden to me that could
only be overcome by clear and convincing evidence. If that's
the case, you know, I'd like to get your sense of why we're not
seeing more enforcement actions. Is it the structure that we
put in place? Is it the staffing issue? Is there something else
going on?
Then let me move on--I appreciate your indulgence giving me
the time to get through these issues. I appreciate it.
The Democratic Republic of Congo--and I apologize, I know
this isn't necessarily what you came to talk about--but just in
other hearings I've participated in, I know that they've got an
issue with respect to forced labor too. It appears to be
elements that are going into batteries, for example, or other
high-tech materials.
But a lot of the structure sounds similar to what may be
going on with what we're told has been going on with the
Uyghurs, individuals who are being forced into labor,
essentially enslaved. In some instances, they're getting paid,
but not much. Dangerous working conditions, for example, when
they're mining cobalt. Children. That's right. Some as young as
6. I'll make articles available for that record too.
But it struck me as sort-of two pieces that I wanted to
raise with this particular group. One is, that this links back
to China. Apparently China owns a lot of these mines that are
in these African countries that are using the slave labor
there. So it made me wonder, is there ability for China to
circumvent the structure that was put in place with the statute
just by, you know, off-shoring it, basically?
Then the other issue I was wondering about is the statute
speaks specifically about the Uyghurs, and I know that there
are other laws that govern other countries, but I don't know if
they are as aggressive as this one, frankly, and as far-
reaching.
So my question on that front would be: Does Congress need
to do more to address this type of activity across the board?
Not that we want to, you know, neglect what's going on with the
Uyghurs and China. But if there are other issues of this going
on in other countries, we need to address for the reasons the
Chairman mentioned in the same way.
So, with that, Mr. Chairman, I appreciate the opportunity
to give the opening statement. I look forward to your
testimony.
[The statement of Ranking Member Ivey follows:]
Statement of Ranking Member Glenn Ivey
October 19, 2023
Thank you, Mr. Chairman, and thank for calling this hearing. I
appreciate the fact that you did this.
Just in my review in preparation for this hearing myself, it
appears that additional oversight is going to be important here. In
reviewing the statute, I saw that there are many reports that are
generated, or required to be generated by the statute, but I don't know
that either they are being generated or we are reviewing them as
closely as we should. I think this is a big step in the right
direction, so I greatly appreciate that.
I want to apologize to the witnesses for the light turnout in the
hearing room today. As you may know, the House is a little distracted
with some internal matters. But I assure you, it doesn't reflect on the
importance of the matter that we're here to hear your testimony about.
I want to talk in a couple of tranches here. One is with respect to
the Uyghurs. But I also have an interest in some of the issues that are
going on in Africa. Although, I believe there are some links there as
well with respect to forced labor. The goods might be a little bit
different, but I think the moral issue and the economic issue is very
similar, and the need for the United States to step in and address it,
whether it's in China or Africa or wherever is important as well.
With respect to this issue, just in reviewing the statute, there's
a couple things that I wanted to raise, and I'll have a chance to ask
you some questions about it, but I'll just flag it now. The first is,
as the Chairman mentioned, I don't know if there's many prosecutions of
these cases as one might inspect, or the interceptions.
I've got a criminal prosecution background, so I might have a
little bit of a different perspective. You all might need to give me
some guidance on that. But it does appear that there have been
interceptions of shipments where forced labor goods have been included
in those, and the new testing methods, I think, have reflected that to
some extent.
But I do wonder about next steps, whether there's an effort, or the
ability, frankly, to take it beyond that point with respect to
sanctions. Just in reviewing the sanctions section here, there's
language about asset blocking for example, and I did notice that there
are shipments that can be set back, I suppose, or not allowed into the
country.
But I wasn't clear on whether we had the ability to actually seize
and forfeit what was shipped over because it would seem to me that if
we really want to send a message that this is unacceptable, seizure is
the way to do it as opposed to just sending it off to some other place
where they can then still make money off the illegal goods.
Second, I know there's issues about the definitions that allow
companies or allow the United States to put some of these companies on
the list, where they get their rebuttable presumption in making a
determination about whether this specific company is going to get the
kind of extra oversight that it should based on where these goods are
coming from.
And I thought that was important in two ways: One is, the de
minimis issue that the Chairman just raised. If we are seeing
shipments--and again, this might be my limited understanding of how
this is working, but I believe it's an $800 cutoff. If we're seeing
multiple items that are falling under the $800 amount--and I recognize
that there's a limit--I'll come to this in a moment--limited
enforcement capability just from boots on the ground with respect to
funding that Government has on this front, but if we're finding
multiple examples of these de minimis items, is there a way to
aggregate those so that we can still pursue sanctions against these
companies that are shipping it?
If not--I believe also the de minimis number was raised from 200 to
800. I understand why. There's a limit to how much can be inspected and
the like, just sheer manpower. But that might also mean that if there's
individual shipping, like especially by, say, email ordering or
electronic requests, that there's a way to circumvent the law that was
put in place simply by just sending it in smaller amounts. So if that's
a correct reading, I'd like to get your thoughts in how we can address
that.
With respect to the manpower issue, we've gotten a letter from the
National Treasury Employees Union. Doreen Greenwald, who's the national
president sent it, and I'd like to make this part of the record without
objection.
Mr. Bishop. I thank the Ranking Member for his careful
preparation and interest in the issue and even the expanded
sort-of notion of what this subcommittee ought to be looking
at.
I also welcome Ms. Ramirez, and I'll say that other Members
of the committee are reminded that opening statements may be
submitted for the record.
[The statement of Ranking Member Thomas follows:]
Statement of Ranking Member Bennie G. Thompson
October 19, 2023
I am pleased that we are holding this subcommittee hearing today to
shine a spotlight on the administration and enforcement of the Uyghur
Forced Labor Prevention Act (UFLPA).
UFLPA was necessary to combat the horrific genocide and crimes
against humanity perpetrated by the People's Republic of China against
the Uyghur population. This minority group has been systematically
persecuted for decades, but in recent years the Chinese government has
forcibly detained over 1 million ethnic Uyghur people and other Muslims
in reeducation centers, using threats, violence, and fear to force them
into accepting employment in labor-intensive industries.
Ensuring that U.S. consumers are not unwittingly supporting human
rights violations by purchasing goods made wholly or in part using
forced labor from the Xinjiang region of China is truly an issue of
bipartisan importance. I look forward to hearing from the witnesses
today about the on-going implementation of this relatively new law, and
what more can be done to achieve full compliance.
I expect that some of what we may hear today will be critical of
how the Department of Homeland Security (DHS) has not yet done enough
to prevent the importation of goods made with forced labor, which in
turn undercuts the competitiveness of American companies who abide by
the law. It is critical that we help ensure that American companies
that do not engage in human rights violations can fairly compete in the
global marketplace and are not unduly disadvantaged.
However, it's important to note that, by passing UFLPA, Congress
has asked DHS, and Customs and Border Protection (CBP) in particular,
to quickly establish new policies and procedures in addition to hiring
hundreds of new employees to carry out this important work. It will
take time for DHS to fully develop the manpower and expertise needed to
inspect and halt every shipment that contains goods made with forced
labor, but that does not mean that the Department isn't committed to
the goals of the Act.
Since the beginning of 2022, the Department has created and
implemented a strategy which establishes that ending forced labor is a
moral, economic, and national security priority for DHS. As of last
month, CBP has stopped over 5,000 shipments of goods valued at over
$1.8 billion for review and consequently denied entry into the United
States for over 2,300 shipments. Additionally, DHS has created and
published a list of entities known to utilize forced labor, and the
Department has participated in adjudications with companies that may
object to their inclusion. Ensuring that the companies on this list
meet the criteria and are not unfairly included takes time and careful
consideration.
As companies grapple with the new requirements of UFLPA and
discover ways to evade the intent of the law, it will be essential for
DHS to have continued support from Congress. Whether that requires more
funding to bolster CBP's trade enforcement and DHS's expansion of the
entities list, or new restrictions on what can and cannot be imported,
Members on this committee and others must remain engaged. It remains
critically important that we uphold American values by fully enforcing
this Act and meeting these challenges head on.
I look forward to hearing what recommendations our witnesses have
today for improving the implementation of UFLPA. I also hope we can
hold a subsequent hearing with witnesses from DHS and CBP to hear
directly about the challenges they are facing and how this committee
can best support their vital work on prohibiting the import of goods
made with forced labor.
Mr. Bishop. I'm pleased to have a distinguished panel of
witnesses before us today on this very important topic. I ask
that our witnesses please rise and raise your right hand.
Do you solemnly swear that the testimony you will give
before the Committee of Homeland Security of the U.S. House of
Representatives will be the truth, the whole truth, and nothing
but the truth, so help you God?
Let the record reflect that the witnesses have answered in
the affirmative. Thank you. You may resume your seats, and I
would now like to formally introduce our witnesses.
Ms. Kimberly Glas is the president and CEO of the National
Council of Textile Organizations. She is also a commissioner on
the U.S. China Economic and Security Review Commission.
Mr. Peter Mattis currently serves as president of the
Jamestown Foundation, and is a former Senate-appointed staff
director of the Congressional Executive Commission on China.
Ms. Louisa, Greve--is that how I pronounce your name?
Ms. Greve. Greve.
Mr. Bishop. Ms. Louisa Greve is the director of global
advocacy for the Uyghur Human Rights Project.
Mr. Michael Stumo is the CEO of the Coalition for a
Prosperous America, an organization which represents domestic
producers and workers across the U.S. economy. I thank all of
the witnesses for being here.
I now recognize Ms. Kimberly Glas for 5 minutes for her
opening statement.
STATEMENT OF KIMBERLY GLAS, PRESIDENT AND CEO, NATIONAL COUNCIL
OF TEXTILE ORGANIZATIONS
Ms. Glas. Chairman Bishop, Ranking Member Ivey, and Members
of the committee, thank you for the opportunity to testify at
this critical hearing on behalf of the U.S. textile industry
and its 540,000 workers across our supply chain.
The U.S. industry and our regional allies have been a
direct victim of aggressive predatory trade practices by China,
costing millions of jobs and making once-bustling towns across
the United States a graveyard of factories. Our industries are
survivors, thrivers, innovators, sustainability chiefs, and we
are strategic supply chain making life-saving PPP when the
country needed it the most, and a proud supplier of 8,000
different products to our U.S. military.
Today, our industry is facing unparalleled demand
destruction as a direct result of negative market forces
exacerbated by anemic customs and trade law enforcement.
Chinese cotton from Xinjiang is flooding the global
marketplace, making its way onto our doorsteps and into our
closets. As a result, American textile plants have been forced
to idle equipment, lay off workers, while some companies have
been put out of business entirely. We need urgent action and
attention, and we appreciate this hearing today.
Twenty percent of the world's cotton is grown in Xinjiang
made with forced labor. Seventy-two percent of all Chinese
cotton apparel or textiles utilizes Xinjiang cotton. This
banned cotton is also a major source of inputs throughout
Asia's textile and apparel supply chain, much ultimately
destined for the U.S. marketplace. So how much of this banned
cotton is being stopped?
U.S. imports of textile apparel and footwear in 2022
totaled 184 billion, but only 39 million in shipments were
detained for possible UFLPA violations over the last 15 months.
To put it in context, that's a mere 2/10 of a single percentage
point of total imports. Shockingly, despite cotton production
increasing in Xinjiang since UFLPA became enacted, enforcement
for textile has actually decreased over the last year, both for
UFLPA and in our free trade agreement countries where the
Chinese are trying to hide some of their cotton.
We advertise these figures on the CBP website. You may as
well put up a billboard to China and the trade cheaters that
say, Come on in, we aren't really looking. De minimis, I'd
rename this the forced labor, U.S. job destroyer, black market,
we don't really look, superhighway. Once used exclusively by
U.S. travelers bringing personal items home from abroad, the de
minimis provision has been weaponized by Chinese e-commerce and
other sites to send 3 million packages to the United States
each day, and it's estimated half of these packages are textile
and apparel.
These packages bypass inspections, duties, and penalties.
De minimis means minimal inspection. In 2016, we had 150
million of these packages. Today, we are on record for 1
billion individual packages containing forced labor goods,
counterfeits, fentanyl, largely un-inspected and receiving VIP
express treatment making de minimis the world's greatest black
market. Astonishingly, legalized by the U.S. Government to
offshore industries.
One billion packages are not de minimis to U.S.
manufacturers, U.S. workers, retailers, and our free trade
agreement partners who are being displaced from the U.S.
marketplace. UFLPA is impossible to enforce with this loophole.
When a fire is out of control, you don't look for more data to
examine the fire. You throw Niagara Falls at it.
In terms of our recommendations, Congress must get
aggressive on oversight of Customs enforcement. You must bring
up CBP officials and ask them the hard questions, ask them for
the metrics, ask them to put out a public roadmap on stepped-up
enforcement activity so everyone in the world understands we're
taking an aggressive posture related to this.
We also have to step up our penalties. We have to close the
de minimis loophole. There are tools in the toolbox right now
that the administration has, through executive authorities and
rulemakings, to close the de minimis loophole. We need to ask,
why aren't you? Congress needs to work on a long-term solution
on de minimis, but we can stop the bleeding right now. We need
to utilize the UFLPA entity list more robustly to deter the
fraudulent illegal trade.
In closing, American manufacturers and especially the
American textile industry competes against Chinese companies,
Chinese government, and unfortunately, our own Government when
we fail to effectively enforce our U.S. trade law. Who in our
Government would vote to allow China to ship billions each year
un-inspected, duty-free to the United States? What a gift.
Who would condone the packaging and exporting of dangerous
products to our marketplace, including products like fentanyl?
Who would approve of the flooding of our market with subsidized
products often made with forced labor? Yet, that is the de
facto polity of the U.S. Government when we take a weak posture
toward customs enforcement, an aggressive enforcement plan
coupled with a set of rational revisions to the outdated, and
now extremely dangerous loopholes in our trade law would
prevent the discontinuation of this devastation. But Congress
and the Executive branch need to act now.
I thank you for the committee's leadership on these
incredibly important issues, and our industry depends on these
solutions.
[The prepared statement of Ms. Glas follows:]
Prepared Statement of Kimberly Glas
October 19, 2023
Chairman Bishop and Ranking Member Ivey, thank you for the
opportunity to testify on this subject that is so important to our
Nation and to the U.S. textile industry and our workers.
My name is Kimberly Glas, and I am president and CEO of the
National Council of Textile Organizations (NCTO), a not-for-profit
trade association established to represent the entire spectrum of the
United States textile production chain, from base fibers to finished
sewn products, as well as supplier sectors that have a stake in the
prosperity and survival of the U.S. textile industry. We serve as the
voice of the U.S. textile industry and represent over 150 member
companies. I also have the honor of serving as an appointed
commissioner to the bipartisan U.S.-China Economic and Security Review
Commission, although I am not appearing before you today on behalf of
the Commission.
The U.S. textile sector is an extremely diverse, technically
advanced, and highly capital-intensive industry that involves a multi-
stage production chain. This domestic production chain is comprised of
the following: suppliers in the cotton, wool, and man-made fiber
sectors; yarn and fabric manufacturers; textile home furnishings
producers; dyers, printers, and finishers; and our customers in the
U.S. apparel, home furnishings, automotive, aerospace, construction
materials, energy exploration, and other end-use industries.
This vital domestic textile industry is an important component of
the U.S. economy with production found in every region of the country.
The industry provides much-needed jobs in rural areas and has
functioned as a springboard for workers out of poverty into good-paying
jobs for generations. The breadth, scope, and manufacturing
capabilities of the industry are unparalleled--the industry has
invested $21 billion over the past 10 years in the latest innovations
on sustainability and production capabilities. This focus on innovation
enables the industry to create hundreds of thousands of products
including apparel, industrial textiles, military uniforms, and other
defense applications. The U.S. textile industry is a strategic supply
chain, as exemplified by its heroic efforts to convert machinery
overnight to manufacture life-saving PPE as supply chains broke down
abruptly at the outset of the pandemic.
The U.S. textile sector further bolsters the national economy as a
consumer of billions of dollars of inputs and support services, such as
machinery, telecommunications, technology services, and numerous other
products needed to manufacture textiles. According to the U.S.
Department of Commerce, every job directly supplied by the U.S. textile
sector provides three additional jobs throughout the economy. As such,
direct and indirect employment supplied by the U.S. textile industry is
responsible for nearly 2.4 million jobs Nation-wide. Additional details
related to the U.S. textile industry are provided below:
U.S. Textile Industry Key Facts
The U.S. textile industry supply chain--from fibers to
apparel and other sewn products--employed 538,000 workers in
2022. One textile job supports 3 other jobs in the United
States.
The U.S. industry is the third-largest exporter of textile-
related products in the world. Fiber, textile, and apparel
exports combined were $34.0 billion in 2021.
The U.S. textile industry invested $20.9 billion in new
plants and equipment from 2012 to 2021.
The domestic textile industry is critical to our national
security in that it supplies more than 8,000 different products
to the U.S. military.
The United States is the world leader in textile research
and development, with the U.S. textile complex developing next
generation textile materials such as conductive fabric with
anti-static properties, electronic textiles that can monitor
heart rate and other vital signs, antimicrobial fibers,
lifesaving body armor, and new fabrics that adapt to the
climate to make the wearer warmer or cooler.
According to a recent study by North Carolina State University's
Wilson College of Textiles, the national economic impact of textile
investment is substantial. Thirteen jobs are created for every $1
million increase in U.S. textile production. That means if only 5
percent of textile imports were converted to onshore production ($6.5
billion), 84,500 new U.S. jobs would be created.
The vital domestic supply chain is seeing demand destruction due to
several factors. These issues have been compounded by insufficient
customs enforcement. There are a multitude of predatory trade practices
hurting the industry, including a loophole in U.S. trade law known as
``de minimis'' shipments, the rampant undervaluation of goods, import
fraud, and forced labor in supply chains.
introduction: enforcement is key
I am honored to join a panel of respected experts to review how a
lack of focused, aggressive enforcement of our trade laws is failing to
combat forced labor practices that the Uyghur Forced Labor Prevention
Act (UFLPA), which passed overwhelmingly in the House and Senate with
broad bipartisan support, was designed to address. This substantial
lack of enforcement is profound, allowing forced labor products to
stream into the United States directly from China and other locations
virtually undetected and without recourse.
My testimony will focus on current supply chains, the lack of
customs enforcement of UFLPA for our sector and its implications to
domestic manufacturers and U.S. workers, and what Congress and the
administration can immediately do to stem this disastrous economic tide
while also addressing the profound human rights abuses impacting
China's Uyghur population. I will also underscore that the de minimis
trade loophole makes UFLPA enforcement virtually impossible and in fact
rewards goods made with slave labor with preferential duty-free status.
It is hurting our industries and undermining all manner of trade
enforcement efforts. We greatly appreciate the committee holding this
hearing today, and we want to be an active partner with you on
immediate follow-up steps from this hearing.
I will also provide an overview of global textile and apparel
supply chains so that the subcommittee can better understand how China
undermines them by producing and exporting tainted products and discuss
at length how a failure to enforce our trade laws fuels forced labor
practices and U.S. manufacturing job losses.
China's Rise to Dominance in Global Textile and Apparel Production
To infiltrate global supply chains with forced labor products at
scale, China first had to achieve dominance in this sector. Starting in
the mid-1990's, China emerged as a large-scale predatory force
benefiting from virtually limitless government programs intended to
ensure that China's textile industry captured world markets and
displaced foreign competitors and workers. China leveraged the Asian
financial crisis of the late 1990's to steeply devalue its currency and
slash prices for textile and apparel exports by 30-80 percent virtually
overnight. China paired its persistent currency devaluation with heavy
industrial subsidies to its state-owned factories, which has shrouded
market forces, undervalued the true cost of its products, and displaced
virtually all competitors.
These economic factors were compounded by a series of U.S. policy
decisions that devasted U.S. textile and apparel manufacturing and our
trade partners' operations in the Western Hemisphere. These trade
liberalization policies included allowing China's non-market economy to
join the World Trade Organization (WTO) and enter into permanent normal
trade relations with the non-market economy of Vietnam. Arrangements at
the WTO that limited overproduction and dumping of textiles and apparel
were also phased out, creating an opportunity to fill rising global
demand for apparel with cheap, government-subsidized product from China
and its Asian supply chain partners.
China's rise came at the direct expense of the United States, as
these gains led to a sharp decline in U.S. textile and apparel output
and employment, with far-reaching implications for our trade and
preference program partners in the Western Hemisphere. Despite an
unprecedented increase in global apparel consumption from 1997-2009,
U.S. textile and apparel production declined by 61 percent, employment
decreased by a staggering 69 percent, exports fell by 15 percent, and
the U.S. trade deficit for textile and apparel products increased by 82
percent. At the same time, Chinese textile and apparel exports have
exploded, making China the dominant player in the global market. From
1992-2016, Chinese textile and apparel exports to the world grew by a
staggering 910 percent, skyrocketing from $26.4 billion to $266.3
billion.\1\ In fact, China's share of the world's textile and apparel
trade quadrupled, growing from 9.5 percent in 1992 to 38.3 percent in
2016.
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\1\ World Integrated Trade Solution (WITS).
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Further fueling China's dominant global position in the textile and
apparel sector is the fact that many key competitors in China are
state-owned enterprises, including companies owned by the People's
Liberation Army. Moreover, China is the world's leading purveyor of
illegal trade practices designed to unfairly bolster a blatantly
export-oriented economy. These predatory practices take many forms,
from macroeconomic policies that grant across-the-board advantages to
their manufacturers to industry specific programs intended to
monopolize global markets in targeted areas.
It has also come to light that China's abuses include the
exploitation and genocide of an estimated 800,000 to 1.8 million Uyghur
Muslims in China's Xinjiang Uyghur Autonomous Region (XUAR) and beyond,
where forced labor camps are an integral part of cotton, textile, and
apparel production. The country also actively ignores its duty to
maintain any basic labor or environmental standards in manufacturing,
resulting in rampant pollution and workplace safety hazards throughout
its textile production chain.\2\ China also continues to massively
undervalue its products to maintain its leading position in the market,
slashing prices on its apparel exports by an inexplicable 17.3 percent
between 2020 and 2021, despite the imposition of 301 tariffs, at a time
when consumer prices across-the-board rose by 4.2 percent.\3\
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\2\ See: News Article.
