Liability for Forced Labor Under U.S. Law: The Long Road Ahead

In October 2021, Reuters reported that U.S. remote control maker Universal Electronics Inc (UEI), took part in an agreement with Xinjiang authorities for the transport of Uyghurs to work in their plant in southern China. While many global corporations, including American companies and many others which trade on the United States stock exchange, are reportedly linked Uyghur forced labor through their supply chains, this is the first confirmed instance of an American corporation directly employing and transporting Uyghur forced laborers in China from Xinjiang. The UEI example, along with reports of Uyghur forced labor found in the supply chains of American companies such as Nike and Apple, highlights an important concern for U.S. companies: that human rights abuses such as forced labor or human trafficking continue to exist in the value chains of U.S. companies.

The U.S. has tools at its disposal to hold corporations accountable for the use of forced labor or human trafficking, such as the Trafficking Victims Protection Reauthorization Act (TVPRA), and Section 307 of the Tariff Act, which allows Customs and Border Patrol (CBP) to issue Withhold and Release Orders (WRO) against products made abroad in whole or in part using forced labor. The U.S. government has also made progress toward improving prevention and enforcement of forced labor in the U.S., including through the White House National Action Plan to Combat Human Trafficking and the recent passage of the Uyghur Forced Labor Prevention Act.

U.S. Government Initiatives Toward Combatting Forced Labor

White House National Action Plan for Combatting Human Trafficking 

The White House’s National Action Plan to Combat Human Trafficking, which was released in January lays out a set of principles the administration aims to achieve, with a list of priority actions organized under three Pillars: prevention, protection, and prosecution of human trafficking. These pillars represent the Biden administration’s commitments through inter-agency collaboration and allocation of resources toward combating human trafficking.

Principle 1.3, under Pillar one of the NAP (prevention of human trafficking), calls for strengthening of “efforts to identify, prevent, and address human trafficking in product supply chains and ventures.” To meet this principle, the NAP lays out three primary commitments, including:

  • Government agencies with a heightened risk for human trafficking in government contracts with designate a senior official to coordinate with other agencies and ensure implementation of anti-trafficking procurement practices
  • Relevant agencies will work together for outreach with industries where the risk of forced labor and human trafficking in supply chains is high. This includes raising industry leaders’ awareness of existing government resources to support the prevention of human trafficking and forced labor. These agencies will work with industry leaders to discuss existing challenges as well as opportunities for improvement of human trafficking and forced labor prevention.
  • The Department of Defense’s (DOD) Trafficking in Persons Program Management Office will work to identify “promising practices” for hiring and recruitment under government contracts. This information will then be shared with other government contracting authorities to ensure the prevention of labor trafficking in government contracts.

In Principle 1.4, also under Pillar one of the NAP, the White House commits to building “capacity to prohibit goods produced with forced labor from entering United States markets and stop those seeking to criminally benefit from forced labor overseas.” Under this Principle, the NAP lists commitments which include:

  • DHS’s United States Customs and Border Patrol (CBP) will make information on forced labor trade enforcement accessible on their website and the federal registrar, including making Withhold and Release Orders and Findings public. CBP will share government resources on forced labor due diligence on their website.
  • The United States Trade Representative (USTR) will ensure U.S. trade policy contributes to U.S. anti-trafficking and forced labor efforts wherever possible through coordinating with relevant government agencies. This includes through negotiating labor rights commitments with U.S. trade partners.

Other Recent USG Commitments

The White House’s NAP to Combat Human Trafficking is one of a number of recent initiatives aimed at preventing corporations from involvement in human rights abuses. In addition to the NAP, the White House has also made commitments as part of the 2021 Summit For Democracy, including the M-Power initiative, through which the Bureau of International Labor Affairs (ILAB) will work with various stakeholders to improve labor rights. ILAB, along with other relevant government agencies, will spend $120 million over the next two years to strengthen worker voice and support a strong labor movement. Through the collaboration of like-minded governments, labor stakeholders, and worker organizations, the M-POWER initiative will work toward strengthening trade unions, supporting labor reform, promote worker organizing, and extend protections to vulnerable workers throughout the world.

