Fashion Intel & Analysis

September 22, 2020 

This afternoon, in a 406 to 3 vote, the House of Representatives passed the Uyghur Forced Prevention Act (H.R. 6210). In a statement from the Uyghur Human Rights Project, Executive Director Omer Kanat said “Companies are now on notice. Americans do not want to be complicit in buying products made by Uyghurs locked in Chinese forced-labor factories. UHRP warmly thanks the House of Representatives for responding with a resounding vote to pass this bill.”

September 22, 2020 

This afternoon the House of Representatives voted to unanimously approve renewal of the Caribbean Basin Trade Partnership Act (CBPTPA). Kevin Brady (R -TX) applauded the passage and noted that CBTPA creates opportunity for workers, farmers, innovators, as well as strong market for U.S. made yarns and fabrics. Brady then went on to say “But we should be here today voting on two trade extensions: the Caribbean Basin Trade Partnership and the Generalized System of Preferences…In the midst of a pandemic, we should be doing everything we can to offer our job creators certainty, yet Democrats are not including an extension of GSP in today’s vote. The GSP program reduces tariffs on thousands of products from around the world. This program saves American families money on everyday products and boosts America’s economy. And in my state of Texas, GSP brought our consumers and small businesses over $76 million in cost savings in 2018 alone.” You can read the full remarks here.

September 22, 2020 

The House calendar shows that the votes are expected this week on two pieces of legislation focused on sanctions against China and products made in the XUAR region. The timing for House consideration is still up-in-the-air, and could happen as early as today, or as late as Friday. Following consideration by the Rules Committee yesterday, the House is expected to take up H.R. 6210, the Uyghur Forced Labor Prevention Act, and H.R. 6270, the Uyghur Forced Labor Disclosure Act.

The bill summary for H.R. 6210 is:

This bill imposes various restrictions related to China's Xinjiang Uyghur Autonomous region, including by prohibiting certain imports from Xinjiang and imposing sanctions on those responsible for human rights violations there.

Goods manufactured or produced in Xinjiang shall not be entitled to entry into the United States unless Customs and Border Protection (1) determines that the goods were not manufactured by convict labor, forced labor, or indentured labor under penal sanctions; and (2) reports such a determination to Congress and to the public.

The President shall periodically report to Congress a list of foreign entities and individuals knowingly facilitating (1) the forced labor of Uyghurs, Kazakhs, Kyrgyz, and members of other Muslim minority groups in Xinjiang; and (2) efforts to contravene U.S. laws regarding the importation of forced labor goods from Xinjiang. The President shall impose property-blocking sanctions on the listed individuals and entities and impose visa-blocking sanctions on the listed individuals.

Securities issuers required to file annual or quarterly reports with the Securities Exchange Commission shall disclose in such reports certain information related to Xinjiang, including instances where the issuer knowingly (1) engaged in activities with an entity helping to create mass surveillance systems in Xinjiang, (2) engaged in activities with an entity running or building detention facilities for Muslim minority groups in Xinjiang, or (3) acquired a significant amount of textiles produced in Xinjiang. After being notified of such a disclosure, the President shall determine whether to investigate if sanctions or criminal charges are warranted.

The bill summary for H.R. 6270 is:

This bill requires issuers of securities to publicly disclose their activities related to China's Xinjiang Uyghur Autonomous Region. Specifically, issuers must disclose the importation of manufactured goods and materials that originated or are sourced from that region, as well as details about the commercial activity, gross revenue and net profits, and future import plans regarding these goods and materials. Furthermore, issuers must disclose whether any of these goods or materials are from forced labor camps.

In a related action, the Wall Street Journal reports today that several major compliance audit organizations have announced they will not conduct audits in the XUAR region. According to the article, the firms are: Bureau Veritas, TÜV SÜD, Sumerra, RINA SpA, and WRAP (Worldwide Responsible Accredited Production). Below is a graphic from the article breaks down the officially reported exports from the Xinjiang region.