\3\ BLS CPI Summary; September 14, 2021.
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Impact on U.S. Trade Partners in the Western Hemisphere
Of course, China's predatory trade practices have had a massive
adverse impact not only on U.S. manufacturers and workers, but also
directly on our valued political and economic allies in the Western
Hemisphere, contributing to economic instability and outward migration.
Despite promises of preferred access to our consumer market through
free trade agreements (FTAs), our trading partners find themselves at a
distinct disadvantage to China's aggressive trade tactics.
As the United States was poised to finalize the Dominican Republic-
Central America Free Trade Agreement (CAFTA-DR) and enable the region
to compete for the U.S. consumer apparel market against a rising China,
the major developments noted above--China's adoption of deplorable
trade and economic tactics and the liberalization of U.S. trade
policy--served to directly counteract that opportunity. These events
negatively impacted investment, sourcing, and production decisions in
the CAFTA-DR region, which was not equipped to compete with the
aggressive, predatory policies and practices employed by the Chinese
Communist Party.
Despite those enormous challenges, the CAFTA-DR agreement has been
a strong and critical co-production chain for our collective industry
sectors. As an example, CAFTA-DR is the top destination for U.S.
textile exports, accounting for 80 percent of all U.S. spun yarn and 94
percent of U.S. cotton yarn exports last year. This is a critical co-
production chain, along with the United States-Mexico-Canada (USMCA)
Agreement, because we have strong trade agreements that have rules to
incentivize the use of U.S. and regional components to gain duty-free
access and thereby promote critical investments. If we didn't have
these rules, we would provide a backdoor to China and others non-
signatories that compete unfairly--and we would see this strategic
industry evaporate virtually overnight.
The Biden-Harris Administration's Call to Action
In 2021, to combat China's threat to the vibrant textile and
apparel co-production chain in the Western Hemisphere and this trade
predator's adverse impact on our output and employment, the
administration announced a public-private effort to drive investment
and create economic opportunities in Central America through a ``Call
to Action'' initiative.
Our industry was immediately supportive, and since the start of the
effort, the CAFTA-DR supply chain has attracted $2 billion in
investment, including significant investments in both Central America
and the United States by American textile companies. Our hemispheric
trade platform requires a dependable business environment and stable
workforce throughout the production chain. Sufficient economic and
employment opportunities must exist for workers both at home and
abroad, for which our industrial sector plays a critical role. The
damage that China inflicts on the U.S. textile industry and our Central
American and USMCA co-production partners is one of the root causes of
outward migration that absolutely must be addressed.
We regret that what was once excitement and optimism in our
industry for the promise of increased production, cooperation, and
growth in this hemisphere just a few short months ago has taken a
substantial turn. A lack of adequate customs and trade enforcement has
compounded the effects of China's on-going predation to lead to a
historic level of demand destruction for textiles and apparel in this
hemisphere that threatens the industry's vitality. The situation has
reached a tipping point where a large portion of U.S. textile
production and employment, as well as the broader Western Hemisphere
textile and apparel co-production chain, is threatened if enforcement
activity is not ramped up immediately.
As our industry has made massive capital investment to support
export and production opportunities in our free trade agreements, those
dollars become worthless if the integrity of our FTAs is not
aggressively protected by our customs enforcement and investigative
bodies. With your immediate help and the administration's support, we
believe we can help stem this tide.
part i: supply chains
Today, China is the global leader in cotton production and apparel
manufacturing, as well as Asia's central sourcing hub for raw cotton
fibers and other cotton and synthetic textile inputs such as yarns and
fabrics. Powerhouse apparel producers in Asia, like Vietnam, Cambodia,
Bangladesh, and others, source massive quantities of their textile
inputs from China or through a Chinese supply chain. As previously
mentioned, China's supply chains are mostly devoid of labor and
environmental standards and rife with non-market practices like state-
owned enterprises, government subsidies, and forced labor.
By contrast, Western Hemisphere supply chains feature the United
States as the central hub for textile inputs, supported by FTAs that
demand adherence to strong rules of origin and high labor and
environmental standards, reciprocal market access, customs inspections,
and other key requirements. In return, regional producers enjoy duty-
free access to the lucrative U.S. consumer market.
China's Forced Labor Textile and Apparel Supply Chains
Unfortunately, China's supply chains are inextricably linked to the
country's use of Uyghur forced labor in Xinjiang. China's XUAR region
is a major cotton, textile, and apparel production center, accounting
for 90 percent of China's total annual cotton crop and 20 percent of
the entire world's cotton production, according to USDA.\4\ Further,
roughly 20 percent of the cotton fiber that China's textile industry
consumes is imported; that means around 72 percent of cotton products
produced in China contain Xinjiang cotton. This cotton further taints
finished textile and apparel products produced by countries throughout
China's Asian supply chain.
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\4\ See: https://www.ers.usda.gov/amber-waves/2022/december/shift-
in-geography-of-china-s-cotton-production-reshapes-global-market/.
Furthermore, Xinjiang cotton production has increased since the
passage of the UFLPA--meaning these forced labor supply chains are
unknowingly hanging in our closets and delivered to our doorsteps and
undermining domestic manufacturers.
At the same time, China is also a major purchaser of U.S.-grown
cotton. As a result, it is commonplace for fibers, yarns, and fabrics
from various countries of origin to be indiscriminately mixed at all
stages of the production process, concealing and diluting the source
and proportion of forced labor inputs found in a final garment. These
harms are not limited only to cotton products but extend to cotton-
synthetic blends and other synthetic textiles as well. Due to the
amount of cotton produced in the XUAR, and China's dominant position as
a fiber, yarn, and fabric supplier for its own apparel production and
apparel production throughout Asia, we can logically deduce the sheer
impact China's forced labor practices have on Asian apparel production
overall.
To combat China's systematized use of forced labor in cotton,
textile, and apparel production, Congress passed the UFLPA, which bans
the importation of any product linked to Xinjiang and forced labor
practices. Because the XUAR region provides the overwhelming majority
of China's cotton and also supplies processed textile components,
China's entire cotton textile and apparel supply chain is not only
linked to forced labor but is dependent on these abhorrent practices.
Since so much of China's textile and apparel industry is directly
reliant on XUAR forced labor, we expected to see immediate impacts on
this sector as a result of UFLPA's implementation last June.
But what are we seeing instead? Since XUAR cotton production has
increased, we should be asking where this massive quantity of cotton is
going. Similarly, XUAR textile and apparel production has not abated.
Where are those inputs and finished garments going? These products are
banned from entering the United States, which remains the single
largest export market in the world for Chinese-made textile and apparel
products. Despite the heightened level of scrutiny, UFLPA enforcement
reports show that these products are not being stopped in significant
numbers at our borders--at least not in proportion to the expected
volume of tainted trade. Undoubtedly, a very large portion of the
billions of dollars of Chinese textile and apparel exports that enter
the United States each year through direct shipment via ``de minimis''
entry, are still accessing our market even though they are in violation
of UFLPA. For other portions of this trade, Chinese importers employ a
myriad of ways to creatively disguise and obfuscate supply chains,
reducing supply chain transparency and integrity.
U.S. Customs and Border Protection (CBP) enforcement for UFLPA
within our sector has been anemic and clearly not a priority. CBP has
detained a mere $14 million in goods so far this year based on the data
available through August--that is a decrease from last year. These
statistics are published on the CBP website--advertising to those who
want to skirt the rules that the United States Government is inspecting
this trade at such a minimal level that you can import these products
with virtually zero risk of detection.
Several readily-available avenues currently exist to disguise a
product's supply chain, allowing for easy circumvention of UFLPA, our
FTAs, and other U.S. trade laws. Among these are the dilution or mixing
of forced labor products with clean products, transshipping banned
products through a third-party country, exploiting de minimis access,
undervaluation/dumping, misclassification, and money laundering. These
and other tactics are heavily exploited by producers in China and other
Asian markets, and I will review a few of these in more detail below.
In any case, with the massive quantities of banned goods produced
in China, coupled with UFLPA's rebuttable presumption that any products
linked to Xinjiang are the product of forced labor, we should see
massive amounts of Chinese products, both shipped directly and through
secondary markets, regularly stopped at our borders. As I will discuss
in greater detail, the sheer volume of China's access to our market,
combined with a miniscule level of UFLPA seizures in the textile and
apparel sector leads to the conclusion that CBP efforts in this area
are completely indefensible to date.
part ii: enforcement
The large amount of duties collected on textiles and apparel
(typically around 40 percent of regular duties collected by CBP)
provides a hefty incentive for bad actors domestically and around the
world to cheat the system and circumvent our trade laws. The situation
has had a devastating impact on U.S. textile production and employment,
as well as the broader Western Hemisphere textile and apparel co-
production chain. This wide-spread damage will persist if enforcement
activity is not ramped up immediately to address China's use of forced
labor and other banned practices.
Included below are some examples of alarming trade data trends and
declining enforcement statistics that help paint the picture of what
industry is currently facing.
Enforcement of UFLPA
UFLPA enforcement in the textile and apparel sector has been
declining despite this sector being at the forefront of the problem. As
noted earlier, with 20 percent of global cotton being produced in the
XUAR and 72 percent of cotton products made in China containing
Xinjiang cotton, we should be seeing stopped shipments at a much higher
rate than is occurring.
For scale, total U.S. imports of textile, apparel, and
footwear totaled $184 billion in 2022, and only $39 million in
shipments were detained for possible UFLPA violations over the
last 15 months--representing a mere two-tenths of a single
percentage point of apparel imports.
When reviewing CBP's reported UFLPA activity in the textile
and apparel sector, we find the average number of UFLPA reviews
per month is down 50 percent by value ($1.7 million vs $3.5
million) and 24 percent by shipment count (53.8 vs 70.4) in
2023 compared to 2022.
Although UFLPA specifically identifies cotton as a high-
priority sector, other sectors have seen much greater levels of
scrutiny by CBP. From June 2022 through August 2023, CBP has
subjected 2,412 shipments of electronics equating to $1.5
billion to UFLPA reviews. By contrast, only 923 shipments of
textiles, apparel, and footwear equating to a mere $39 million
were reviewed for UFLPA. In July, CBP detained 6 shipments of
apparel from Nicaragua for suspected UFLPA violations--a first
for a Western Hemisphere FTA country. This highlights the
importance of taking a closer look at CAFTA-DR shipments for
FTA compliance.
Current CBP Testing Statistics and Findings
From December 2022 to May 2023, CBP tested a total of 86 samples of
apparel and footwear with 15 percent coming back testing positive for
Xinjiang cotton. Reportedly, CBP has an exclusive contract with Oritain
to conduct this testing and has paid the company $1.3 million dollars
for UFLPA cotton testing to date.\5\ CBP was allocated $101 million to
enforce bans on forced labor products. This raises questions as to why
more testing is not being conducted to ensure compliance with UFLPA
since the resources have already been allocated, and why CBP has not
requested more resources from Congress to employ isotopic testing more
broadly and more aggressively. Further, the fact that Oritain is the
sole supplier of isotopic testing to the U.S. Government points to a
potential conflict of interest, given that the company reportedly has a
client relationship with Shein, the multi-billion dollar Chinese e-
commerce company well-documented for its poor labor and environmental
practices and ties to Xinjiang cotton. At the very least, CBP should be
utilizing more companies who can ramp up isotopic testing and other
technology platforms to better enforce this trade.
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\5\ See: https://www.reuters.com/markets/commodities/us-customs-
finds-garments-made-with-banned-chinese-cotton-documents-2023-09-01/.
Section 321 De Minimis Tariff Waivers
These tainted forced labor products are coming directly to our
doorsteps through de minimis shipments. Nearly 3 million de minimis
shipments are coming into the United States each day, largely
uninspected and tariff-free because of an unintended loophole in our
trade law. These shipments are at high risk of not only violating UFLPA
but also containing counterfeits or dangerous fentanyl or posing other
dangers to consumers. By definition, these packages are deemed to
represent an amount of trade that is too minimal for CBP to review or
collect any tariffs on, including China 301 penalties. The United
States received more than 1 billion individual packages claiming de
minimis preferences in fiscal year 2023, an increase of nearly 700
percent from the 150 million packages that entered via de minimis in
2016. This is no longer ``minimal trade,'' and de minimis should be
renamed ``de maximus'' trade given the overwhelming volume. De minimis
makes it impossible to enforce UFLPA and rewards China and others with
a de facto free trade agreement with no strings attached.
This exponential growth in de minimis imports is the direct
consequence of faulty CBP rulings that have allowed mass distributors,
such as Shein, Temu, Amazon, and others, to facilitate millions of
direct duty-free, and virtually uninspected de minimis shipments each
day. Last year, Bloomberg published a report by Sheridan Prasso who had
isotopic testing performed on two batches of cotton products from
Shein, whose entire multi-billion-dollar business was created by de
minimis. Bloomberg reported that ``first batch of Shein garments, which
included pants and a blouse, matched both Xinjiang samples with only
slight variations,'' while the second batch showed higher variations of
isotopes, but well ``within the range that indicates a very likely
Xinjiang origin.'' Another item was determined to contain XUAR cotton
mixed with other materials, while content for another was misclassified
entirely.\6\
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\6\ See: https://www.bloomberg.com/news/features/2022-11-21/shein-
s-cotton-clothes-tied-to-xinjiang-china-region-accused-of-forced-labor.
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It defies basic common sense to pretend that the billions of
dollars in these duty-free shipments transacted each day are actually
``de minimis.'' They are not de minimis to U.S. manufacturers who are
seeing a substantial erosion of market share; U.S. workers who are
losing their jobs; small Main Street brick-and-mortar retailers who can
no longer compete with cheap forced labor products; and FTA partners
who are being displaced from the U.S. market.
As a result, under the U.S. de minimis tariff waiver system China
and everyone else effectively has FTA access to the United States for
products under $800. This access is a pure gift and comes with no rule
of origin requirements, reciprocal market access, or labor or
environmental standards. To put this another way, under our de minimis
program, the United States provides duty-free, direct-to-consumer FTA
access for all Chinese products, including those made with forced
labor, that are priced under $800. China does not offer other countries
the same generous program, maintaining its own de minimis level at a
mere $7.
To be clear, this arrangement is directly benefiting the Chinese
government's forced labor regime in the XUAR. CBP reports that China
and Hong Kong are the top two sources for de minimis shipments and
estimates that half of all de minimis packages entering the United
States contain textiles and apparel, the production of which has
pervasive linkages to Xinjiang. The de minimis forced labor loophole is
severely undermining businesses, our FTAs, and our ability to enforce
our laws regarding forced labor products entering the U.S. marketplace.
Last time I checked, UFLPA did not have an exemption for forced
labor products that are routed to the United States via de minimis
rather than through a formal customs entry. We may well ask why CBP is
not doing more to enforce UFLPA regarding de minimis shipments.
Free Trade Agreement False Origin Claims
Beyond UFLPA evasion and out of control de minimis shipments, we
are also confronting a lack of customs enforcement of our FTA rules.
The United States has an elaborate system of FTAs that provide certain
trading partners with lucrative duty-free benefits. In the textile
sector, these benefits are tied to a yarn-forward rule of origin,
mandating for most textile and apparel items that production steps from
the yarn stage forward must be conducted in the FTA region.
The FTA system is defrauded when importers claim FTA tariff-free
treatment even though the finished item is comprised of yarn or fabric
sourced from China or another non-FTA country. This is often
accomplished by falsifying documents showing that textile inputs were
sourced from a legitimate textile manufacturer in the United States.
Trade statistics reveal that the CAFTA-DR region is importing
billions of dollars of textile inputs (yarns and fabrics) from sources
outside of the trade bloc, namely Asia. Major textile exporters in Asia
including China report sending 875 million kilograms of yarns and
fabrics valued at $6.3 billion to the CAFTA-DR countries and Mexico in
2022. That is a 33 percent increase by value and a 111 percent increase
by quantity from 2018's pre-pandemic levels. Unit values also dropped
38 percent over this time frame. As the CAFTA-DR region is largely
oriented around producing duty-free apparel destined for the U.S.
market, logically these imported textiles are likely finding a backdoor
entry point to the United States through this FTA region, and similar
concerns exist with USMCA.
For example, the renegotiated USMCA free trade agreement included
an updated provision that requires all pocketing fabric used in apparel
to originate in the FTA region, produced by either the United States,
Mexico, or Canada. This rule went into effect in two stages, with a
partial implementation beginning January 1, 2022 and all remaining
products requiring regional, yarn-forward compliant pocketing as of
January 1, 2023. Previously, pocketing fabric was permitted to
originate from any global supplier. Despite U.S. pocketing fabric
manufacturers having a clear understanding of the market and ramping up
production in anticipation of this new requirement, to date there has
been a dearth of orders for pocketing fabric or pocketing yarn for the
nearly $3.2 billion \7\ worth of apparel entering the United States
from Mexico annually. CBP has been unable or unwilling to aggressively
address this issue and as a result workers are being laid off.
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\7\ U.S. Department of Commerce; OTEXA Major Shippers Report.
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Sadly, this is in keeping with trends our industry has been
monitoring that show FTA enforcement for textiles has declined
substantially in recent years. In fiscal year 2022, CBP's illegal
transshipment verifications, which incredibly can now be conducted
``on-line,'' resulted in a total of 38 semi-virtual and on-site
inspection visits. This compares to a total of 139 on-site visits CBP
conducted in fiscal year 2018, which reflects CBP activity in a pre-
pandemic year. In addition, commercial fraud penalties levied were just
$2.5 million for fiscal year 2022 compared to $19 million in fiscal
year 2018. When CBP does pull product for lab testing, they report a 50
percent discrepancy rate in the samples, indicating that
misrepresentations are prevalent.
Noting the adverse impacts that subpar or non-existent enforcement
has on a U.S. business that invests in American manufacturing with the
promise of increased production and export markets, it would be better
to have no FTA than to have an FTA that is not enforced.
recommendations
As an innovative and dynamic domestic industry, American textile
manufacturers can compete against the best in the world when we can do
so on a level playing field and under the right economic conditions,
which are currently fueling a manufacturing slowdown in the U.S.
textile sector that I represent. Unfortunately, despite the fact that
the United States has strong rules of origin in our FTAs, a robust ban
on forced labor products, and an entire agency tasked with customs
enforcement, the playing field today is so unbalanced. This is
compounding the economic challenges the industry is facing, and
creating a serious threat for U.S. textile manufacturers, unlike
anything many have weathered before. We urge Congress to take immediate
action to address the roots of this severe problem and we need the
committee's direct intervention.
Congress Must Get Aggressive on Oversight of Customs Enforcement
Over the past 20 years or so, the focus at CBP has become
increasingly oriented toward trade facilitation--in other words,
ensuring that trade is frictionless and enforcement is minimal. This is
a major shift from previous years, when customs enforcement was housed
under the jurisdiction of Treasury, prior to the formation of the
Department of Homeland Security (DHS). As DHS's founding was predicated
on the need for increased border security, it is not a surprise that
enforcement of trade laws seems to have shifted much lower on the list
of CBP's priorities.
However, as I have demonstrated above, CBP's inability to conduct
adequate enforcement has real consequences here in the United States--
with communities devastated by manufacturing facilities closing--and
throughout this hemisphere where apparel production is a top employment
sector. If current trends are allowed to continue, manufacturing and
job destruction in the United States caused by insufficient enforcement
will in turn put 2 million Western Hemisphere apparel jobs in jeopardy.
When workers in our FTA partner countries lack employment
opportunities, they will seek those opportunities elsewhere, resulting
in increased outward migration and pressure on our border.
We strongly recommend the Congressional committees undertake an
aggressive posture toward oversight of enforcement of UFLPA and our
customs laws. Congress can play a key role in lighting a fire under
customs enforcement officials and demanding results--and should require
CBP officials to testify regularly to the committee on its activities
and outcomes. The industry and recent letters from Congressional
leaders have requested the White House publicly announce an aggressive
plan for stepped-up UFLPA enforcement and FTA enforcement and use its
statutory authority to close the de minimis loophole. We need the
committee to amplify this urgency and hold CBP accountable because of
the implications to our domestic supply chains that are under direct,
urgent threat now.
Congress Must Aid American Lives and Human Rights by Closing the De
Minimis Forced Labor Loophole
Today's hearing has highlighted that fentanyl entering the United
States via de minimis is killing our communities. This is an economic
fire, a health fire, and human rights fire--and we need it extinguished
immediately. In a similar vein, Chinese forced labor products are
killing jobs in our rural communities where many textile facilities
operate; to say nothing of the deplorable conditions under which
oppressed Uyghurs are forced to slave to produce clothes for pennies
and wealth for China. Congress must ensure that UFLPA is enforced to
the greatest extent possible--and this means shutting down ``China's
FTA'' through de minimis. There have been many bipartisan voices who
have underscored the severity of this loophole including:
``This is a free trade agreement with China.''--Ways and Means Chairman
Jason Smith.
``It puts American businesses at a competitive disadvantage while
flooding American consumers with undoubtedly harmful products.''--Ways
and Means Trade Subcommittee Ranking Member Earl Blumenauer.
Due to a lack of UFLPA enforcement on de minimis shipments, China's
forced labor products enjoy better access to the U.S. market than
products from any of our FTA partners. Think of that: billions of
dollars' worth of Chinese apparel, tainted by forced labor, getting VIP
treatment on its way straight to our front doors at the expense of
workers and manufacturing in the United States and our critical
regional supply chains. We must stop China's forced labor regime and
support American companies and workers who are being exploited as a
result.
Congress must do everything it can to close this gaping loophole,
including holding high-profile hearings, advancing robust legislation,
pressing the administration to initiate rulemaking, and utilizing every
other tool at its disposal. Further, Congress needs to push the
administration to use its authorities to close the de minimis loophole
given how wildly out of control the situation has become. The
administration has such authority under existing executive authorities
and rulemaking processes, but has not utilized them to date. We urge
the committee to weigh in aggressively with the administration on this
matter. We can't emphasize this point enough.