More recently, the Uyghur Forced Labor Prevention Act was passed into law on December 23, 2021, which requires CBP to treat products being imported into the U.S. which were produced in the Xinjiang Uyghur Autonomous Region (XUAR) with a presumption that the products were made with forced labor. While these efforts all represent steps toward stronger commitments to preventing corporate human rights abuses, there remain significant gaps that the U.S. government can take steps to fill.

Gaps and Solutions

While these commitments represent a positive step toward the elimination of forced labor from the value chains of U.S. companies or from entering U.S. markets, gaps still exist that need to be addressed.

Gaps in Import Prohibitions 

The Reuters article about UEI illustrates a significant gap in existing import prohibitions. While UEI’s products made with Uyghur forced labor could be prevented from entering U.S. markets, according to Reuters, “a very small quantity” of UEI’s products made in their factory in southern China are imported into the U.S. This means that, even if these products were banned from importation into the U.S., exports to other countries would continue. Moreover, even if UEI’s products were prevented from being imported into the U.S., not only would their operations continue, mostly unscathed, but their profits from products made using Uyghur forced labor would continue to come into the U.S., where UEI is headquartered, and where executives’ salaries are likely paid. This presents a serious gap in the U.S.’s enforcement and prevention of human rights abuses like forced labor and human trafficking in value chains of U.S. companies.

The UEI example demonstrates that, in addition to prohibiting products made with forced labor or human trafficking from entering U.S. markets, U.S. values would be served by also preventing the profits made from such products from entering U.S. markets. Additionally, the U.S. should work with other nations to ensure that they develop and strengthen mechanisms intended to prohibit import of products using forced labor. The European Union Commission announced in September 2021 a commitment to the prohibition of products made with forced labor from entering EU markets. This would result in the closing of a significant safe harbor for companies whose products are blocked from import into the U.S.  Additionally, while the United States Mexico Canada Agreement (USMCA), which went into effect in July 2020, includes “groundbreaking commitments” on preventing the import of products made using forced labor, these commitments have yet to be fully realized. Such import prohibitions could ensure that when a company such as UEI is prohibited from importing their products into the U.S, those products will not have a safe harbor at other ports.

Expanding Corporate Accountability Measures 

While some U.S. companies engage in human rights conscious business practices, others profit from engaging in practices that push suppliers toward providing lower and lower cost items, at the expense of providing employees a living wage and adequate working conditions. This system allows companies to unfairly profit from human rights abuses without consequence and creates unfair competition in which corporations are incentivized to engage in human rights abuses in their value chains in order to be competitive with their peers. Many in the private sector view the presence of human rights abuses in their value chains as a standard cost of business. However, while this method of conducting business is commonplace, it should not be normal.

Holding U.S. corporations accountable for activities in foreign countries is not a novel concept. For example, U.S. companies are prohibited from engaging in bribery and corruption anywhere in the world, like through the Foreign Corrupt Practices Act (FCPA). The U.S. should create similar legal prohibitions against the use of forced labor, human trafficking, or other human rights abuses in the value chains of U.S. companies. U.S. institutions can do this through extending mechanisms which are already in place to include prohibitions of human rights abuses in addition to abuses such as corruption and bribery.

U.S. law has some mechanisms to disincentivize human rights abuses such as forced labor from occurring within the supply chains of U.S. corporations. However, existing mechanisms are incomplete and allow too much space for corporations to continue exploitative business practices with impunity. Forced labor can be targeted more effectively through prohibiting profits made from the sale of goods made with forced labor from entering U.S. markets. Import bans can also be strengthened through ensuring similar bans exist in other states.

Additionally, corporations need to be legally liable under U.S. law to be disincentivized from committing human rights abuses abroad. Many states in Europe have either developed, or are in the midst of developing mandatory human rights due diligence legislation (mHRDD), which requires corporations to engage in human rights and environmental due diligence to ensure that human rights abuses are not present in their supply chains. As more of these pieces of legislation are enacted in other countries, U.S. corporations that operate transnationally will be required to abide by mandatory human rights due diligence. The U.S. can contribute to strengthening these types of initiatives through developing its own legislation aimed at holding corporations accountable for human rights abuses.

Written by Noor Hamadeh, Advocacy Counsel at ICAR


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