September 22, 2020 

The House is scheduled to vote tomorrow on H.R. 991 - Extension of the Caribbean Basin Economic Recovery Act. As you know, CBTPA plays an important role in the facilitation of trade with the Caribbean Basin. Along with the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act, CBTPA has created a growing market for apparel made in Haiti. In 2019, apparel imports from Haiti grew by 13.4%. Today USFIA joined with other industry groups to ask House members to vote YES on H.R. 991. The letter says that “not only have these programs supported numerous U.S. textile, apparel, and footwear jobs, but they have also supported economic development in the region, advancing key U.S. foreign, security, and immigration policy goals.” If CBTPA is part of your sourcing strategy, we encourage you to contact your Representatives and ask them to support this legislation.

Reflecting the widespread support for CBTPA, last week the Congressional Black Caucus (CBC) urged renewal of CBPTA in a letter to Congressional leadership. The letter outlined trade with the Caribbean Basin, in 2018 U.S. exports to all countries under CBTPA totaled $13.4 billion while imports totaled $6 billion, creating a $7.4 billion goods trade surplus for the United States. Calling on Congress to pass H.R. 991, the CBC emphasized “the prompt reauthorization of this bipartisan agreement will allow for continued engagement that are so critical to the success of our trade policies.”

September 24, 2020 

On September 18th American Shipper published an interview with Ana Hinojosa, U.S. Customs and Border Protection (CBP) Executive Director for Trade Remedy Law Enforcement and head of CBP’s Forced Labor Division. The interview focused on the recent Withhold Release Orders (WRO) on U.S. imports from the XUAR region of China. Hinjosa says since the Forced Labor Division was created in 2018, enforcement work has slowly ramped up at CBP. In 2020, CBP has issued 12 WRO’s, including the 5 WRO’s that were issued earlier this month. In the interview Hinojosa emphasizes it is the responsibility of the importer to exercise their due diligence in ensuring forced labor is not present in the supply chain. She also talks about the expectations about what companies need to do. Following are some of the key excerpts from the interview.

Question: It’s easy to track down products that are directly exported from a given company. How do you make sure the cotton out of this region does not leak into the intra-Asia countries and made into products? If it does, will you issue a WRO for those products?

Hinojosa: We have to establish reasonable suspicion the good in whole, or in part, is made with forced labor. The product itself is subject to the statute. We have a number of resources to identify what the risk is and the source of the product. We would use our audit enforcement tools as well as our lab system. We have the right to leverage whatever we can in that regard. If that product has parts made with forced labor, it will be subject to the WRO statute.

Importers must exercise due diligence, especially with China. There is so much information published on forced labor it would be hard for importers to say they did not know of the risk. You have tools like the comply chain app where businesses can figure out how to avoid goods that could be higher in risk. You have the State Department’s U.S. Trafficking in Persons Report (TIP). If you are a downstream purchaser, inform yourself on where the products you are looking to buy come from.

Question: This really is a wake-up call for companies to know their supply chains. How can a retailer prove their products are pure and do not contain cotton from that region?

Hinojosa: They need to submit a proof of admissibility. This is hard. China’s supply chains are opaque and can be difficult to track. But ultimately, it is the responsibility of a company to exercise their due diligence and make sure the product they are importing is in compliance. If they are going to use a manufacturer from another country at a lesser cost, they have to find out how that manufacturer is doing that.

The liability of bringing in goods does not end at potential detentions at the border. There can be seizures separate from that. Those consequences affect both the manufacturer or importer. They can also face civil liabilities charged by the CBP if they knowingly or negligently brought in fraudulent goods. If they are complicit, they can also be charged with criminal liabilities by Homeland Security investigations both individually or as a company. For example, we recently finalized a $575,000 civil enforcement action against PureCircle, which imported stevia products that were produced by force labor. In June, close to 13 tons of hair products manufactured by Lop County Meixin Hair Product Co. Ltd were detained at the Port of New York/Newark.