We strongly encourage the committee to hold U.S. Customs and Border
Protection accountable and call CBP before the committee:
Utilize the UFLPA Entity List More Robustly as a
Deterrent.--The UFLPA Entity List is designed to stop market
access to the United States for facilities utilizing forced
labor products. Yet, only 27 entities have been identified
overall, and for our sector--only a handful of entities have
been added to the list from the world's largest textile- and
apparel-producing nation utilizing XUAR cotton in 72 percent of
its output. As a result, this is not a significant deterrent if
the administration is not naming more entities who are in non-
compliance. Why has the administration underutilized this
resource?
Make Withhold Release Orders Substantially More Effective.--
Our Withhold Release Order process is broken and ineffective to
deter problematic trade. It simply names a company/entity
utilizing forced labor and banning that entity from market
access to the United States. Given the pervasiveness of the
cotton supply chain--to make a WRO substantially more
effective, we must expand the WRO tool substantially.
CAFTA-DR/USMCA/FTA Compliance.--Given the massive influx of
yarns and fabrics from Asia that have been imported into CAFTA-
DR and USMCA countries, likely falsifying origin, why has CBP
inspections for these items declined so substantially over the
past 5 years?
Isotopic Testing.--Congress allocated $101 million for UFLPA
enforcement. To date, based on a Reuters report, CBP has only
utilized $1.3 million in funding. Why is CBP not utilizing this
resource more and other tools to mitigate this trade? How is
CBP ensuring that there is not a conflict of interest in
utilizing only one isotopic testing company that has specific
client relationships outside of the Government contract?
Furthermore, why is CBP not utilizing more companies that can
provide DNA analysis on cotton and other methodologies that
could help with more effective enforcement? In addition, why is
CBP not utilizing isotopic testing on garments at U.S. retail
to determine origin? What statute prohibits CBP from conducting
that kind of testing?
Stepping-up Inspections and Penalties, and Providing a
Strategic Roadmap to Industry on Aggressive, Proactive Efforts
Moving Ahead.--We will continue to experience substantial
demand destruction due to the current lack of an effective,
public, stepped-up enforcement strategy for textiles and
apparel under UFLPA on shipments from China and other secondary
Asian suppliers, and also in our FTAs. We simply don't have
time to waste and would encourage the committee to ensure CBP
is publishing an accountability plan on enforcement activities
with metrics, and ensure it is leveraging all its authorities
to step up penalties in this sector.
Furthermore, we strongly support the recent Senator Tillis-Senator
Brown-led letter \8\ asking the administration to immediately convene a
top-level interagency working group to develop and announce an
aggressive action plan for textiles and apparel enforcement, given the
economic consequences facing both our industry and our trade partners
in the Western Hemisphere. This plan must include substantially-
increased enforcement for UFLPA and FTA inspection/verification, plus
using executive authorities on de minimis to stop this harmful trade.
We would strongly appreciate the committee weighing in with the
administration on this high-priority request.
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\8\ See: Senator Brown-Tills Letter.
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Simply put, we need your help in amplifying this urgent need. We
think this hearing is an important step and we look forward to being an
active partner with you in any way possible to advance your efforts.
conclusion
For far too long we have permitted China to set the global agenda,
undermining U.S. values and ideals and harming our workers and trading
partners in the Western Hemisphere. With Congress' help, we can shut
down express U.S. access for forced labor products, hold China
accountable for its unfair trade practices that undermine U.S. and
regional competitiveness, and end the exploitation of the Uyghur people
through a systematic slave labor regime.
Not only are we failing to stop forced labor trade that Congress
explicitly acted to address through UFLPA, but it is being rewarded
with duty-free access under the de minimis provision of our trade law.
What was once an obscure administrative tool afforded by Congress to
CBP to improve efficiency for travelers, de minimis has become a
superhighway for illicit goods as a result of ineffective rulemaking
and a lack of adequate Congressional oversight.
I thank you for the opportunity to testify today and for the
committee's attention to these critical issues. I look forward to
answering your questions and working with you in the weeks and months
ahead to ensure better enforcement of UFLPA and other trade laws.
Mr. Bishop. Thank you, Ms. Glas.
I now recognize Mr. Peter Mattis for 5 minutes for his
opening statement.
STATEMENT OF PETER MATTIS, PRESIDENT, JAMESTOWN FOUNDATION
Mr. Mattis. Thank you, Chairman Bishop, and thank you
Ranking Member Ivey for your time and attention to this issue.
It's almost 3 years since the Congressional Executive
Commission on China held a hearing on what was taking place in
Xinjiang and the Uyghur genocide and the forced labor issue.
Here we are today discussing the implementation of what was a
very long process to get legislation introduced and passed.
Thank you for your time and attention to this. And to the
issue--the question of oversight.
The Uyghur Forced Labor Prevention Act was designed to help
address part of genocide being committed by the People's
Republic of China ruled by the Chinese Communist Party. Forced
labor contributes to this genocide by reducing and diluting the
Uyghur population in Xinjiang Uyghur Autonomous region,
dispersing families, and as Nicole Koholor of the Holocaust
Museum pointed out, separating Uyghur men and women, and
keeping them apart for extended periods of time.
The rebuttable presumption is the core of this bill, and it
has two parts: The first was drawing the line around the
Xinjiang Uyghur Autonomous region, recognizing that if you
can't get in and look and inspect, then you can't have any
confidence about what is being done. U.S. companies started
reporting to the U.S. Government and later to the U.S. Congress
really is the spring and summer of 2018, that their inspectors
were being detained and not given access to facilities there.
But the core part of the--another piece of this was going
after the participants in the labor transfer programs, because
if we just drew a line around the Xinjiang Uyghur Autonomous
region, we would have inadvertently created an incentive for
Beijing to accelerate its genocide and to further depopulate
the Uyghur region by moving them out of the Xinjiang Uyghur
Autonomous region. You had to have both parts of this to work
in tandem.
The lion's share of this burden was handed to the Forced
Labor Enforcement Task Force created by USMCA agreement, the
FATF. To date, I think you'll notice that there have been 27
entities, plus their subsidiaries, put on this. But similar to
the points that Ms. Glas made about de minimis loophole and the
gap between sort-of the universe of what could be and the
universe of what actually is inspected is similar in this case.
A research group at Sheffield Hallam University, led by
Laura Murphy, identified at least 55,000 entities that could be
put on the entity list, and yet, we have 27. How much is being
missed? How many de minimis shipments? How many in cotton? How
many in all of the other materials that have not yet
necessarily been prioritized? CBP is starting to look at PVC
pipes. But what about rayon? What about apparel products that
don't have any cotton in them? What else is there?
Because as CDC uncovered, and as researchers affiliated
with Louisa Greve's organization have found there is a full
range of consumer products. It's not just apparel. It's in
polysilicon. It's in electronics. It could very well be in your
iPhone, or any other sort of mobile phone you carry. So if we
don't make the entity list part of this, we're simply not
taking care of the intent of the law, and we're creating bad
incentives, or perverse incentives, that we want it to work
against.
So to this end, I think we need to be thinking about what
are ways in which the process can be eased and smoothed out? So
as Mr. Ivey noted, it's possible that there's too much of a
process within the FATF, that it's an interagency process to
get to yes, rather than an interagency process to stop
nominations.
I think we should assume that U.S. Government departments
that would nominate an organization for inclusion on the entity
list are going to do their due diligence and are responsible
stewards of public trust. To that end, I think any FATF member
that would nominate an organization for inclusion on the entity
list or labor transfer program, that it should be approved and
added to the entity list within 14 days unless there's
convincing evidence to refute that nomination.
Any other U.S. Government department should have the power
to make that nomination, and it should probably have a longer
time line, say 30 to 60 days. NGO's also can help, but I don't
think you can have that kind of automatic inclusion. But the
Uyghur Forced Labor Prevention Act explicitly notes the role
that NGO's have in providing information to the U.S. Government
to better enforce this law.
Second, I know that this is not necessarily Homeland
Security jurisdiction, but it's worth keeping in mind: you
mentioned the sanctions piece. The Uyghur Forced Labor
Prevention Act modified the Uyghur Human Rights Policy Act to
add forced labor as a concern. But to date, just like all the
other aspects of the UHRPA, there have been no sanctions that
have been provided under this. It seems like this would be a
tool that would be useful even where entity lists or withhold
release orders may not work.
Last, I'll just say that there seems to be an issue with
China competence across the U.S. Government. If DHS researchers
are trying to use Google Translate to hunt down things related
to these entity listings, we've got to do a better job and
we've got to think about the resourcing, whether it is in terms
of both Government capability and the support for this
competency in the private sector that can be used to support
these concerns.
Thank you very much.
[The prepared statement of Mr. Mattis follows:]
Prepared Statement of Peter Mattis
October 19, 2023
The Uyghur Forced Labor Prevention Act (Pub. L. 117-78) was written
to address one aspect of the Chinese Communist Party's (CCP) on-going
genocide of the Uyghur people--a situation that has been recognized as
genocide by both the Trump and Biden administrations. Evidence
continues to accumulate showing that the CCP has a systematic policy to
subjugate Uyghurs and others of Turkic or non-Han ethnicities in the
Xinjiang Uyghur Autonomous Region (XUAR). A core component of that
policy is forced labor. Forced labor contributes to the genocide as
part of Beijing's policies to reduce and dilute Uyghur population and
eradicate Uyghurs' cultural identity by separating families, dispersing
Uyghurs across the People's Republic of China (PRC), and increasing Han
migration to the region. The driving purpose behind the law was that
Americans should not be complicit in this genocide, nor should the CCP
be allowed to profit from it.
To fulfill that purpose, the Uyghur Forced Labor Prevention Act
created a ``rebuttable presumption'' that goods made in the XUAR or
made with raw materials produced in the XUAR and by companies
participating in PRC coercive labor transfer programs that moved
Uyghurs outside of the XUAR to work would be considered made with
forced labor and ineligible for import into the United States. The
PRC's use of large-scale and systemic forced labor in the region and
practice of preventing routine monitoring and due diligence in the XUAR
and other places that use Uyghur forced labor meant that previous
practices related to identifying forced labor products (and other
supply chain risks) were insufficient. It was simply not possible to
identify specific locations where forced labor was employed and trace
those products or materials through the supply chain to the United
States.
The Uyghur Forced Labor Prevention Act places a large burden on the
Forced Labor Enforcement Task Force (FLETF). The FLETF was authorized
by the USMCA Implementation Act and officially established by Executive
Order 13923. The Secretary of Homeland Security chairs the FLETF, and
other members include representatives from the Department of State, the
Department of the Treasury, the Department of Justice, the Department
of Labor, and the Office of the United States Trade Representative. The
Secretary also can invite other relevant parts of the U.S. Government,
such as the National Security Council, to participate.
The law required FLETF to hold a public comment period and conduct
a public hearing to ensure consultation with the private sector and
civil society as part of its process for drafting an implementation
strategy. The Uyghur Forced Labor Prevention Act mandated that the
strategy for ensuring the rebuttable presumption was enforced included,
among others, recommendations for U.S. Customs and Border Protection,
guidance for importers on how to keep their supply chains clean, and a
plan for working with civil society and private-sector organizations on
enforcement.
The FLETF also has responsibility for maintaining the entity lists
created under the Uyghur Forced Labor Prevention Act. The entity lists
were created, because the PRC's labor transfer programs moved Uyghurs
outside the XUAR. Drawing a line around the XUAR for the rebuttable
presumption would not have been enough and would have created the
unintended incentive for Beijing to move Uyghurs out of the XUAR, where
their coerced work product would not be subject to the rebuttable
presumption. Such an unintended incentive for the PRC to depopulate the
XUAR, especially of its Uyghur population, arguably would have
accelerated the genocide. The entity lists were intended to create a
mechanism to which FLETF members could identify programs and
participants whose use of Uyghur forced labor should make them subject
to the rebuttable presumption.
This task, however, appears to be beyond the capacity of the FLETF.
As I understand the original purpose of the FLETF, it was never
intended to serve as an operational interagency body. Executive Order
13923 states that participating agencies will need to fund their own
related staff work. Combatting forced labor has been U.S. policy since
1930, so one could be forgiven for lacking sympathy for officials at
the FLETF members complaining about a lack of budget and personnel. But
resources identify priorities. In sum, the Uyghur Forced Labor
Prevention Act gave elements of the policymaking and enforcement to a
body that was never intended or sufficiently resourced to be an active
operational element of the interagency process.
The Uyghur Forced Labor Prevention Act entity lists are a critical
element of fulfilling the law's intent, because, absent an effort to
create a comprehensive listing of these coercive labor transfer
programs and participating entities, the U.S. Government is creating an
inadvertent incentive for the CCP to accelerate the genocide and
depopulate the XUAR of its Uyghur and other Turkic or Muslim
minorities. Both parts of the rebuttable presumption need to be
operative. The more comprehensive these lists become, the more guidance
is available for companies on with whom to partner and for U.S. Customs
and Border Protection on where to focus their efforts.
However, only 27 unique entities and their subsidiaries have been
added to the entity list since June 2022 when the rebuttable
presumption went into effect and the FLETF's strategy was delivered.
Nearly a full year passed before 2 entities and 8 of their subsidiaries
were added to the entity list on June 12, 2023. An additional 2
entities were added on August 1, 2023, and 3 more on September 26,
2023. This relatively small number of entities barely scratches the
surface of potential listings. A research team led by Laura Murphy of
Sheffield Hallam University identified roughly 55,000 companies that
likely or certainly warrant being on the entity lists. Moreover, many
of the entities among these 27 companies already were subject to
Withhold Release Orders that prevented their goods from entering the
United States.
The gap between the 27 entities listed and the 55,000 entities that
probably should be listed also suggests that enforcement of the Uyghur
Forced Labor Prevention Act, more broadly, suffers from a similar gap
in enforcement. U.S. Customs and Border Protection is stopping a great
deal of goods, but how much is entering the United States through the
de minimis channel? How much of the seafood being imported should be
subject to the rebuttable presumption? How much of the goods or
materials made in or sourced from the XUAR enter the United States
through third countries?
At least some of the problems in building out the entity lists come
from a lack of resources, particularly related to knowledge, skills,
and access related to researching PRC-related topics. Much of the
research necessary to support this work requires Chinese-language
ability and the ability to access websites, corporate records,
commercial databases, and other relevant information on the other side
of the Great Firewall. Beijing's information crackdown on due diligence
and consulting firms as well as more effective tools for tracking and
blocking the activities of foreign users of the PRC internet has raised
the bar for researchers even higher.
In light of the above framing, as a concerned individual
representing my own views, I would make the following recommendations
for improving the FLETF's ability to guide the enforcement of the
Uyghur Forced Labor Prevention Act and on implementation of the act
more generally:
The White House and the Secretary of Homeland Security must
signal to the interagency that expanding the entity lists
appropriately and comprehensively is a priority. The lists were
intended to be a responsive tool rather than the cumbersome
legal process for a Withhold Release Order. The demand signal
is important for setting day-to-day priorities, and it must
come from the top.
In next year's budget cycle, Congress and the Biden
administration should work on identifying the budgetary and
personnel requirements to better staff FLETF so that it can
fulfill its mandate effectively.
To improve implementation of the entity list process, an
interagency process should be required only for removing or
blocking the addition of entities. Instead, any FLETF member
should be able to nominate an entity for inclusion, and, unless
the FLETF chair provides evidence to refute the addition of the
nominated entity or labor transfer program within 14 days, then
they will be added to the entity list.
Relatedly, other U.S. Government agencies that are not FLETF
members also should be able to nominate entities for automatic
inclusion after a set period of time to allow the task force to
review. In this case, a longer time line to refute should be
considered, perhaps 30 to 60 days.
Although it would be advisable to include non-governmental
organizations in this process, the potential for abuse to stall
the entity list process requires more careful consideration
than simply setting a time line.
The Uyghur Forced Labor Prevention Act amends the Uyghur
Human Rights Policy Act (Pub. L. 116-145) to include
involvement in forced labor as one of the sanctionable
offenses. The sanctions authorities under the Uyghur Human
Rights Policy Act have not been used on a single PRC or CCP
official in any of the categories, much less involvement in
forced labor as provided by the Uyghur Forced Labor Prevention
Act. Instead of requiring the State Department to report to
Congress when actions are taken--creating a disincentive for
U.S. officials in the Executive branch who do not want to go
through the process of releasing a report to Congress to take
action--Congress should require reports every 60 days that
these sanctions authorities go unused. These reports for why
authorities are not used should be required, given prevalence
of forced labor and the Department of State's determination
that genocide is occurring. As long as those two conditions
hold, inaction should trigger Congressional oversight.
The lack of PRC-related research skills and capabilities
among the FLETF members, particularly in those departments
without a traditional foreign policy focus, suggests the need
for a larger effort to build ``China competence'' and
capabilities across the U.S. Government that can be leveraged
across the Government.
Congress should create a new open-source information and
intelligence organization to collect, process, and exploit
publicly- and commercially-available information. The nature of
the PRC and CCP systems require the sprawling and overlapping
central, provincial, and local structures to communicate many
objectives and guidance out in the open. Open-source research
has been the foundation for much of the global conversation
about the Uyghur genocide and forced labor. The PRC, however,
is getting much better at restricting access and shutting off
access to researchers who look at sensitive topics. The United
States needs a professional, Government-scale effort rather
than relying on hobbyists and individual researchers for such
work.
Congress should invest in expertise building inside and
outside the U.S. Government. Researching sensitive topics, like
human rights abuses, requires a great deal of knowledge, and
the number of people inside or outside Government who can
perform this work are much smaller than Americans should be
comfortable with. Although the growth of private companies
doing some of this work is welcome, they profit from
(rightfully) keeping their information and tools proprietary.
The U.S. Government and public interest is best served by
information that can be discussed publicly. I have not read a
single one of the various U.S.-PRC competition bills over the
past three Congresses that has made investments in developing
expertise and language skills at sufficient scale. This stands
in stark contrast to the early Cold War, when the White House
and Congress understood the need for building a broad base of
public and private-sector expertise.
Mr. Bishop. Thank you, Mr. Mattis.
I now recognize Ms. Greve for 5 minutes for her opening
statement. Did I get that right this time?
STATEMENT OF LOUISA GREVE, DIRECTOR OF GLOBAL ADVOCACY, UYGHUR
HUMAN RIGHTS PROJECT
Ms. Greve. Thank you both so much for the opportunity to
testify. The passage of the Uyghur Forced Labor Prevention Act
in December 2021 was truly occasion for hope for Uyghur
Americans, and for the Uyghur Diaspora more broadly around the
world that there was actual economic leverage being brought to
bear through just one aspect of the genocide consuming their
people.
I want to emphasize the incremental nature of the
implementation of this bill. The law required a strategy to be
published after 6 months. This is a relatively fast and short
turnaround time to provide the strategy for a complicated set
of enforcement that is different from previous methods of
enforcing the import ban under U.S. law.
Several of the things that are coming along step by step,
including adding additional targeted sectors from cotton,
tomatoes, and polysilicon to include, as well, all kinds of
minerals, including the cobalt and the lithium that are
required for the renewables. Just last week, we have two
entirely new sectors identified by NGO reporting, C4ADS issued
a report on all mining in Xinjiang and the Xinjiang region,
which implicated through ownership and trade ties over 200
global corporations and including publicly-traded companies
that are traded in our own retiree funds.
The last one is seafood. So let me give you the headline.
It's a bit shocking. The name of the report is, ``The Uyghurs
Forced To Process The World's Fish.'' The report from the Ocean
Outlaw Project found that Uyghurs subjected to forced labor in
the processing plants on land are processing, ``much of the
seafood sent to America and Europe.'' This doesn't--this
includes fish that may be advertised as local catch, but then
it's processed in China and then sent back out. Extremely
concerning.
Other sectors include luxury vinyl flooring, automotive,
and the list goes on. This does take time to implement, but
there is a partnership not only as contemplated in the law but
in CBP and FATF's own outreach to CSOs. There is a clear
commitment to receive information from the public, from
researchers, such as Dr. Laura Murphy, there's a dedicated
email address, which I have to say is not very normal in my
experience with Government agencies.
So we all need to take advantage of that, and then we need
CBP and FATF to do their part to process the information. I do
believe there's a capacity issue with China's language ability
and staffing. Transparency is something that has been improving
and needs further oversight and encouragement to continue.
There is now a UFLPA data dashboard. It contains information
about the shipments stopped. This didn't used to exist at all.
So thanks to global concern about Uyghurs, and NGO and
Congressional concern, this transparency is much stronger with
this data dashboard.
Let me move to de minimis as a huge black hole. I would
suggest that the solution to ensure that if the amount cannot
be lowered, if there is resistance because of the intention to
ease normal trade, at a minimum, Congress should ensure that
countries where there is a high risk of forced labor,
especially state-imposed forced labor--it's a state policy.
That entire country needs to realize that their business
interests will be hurt because they will not have access to
this no tariff, and low inspection channel. There are bills.
There's a Senate bill, and there's also a bicameral bill called
the Import Security and Fairness Act, which will do just that.
I'd also like to recommend that Congress press CBP on
greater transparency on non-ocean shipping. People may not be
aware that shipments into the United States through railroad
and air are not provided to the public in the same way. Ocean
shipping manifests are provided, and then we have private-
sector data aggregators that put that information up. Then
NGO's and market competitors in the American market can see
where the shipments are coming and provide e-allegations and
give tips to the Government about where there may be violations
of the forced labor import ban. That's totally missing for air,
road, and rail.
We've already talked about the entity list, certainly this
is urgent. Then, finally, penalties. We are unaware of any
penalties being imposed for any importer that is knowingly
benefiting or providing false information to CBP in rebutting
the presumption of forced labor, and it's urgent. Any law that
is seriously being enforced should also come with penalties for
violators.
Then finally, we have a strong--a real issue with the
reexports. We need data on what reexports are happening after a
detention inspection and then denial of entry. We also need
active diplomacy, which is in Section 4 of the law that
involves more than one entity, not just the State Department,
but also our enforcement agencies to make sure that other
countries don't become the dumping ground for Uyghur forced
labor.
Thank you.
[The prepared statement of Ms. Greve follows:]
Statement of Louisa Greve
October 19, 2023
I'd like to begin by thanking Subcommittee Chairman Dan Bishop and
Ranking Member Bennie Thompson for the opportunity to testify at this
important hearing.
About UHRP: The Uyghur Human Rights Project (UHRP) promotes the
rights of the Uyghurs and other Turkic Muslim peoples in East
Turkistan, referred to by the Chinese government as the Xinjiang Uyghur
Autonomous Region, through research-based advocacy. UHRP was founded in
2003 as a project of the Uyghur American Association and became an
independent nonprofit organization in 2016.
UHRP is a member of the Steering Committee of the Coalition to End
Forced Labour in the Uyghur Region, a global coalition of Uyghur civil
society organizations, trade unions, anti-modern-slavery, and anti-
human-trafficking organizations.
My testimony addresses the following topics:
Incremental nature of UFLPA implementation enforcement steps
Strategy published 6 months after enactment, as required
under the law (June 21, 2022)
On-going additions of targeted sectors, including
agricultural products and aluminum, with future
examinations of mineral and seafood sectors expected
Transparency: CPB's ``UFLPA data dashboard'' launched 9
months after law went into effect
New tracing tools: $7.8 million contract with Sayari
announced in November 2022
First-ever CBP Forced Labor Technical Expo, over 2 days in
March 2023.
Enforcement challenges, weaknesses and recommendations:
Addressing de minimis ``black box''
Need for transparency on rail, road, and air imports
Slow pace of additions to the UFLPA Entity List and
challenges of interagency coordination among 7 agencies in
the Forced Labor Enforcement Task Force (FLETF)
Penalties for ``knowingly benefiting'' from forced labor
imports
Ensuring our trading partners do not become ``dumping
grounds'' for Uyghur forced-labor goods--urgency of
progress in Europe, Canada & Mexico, Japan, and others.
incremental nature of uflpa implementation enforcement steps
Strategy published 6 months after enactment, as required under the law
The UFLPA required DHS, as the lead agency of the seven-agency
Forced Labor Enforcement Task Force (FLETF), to report to Congress a
strategy for enforcement, no later than 6 months after enactment. The
strategy was duly published on (June 21, 2022). Credit is due for on-
time publication of the Strategy within this tight time frame for
standing up a new type of enforcement. As a region-wide WRO at the
subnational level rather than national level and covering every input
at every step of the supply chain down to raw materials (mining,
agriculture, and industrial processing), this is a challenging mandate
for implementation.
On-going additions of targeted sectors
The strategy explicitly contemplated adding additional product
sectors to the original list of high-risk industries (see next page),
as new research and new data emerges over time. Since implementation,
new industries such as agricultural products and aluminum have been
publicized as being at high risk of Uyghur forced labor. UHRP urges and
expects that on the basis of two new reports this month, CBP will now
heighten scrutiny of the mineral and seafood sectors.
In January 2023, at least one law firm published a notice
about CBP targeting of aluminum, which the firm noted as a new
sectoral target. (Trade Compliance Flash: Prepare for CBP's
UFLPA Enforcement Against Aluminum Products).
Also in January 2023, CBP published an article highlighting
detention and examination of fruit at the ports of Newark,
Oakland, and Los Angeles, in which CBP credited NGO reporting
for conducting research enabling CBP to take action (UHRP's
August 2022 report, Fruits of Uyghur Forced Labor: Sanctioned
Products on American Grocery Store Shelves).\1\
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\1\ Available at: https://www.google.com/
url?sa=t&source=web&rct=j&opi=89978449&url=- https://uhrp.org/wp-
content/uploads/2022/09/Red-Dates-Report-Formatted_PI_2022-08-27-
FINAL.pdf&-ved=2ahUKEwjyhpHAo6KHAxUEMlkFHZmFCH4QFnoECBoQAQ&usg=AOv-
Vaw0aA2xpXsxBBk1lssfAqPr.
An explosive new report published 10 days ago finds that
Uyghurs are subjected to forced labor for ``processing much of
the seafood sent to America and Europe. The report finds that
``at least 10 large seafood companies in China have used more
than a thousand Uyghur workers since 2018. During that time,
those companies shipped more than 47,000 tons of seafood--
including cod, pollock, shrimp, salmon, and crab . . . ''
(October 9, 2023, Outlaw Ocean Project, The Uyghurs Forced to
Process the World's Fish. Media exclusive in The New Yorker.)
Two days later, the C4ADS research institute published a
report on mining, including gold, mapping ``the relationships
between Xinjiang Uyghur Autonomous Region-based mines reliant
on forced labor and global networks of finance and trade--
including hundreds of American companies and the index fund
portfolios of several major asset management firms.'' (October
11, 2023, Fractured Veins--C4ADS).
For links to 27 NGO and U.S. Government reports to date, on
a variety of sectors from solar to automotive to luxury vinyl
flooring, see the ``reports'' page collated by the Coalition to
End Forced Labour in the Uyghur Region.
Transparency
CPB's ``UFLPA data dashboard'' was launched 9 months after the law
went into effect. This is a major step forward. Previously, information
on UFLPA enforcement, and enforcement of forced-labor WROs and the
Section 307 forced-labor import-ban generally, was provided in monthly
enforcement updates published on the CBP website, which were irregular
and sometimes appeared after long delays. In contrast, the Uyghur
Forced Labor Prevention Act Statistics/U.S. Customs and Border
Protection page is promptly updated each month, and contains far
greater detail. It reveals, for example, that $1.8 billion in goods
have been targeted for detention and examination since the law went
into effect.
It would be even more useful if all shipment-origin countries were
to be included, rather than only the top 5. Currently, the top 5
countries are Malaysia, Viet Nam, China, Thailand, and Mexico, with all
other origin-countries grouped under ``Other.''
In addition, it would be extremely useful if it provided a more
detailed breakdown of goods, akin to the level of specificity in the
June 21, 2022 table. For example, solar panels are included in the
``Electronics'' category, making it impossible for importers, and for
watchdog groups, to determine which sectors and products are indeed
being stopped at the ports.
New tracing tools
The private-sector commercial risk intelligence firm Sayari
announced in November 2022 a $7.8 million CBP contract. According to
the Sayari press release, the contract will support CBP ``mitigation of
ongoing global supply chain risks and ensure major U.S. corporations
comply with import regulations, including new directives like the
Uyghur Forced Labor Prevention Act (UFLPA).''
It could be useful for Congress to request an update from CBP on
the usefulness of new tools such as the Sayari platform, and the impact
of these tools on CBP's operations and effectiveness.
Tools for private-sector supply chain tracing and UFLPA compliance
In March 2023, CBP organized the first-ever Forced Labor Technical
Expo, a 2-day event in Washington. Nineteen for-profit firms gave
presentations about their services related to importers' compliance
with the U.S. import ban and UFLPA's rebuttable presumption. Such
services range from supply chain tracking software to DNA testing of
raw materials and use of AI to identify high-risk links in supply
chains. DHS and CBP officials delivered remarks emphasizing the Federal
Government's commitment to eradicate forced labor in U.S. markets, as
part of a global need to stop forced labor anywhere in the world.
Several of the firms have also proactively offered briefings to
nonprofits campaigning for an end to Uyghur forced labor and an end to
corporate complicity. It would be useful for Congress to commission
research, perhaps from CRS, to understand the nature of these services
and their impact on compliance.
Addressing the de minimis ``black box''
As the UHFP Board Chair, Nury Turkel, testified in a Ways and Means
Committee hearing in May, CBP officials' remarks at the CBP Trade
Facilitation and Cargo Security Summit in April revealed a series of
problems with CBP's capacity to police ``de minimis'' entries valued at
$800 or less. CBP data show that in 2022, less than half of de minimis
shipments included data either through ``Type 86 entry'' or the
``Section 321 data pilot program.''
Sal Ingrassia, former port director at the JFK Airport, which sees
about one-third of the de minimis entries to the United States, said
that while the agency is glad brokers are providing Harmonized Tariff
Schedule codes in the Type 86 test, ``we still have a lot of
concerns,'' because CBP is finding the data is often not correct.
According to an article in International Trade Today, CBP found ``some
type of violation'' in 25 percent of shipments examined:
``Ingrassia said ports identified de minimis shipments to examine and
reported to the de minimis working group what they learned. `One-
quarter of what we looked at had some type of violation,' he said. `It
was alarming to see we had so many violations.' He said a large number
of the violations were either an HTS misclassification `or unmanifested
merchandise in the shipment, meaning that we had an e-commerce package
or shipment with three items in it. Only one item was declared. That's
a real problem for us when we're talking about entry Type 86.' . . .
Ingrassia asked rhetorically: `How can we run a system like entry Type
86 without having correct information?' ''
In addition, in 25 percent of cases, CBP was simply unable to
locate packages identified for inspection. These are the cases where
CBP had asked companies to hold packages for inspection and then
discovered that packages had already been released before CBP could
inspect them.
A third issue was raised by Brandon Lord, executive director of
CBP's Trade Policy and Programs Directorate, who seemed to imply that
CBP will require fewer data in the future, not more, saying that CBP
will ``mandate way less'' than the combined data elements used in the
Type 86 test and the Section 321 data pilot, according to International
Trade Today. In a later interview with International Trade Today, Mr.
Lord said that ``de minimis'' is not a ``loophole''. CBP Trade Policy
Director: de Minimis Is No Loophole (April 24, 2023)
The fourth question that should be examined by Congress is how CBP
handles transshipment coming from a third country and not the country
of origin--such as Canadian warehouses. Some members of the importing
business community apparently favor the creation of a new arrangement,
such as ``Free Trade Zones'' in third countries, to warehouse goods
that could later be sold to consumers under the de minimis threshold.
It is important that any such new arrangements do not worsen gaps in
enforcement of forced-labor and other trade laws in relation to de
minimis shipments.
The Los Angeles Field Office reportedly handles about a third of
the national volume of de minimis packages. At the April Summit, the
director of this office discussed a test operation that flagged ``quite
a few shipments'' as non-compliant and pointed to the need for
``advanced data'' to flag shipments for enforcement, including health
and safety risks, infringements on intellectual property or are of
interest to other Partner Government Agencies, including narcotics and
other contraband, and of course forced-labor goodies.
Finally, it is encouraging that Congressional statements and
letters are beginning to grapple with the implications of breakneck
market growth of direct-to-consumer shipping of cheap goods from China
by Shein, Temu, and similar companies. According to the US-China
Security and Economic Review Commission, Shein has a ``dominant'' place
in the ``fast fashion sector, surging past Tiktok, Instagram, and
Twitter to briefly become the most downloaded app in the United States
in May 2022. The April 2023 US-China Security and Economic Review
Commission report cites heightened risks of ``exploitation of trade
loopholes; concerns about production processes, sourcing relationships,
product safety, and use of forced labor; and violations of intellectual
property rights.'' The brief raises the alarm about the race by other
Chinese e-commerce platforms to copy this model, highlighting the
``risks and challenges to U.S. regulations, laws, and principles of
market access.''
In sum, according to International Trade Today's reporting, CBP is
facing capacity issues in enforcing U.S. trade laws for de minimis
entries. In 2022:
One-half were shipped with zero digital data provided to
U.S. customs authorities.
One-quarter of those flagged for inspection were never
inspected because the importer failed to comply with the order
to hold the items for inspection, and
one-quarter of those inspected at JFK airport had ``some
type of violation.''
I associate myself with Nury Turkel's conclusion that it is hard to
believe that Congress intended for the ``de minimis'' provision, which
has the singular intent of waiving tariffs on small shipments, to
result in spotty or non-existent policing of Congress's black-letter
prohibitions on the importation of fake, dangerous, and forced-labor
goods. It is past time for Congress to re-examine the assumption behind
raising the threshold from $200 to $800 in the Trade Facilitation and
Trade Enforcement Act of 2015.
Need for transparency on rail, road, and air imports
UHRP joined 37 other watchdog and advocacy groups calling for
greater transparency in import data. Our Open Letter to CBP on Trade
Data Transparency, published in October 2022, urged CBP to institute
disclosure of air, road, and rail manifests, in addition to maritime
vessel manifests. CBP and FLETF have repeatedly stated and demonstrated
their appreciation of independent reports on supply chain risks on
forced labor.
For this partnership to be effective, and to ensure that actionable
data can be provided by U.S. private-sector firms affected by unfair
competition as well as by research NGO's, public disclosure by CBP of
import data other than ocean shipping is vital.
Slow pace of additions to the UFLPA Entity List
Following the 20 original entities named in the Enforcement
Strategy on June 21, 2022, it was not until June 2023 that FLETF
announced the first additions. UHRP said in a public statement that we
were disappointed by this small number, more than a year after the law
went into effect. As UHRP said at the time, ``The entity list is key to
public messaging: perpetrators of Uyghur forced labor do not have
access to U.S. consumers. Strong language on enforcement isn't enough--
naming the companies is essential.'' As of today 8 entities have been
added, for a total of 28.
UHRP, along with many other research organizations, have submitted
substantial data which government agencies have not yet acted on. UHRP
has utilized the channels for public input created by FLETF, including
a dedicated email address ([email protected]) as well
as the e-allegations portal. We have urged FLETF to make use of this
intensive research by substantially expanding the entity list.
The Entity List faces particular challenges in adding entities due
to the multi-agency structure of FLETF. Lawyers in all seven agencies
are part of the review, and if a vote must be taken, a majority must
sign off before an entity is added. The bureaucratic nature of this
process appears to be an obstacle to decisive action. I am aware of
progress in designating many months after publication of the Strategy,
designated staff in the agencies focused on Entity List decisions, and
sincerely hope that the pace will continue to pick up.
Penalties for ``knowingly benefiting'' from the importation of goods
produced with forced labor
Vigorous implementation of any law requires agencies administering
that law to not only provide clear guidance on compliance, but also to
impose penalties in any cases of willful violations or knowing
provision of inaccurate or false information. It would be useful for
Congress to seek further information from DHS and CBP about their
strategy for deterring willful or knowing evasion.
For example, UHRP urges the imposition of penalties on the
importers of Xinjiang Production and Construction Corps (XPCC). The
XPCC was placed under Global Magnitsky sanctions on July 31, 2020, and
UHRP published a report on XPCC imports in August 2022 (Fruits of
Uyghur Forced Labor: Sanctioned Products on American Grocery Store
Shelves). Therefore, there is no room for doubt that importers should
have been on notice that goods from the XPCC are illegal to import
(since all financial dealings with the XPCC are prohibited). Yet it
would appear that importers continued to bring in XPCC goods at least
until the CBP detentions of multiple shipments at the ports of Newark,
Oakland, and Los Angeles at some point between August 2022 and
publication of the CBP magazine article on the detentions, in January
2023.
The 2023 UFLPA Implementation Strategy Update (Updates to the
Strategy to Prevent the Importation of Goods Mined, Produced, or
Manufactured with Forced Labor in the People's Republic of China Report
to Congress, July 26, 2023, Department of Homeland Security, Office of
Strategy, Policy, and Plan) mentions the question of prosecution in two
places:
Fruits of Uyghur Forced Labor: Sanctioned Products on American Grocery
Store Shelves
(1) ``CCHT will send viable referrals of allegations against those
identified as high-priority sectors pursuant the UFLPA to HSI
field offices to pursue criminal investigation and Federal
prosecution, as appropriate.'' (p. 10)
(2) ``to identify and investigate individuals and entities who are
knowingly importing or benefiting from the importation of goods
produced with forced labor.'' (p. 13)
To date, DHS has not provided any updates about whether such
investigations have been pursued. Nor has CBP announced any civil
penalties regarding importers.
Ensuring our trading partners do not become ``dumping grounds'' for
Uyghur forced-labor goods--urgency of progress in Europe,
Canada & Mexico, Japan and others
UHRP has a number of questions about how CBP, DHS, the State
Department, USTR, and other agencies are coordinating in their efforts
with other countries, a mandate contained in Section 4 of the UFLPA. We
are looking for answers to questions such as the following: How best
for civil society to feed in and/or amplify the U.S. agenda with policy
makers in other countries, where NGO's and trade unions have partners
with capacity to mobilize awareness & sense of urgency. All our efforts
to point to forced labor as an actionable arena in Southeast Asia,
Japan, etc, run into the response: ``we can't risk trade retaliation.''
Is there a plan to help govts act jointly, to overcome their fear of
China's retaliation? What is the progress under the the U.S.-Japan Task
Force on forced labor (under USTR) going to do anything? What are the
outcomes and plan for operationalizing the repeated G7 commitments on
this issue? What is the U.S. (and allies') agenda to fix the ILO's and
UNGP's blind spots on how state-imposed forced labor requires a wholly
different approach than nonpolitical, corrupt/illegal forms of forced
labor, especially in the context of China's constellations of
interlocking atrocity crimes?
Mr. Bishop. Thank you, Ms. Greve.
I now recognize Mr. Michael Stumo. Is that how you
pronounce your name, sir?
Mr. Stumo. Yes, sir.
Mr. Bishop. Mr. Stumo for 5 minutes for his opening
statement.
STATEMENT OF MICHAEL STUMO, CEO, COALITION FOR A PROSPEROUS
AMERICA
Mr. Stumo. Chairman Green, Ranking Member Ivey, and
honorable Members, my name is Michael Stumo. I'm the CEO of the
Coalition for a Prosperous America. CPA is proud to be the
Nation's leading bipartisan organization representing
exclusively domestic producers and workers across many
industries. I appreciate the testimony of my fellow panelists.
I largely agree. I'm going to supplement in a little different
way.
You--this committee's been rightly worried about narcotics
coming through the Southern Border, but I will focus on the
forced labor goods, the narcotics, and the contraband that
comes into our mailboxes through the de minimis loophole. CBP
said this regarding de minimis: ``Illicit opioids can now be
purchased on-line from the comfort of one's home. Opioids
entering the country through express consignment or
international mail have a substantial higher purity level than
the opioids entering the Southwest Border''.
On a typical day, 26,000 customs officers admit 107,000
goods shipments through normal entry. These entries have
paperwork prepared by licensed Customs brokers who are
responsible for maintaining the integrity of our ports and
complying with over 500 laws governing merchandise entry. But
thanks to the de minimis loophole, an additional 2 to 3 million
shipments per day enter our ports. These shipments arrive by
mail and express shipper without sufficient data, without
inspection, or a broker's involvement. They are overwhelming
our Customs officers.
De minimis has been weaponized by our adversaries abroad,
including China, and exploited by transnational criminal
organizations. Express shippers and a handful of e-commerce
platforms that profit from it are the primary defenders.
Whether an express shipper or a Customs broker has the right to
import is crucial. Customs brokers are as, CBP says, trained
and licensed, ``to act as forced multipliers in combating fraud
and other schemes against the government''.
Customs brokers have a duty to know their customer and to
know what is the imported package on ships, trucks, and
airplanes. If they facilitate imports that contain fentanyl or
other unlawful goods, they can lose their license and their
livelihood. Express shippers and postal services, on the other
hand, just pick up sealed packages with addresses and
information filled out by China post, regular citizens, or
criminal organizations.
De minimis was originally a rational administrative
exception. It allowed Customs officers to waive low-valued
mailed gifts or knickknacks purchased by travelers. But in
1994, Customs changed its de minimis rules to eliminate the
need for a broker for the commercial shipments. Now, if China
post, for example, merely declares the value is less than 800
in China, not here, it is de minimis eligible. This allows
consignees like FedEx, DHL, U.S. Postal Service, and express
shippers to import merchandise without inspection or a trained
broker.
Thirty years later, the result has been a massive lawless
disaster that destroys U.S. businesses, enriches forced labor
purveyors, and enables undetected delivery of the most potent
fentanyl shipments. Criminal organizations and citizens can and
do order contraband, including fentanyl, on-line then sit back
and wait for the postman or the UPS delivery women to deliver
the package to their door from Mexico or China.
According to the State Department, most shipments originate
in China with suppliers who use international mail
consolidators to mask the origin of the shipments. Most U.S.-
based traffickers utilize invalid addresses, relying on the
large volume of e-commerce parcels from China and meetings of
concealment.
Congress rightly passed the UFLPA to address forced labor
of Chinese goods. There are improvements that Congress should
make to the Act, which I cover in detail in my written
testimony. But the de minimis loophole makes a mockery of the
Act. China's Shein and Temu have built enormous businesses
around de minimis. Their fast-fashioned goods are rife with
forced labor cotton and other materials, but not inspected. The
sheer volume of Shein and Temu goods are forcing U.S. stores
and textile companies to close, or lay off employees right now.
Tellingly, Shein and Temu do not sell any goods in China.
The problem will get worse. TikTok is now launching its own
e-commerce platform. The de minimus loophole is ungovernable
lawlessness. My organization estimates 188 billion de minimis
goods came in last year. Some say we just need a bit more
shipment data. That has been tried and failed. It will always
fail. No country uses de minimis like we do, and many
effectively ban it. De minimis should be ended or dramatically
restricted. China should be barred. The Biden administration
can fix this with Executive action, and Congress can do so with
legislation.
Thank you.
[The prepared statement of Mr. Stumo follows:]
Prepared Statement of Michael Stumo
October 19, 2023
introduction
The rise of Shein and Temu have laid bare the limitations of U.S.
Department of Homeland Security (``DHS'') forced labor enforcement
actions to date.
On January 13, 2021, U.S. Customs and Border Protection (``CBP'')
issued a Withhold Release Order (``WRO'')\1\ against all cotton
products produced in China's Xinjiang Uyghur Autonomous Region.\2\ This
WRO included apparel and all other cotton-downstream products
``produced outside the Xinjiang region that incorporate these
inputs.''\3\ Acting DHS Secretary Ken Cuccinelli said ``DHS will not
tolerate forced labor of any kind in U.S. supply chains.'' And on
December 8, 2021, 427 Members of the U.S. House of Representatives
passed a resolution condemning the on-going genocide and crimes against
humanity being committed against Uyghurs and members of other religious
and ethnic minority groups by the People's Republic of China.\4\
Finally, on June 21, 2022, the Uyghur Forced Labor Prevention Act
(UFLPA) went into effect.
---------------------------------------------------------------------------
\1\ WROs are the legal instrument CBP uses to stop the importation
of goods made in-whole or in-part with forced labor, which were
prohibited by Section 307 of the Smoot Hawley Tariff Act of 1930 (19
U.S.C. 1307).
\2\ CBP Issues Region-Wide Withhold Release Order on Products Made
by Slave Labor in Xinjiang (Jan. 13, 2021), available at https://
www.cbp.gov/newsroom/national-media-release/cbp-issues-region-wide-
withhold-release-order-products-made-slave.
\3\ Id.
\4\ H. Res. 317--Condemning the on-going genocide and crimes
against humanity being committed against Uyghurs and members of other
religious and ethnic minority groups by the People's Republic of China.
117th Congress (2021-2022)
---------------------------------------------------------------------------
Nonetheless, during this same time period, fast-fashion giant
Shein's market valuation rose over tenfold to $66 billion as of May
2023.\5\ In the first half of 2022, Shein ``eclipsed Amazon in the
U.S.--with 22.4 million Shein downloads versus 22 million for
Amazon''.\6\ Earlier this year, Temu, a new ecommerce platform linked
to one of China's top retailers, aired repeat ads during the Super Bowl
and became ``the most downloaded app in the United States, surpassing
Amazon and Walmart.''\7\ Temu's valuation is now estimated at $100
billion.\8\
---------------------------------------------------------------------------
\5\ Vanessa Romo, ``Shein invited influencers on an all-expenses-
paid trip'', NPR, June 30, 2023, available at https://www.npr.org/2023/
06/30/1184974003/shein-influencers-china-factory-trip-backlash.
\6\ Emily Dreibelbis, ``Shein Unseats Amazon as Most Downloaded US
Shopping App'', PC Mag, July 19, 2022, available at https://
www.pcmag.com/news/shein-unseats-amazon-as-most-downloaded-us-shopping-
app.
\7\ Michelle Toh, ``New online superstore surpasses Amazon and
Walmart to become most downloaded app in US'', CNN, February 19, 2023,
available at https://www.cnn.com/2023/02/16/tech/temu-shopping-app-us-
popularity-intl-hnk/index.html.
\8\ Chelsey Cox, ``Retailers Shein and Temu violate U.S. tariff law
and evade human rights reviews on imports, House report says'', CNBC,
June 22, 2023, available at https://www.cnbc.com/2023/06/22/shein-temu-
evade-us-tariff-and-human-rights-law-on-imports-house-report.html.
---------------------------------------------------------------------------
Shein and Temu's tremendous success comes in spite of wide-spread
acknowledgement of their flouting of CBP's WRO and the UFLPA.\9\
---------------------------------------------------------------------------
\9\ See, e.g., U.S.-China Economic and Security Review Commission,
Issue Brief: Shein, Temu, and Chinese e-Commerce: Data Risks, Sourcing
Violations, and Trade Loopholes. April 14, 2023 (``Shein cotton apparel
sourcing practices appear to be in direct violation of the Uyghur
Forced Labor Prevention Act.''), available at https://www.uscc.gov/
sites/default/files/2023-04/Issue_Brief-Shein_Temu_and_Chinese_E-
Commerce.pdf. See also U.S. House Select Committee on the Chinese
Communist Party, Fast Fashion and the Uyghur Genocide: Interim
Findings. June 22, 2023, available at https://
selectcommitteeontheccp.house.gov/media/reports/fast-fashion-and-
uyghur-genocide-interim-findings (``Key Finding 2: Temu's business
model, which relies on the de minimis provision, is to avoid bearing
responsibility for compliance with the UFLPA and other prohibitions on
forced labor while relying on tens of thousands of Chinese suppliers to
ship goods direct to U.S. consumers.'')
---------------------------------------------------------------------------
Simply put, the credibility of the United States is on the line.
forced labor enforcement actions against merchandise from china need to
be country-wide, not entity specific.
In 2015, Congress repealed the ``consumptive demand'' clause of the
long-standing ban on forced labor imports. This clause provided an
exception to the ban if comparable U.S. products were unavailable or
domestic production failed to meet demand.\10\ Repealing this clause
was good, as it removed the only material statutory barrier to
enforcing the prohibition of forced labor imports.
---------------------------------------------------------------------------
\10\ See CBP, ``Repeal of the Consumptive Demand Clause'', CBP
Publication 2130-0316, available at https://www.cbp.gov/sites/default/
files/assets/documents/2016-Oct/Fact%20Sheet%20-
%20Repeal%20of%20the%20Consumptive%20Demand%20Clause.pdf.
---------------------------------------------------------------------------
In 2018, CBP issued two WROs. The first, on March 5, 2018, was
against products from a specific Chinese corporate entity: Huizhou Mink
Industrial Co. Ltd.\11\ However CBP's second WRO, issued on May 5,
2018, applied to ``All Turkmenistan Cotton or products produced in
whole or in part with Turkmenistan cotton.''\12\ As Shawn MacDonald,
head of Verite, a non-profit focused on labor and human rights abuses,
told Reuters at the time, ``This signals an important change in how CBP
is approaching their authority.''\13\
---------------------------------------------------------------------------
\11\ CBP Withhold Release Orders and Findings, available at https:/
/www.cbp.gov/trade/forced-labor/withhold-release-orders-and-findings.
\12\ Id.
\13\ Sebastian Malo, ``U.S. bans imports of slave-picked cotton
from Turkmenistan'', Reuters, May 24, 2018, available at https://
www.reuters.com/article/us-usa-trafficking-turkmenistan-idUSKCN1IP3UB.
---------------------------------------------------------------------------
The difference between these two WROs is night and day. The first
WRO merely punishes a specific corporate entity, while the second WRO
properly holds the sovereign--in this case, Turkmenistan--accountable
for forced labor operations within its territory.
And from an execution perspective for CBP, the two WROs are also
worlds apart. Concealing the involvement of a specific corporate actor
early in the supply chain is trivial, but concealing the entire country
of origin of a product or input is an order of magnitude more
difficult.
In DHS's lead-up to the implementation of the UFLPA, the Coalition
for a Prosperous America (CPA) stressed these points. In our March 10,
2022 comment to DHS's Forced Labor Enforcement Task Force (FLETF),\14\
CPA pointed to statements from Chinese authorities that China would not
allow the policing of its supply chains, rendering entity-specific
investigations futile. When a foreign government actively obstructs
forced labor investigations, CPA believes that at a minimum, WROs
should apply against the entire relevant product class from that
country, not just specific corporate entities. CPA pointed to the
Turkmenistan WRO as the appropriate model.
---------------------------------------------------------------------------
\14\ CPA Public Comment Letter Regarding Implementation of The
Uyghur Forced Labor Prevention Act, March 14, 2022, available at
https://prosperousamerica.org/cpa-public-comment-letter-regarding-
implementation-of-the-uyghur-forced-labor-prevention-act/.
---------------------------------------------------------------------------
Unfortunately, CPA's recommendations were rejected by DHS when they
released their Report to Congress, ``Strategy for the Uyghur Forced
Labor Prevention Act.'' Upon publication of the FLETF Report, CPA
issued a press release stating:
``The Report acknowledges that the `PRC government engages in genocide
and crimes against humanity' more than once, but everything that
follows in the strategy report ensures that the PRC government is
undisturbed and that importers can continue to source from China with
confidence, regardless of actions by the regime there.''\15\
---------------------------------------------------------------------------
\15\ CPA Statement on Implementation of Uyghur Forced Labor
Prevention Act, June 24, 2022, available at https://
prosperousamerica.org/cpa-statement-on-implementation-of-uyghur-forced-
labor-prevention-act/.
---------------------------------------------------------------------------
CPA was right. DHS's forced labor approach was guaranteed to fail,
and it has.
If CBP had issued the same WRO for Chinese forced-labor cotton that
it had for Turkmenistan--i.e., country-wide instead of confined to a
specific region or set of corporate entities--then Shein and likely
Temu would not exist in the United States today, or at best would be
trivial actors. For CBP, denying entry of cotton apparel products
shipped from China can be nearly automatic. But forcing CBP to link the
shipment's merchandise to a specific corporate entity or direct
shipment from a specific region within China doomed enforcement from
the start. This point will be expanded upon below.
Finally, it should be noted that the UFLPA's rebuttable presumption
is entirely consistent with country-wide WROs. Indeed, CBP has already
done so using the underlying forced labor authority in Section 307 of
the Tariff Act of 1930. On November 1, 2019, CBP issued a WRO for
``Tobacco produced in Malawi and products containing tobacco produced
in Malawi'', but subsequently excluded three corporate entities who
demonstrated that their Malawi tobacco products were not made in part
with forced labor.
There is nothing stopping DHS from taking the same approach for
China as it has for Turkmenistan and Malawi. DHS should do so, issuing
country-wide WROs for the relevant product class where there is a
forced labor finding.
dhs enforcement strategies are meaningless thanks to de minimis
Regular Imports versus De Minimis: It is imperative to understand
the distinction in customs law between formal and informal entry on the
one hand (aka, ``normal imports''--anything import not arriving with de
minimis treatment), and de minimis entry on the other (aka, lawless
imports). De minimis imports are lawless because they allow vendors
completely beyond our jurisdiction to ship directly to American
households.
Strategies that have merit for formal and informal entry are
inevitably completely undermined by de minimis. Country-wide WROs will
be extremely effective for regular imports, but more easily avoided if
entered via de minimis.
background: where did de minimis come from?
In fiscal year 2022, U.S. Customs and Border Protection (CBP)
processed more than $3.35 trillion worth of imported goods, an
astonishing increase of 19.5 percent over the prior year. However,
$3.35 trillion is an undercounting of imports. Unfortunately, not even
CBP knows the total value. That's due entirely to de minimis. De
minimis is one of the three types of ``consumption entry'', a term CBP
uses for imported merchandise for use in United States commerce. The
other two types of consumption entry are ``formal entry'' (required for
merchandise $2,500 and over) and ``informal entry'' (available for most
merchandise valued at less than $2,500). Our $3.35 trillion tally
includes formal and informal entry, but not merchandise imported via de
minimis.\16\
---------------------------------------------------------------------------
\16\ Josh Zumbrun, ``The Tiny Loophole That Understates the Trade
Deficit With China'', WSJ, June 17, 2022, available at https://
www.wsj.com/articles/the-tiny-loophole-that-understates-the-trade-
deficit-with-china-11655458201.
---------------------------------------------------------------------------
This is because de minimis is an ungovernable break in our customs
controls, where over 2 million shipments per day enter the United
States with little to no scrutiny. Most arrive without digital data,
offering only a word or two written on the package to give a hint as to
what's inside. It would take an army of investigators to even attempt
to inspect these shipments.
CBP is flagging the problem in their own muted manner, warning in
March 2023: ``The overwhelming volume of small packages and lack of
actionable data impacts CBP's ability to identify and interdict high-
risk shipments that may contain narcotics, merchandise that poses a
risk to public safety, counterfeits, or other contraband.''\17\
---------------------------------------------------------------------------
\17\ https://www.cbp.gov/sites/default/files/assets/documents/2023-
Mar/NGF%20E-Com- merce%20Task%20Issue%20Paper%20March%202023.pdf.
---------------------------------------------------------------------------
We know that the majority of de minimis shipments are shipped
directly from China and Hong Kong, but after that, it gets murky. The
next largest origin country is Canada, but due to the lack of data on
de minimis shipments, we do not know the merchandise country of origin
for most of those shipments from Canada.
Examining the development of the de minimis fiasco offers a
foundation for understanding other negative customs policies that
frustrate Congressional expectations in issues such as product safety,
narcotics laws, and forced labor laws.
why congress created ``de minimis''
When goods are brought into the country, the law says the customs
officers must record merchandise's value, catalog its importation by
way of an ``Entry'' form and ``Entry Summary'', and collect any
applicable tariffs and taxes. If Customs law did not make an exception
to this requirement for trivial items, however, Customs officers would
be forced to do the assessment for every little souvenir or knick-knack
brought in from abroad. Imagine being asked for copies of receipts for
the snow-globe and t-shirt you brought back from Paris while standing
in the customs line at the airport. Nobody wants that.
This is why, in 1938, Congress created the ``De Minimis'' rule.
``De Minimis'' is Latin for ``too trivial or minor to merit
consideration''. It was added as Section 321 to the Tariff Act of 1930,
codified in the U.S. Code at 19 U.S.C. Sec. 1321. The law's opening
line states its purpose: ``to avoid expense and inconvenience to the
Government disproportionate to the amount of revenue that would
otherwise be collected.''
Crucially, this is the reason merchandise imported via de minimis
is admitted ``free of duty and of any tax''--because no entry was
assessed to begin with. The assumption was that any revenue gained
would not be worth the officer's time at performing the assessment.
This clearly no longer holds true.
To this day, 19 U.S.C. Sec. 1321 is titled ``Administrative
exemptions''. This is yet another clear indicator that Congress never
intended de minimis to be a channel for import commerce consisting of
millions of packages per day. And it is why it is appropriately called
a ``loophole'', one that was enabled not by Congress but by regulatory
rulemaking, as will be discussed below.
the three different types of de minimis entry
Congress created three separate types of de minimis entry covering
two different scenarios, and a catch-all. They are still enumerated in
the law today:
1. 19 U.S.C. 1321(a)(2)(A): ``Bona fide gifts'' shipped from
abroad;
2. 19 U.S.C. 1321(a)(2)(B): ``articles accompanying'' travelers
for ``household use''; and
3. 19 U.S.C. 1321(a)(2)(C): ``any other case''.
Originally, in 1938, Congress assigned a $5 threshold for bona fide
gifts and personal effects travelers brought with them, and a $1 de
minimis for ``any other case''. ``Any other case'', (a)(2)(C), was
never meant to be a channel of any meaningful volume of goods. Yet
today, the ``anything else'' category is what is being used to waive
through millions of shipments per day! Having been lightly touched
since its 1938 inception, as of 1994, the de minimis thresholds stood
at $50 for bona fide gifts from abroad, $25 for souvenirs brought back,
and just $5 for anything else.
1994: birth of the de minimis loophole via customs rule-making
NAFTA went into effect on January 1, 1994, and was a high-profile
legislative event. It thus largely overshadowed another monumental
piece of legislation that was passed alongside NAFTA: the Customs
Modernization Act, or ``Mod Act.'' The Mod Act increased the bona fide
gift threshold from $50 to $100; ``accompanying articles'' from $25 to
$200 for; and a tremendous increase from $5 to $200 for de minimis. In
the legislative record, however, Congress focused on the first two
categories, but not the ``in any other case'' increase to $200
alongside the ``accompanying articles'' increase.
Besides the raise from $5 to $200, the other transformative change
happened not from the 1994 Mod Act, but when U.S. Customs service
drafted their subsequent implementing regulations that allowed any
``consignee'' to import merchandise, without even the use of a Customs
broker. The National Customs Brokers and Forwarders Association of
America (``NCBFAA''), founded in 1897, is the trade association
representing the Customs brokers' profession and was very involved in
the development of the Mod Act. It is telling that an organization so
involved in the legislative process was stunned by the subsequent
interim regulations.\18\
---------------------------------------------------------------------------
\18\ National Customs Brokers & Forwarders Ass'n of America, Inc.
v. United States, 861 F.Supp. 121, 125 (1994).
---------------------------------------------------------------------------
Customs brokers were alarmed because the norm around the world was
that only owners, purchasers, or a Customs broker hired by the owner or
purchaser could do an importation. This is the norm because importers
are expected to be knowledgeable about the merchandise they are
importing. They are expected to be able to answer Customs officers'
questions. This norm is U.S. law, 19 U.S.C. 1484, except for de
minimis. Allowing ``consignees'' to perform import entries meant that
parcel carriers (e.g. mail carriers and express couriers) could perform
imports despite having no knowledge of the merchandise beyond what is
written on the declaration.
The NCBFAA filed an emergency lawsuit, claiming that the U.S.
Customs Service was violating statute with these regulations. Multiple
reasons were cited, but importantly from a policy perspective was the
fact that the law (19 U.S.C. 1484) mandated that ``only an owner,
purchase, or licensed broker may make entry of merchandise.''\19\ Doing
away with this requirement for de minimis shipments would lead to a
host of grave issues.
---------------------------------------------------------------------------
\19\ Id., 128.
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NCBFAA cautioned that ``Customs is abrogating its responsibility to
enforce certain laws and is providing opportunities for their
violation.''\20\ While NCBFAA's lawsuit was against the U.S. Customs
Service, the express shippers joined as defendant-intervenors. The
Federal court that heard the challenge understood the consequential
nature of the case, writing ``With regard to [the express shippers],
resolution of this matter will define their frontier in this
industry.''\21\
---------------------------------------------------------------------------
\20\ Id.
\21\ Id., 126.
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NCBFAA warned the court and the country as follows: ``Specifically,
plaintiff points out . . . the proposed regulations allow entry of
shipments valued at amounts up to $200 through summary manifest
information, that is, without any requirement of a Harmonized Tariff
Schedule of the United States (HTSUS) subheading number, and exempt
these shipments from the requirement of filing an entry summary.
Plaintiff contends that this lax entry procedure will create
difficulties for Customs relative to the enforcement of visa
requirements for apparel, intellectual property rights for patents and
copyrights, and antidumping and counter-vailing duty orders. Plaintiff
contends that the proposed changes will hinder the Food and Drug
Administration's enforcement capabilities as well.''\22\
---------------------------------------------------------------------------
\22\ Id., 129.
---------------------------------------------------------------------------
Unfortunately, the court found that the Secretary of the Treasury
had broad rulemaking authority governing de minimis shipments, and thus
ruled against the NCBFAA. The above prediction is precisely what has
transpired.
the final rule docket also accurately predicted the many calamities of
de minimis
Following the lawsuit, on April 14, 1995, the Customs Service
published its Final Rule (60 FR 18983) in the Federal Register, and
here too, the docket was filled with commentators who accurately
predicted the myriad of problems.\23\
---------------------------------------------------------------------------
\23\ 60 FR 18983, https://www.federalregister.gov/documents/1994/
06/13/94-14255/express-consignments-formal-and-informal-entries-of-
merchandise-administrative-exemptions.
---------------------------------------------------------------------------
fda abandons oversight role for food, cosmetics, and more
Just as the NCBFAA predicted, FDA concluded that it should simply
abandon oversight for various imports it is supposed to monitor,
including room-temperature food stored in air-tight containers and
cosmetics.\24\ The FDA's dereliction of duty continues to this day for
millions of shipments from around the world, most of which originate
from China.
---------------------------------------------------------------------------
\24\ FDA CSMS No. 94-001260, ``FDA Low Value Shipments''.
---------------------------------------------------------------------------
2015: de minimis rises from $200 to $800 without debate
Express shippers and e-commerce platforms were able to accomplish a
legislative coup in 2015, when they successfully raised the de minimis
threshold from $200 to $800. This was a provision tucked into the Trade
Facilitation and Trade Enforcement Act of 2015 (``TFTEA''). TFTEA did
include a number of improvements to our anti-dumping and countervailing
duty laws, and thus earned support from businesses and groups who
typically favor strong trade enforcement. Unfortunately, as in 1994,
this change from $200 to $800 did not face Congressional scrutiny, and
was obscured by other customs issues. Congress cannot let this happen
again as it takes up customs policy.
a note about de minimis monetary thresholds
Because de minimis is now associated with e-commerce, it is often
erroneously assumed that the $800 limit refers to a U.S. retail price.
But because de minimis was never meant to be an avenue of commerce, the
U.S. retail price is actually irrelevant in determining whether the
$800 threshold has been met. Instead, per 19 U.S.C. Sec. 1321(a)(2),
the $800 is the ``fair retail value in the country of shipment''--not
of America.
``consignee entry'' combined with an $800 de minimis threshold
transformed the nature of international trade and e-commerce in america
Under the traditional trade paradigm, importers were typically
wholesalers or large retailers, importing particular products by the
container-load and then distributing those products domestically.
Essentially, merchandise was almost always shipped in bulk. This made
regulating and policing import commerce fairly straightforward.
Conversely, with de minimis' consignee entry, that same shipping
container may now have as many as 5,000 individual shipments, all small
packages going to individual Americans.
China's SHEIN and Temu are now the most downloaded e-commerce apps
in the United States, and their operations are almost entirely outside
the country. Mailbox-sized shipments are sent directly from abroad, and
imported via de minimis entry with little documentation. SHEIN is now
larger than The Gap, and the United States misses out not only on
revenue from duties, but also the over 20% corporate income tax rate
The Gap is subject to as they are displaced by SHEIN. This is extremely
problematic for CBP, because they face a comparable work load whether a
bill of lading represents an entire shipping container or one
individual package.
This is how Laurie Dempsey, CBP's Director of Intellectual Property
Rights, described the situation in 2019:
``TFTEA's change to the de minimis value, however, caused a dramatic
increase in the volume of shipments making use of de minimis entry
procedures. These procedures provide fewer data elements for CBP to use
to effectively identify and target high-risk shipments, including for
narcotics, counter-proliferation, and health and safety risks. The
dramatic increase in shipments has left CBP with less information about
a greater number of shipments.
``The increasing use of new and changing industry business models,
particularly in the e-commerce environment, further exacerbates this
information gap. Entities receiving goods in the United States, which
CBP previously believed to have limited financial interest in a
shipment, are now critical players with increasing influence in how
low-value goods move around the world.
``This shift in the roles of parties to the transaction has not been
accompanied by a change in responsibilities from a regulatory or policy
perspective. Moreover, the advent of just-in-time delivery, along with
contract manufacturing and on-line payment processing, has given
merchants more flexibility and greater access to markets once limited
by location. Free trade agreements have also allowed new routes for
goods from all over the world to cross borders more easily.
``CBP is concerned that the proliferation of new and changing business
models, particularly in the e-commerce environment, and the increase in
small packages, is permitting bad actors to operate with relative
impunity.''\25\
---------------------------------------------------------------------------
\25\ U.S. Department of Homeland Security, ``Privacy Impact
Assessment for the E-Commerce ``Section 321'' Data Pilot'', DHS/CBP/
PIA-059 (September 26, 2019), page 2, available at https://www.dhs.gov/
sites/default/files/publications/privacy-pia-cbp-section321-059-
september2019.pdf.
CBP's Trade Director on de minimis: ``Zero incentive . . . to learn
the requirements'': In April 2023, at CBP's Trade Facilitation and
Cargo Security Summit, CBP's executive director of the trade policy and
programs directorate, Brandon Lord, stated this truth about de minimis
plainly: ``it's so easy to sell directly to U.S. consumers from
overseas and mail the merchandise to them. And there's zero incentive
as that foreign shipper, or foreign seller, to learn the requirements
to enter the United States.''\26\
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\26\ Mara Lee, ``Type 86 Test Revealing Compliance Weaknesses in
Small Packages'', International Trade Today, April 17, 2023, available
at https://internationaltradetoday.com/article/2023/04/17/type-86-test-
revealing-compliance-weaknesses-in-small-packages-2304170052.
---------------------------------------------------------------------------
De Minimis is destroying lawful retailers and gutting U.S. communities
Zero incentive flows from zero liability due to zero U.S.
presence.\27\ Zero U.S. presence means zero U.S. income tax. Why should
any retailer have a presence in the United States? Thanks to de
minimis, all brands are incentivized to move off-shore to a tax haven,
face zero liability for what they sell, and pay zero duties or income
taxes. De minimis is authorized anarchy destroying our society. It
harms every part of American society: producers, distributors,
retailers.
---------------------------------------------------------------------------
\27\ De minimis supporters will protest the assertion of zero
liability, and it is correct that for countries with U.S. extradition
agreements, there is technically a legal path to liability. To
understand what that looks like, and why it should be dismissed as an
assurance, consider how it took over 5 years for the United States to
arrange extradition of a single, notorious high-profile e-commerce
marijuana seed dealer selling into the United States from Canada. See
Jeremy Hainsworth, ``Canada's `Prince of Pot' ordered extradited to
US'', NBC NEWS (May 10, 2010), available at https://www.nbcnews.com/id/
wbna37067430.
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De minimis guts municipal and county governments of jobs and income
as their retailers, big and small, close. So far in 2023, ``[a]t least
20 major retailers have said they will close U.S. stores in 2023, a
combined total of 3,193 locations.''\28\ Even the National Retail
Federation, which has a severe bias against any friction at the border
for imported merchandise, agrees there's a problem. In July, NRF Vice
President & Deputy General Counsel Ceara Flake wrote:
---------------------------------------------------------------------------
\28\ Dominick Reuter, ``Nearly 3,200 stores are closing across the
US in 2023. Here's the full list.'' INSIDER. (Sept. 26, 2023),
available at https://www.businessinsider.com/stores-closing-in-2023-
list.
``Criticism of the UFLPA frequently arises from the fact that de
minimis shipments, which are often smaller scale direct-to-consumer
shipments of goods purchased on-line, are not subject to import duty
and may enter without the filing of a formal entry. This trade rule
gives an unfair advantage to foreign ecommerce companies, including
those that might employ forced labor.''\29\
---------------------------------------------------------------------------
\29\ Ceara Flake, ``NRF General Counsels Forum enabled peer-to-peer
discussions on pressing retail topics'', NRF.com, July 13, 2023,
archived at https://web.archive.org/web/20230000000000*/https://
nrf.com/blog/nrf-general-counsels-forum-enabled-peer-peer-discussions-
pressing-retail-topics.
The U.S. House Select Committee on the CCP found that ``Temu and
Shein alone are likely responsible for more than 30 percent of all
packages shipped to the United States daily under the de minimis
provision, and likely nearly half of all de minimis shipments to the
U.S. from China.''\30\ Sometimes, Temu and Shein are spoken of as
``exploiting'' de minimis. But the fact is, the platforms are using de
minimis entirely in the manner conceived of by its supporters.
---------------------------------------------------------------------------
\30\ U.S. House Select Committee on the Chinese Communist Party,
Fast Fashion and the Uyghur Genocide: Interim Findings. June 22, 2023,
available at https://selectcommitteeontheccp.house.gov/media/reports/
fast-fashion-and-uyghur-genocide-interim-findings.
---------------------------------------------------------------------------
U.S.-based e-commerce platforms may have been temporary
beneficiaries of de minimis, as it allowed their platforms to retail
merchandise consequence and duty-free in a manner unavailable to brick-
and-mortar retailers. But Shein and Temu's success has caused even NRF
to belatedly acknowledge how de minimis undermines the rule of law.
Leading U.S. retailers may be tempted to believe that they can
continue their transition from a mostly brick-and-mortar-based business
to an e-commerce based `platform' while convincing Congress to exclude
their foreign website competition, but this too is folly.
Close one, and another website or app will take its place. Last
month, TikTok officially launched its U.S. e-commerce service with over
200,000 vendors enrolled, and sales available from within its app,
which already has 150 million users in the United States.\31\ A review
by Bloomberg found that almost all the vendors were from China and that
counterfeits were rampant.\32\
---------------------------------------------------------------------------
\31\ Sapna Maheshwari, TikTok Popularizes Products. Can It Sell
Them, Too? NY Times. Sept. 12, 2023, available at https://
www.nytimes.com/2023/09/12/business/tiktok-shop-e-commerce.html
\32\ Alex Barinka, TikTok's New Amazon Copycat Is Full of Cheap
Chinese Goods, BLOOMBERG, Sept. 7, 2023, available at https://
www.bloomberg.com/news/articles/2023-09-07/tiktok-shop-full-of-cheap-
goods-is-live-for-some-us-app-users.
---------------------------------------------------------------------------
The sole U.S.-based winner from de minimis anarchy is express
shippers, who have enjoyed record profits by displacing traditional
importer-wholesalers. Simply put, their businesses will continue to be
profitable even after de minimis is repealed, as will U.S.-based
ecommerce platforms, and the short-term marginal extra profits of de
minims supporters is not worth sacrificing our morals and society.
De Minimis entries provide no useful data
For all entries other than de minimis, the importer of record must
be U.S.-based or hire a licensed U.S. customs broker (who must be a
U.S. citizen). The importer must file an ``Entry Summary'' on CBP Form
7501 for the shipment. The Entry Summary provides the critical
information CBP needs to enforce the over 500 laws for which it has
enforcement responsibilities.
Because Entry Summaries are not provided for de minimis shipments,
CBP has no visibility into the parties to the transaction and very
little useful data. A shipping manifest is all that is needed, and the
shipping manifest merely declares from where a shipment (not the
merchandise inside the shipment) originated and where it is being
delivered, and a short, plain-language description of the merchandise
(e.g., ``bag'').
CBP stated in June 2023 that:
The overwhelming volume of small packages and lack of
actionable data limit CBP's ability to identify and interdict
high-risk shipments that may contain narcotics, merchandise
that poses a risk to public safety, counterfeits, or other
contraband.
In fiscal year 2022, CBP cleared over 685 million de minimis
shipments with insufficient data to properly determine
risk.\33\
---------------------------------------------------------------------------
\33\ CBP Commercial Customs Operations Advisory Committee,
Government Issue Paper, E-Commerce Task Force. June 2023. Available at
https://www.cbp.gov/sites/default/files/assets/documents/2023-Jun/NGFE-
C?1.PDF.
---------------------------------------------------------------------------
CBP's ``Enhanced Data'' Pilots are Failures
For 4 years now, CBP has offered two voluntary ``enhanced data''
pilot projects for de minimis shipments. One, known as the Section 321
data pilot, gave ``fast lane'' de minimis privileges to the big three
express shippers (FedEx, UPS, DHL), three big U.S. e-commerce platforms
(Amazon, eBay, and Zulily), and three large logistics providers. While
CBP recently began soliciting additional participants, the on-going
extension of this pilot is inherently anti-competitive. The other data
pilot, which is indefinite, is known as ``Type 86 Entry''. Type 86
Entry is entirely voluntary, but it does allow shippers--including
foreign vendors--to provide the data elements that would normally be
required on an Entry Summary, including country of origin.
Predictably, the data is junk. As reported by International Trade
Today this April:
``Almost half of de minimis shipments last year were covered either by
the Type 86 entry test or the Section 321 data pilot program, CBP said,
but that doesn't mean that the government has a good grasp on what
merchandise is entering in small packages.
``Sal Ingrassia, whose time as port director at the JFK Airport had him
overseeing about one-third of the de minimis entries to the U.S., told
an audience at CBP's Trade Facilitation and Cargo Security Summit April
17 that while the agency is glad brokers are providing Harmonized
Tariff Schedule [HTS] codes in the Type 86 test, `we still have a lot
of concerns,' because they're finding the data is often not correct.
``Ingrassia said ports identified de minimis shipments to examine, and
reported to the de minimis working group what they learned. `One
quarter of what we looked at had some type of violation,' he said. `It
was alarming to see we had so many violations.' He said a large number
of the violations were either an HTS misclassification `or unmanifested
merchandise in the shipment, meaning that we had an e-commerce package
or shipment with three items in it. Only one item was declared. That's
a real problem for us when we're talking about entry Type 86.'
``Also, for another 25 percent of the packages, CBP asked the company
to hold the package so CBP could inspect it, and when CBP got there,
the package had already been released. Ingrassia said that may not have
always been deliberate, since Type 86 shipments are released
immediately unless CBP puts a hold on any, and some of the releases may
have happened before the company knew there was a request to present
the package. But a non-presentation rate of 25 percent is problematic
for the agency.
``Ingrassia asked rhetorically: `How can we run a system like entry
Type 86 without having correct information?' ''\34\
---------------------------------------------------------------------------
\34\ Mara Lee, ``Type 86 Test Revealing Compliance Weaknesses in
Small Packages'', INTERNATIONAL TRADE TODAY, April 17, 2023, available
at https://internationaltradetoday.com/article/2023/04/17/type-86-test-
revealing-compliance-weaknesses-in-small-packages-2304170052.
De minimis has bred such routine lawlessness at our ports that even
fentanyl shippers are opting to voluntarily enroll in Type 86 de
---------------------------------------------------------------------------
minimis entry:
``[CBP Trade Director] Lord said that members of his team, along with
CBP broker management officials, recently visited nearly a dozen
different brokers who had filed more than one Type 86 entry for a
package that CBP discovered contained fentanyl.
`` `Our attitude is: Type 86 still requires reasonable care,' he said.
He told brokers they will be seeing more times when CBP tells brokers
that what they filed as a Type 86 will need to be a formal entry,
`because we're seeing fentanyl like I mentioned, or because we're
seeing other issues of noncompliance.' ''
de minimis and fentanyl
This committee has received, and continues to receive, ample
testimony on the devastation of the fentanyl epidemic. Last week,
Majority Members of this committee issued their Phase 3 Interim Report
on the crisis at the Southern Border. Section 1 of this report studied
trends in seizures along the Southern Border, finding that the increase
of surveillance technology at official land-border ports was driving
smuggling areas between ports. The Report made this important
observation:
``While it is true that most of the fentanyl seized by CBP is
intercepted at official ports of entry, this is because those
facilities are equipped for that very purpose. Naturally, seizures will
be higher in locations designed to seize drugs.''\35\
---------------------------------------------------------------------------
\35\ House Committee on Homeland Security Majority, Interim Report
on the Third Phase of the Committee's Comprehensive Oversight
Investigation Into the Crisis at the Southwest Border, pg. 16. October
10, 2023, available at https://homeland.house.gov/wp-content/uploads/
2023/10/Phase-3-Report.pdf
The same is true for our commercial shipment ports. By far the most
secure are our ocean vessel ports, where shipments arrive virtually
entirely by way of ``formal entry''. Formal entry shipments are the
least likely to contain contraband or counterfeits. And for ocean
vessels, CBP receives detailed shipping manifests far in advance of the
cargo's arrival. Indeed, ocean shipping vessel manifests are even made
freely available on-line--something that is long overdue to be
replicated via other modes of transport.
De minimis shipments arranged via e-commerce tend to arrive by
express courier or mail or by logistics companies via air cargo or
truck. A high volume of small packages with little-to-no advance
manifest information. In CBP's Strategy to Combat Opioids, the agency
stated as follows:
``The advent of e-commerce has added another layer of complexity to
this problem. Illicit opioids can now be purchased on-line from the
comfort of one's home. Opioids entering the country through express
consignment or international mail have a substantially higher purity
level than the opioids entering along the Southwest Border.''\36\
---------------------------------------------------------------------------
\36\ CBP, Strategy to Combat Opioids, May 2021, available at
https://www.cbp.gov/sites/default/files/assets/documents/2021-May/CBP-
Opioid-Strategy.pdf.
The fact that fentanyl is even entering through CBP's enhanced de
minimis data pilots should serve as an alarm. Shut it all down. As
stated earlier, de minimis offers zero societal benefit. Shutting down
smuggling over the Southern Border, both through and between ports, is
an imperative that we are making progress on through investments.
Shutting down de minimis now, either by way of regulation from the
administration or by statute from Congress.
how to repeal de minimis
Much attention is paid to the increase of the de minimis threshold
from $200 to $800 in 2016, but the truth is the vast majority of
shipments declare a value far below $200. Furthermore, the monetary
limit is unthread to the U.S. transaction price, and instead is tied to
the ``fair value'' in the country of shipment. This goes back to how de
minimis was never intended to be an avenue of commerce. CPA discussed
the details of how de minimis came to be, and how to repeal it, in a
submission to the U.S. Senate Committee on Finance in July.\37\ This
submission also discusses de minimis's total undermining of consumer
safety laws, from children's toys to cosmetics.
---------------------------------------------------------------------------
\37\ CPA Submission to the U.S. Senate Committee on Finance, July
11, 2023, available at https://prosperousamerica.org/wp-content/
uploads/2023/08/230711-CPA-ltr-Customs-Reform.pdf.
---------------------------------------------------------------------------
false assertions from de minimis supporters, and even cbp's office of
trade
Express shippers, primarily by way of certain trade associations,
have invested heavily in distorting the truth about de minimis
shipments. Their assertions routinely are baseless, provided without
citation. In August, CBP published a ``Falsehoods & Facts'' webpage
directly rebutting these assertions, with supporting citations. To the
extent the committee has questions about assertions they have heard in
support of de minimis, we encourage the committee to visit this
webpage: https://prosperousamerica.org/falsehoods-facts-the-truth-
about-de-minimis/.
Finally, it should be noted that in October, 2022, CBP's Office of
Trade published a slide presentation stating that the ``Total Value''
of de minimis shipments in the agency's fiscal year 2021 was
$39,876,651,152. This is incorrect, and the true number is unknowable.
This figure represents only the value of de minimis shipments for which
electronic information was provided, which is a minority of total
shipments. While CBP confirmed this error to CPA in an email, the
Office of Trade has declined our public calls to correct the document.
This incorrect figure has become an important part of the advocacy from
de minimis supporters, suggesting that the value of de minimis
shipments is going down or negligible. This is addressed in more detail
at the CPA Falsehoods & Facts web page above.
Mr. Bishop. Thank you, Mr. Stumo. Members will be
recognized by order of seniority for their 5 minutes of
questioning. An additional round of questioning may be called
after all Members have been recognized. I now recognize myself
for 5 minutes of questioning.
Ms. Glas, I'll begin with you. In my home State of North
Carolina, we have the largest textile mill industry in the
Nation, driven by a skilled work force and innovative research.
Can you describe the impact of failing to prevent imports
linked to forced labor in China that it has on the U.S. textile
manufacturers?
Ms. Glas. Thank you, Congressman Bishop, and thank you so
much for your support for our industry in your opening
comments.
I can't tell you how consequential the textile industry is
to the State of North Carolina and rural communities across the
United States. It is a strategic supply chain because of the
products you noted in your opening statement that we make.
Eighty percent of what we make in North Carolina in terms of
yarn spinning is then sent to places like Central America made
into a finished garment, and coming back free trade agreement,
having to comply with labor and environmental standards.
If you talk to anyone in our industry right now, they will
say they are running at 50 percent capacity. So it is not just
economic market forces that are impacting the most innovative,
resilient, automated industry in the world, but it's also
impacting 1.5 million workers in our Western Hemisphere,
exacerbating the migration crisis.
Yet, the statistics I talked about--and you know I'm fired
up about this issue--the statistics I talked about on the CBP
website advertises to the Chinese and the world, Guess what?
We're not doing much here. We have had a very simple ask, and
we're asking this committee, please help our industry. This is
an immediate crisis.
This is not just about the State of North Carolina. This is
about the very supply chains just years ago when nurses were
wearing garbage bags came to the forefront of helping in a
crisis. I can't even tell you the consequences. A lot of our
textile mills are the only tax base in the community. When it
comes away, there's no new jobs that come overnight.
Mr. Bishop. Yes. Absolutely.
Ms. Glas. So it requires a lot of oversight over CBP to ask
them the hard questions we're asking, and to ask the
administration, if you can stop the bleeding by putting out a
public road map, helping increase penalties and inspections,
showing our industry that we're fighting for them at this point
in time is what's necessary, and we must close the de minimis
loophole.
Mr. Bishop. The numbers are striking. I think as a matter
of enforcing trade law for the American people, the notion that
American producers should be required to compete against slave
labor from a denier of human rights abroad is the easiest thing
for American consumers and voters to understand. I think they
entirely support enforcement efforts against it.
You know, the numbers that I thought of interest--there was
this article before I lose my time, I want to ask unanimous
consent, enter into the record a recent Reuters article titled,
``U.S. Customs Finds Garments Made With Banned Chinese
Cotton.''
Without objection, so ordered.
[The information follows:]
Exclusive: US Customs finds garments made with banned Chinese cotton
By Katherine Masters
September 1, 2023 1:07 AM EDT
NEW YORK, Sept 1 (Reuters).--Roughly 27% of tests performed on
shoes and garments collected by U.S. Customs and Border Protection in
May showed links to cotton from China's Xinjiang region, which has been
banned because of concerns over forced labor, according to documents
obtained by Reuters under the Freedom of Information Act.
The results, which have not been previously reported, highlight the
challenges of complying with the U.S. law aimed at blocking imports of
cotton linked to forced labor in China. It requires cutting out the far
western region from apparel supply chains.
To help enforce the law, customs officials have turned to isotopic
testing, which can link cotton to specific geographic areas by
analyzing the concentration of stable elements like carbon and hydrogen
present in both the crop and the environment in which it has been
grown, experts say.
Ten of the 37 garments collected by Customs and Border Protection
in May returned as ``consistent'' with Xinjiang, the documents show. So
far, officials have collected at least three batches of footwear and
apparel as part of their enforcement efforts, on Dec. 22, 2022, April
11, 2023, and on May 23, 2023, according to government documents
released to Reuters.
Overall, 13 of 86 total tests, or 15 percent, were deemed to be
consistent with Xinjiang.
Much of the other information on the documents was redacted,
including brands of the garments that were tested. Descriptions of the
items detail a range of apparel, from boxers, jeans and tee-shirts to
baby onesies and dresses. All contained cotton, in some cases mixed
with other textiles such as spandex and rayon.
One item collected in May that returned as consistent with Xinjiang
was described as a ``Mickey T-shirt'' made from a blend of cotton and
polyester. Laura Murphy, a professor of human rights and contemporary
slavery at Sheffield Hallam University in England, said the range of
products and high rate of positive samples underscored the difficulty
of enforcing the ban.
``The amount of Xinjiang cotton entering the U.S. should be zero,''
she said. ``So, anything above zero percent should be a real warning.''
Customs officials did not immediately respond to questions about
the test results, including how they selected garments for the
analysis.
In June, the agency told Reuters in June it ``prioritizes action
against the highest-risk goods based on current data and
intelligence,'' but said sharing more details publicly would
``compromise the success of our work and therefore U.S. economic and
national security.''
Isotopic testing is not yet a ``routine process'' for U.S. Customs,
Eric Choy, the agency's executive director for trade remedy and law
enforcement, told Reuters in June. He added that officials at
individual U.S. ports can request testing if they receive allegations
about specific shipments or suspect the goods have links to Xinjiang.
Many retailers have also turned to isotopic testing in a bid to
keep their supply chain free of cotton with links to forced labor.
Goods produced partially or entirely in Xinjiang are banned in the U.S.
A Federal report published last year estimated that cotton from
Xinjiang accounted for roughly 87 percent of China's production and 23
percent of the global supply in 2020 and 2021. Countries including
Vietnam, Cambodia, and Bangladesh--some of the world's largest
producers of cotton clothing and consumer goods--still import large
quantities of finished fabric from China. It then often makes its way
to the U.S. in the form of apparel made by suppliers in those
countries, according to the report.
Retail executives and testing companies told Reuters that isotopic
analysis is often used to verify that suppliers are only using cotton
sourced from approved locations, such as the United States or India.
Victoria's Secret, Ralph Lauren, and ecommerce giant Shein are among
the companies that contract with Oritain, an isotopic testing company
headquartered in New Zealand, to verify the origin of cotton in their
supply chains.
U.S. Customs and Border Protection does not perform its own testing
and has paid Oritain more than $1.3 million since 2020 for cotton goods
analysis, according to records from the agency obtained by Reuters
under the Freedom of Information Act. However, the agency redacted the
name of the provider that analyzed the three batches of footwear and
apparel collected in December, April and May, and did not immediately
confirm whether Oritain had performed the testing.
Officials said isotopic testing alone is not enough to clear
shipments detained at U.S. ports for suspected links to Xinjiang. More
retailers and manufacturers are ``spot checking'' materials from yarns
to finished fabrics at various points in their supply chains using the
analysis. Still, there is no guarantee those same materials were used
in the finished products being investigated, according to Choy.
``It's not a silver bullet,'' he said. ``Testing that's done at the
spinning level or the yarn level of the supply chain doesn't
necessarily represent the actual shipment.''
Reporting by Katherine Masters; Editing by David Gregorio.
Mr. Bishop. You know, it talks about in these enforcement
or testing occasions three batches of footwear on December
2022, April 2023, May 2023. On average, the amounts there were
as much as 15 percent. But on some occasions, 23 percent when
they do isotopic testing. Tell me about isotopic testing, and
why is it not being used more widely?
Ms. Glas. That's a fantastic question. We're asking that
question. So Congress' bipartisan support for this topic and
bipartisan support for investing in UFLPA, as part of the
appropriations set aside $101 million for UFLPA enforcement,
not just for textiles, but all the goods that we were talking
about on this panel today and beyond.
So far, according to that Reuters article--and please note,
Chairman, that was released as part of a FOIA request that our
industry has not seen. But according to the Reuters article, it
says they've only utilized $1.3 million on isotopic testing.
Where is this money going, and why? Textile and apparel is one
of the primary forced labor products coming out of Xinjiang.
Xinjiang production of cotton has grown.
We have the ability, Congressman, just so you understand
the process--isotopic testing basically, you can send a product
to a lab. You can take a few of the articles out of a
particular shipment, send it to a lab, and determine--we have
the analysis to determine where is that cotton grown. So, a lot
of the U.S. yarn and the products coming out of our Western
Hemisphere uses U.S. cotton grown across 18 States. We have
this technology. This is not hard. We just need to utilize it
more in order to determine and deter the trade, and publicly
tell people, these are the folks who are violating it. You'll
never deter the trade if you're not stepping up your
enforcement activities.
Mr. Bishop. You talk about de minimis, and we will come
back to that. My time has expired, but I will just comment
before passing it on to the Ranking Member, that what's de
minimis is the use of this isotopic testing and maybe other
interdiction means, but it just doesn't make sense. My
understanding is that's been resourced. I think we need to know
from CBP why it's not being more widely used.
Now, I recognize Ranking Member Ivey for 5 minutes of
questions he may have.
Mr. Ivey. Thank you, Mr. Chairman. I'll actually pick up on
the de minimis issue because I did want to have a follow-up
with Mr. Stumo.
I think you suggested eliminating de minimis entirely?
Mr. Stumo. No. 1, go back to pre-1994 where merchandise
imports use a Customs broker. So don't let consignees bring in
de minimis. So that's the most important part.
Mr. Ivey. OK.
Mr. Stumo. Second, if you have very risky goods, like
apparel, or risky countries, like China, which 90 percent of
our counterfeits--80 to 90 percent of our counterfeits come
through, they're ineligible. But Canada doesn't let de minimis
come in through Canada posts. The European Union with their vat
de minimis, they tried to go down to like 10 bucks, I think,
for vat de minimis, and they had tons of cell phones allegedly
coming through at 8 bucks. You know, so they just shut it down
to zero. I just talked to the Mexican Retail Federation, they
want to shut it down. So the broker--the consignees should be
shipping. They're not--they can't enforce 500 different trade
laws.
Mr. Ivey. Well, let me follow up on that. So with respect
to--just take it down not from 800 back to 200, but just take
it to zero is what you're suggesting?
Mr. Stumo. You know, we can still bring in the knickknacks
and snow globes from overseas and let grandma send us a book,
but for this to be a major commercial channel, you're going to
ease so much burden from CBP by redirecting these goods right
through normal entry where they have to file the paperwork, the
Customs brokers do it just like they used to.
Mr. Ivey. All right. So you wouldn't need additional CBP
staff?
Mr. Stumo. Well, I can't guarantee you wouldn't need
additional, but you wouldn't have 3 million. You'd ease the
burden a lot.
Mr. Ivey. What I'm trying to get at, though, is, you know,
what do we need to do to get it there? So I appreciate your
point about eliminate de minimis, but in order for us to
actually make that real, we need to know if there are
additional resources that would be required. That's all I'm
trying to say.
Mr. Stumo. I'd be supportive of additional resources.
Mr. Ivey. OK. Ms. Glas, with respect to the isotopic
testing--because I remember certain types of testing for, you
know, cases that I handled before--how long does it take to do
the testing, and you know, what does it entail?
Ms. Glas. Based on my analysis with industry, it can take 3
to 4 weeks. Maybe it can be expedited. It's not a super-
involved test. It just requires, does the lab have time to
actually run the testing?
Mr. Ivey. Fair enough. So with respect to a particular
shipment--I apologize about cutting you off, but I only get 5
minutes.
Ms. Glas. Yup.
Mr. Ivey. So a shipment would come in--because I think part
of what happened with these rules--it all happened before I got
here, but you had people who were trying to ship goods into the
United States, and they were worried about how long it took and
how much it costs and how it delayed those activities.
So are you suggesting that the way this would work is they
would do samples? They would test all of it? What are you
proposing?
Ms. Glas. What they're doing right now, based on the $1.3
million that they have tested, they've tested small batches of
goods that they have--apparently CBP determined has a higher
risk of Xinjiang cotton. So this is not a very difficult test.
In fact, a lot in the private industry are using the testers to
ensure that their supply chains are transparent in making sure
that they are not sourcing Xinjiang cotton by certain
importers. But others are just using the free flow of de
minimis to get their products in because they know these are
largely un-inspected. Other reporters, like Sheridan Prosso
from Bloomberg, did a report that tested various Shein products
she bought off the website since it's essentially a de minimis
company, and practically all of them tested positive for
Xinjiang cotton.
Mr. Ivey. OK. So would your organization--your organization
represents a group of textile companies I take it?
Ms. Glas. Yes.
Mr. Ivey. OK. So to the extent there were delays that were
created by this process if we add this in, your association
members would be supportive of that, because I'm sure there are
other businesses that would be complaining about it? You'd
stand up and say this is something the United States needs to
do?
Ms. Glas. Absolutely.
Mr. Ivey. OK. With respect to extra costs that that might
entail, your organization would support providing additional
resources so that those tests could be done, and additional
staffing, and the like?
Ms. Glas. Of course.
Mr. Ivey. OK.
Ms. Glas. But it's not clear to me that CBP doesn't have
the resources now to start immediately stepping up enforcement
activities.
Mr. Ivey. Well, I did see in one of the statements that
they sent in to us that they had done a little bit more in the
way of inspection than I had assumed. Since the UFLPA went into
effect through May 29, 2023, CBP's stopped more than 4,000
shipments of goods valued at over $1.3 billion for enforcement
action review. I know that's just a drop in the bucket, but
4,000 shipments is still--it's not like they're just sitting
there eating lunch every day, right?
Ms. Glas. Just to put it in context, 72 percent of the
apparel coming in from China that's cotton contains Xinjiang
cotton.
Mr. Ivey. I don't disagree with that stat. But what I'm
trying to get at, though, is in order to check the other 72
percent, it's going to take additional resources. They're going
to need more people and more ability to do it.
Ms. Glas. If CBP needs additional resources, they need to
tell you.
Mr. Ivey. You'd support it?
Ms. Glas. Yes. Of course I support it.
Mr. Ivey. OK.
Ms. Glas. But I also want to make sure that--right now,
we're bleeding. So, I'm trying to figure out a way to stop the
bleeding by using resources already appropriated in order to
address that. If they need more resources, we'll be the first
to support that, first in line, and we'll advocate for that.
Mr. Ivey. Excellent. Thank you so much. I yield back.
Mr. Bishop. Gentleman yields back.
I now recognize Mr. Ezell for 5 minutes of questioning.
Mr. Ezell. Thank you, Mr. Chairman. Thank you all for being
here today. We really appreciate the importance of this
hearing, and it's clear we must ensure the U.S. Customs and
Border Protection has the tools necessary to combat this forced
labor.
We have discussed how the Chinese Communist Party is
sending the Uyghur population into slave labor, undermine
industries across the world. This subjection of Uyghurs has
been clearly declared genocide by both the Trump and the Biden
administration. Today, I want to start by focusing on the slave
labor practice by the CCP, manipulates the markets in the
seafood industry.
Reports have shown the CCP has been using the slave labor
practice on fishing vessels and at seafood processing plants.
These forced labor practices have allowed the CCP to flood the
global market with foreign-raised shrimp. It's placed a massive
financial burden on American shrimpers, including those in
south Mississippi where I live.
Mr. Stumo, I believe one way the United States can create a
fair market for our domestic producers is to stop importing
goods that are produced through forced slave labor since I
think we can all agree on that.
Can you describe how the CBP uses loopholes to get our laws
that should stop products that are involved with this slave
labor?
Mr. Stumo. Yes, sir. How the shrimp gets into the United
States is a good example of the challenges the Government faces
in responding to Uyghur forced labor. Wild-caught Argentine
shrimp could be, you know, shipped to a factory in Xinjiang
province for processing by Uyghur forced labor before being
sent here. There is a problem with manifest transparency. Bills
of lading for open--ocean freight are public. As was said,
truck and rail is not. Air is not.
This committee or the Congress should be making all
manifests public, and should require further supply chain and
transparency. Shift the burden to prove you have the right to
enter our country because you are compliant with our laws
shifted to the importer. That would be important.
Also, I would say that with regard to Mr. Ivey's questions
and yours, even before the UFLPA, we had Section 19, U.S.C.
1307, which is the original law preventing forced labor goods
from coming in. Customs has used it at times.
In 2018, we had a WRO withhold release order against one
entity in China for forced labor goods. But then they did
another one for all of Turkmenistan, a country-wide WRO. What
should happen--and unfortunately, the Uyghur Forced Labor
Prevention Act didn't go country-wide with China. It went
region-wide, which is very difficult to find out what region in
China for Customs. You do a full country-wide, and then you
provide exemptions. What should happen is if we've got cotton-
to-cotton products, country-wide restriction, and then let them
demonstrate that they are compliant. But you only get in if
you're compliant. The whack-a-mole of entity by entity,
laudable, but it's much more labor-intensive.
Mr. Ezell. Thank you. How do practices such as the state-
run labor transfer programs used by the Chinese make
enforcement more difficult here in the United States?
Mr. Stumo. Well, of course, Uyghur forced labor is beyond
Xinjiang. It's all over the country. It's state as opposed to
other forced labor findings by the Department of Labor, which
find this company, or this sector. This clearly comes from
Beijing. It's a state program in Beijing. A state-sponsored
genocide rather than sort-of somebody in the country doing it.
So China doesn't let people do business due diligence. They
don't let people come into the country to inspect. It's a black
box. If you try to pierce that black box, you'll be prosecuted
or disappeared. So you have to have a presumption that it can't
come in once you find that this sector is a problem, and then
they have to prove, any importer have has to prove that it can.
Mr. Ezell. I'll tell you, I have been in contact with--I'm
just about out of time--with so many of the shrimpers on the
Mississippi Gulf Coast that are just--I mean, they're going out
of business. It's a tragedy because, you know, we've got such
wonderful seafood down there on the coast, and it's just really
hurting our hometown shrimpers.
So, you know, we need to, as a Congress and as much
information as we can get, to put a stop to some of this.
So, Mr. Chairman, I yield back.
Mr. Bishop. The gentleman yields back.
I now recognize Mr. Thanedar for 5 minutes of questions.
Mr. Thanedar. Thank you, Chairman Bishop. I appreciate this
hearing, and thank you for all of you to be here.
With the huge volume of goods that come into this country
every day and more and more each year, CBP faces a real
challenge in keeping goods made with forced labor out of this
country.
Democrats have supported CBP by investing in people. In
fiscal 2023, Congress and President Biden provided the
resources for CBP to increase the number of personnel enforcing
the Uyghur Act by more than 250 staff.
But, in addition to people, CBP requires technological
solutions. CBP already uses the Advanced Trade Analytics
Platform to collaborate and share information on shipments that
are at risk for potentially violating import laws.
Now, I ran testing labs for 25 years, so I understand the
technology behind the isotope testing. It is something that's
well within the reach, you know. They need equipment. They need
the personnel trained. It's an easy test to do, and CBP should
be able to do that.
So this platform has identified a weekly average of 162,000
of these types of high-risk shipments at an estimated value of
51 million per week, but more needs to be done.
My question to you, Ms. Glas, is, what can Congress do to
support CBP's investments in technology to help map supply
chains and inform risk-based, intelligence-driven enforcement
of the Uyghur?
Ms. Glas. It's an excellent question. First, according to
the Reuters report that published a FOIA request, it was
reported that CBP is working with one isotopic testing company.
I think the first question is, why are you only working with
one?
Mr. Thanedar. Sure.
Ms. Glas. Are you not--why can't you purchase isotopic
testing equipment yourself to do this internally, because a lot
of these private companies have personal relationships with
other companies, like Shein and whatnot.
So what's the conflict of interest? What is limiting CBP's
ability to use isotopic testing? Our industry just briefed
certain agents who are in the field at the ports. They weren't
even aware isotopic testing existed or their ability to utilize
it. They didn't know that's a problem they should be looking
for.
So the basic training among CBP officials, it makes no
sense to our industry that all this money was set aside by
Congress for enforcement activities, but we've seen substantial
enforcement activities go down first. It's anemic for UFLPA.
I aspire one day it to be the electronics industry, and I'm
glad we're stopping those products, but they had at least 1.5
billion products--dollars' worth of products detained. We have
39 million.
So really figuring out from CBP, OK, what is limiting you?
Asking the industry, asking folks like the National Cotton
Council. Hey, you represent American cotton farmers. Can you
partner with CBP on testing to make sure? Are there other
private entities who--because that would provide opportunities
for our U.S. cotton farmers.
How can we partner more effectively with CBP to get them
the top technology that they need? Also, are we testing these
products at retail? Are we taking products in a 40-mile radius,
going to 200 retailers and taking these products off the shelf
and testing them? When I've asked CBP this question, they're
not sure they have the authority to do that. I'm trying to
figure out the statute to figure out why they wouldn't have the
authority to do that.
So we need to get a lot more aggressive, and we can be--it
would not take a lot of time for someone to run around to a few
stores with the additional personnel that they have to figure
out, OK, let's make sure we're keeping everybody honest.
So I'd love to see a much more aggressive posture in that.
Thank you, it's so wonderful that you have this background on
testing.
Mr. Thanedar. Thank you so much. Thanks for your answers.
Mr. Chair, Chairman Bishop, my time is up, so I yield back.
Mr. Bishop. Thank you, Mr. Thanedar.
The gentleman yields back, and I now recognize Mr. Strong
for 5 minutes of questioning.
Mr. Strong. Thank you, Chairman Bishop.
Ms. Glas, in your testimony, you mentioned the impact that
increasing shipments have had on domestic manufacturers. Can
you talk more about this and specifically the impact that you
have seen in our textile industry, like cotton farmers in
Alabama?
Ms. Glas. This has had--thank you for the question. This
has hurt the entire supply chain, and it has helped superpower
cotton production in China. We have a real opportunity here to
help farmers in States like Alabama and Mississippi and North
Carolina and whatnot gain more market share if we're sourcing
more domestically and here at home.
But, right now, because we're allowing these products to
come in through de minimus, we're allowing--we're not doing
inspections like we should for UFLPA, it's signaling to the
Chinese and others in the world that are trade predators it's
OK to flood our marketplace. You know what happens? We end up
shutting plants in Alabama and in Virginia, in some of the most
competitive plants in the world.
I--every morning I get a text about some crisis happening
in our industry. They are so pleased this committee is having a
hearing because there hasn't been a committee that we're aware
of who have actually brought these issues before on Customs
enforcement. We need to be doing this regularly in order to ask
these officials: (A) what do you need; and, (B) what's
deterring you right now? So please know we want to be an active
partner with you.
On de minimus, if the committee could amplify with the
administration right now, please use your authorities under
rulemaking on de minimus, you could divorce literally overnight
all e-commerce shipments from receiving de minimus.
It doesn't mean you can't be on-line and ordering a
product. Guess what, guys? We're not going to reward the
Chinese. We're not going to reward the CCP, and we're not going
to reward the rest of the world by allowing for unexamined
packages coming in duty-free, putting us out of business.
Mr. Strong. Thank you, Ms. Glas.
Furthermore China is major supplier of textile yarns and
fabrics to other countries that manufacture Fenner's products
for export to the U.S. market.
What enforcement tools can CBP deploy to determine the
origin of textile inputs sent to third countries for
manufacturing and prevent illegal transshipments?
Ms. Glas. CBP could use a lot more of its isotopic testing
authorities. They could be, again, going to retail, pulling
products from the shelf with labels that say ``Made in
Vietnam,'' ``Made in Indonesia,'' testing where that cotton
comes from.
There's a lots of deterrents that can happen that would
easily change the trajectory literally overnight. I'm looking
for a lot more stepped-up enforcement activities. I think we
need an all-out response that's aggressive to help stop the
bleeding and to help stop China hiding its cotton through the
entire marketplace right now. Production is going up.
They have 25 percent or more unemployment amongst their
youth. They're propping up their industry, subsidizing them,
and they're using illegal forced labor to gain market share,
putting our manufacturers out of business and wiping out our
tax bases.
Mr. Strong. That is correct.
Ms. Glas, a significant percentage of the textile and
apparel imports come from Central and South America, countries
with whom we've established a variety of free trade agreements.
Those agreements require firms to show that the production
of textiles and finished goods must be conducted in the region
to obtain duty-free benefits.
How is this system being bypassed or observed to allow
forced labor products, cotton, to enter the United States?
Ms. Glas. We're starting to see more Xinjiang cotton coming
in from the region. We just had the first detention of products
coming in from Nicaragua that were detained under suspected
violation.
We're now seeing, if you look at the trade data, billions
of yarns and fabrics coming from China and Asia through the
region, yet some of this is claiming that it's made in the
region and made in the United States. That undermines our
industry. It undermines all their investments.
But why has Customs enforcement in our free trade agreement
countries substantially gone down since 2018? We are noted by
Congress as a priority sector. Why are we a priority?
Essentially, 40 percent of the duties are collected--are
collected on our industry.
So people want to cheat the system. We can't allow people
to bypass the rules under our free trade agreements to erode
our industries and industries of our partner countries, and
that's why we need immediate help.
Mr. Strong. Thank you.
Chairman Bishop, I yield back.
Mr. Bishop. The gentleman yields back.
I now recognize Mrs. Ramirez for 5 minutes of questioning.
Mrs. Ramirez. Thank you. I like how you said the last name.
Thank you, Chairman, I appreciate it, and Ranking Member Ivey.
This hearing was presented to us as a bipartisan
opportunity to discuss bipartisan law. However, I don't think
that the Coalition for a Prosperous America can really be a
voice in bipartisan conversation, and here's why.
The chairman of the coalition, Zach Mottl, he's a resident
of Burr Ridge, Illinois. I'm from Illinois. Just a few minutes
from my district, actually. So I know of him. The chairman is a
vaccine-denying, anti-abortion, right-wing activist who called
President Joe Biden, the President who signed the Uyghur Forced
Labor Prevention Act, China Joe.
Mr. Mottl and his organization are not fit to advise
Congress on trade policy or human rights policy, just as he was
not fit to be a trustee or acting mayor of the Village of Burr
Ridge, Illinois. You see, in 2019, when Mr. Mottl was acting
mayor of Burr Ridge, 3 Burr Ridge Village officials called for
Mr. Mottl to step down, saying he had politicized the position
in violation of a promise.
The Village board also censured Mr. Mottle as a trustee 5
times and called for his resignation multiple times. I don't
believe--and I know we've all been in this hearing now for a
little bit over an hour--that, if Mr. Mottl is not good enough
to serve the people of Burr Ridge, that we should be hearing
from someone that directly works under Mr. Mottl.
So, with that on the record, I would like to pivot and ask
questions to the other witnesses.
Mr. Stumo. May I actually respond, please?
Mrs. Ramirez. I don't have a question. I have a limited
amount of time.
Mr. Stumo. We've been in business since 2007, and we have a
bipartisan board.
Mrs. Ramirez. I'm reclaiming my time. I'm reclaiming my
time. I'm reclaiming my time.
Mr. Bishop. The time belongs to the Member. If another
Member decides to give you time--we may have a second round of
questioning, we'll see. But the time belongs to the Member.
Mrs. Ramirez. Thank you so much.
For Ms. Greve, we've spoken a lot about goods made with
forced labor in Xinjiang, specifically, but the Uyghur Forced
Labor Prevention Act also covers goods made outside of the area
if there's evidence that workers have been transferred to other
parts of China for forced labor or under coercive conditions.
So let me ask you: To what extent should importers be
paying attention to their supply chains that originate from
other parts of China that may involve forced labor forced upon
the Uyghur population?
Ms. Greve. Thank you very much, Congresswoman. Our
coalition, the Coalition to End Forced Labor in the Uyghur
Region, has been calling since July 2020 for every corporation
to know their global supply chain. This law puts--makes that a
legal obligation. If your imported product is detained for
examination, you have to show CBP that you have a complete
supply chain tracing.
Certainly, a number of industries are using Uyghur forced
labor outside of the Uyghur region. Certainly, any company that
has a, quote--most companies--zero tolerance for forced labor.
If they say that, they need to know their supply chain.
Mrs. Ramirez. Thank you. So I have just one more question,
and, Mr. Mattis, Ms. Glas, or Ms. Greve, you can answer this:
Knowing that importing goods made with forced labor has long
been prohibited, and Congress has strengthened CBP's ability to
stop goods from Xinjiang made with forced labor from coming
into the United States, what are you seeing other countries
doing to reduce some of that forced labor goods from entering
the markets? Then how should the United States be working to
ensure that that's happening? Any of the three of you. We have
about a minute.
Ms. Glas. Just quickly, not every country has a ban on
forced labor products, OK, unfortunately, even including
cotton. So our Government, on a diplomatic level at the State
Department, and some of our agencies needs to be working with
the other governments to more effectively enforce this.
To Ranking Member Ivey's question related to the Congo, we
are seeing the Chinese take advantage of other countries and
trying to illegally transship or invest in assets that make it
almost impossible under the BRI Initiative that help perpetuate
the use of forced labor on the ground or facilitate forced
labor products.
Our State Department should be taking a lead role, along
with CBP, to help deter this trade, and we need to be working
with the international community.
Mrs. Ramirez. Thank you. Mr. Mattis.
Mr. Mattis. The European Parliament is considering formal
legislation to mirror in some ways the Uyghur Forced Labor
Prevention Act but primarily to deal with forced labor
generally internationally. But it's been very clear in the
public releases from the European Parliament that this is
primarily directed at the PRC, that this is their major
concern.
So I think for you, as Members of Congress and meeting with
your European counterparts, particularly those in the European
Parliament, this is something that you can do to support U.S.
diplomacy and the effort to enforce.
Mrs. Ramirez. Thank you.
My time is up, and so I'll yield back. Thank you, Chairman.
Mr. Bishop. The gentlelady yields back.
I think the question is whether, at the discretion of the
Chair with the concurrence of the Ranking Member, I think we'll
proceed to a second round of questioning.
Mr. Ivey. Certainly, Mr. Chairman.
Mr. Bishop. With that--and, Mr. Stumo, I think if you want
to have an opportunity to respond to that, I'll yield you some
time.
I will say this hearing has been extraordinarily
bipartisan, and there's been a commonality in the witnesses and
the Members in terms of digging into the issue, but I will
yield you 30 seconds or so if you wish to address the matters
that were raised by Ms. Ramirez.
Mr. Stumo. Yes. We're very bipartisan. We have very strong
Democratic members who have been big supporters of Democrats.
We have strong Republican members. They all have very strong
feelings for their party and on other issues.
But trade and forced labor doesn't cut across--cleanly
across party lines. It's a very strong issue for our country,
for our employment. While there's a ton of partisan issues out
there, this isn't one of them. I'm proud to be working on this
issue, which I can work with people like Earl Blumenauer,
Ranking, or Chairman Jason Smith, Sherrod Brown, Marco Rubio,
et cetera.
In fact, on de minimus we do have three bipartisan bills
that this committee may want to look at from Ranking Member
Blumenauer in Ways and Means Trade Subcommittee, joined by Neal
Dunn, Sherrod Brown, joined by Marco Rubio in the Senate and
Bill Cassidy from Louisiana, joined by Tammy Baldwin and J.D.
Vance. So----
Mr. Bishop. Thank you, sir. I appreciate the point. I think
the point is well made.
Mr. Mattis, I want to direct to you maybe, because I didn't
hear you addressing the question of--you talked a little bit
about flood and--and the presumptions built in and so forth,
the way it operates, the way maybe it ought to be changed. I'm
hearing about the de minimus exception and ways it ought to be.
It seems to be a mockery of its own name, because about a
billion packages. You can see why you couldn't set up a
regulatory interdiction there that would work.
This point that Ms. Glas has made and this article seems to
make that CBP spent about a million dollars doing isotopic
testing, I noted Mr. Thanedar's comment that it's easy testing
to do. I'm mystified and I know--perhaps we need to ask CBP,
but why would there not be more resources devoted to doing
that? Do you have any insight on that, given your policy
expertise?
Mr. Mattis. Frankly, I'm not sure why more hasn't been
done. I know that when the process began of drafting this piece
of legislation and working it through and getting technical
assistance, there were something like 30 billets at CBP that
were not all full-time employees.
It added up to 30 full-time employees that were devoted to
forced labor enforcement investigations at CBP headquarters.
That was simply too small, too few, and not enough resources.
So I think one of the things that I've seen, at least in my
experience in government, was that, when you ram--when you
provide a bunch of money or you provide a bunch of resources,
when you have such a small existing capacity, it takes time to
build out, and that's kind of a funnel that things are being
forced through.
I think, over time, we can--I think we can all agree that
CBP has not moved fast enough or we would like it to have moved
more. The direction has been in the right way. We just haven't
seen it move at the speed and scale that it should be.
Mr. Bishop. Anything to add to that, Ms. Greve?
Ms. Greve. I would note that it's quite important to
maintain the level of funding. We heard that the $70 million
addition in fiscal 2023 may not be maintained in 2024, and that
would be a real blow backward. It takes time to cost out these
contracts, as you know, in government. To then suddenly drop
the number will completely stop this momentum.
Mr. Bishop. I hear that. I do wonder what became of the $70
million that was used, and I think we need to ask.
Mr. Stumo, do you want to add something?
Mr. Stumo. I would just add one thing. I mentioned before
when Mr. Ivey was out that the Withhold Release Orders with
authority under section 307 or 19 U.S.C. 1307, you can do a ban
on products like we did with Turkmenistan, all products, in the
sense that they were the problematic industry, and then give
waivers for those that prove that they're compliant. That's a
model that could potentially be used for China. Ban, you know,
WRO equivalent against everything, and then you prove that
you're compliant with your own isotopic testing or whatever.
Mr. Bishop. Ms. Glas, I'll give you the last 30 seconds to
just address any topic you want to at further length, including
the one that's being discussed.
Ms. Glas. I would just say we always have to be mindful of
the loopholes we create, right? What are we trying to get at in
terms of addressing some of these issues, and then what are the
unintended consequences, right?
Because nobody labels their product as a forced labor
product into the United States. If we end up banning a
particular product, guess what, instead of it being t-shirts,
it's going to be an auto part. No one is labeling this is a
direct mail shipment for Kim Glas for fentanyl.
I mean, we have got to be mindful that people are looking
to game the system. So what do we have to do? We have to make
sure that we are enforcing and thinking ahead, OK, what are the
unintended loopholes? That's what you need to ask CBP, OK? Why
haven't you moved forward with rulemaking process to stop de
minimus? What are you doing? Also, what's limiting you?
Ranking Member Ivey, if there's some limitations, we'll
support it, but at least come to us. Our industry can also be a
resource on some of the technologies. We want to be asked. We
want to be an active partner in this, because this trade is
killing us.
Mr. Bishop. My time has expired. Thank you, Ms. Glas.
I'll yield to the Ranking Member for 5 minutes.
Mr. Ivey. Thank you, Mr. Chairman.
I'll pick up where you left off along the point you were
just making. But it appears to me that there are briefing,
quarterly briefing requirements I think by the statute so--and
there's multiple committees that have jurisdiction over this.
So it may be they're briefing other committees and not us or,
you know--but that may be an opportunity for us to have more
input from not only your industry but others. You know, the
electronics industries that we were talking about a few minutes
ago, I'd love to hear more from them as well.
With respect to Withhold Release Orders, that's in the
statute. So they have the authority to do that if I'm reading
this correctly.
But I did want to ask this: I've got an article here that
talks about U.S. targets two China-based firms over forced
labor practices. It looks like a DHS press release. But it's
the Camel Group, a battery manufacturer, and Chenguang Biotech
Group, a spice and extract manufacturer.
So there's two--and this is dated August 2, 2023. So
there's two moving forward, just gotten started. Are you
familiar with these at all? No? OK. Well, that's fine.
But it does go to another issue that was raised a few
minutes ago I think, which was, why aren't they doing more of
these? Why aren't they putting more businesses on the entity
list? I think what I'll have to ask--and you all might not be
the group. Maybe we've got to go back to CBP to figure it out.
But what I'm told is one of the concerns is that it's,
because it's a new regulatory regime, they're worried about if
you start putting businesses on there and you start losing
these, you create a precedent moving forward that would be
negative. So, apparently, they're trying to set up the better
possible cases.
Having said that, I think--I take your point, Ms. Glas, you
know, you need assistance now. This is a challenge that's tough
on your industry and also on, obviously, the people, Ms. Greve,
who are suffering at the other end of this supply line.
I want to ask this question too before I run out of time.
The Congo issue, Democratic Republic of Congo, and this is the
rechargeable batteries. This is an article from NPR. It's Terry
Gross, ``How Modern-Day Slavery in the Congo Powers the
Rechargeable Battery Economy.''
Mr. Bishop. Would the gentleman like to submit it for the
record?
Mr. Ivey. I would.
Mr. Bishop. Without objection, so ordered.
[The information follows:]
How `modern-day slavery' in the Congo powers the rechargeable battery
economy
February 1, 2023, 12:38 PM ET
Terry Gross
Smartphones, computers and electric vehicles may be emblems of the
modern world, but, says Siddharth Kara, their rechargeable batteries
are frequently powered by cobalt mined by workers laboring in slave-
like conditions in the Democratic Republic of Congo.
Kara, a fellow at Harvard's T.H. Chan School of Public Health and
at the Kennedy School, has been researching modern-day slavery, human
trafficking and child labor for two decades. He says that although the
DRC has more cobalt reserves than the rest of the planet combined,
there's no such thing as a ``clean'' supply chain of cobalt from the
country. In his new book, Cobalt Red, Kara writes that much of the
DRC's cobalt is being extracted by so-called ``artisanal'' miners--
freelance workers who do extremely dangerous labor for the equivalent
of just a few dollars a day.
``You have to imagine walking around some of these mining areas and
dialing back our clock centuries,'' Kara says. ``People are working in
subhuman, grinding, degrading conditions. They use pickaxes, shovels,
stretches of rebar to hack and scrounge at the earth in trenches and
pits and tunnels to gather cobalt and feed it up the formal supply
chain.''
Kara says the mining industry has ravaged the landscape of the DRC.
Millions of trees have been cut down, the air around mines is hazy with
dust and grit, and the water has been contaminated with toxic effluents
from the mining processing. What's more, he says, ``Cobalt is toxic to
touch and breathe--and there are hundreds of thousands of poor
Congolese people touching and breathing it day in and day out. Young
mothers with babies strapped to their backs, all breathing in this
toxic cobalt dust.''
Cobalt is used in the manufacture of almost all lithium ion
rechargeable batteries used in the world today. And while those outside
of the DRC differentiate between cobalt extracted by the country's
high-tech industrial mining companies and that which was dug by
artisanal miners, Kara says the two are fundamentally intertwined.
``There's complete cross-contamination between industrial
excavator-derived cobalt and cobalt dug by women and children with
their bare hands,'' he says. ``Industrial mines, almost all of them,
have artisanal miners working, digging in and around them, feeding
cobalt into the formal supply chain.''
Kara acknowledges the important role cobalt plays in tech devices
and in the transition to sustainable energy sources. Rather than
renouncing cobalt entirely, he says people should focus on fixing the
supply chain.
``We shouldn't be transitioning to the use of electric vehicles at
the cost of the people and environment of one of the most downtrodden
and impoverished corners of the world,'' he says. ``The bottom of the
supply chain, where almost all the world's cobalt is coming from, is a
horror show.''
On how ``artisanal'' cobalt mines continue to operate in the DRC--
despite being illegal
Technically, under the law, there should not be artisanal mining
taking place in any industrial mine. And yet, lo and behold, at most of
the industrial mines, there is some artisanal mining taking place. In
some cases, predominantly artisanal mining is taking place. And the
reason is, it's a penny-wage way to boost production. I mean, imagine
you're in a part of the world where there are millions of people who
barely get a dollar or two a day who are grindingly poor and will
accept almost any labor arrangement just to survive. Well, you put them
in a tight pit, cram them with 10,000 other people and pay them a
couple of dollars, and they'll produce thousands of tons of cobalt per
year for almost no wages. And so that's not legal, but it's happening.
On why these conditions are on par with slavery
``Imagine an entire population of people who cannot survive without
scrounging in hazardous conditions for a dollar or two a day. There is
no alternative there. The mines have taken over everything.''--
Siddharth Kara
Imagine an entire population of people who cannot survive without
scrounging in hazardous conditions for a dollar or two a day. There is
no alternative there. The mines have taken over everything. Hundreds of
thousands of people have been displaced because their villages were
just bulldozed over to make place for large mining concessions. So you
have people with no alternative, no other source of income, no
livelihood. Now, add to that the menace in many cases of armed forces
pressuring people to dig, parents having to make a painful decision,
``Do I send my child to school or do we eat today?'' And if they choose
the latter, that means bringing all their kids into these toxic pits to
dig just to earn that extra fifty cents or a dollar a day, that could
mean the difference between eating or not. So in the 21st century, this
is modern-day slavery. It's not chattel slavery from the 18th century
where you can buy and trade people and own title over a person like
property. But the level of degradation, the level of exploitation is on
par with old-world slavery.
On the danger of collapse in artisanal mines
``Imagine a mountain of gravel and stone just avalanching down on
people, crushing legs and arms, spines. I met people whose legs had
been amputated, who had metal bars in where their legs used to be.''--
Siddharth Kara
I spoke with many families whose children, husbands, spouses, had
suffered horrific injuries. Oftentimes, digging in these larger open-
air pits, there are pit wall collapses. Imagine a mountain of gravel
and stone just avalanching down on people, crushing legs and arms,
spines. I met people whose legs had been amputated, who had metal bars
in where their legs used to be. And then the worst of all is what
happens in tunnel digging. There are probably 10,000 to 15,000 tunnels
that are dug by hand by artisanal miners. None of them have supports,
ventilation shafts, rock bolts, anything like that. And these tunnels
collapse all the time, burying alive everyone who is down there,
including children. It's a demise that is almost impossibly horrific to
imagine. And yet I met mothers pounding their chests in grief, talking
about their children who had been buried alive in a tunnel collapse.
And these stories never get out of the Congo. People just don't know
what's happening down there.
On the trafficking of children to work in the mines
There's money to be made in every corner and every direction. And
you've got these militias. Sometimes they're called commandos and they
will abduct children, traffic children, recruit children from even
other parts of the Congo. I met children who had come from hundreds of
miles away and have been brought through militia networks down into the
copper cobalt mines to dig. And as they dig and earn their dollar or
two, that's what funds these militia groups. So children are the most
heavily exploited of all the people down there. They're the most
vulnerable and oftentimes trafficked and exploited in some cases in
very violent circumstances.
On government corruption preventing change
Corruption is a big part of the problem. That's what allows so much
of this abuse to persist. And the thing is, imagine the Congo. It's a
war-torn, deeply impoverished nation that has been subjected to
generations of pillage and ransacking going all the way back, now
centuries, to the slave trade. And so when big foreign stakeholders
come waving around large sums of money, it's not a long stretch of the
imagination to see that there would be corruption . . .
The first democratically elected president of the Congo [in 1960],
Patrice Lumumba, made a pledge that the country's immense mineral
riches and resources would be used for the benefit of the people who
live there. And in short order, within 6 months, he had been deposed,
assassinated, chopped to pieces, dissolved in acid and replaced with a
bloody dictator, a corrupt dictator who would keep the minerals flowing
in the right direction. So if you don't play ball with the power
brokers at the top of the chain and with the Global North, Patrice
Lumumba showed what's the outcome, what will happen. And I think that's
also a part of this lesson that we need to understand historically,
when we talk about things like corruption.
On how China came to own most of the industrial mines in the Congo
China cornered the global cobalt market before anyone knew what was
happening. It goes back to the year 2009 under the previous president
in the Congo, Joseph Kabila. He signed a deal with the Chinese
government for access to mining concessions in exchange for development
assistance, a commitment to build roads and some public health clinics,
schools, hospitals, things like that--and that opened the door. Before
anyone knew what happened, Chinese companies had seized ownership of 15
of the 19 primary industrial copper-cobalt mining concessions down
there. So they dominate mining excavation on the ground. And not just
that, they dominate the chain all the way through to the battery level.
They have about 70, 80 percent of the refined cobalt market and
probably half of the battery market.
On witnessing suffering and trauma
There are some incidents that are just so burned into me that
they'll come at me just like a terror, and it's hard. I just hope I've
done justice to those stories and to the people who shared their
tragedies with me, courageously shared these tragedies with me. I just
want their voices [to] reach the world and then the world will decide
what to do with the truth and the testimonies of the Congolese people.
But if I've done some justice to bringing those voices out into the
world that can scarcely function without the suffering of the Congolese
people, then it's all worth it. Even the nightmares and the terrors,
it's all worth it.
Sam Briger and Joel Wolfram produced and edited this interview for
broadcast.
Bridget Bentz, Molly Seavy-Nesper and Gisele Grayson adapted it for
the web.
Mr. Ivey. Thank you, Mr. Chairman.
But basically what it does is it walks through how things
are operating in the DRC with respect to these slave-like
conditions for cobalt reserve mines. These are artisanal
miners, so to speak, but basically people are working with hand
tools. They don't get protection from toxic cobalt dust, which
is generated when you're mining it.
As we mentioned earlier--Mr. Chairman, I think you pointed
it out--some of the people who are doing this mining are as
young as 6-year-olds. I think 40 percent of the people doing
the mining are children. These are mines that are in Africa,
but many of them are owned by China.
There's cross-contamination, or at least that's the issue
that's been raised with respect to cobalt that's come from
these kinds of mines as opposed to the proper supply chain
mines.
My understanding is that the businesses who are using the
cobalt products--and many of them are some of the top
electronics companies in the world--are supposed to be keeping
their supply chains clean, so to speak. But I'm not clear on
whether that's working, and some of these articles are raising
the possibility that it doesn't.
I wanted to get a sense of--and I know you're textiles, not
minerals. But, to the extent you have an understanding of how
we can get the government some assistance from the private
sector that's shipping these materials to provide not only
transparency but some monitoring of their own so that we don't
have to have CBP do all the heavy lifting. There's paperwork
that would be generated.
Then, back to the point that was made earlier, I guess by
me. If we have I think stiffer enforcement penalties than what
we've discussed today, it creates an incentive for these
businesses to--if I'm understanding this right.
So, for example, the clothes made in Vietnam that you've
discussed, and it's company X that does the final, you know,
sewing work and then ships them over. Well, if we find out that
that shipment, through the testing, came from that region of
China that's providing forced labor, what do we do about it?
I mean, if we just have them ship it back to another
country, and they don't get as much as they would there as they
would in the United States, but so what, they're still making
some money. Meanwhile, more of this material is coming through.
So, not only is there no downside to getting caught or a
minimal downside, they're still benefiting from all the
materials that are coming, whether it's electronics or
textiles.
It seems to me that that's insufficient. That if we have to
put in all of that work to find these and put all the testing
and the resources and the like, when we find them, I think
there have to be some kind of sufficient sanctions in order to
send the message back that it's important for you to police
your own supply lines and, you know, so that you're protecting
your business, create an incentive for the business to do it as
well.
I see I've went way over my time, Mr. Chairman. I
appreciate your indulgence.
Mr. Bishop. Mr. Ranking Member, I appreciate you yielding
back.
I yield to the gentleman Mr. Ezell for 5 minutes of
additional questioning.
Mr. Ezell. I wish I could speak like Mr. Ivey. I'll tell
you, it's--I could just sit here and listen to him talk, and it
seems like the clock goes slow on him and fast on me. So
probably--so----
Mr. Bishop. You think fast, though, right, sir?
Mr. Ezell. I do. Yes, I think fast. I just can't get it
out. Anyway----
This is a good environment today, so I was very glad to
have a calm environment here today, and we can all go forward
here.
So, Mr. Mattis, we know the solar installations are
expanding here in the United States. In my district, there are
at least 10 completed or approved utility-scale solar projects.
I want Mississippians to be confident these solar panels are
not enriching the CCP and contributing to this terrible slave
labor genocide.
Unfortunately, we already have examples where the CBP has
failed to stop solar companies with connections to forced labor
in China. This again, like the shrimping issue I just discussed
earlier, should be prevented under our current laws.
What more can the CBP do to target foreign materials from
China that are used in solar sales?
Mr. Mattis. In this case, I think it's a question of simply
recognizing that, if it's being--if it's polysilicon and it's
coming out of the PRC, then it almost certainly should be
subject to an enforcement action, because so much of the
polysilicon products and processing all the way up through
certain pieces of the solar panel and up to almost a complete
product will have some connection to the Xinjiang Uyghur
Autonomous Region. It is about goods that are produced wholly
or in part or goods that use materials that come from the
Xinjiang Uyghur Autonomous Region that should be subject to
that--to that seizure and prevented from entering into the
United States.
So I think that this is one of those priority areas where,
if you have a PRC connection, if the polysilicon is sourced
from the PRC or other parts of it that it should be on the
high-priority list. I would just point out that there were a
number of industry conversations that took place that were not
supportive, shall we say, of the Uyghur Forced Labor Prevention
Act in the process.
There were a handful of American solar companies, though,
that were the ones that were among the most supportive because
they recognize the cost that they were facing. When we look--if
we're looking at a problem like this, you know, broadly
speaking, about the PRC's predatory economic practices, if we
think that there's a market-based solution for nonmarket
problems, we're going to keep doing the wrong thing to address
this.
This is a little bit like preparing for a football game and
thinking that more time in the gym and more time on the
practice field you're going to win, when someone is coming
along with a crowbar and going to break your knee, right? It
doesn't matter how much you did on the other things if someone
is going to break your knee.
I think one of the points of the Uyghur Forced Labor
Prevention Act and other trade actions like Withhold Release
Orders that could be used is that this is about protecting
sort-of the knee of American industry so that it can actually
take the field, whether it's level or not.
Mr. Ivey. Am I the only one that thought of Tonya Harding
when you said that? My goodness. I apologize.
Mr. Ezell. Thank you, Mr. Chairman. I yield back.
Mr. Stumo. I actually would--if you wouldn't mind, I'd like
to----
Mr. Ezell. No, go ahead.
Mr. Stumo [continuing]. Address that we were involved with
this quite a bit. With solar, we've been building back U.S.
solar quite a bit with--starting with President Trump's
tariffs, 201 tariffs on solar, which got a lot more building
going on, and then the Inflation Reduction Act, with its
production tax credits last year.
So you have both the tariff side and then the 301 tariffs
on top of it, but then providing incentives to build here. I
know from a lot of solar companies we have just a construction
super cycle in solar going on here, unfortunately. So both a
Republican initiative and a Dem initiative we supported there.
China then tried to in this sort-of trade, which is just
the smuggler's anarchy of transshipment and circumvention, they
sent it through Southeast Asia. Commerce found that China was
circumventing through Southeast Asia. The administration
declared a climate emergency and declared a moratorium on
tariffs through Southeast Asia for that climate emergency,
which we disagreed with. The Congress, by a majority, voted to
reverse that but not veto-proof.
Right now, we've got a big--a lot of solar going on. We do
have the Chinese with their low-value currency and their crisis
at home that's really subsidizing and sending as much--the
solar volume here is really big. So we have to, on one hand,
put tariffs up and, on the other hand, subsidize. The tariffs
can pay for the subsidies in any industry, but that's something
we've seen that it does work.
Mr. Ezell. Thank you.
Mr. Chairman, I yield back.
Mr. Bishop. The gentleman yields back.
I want to thank all of you, all the witnesses for your
valuable testimony.
Thank you to the Members.
I think this has been a very interesting and useful
hearing, and I see lots of opportunities for bipartisan follow-
up to this hearing.
The Members of the subcommittee may have some additional
questions for you. We would ask the witnesses to respond to
those in writing, if received. Pursuant to committee rule
VII(D), the hearing record will be held open for 10 days.
Without objection, the subcommittee stands adjourned.
[Whereupon, at 3:33 p.m., the subcommittee was adjourned.]
[all]