Background

A recent appeals court decision could make it easier for companies to prove their goods are not made with forced labor and thus get those products admitted into U.S. commerce.

The Court of Appeals for the Federal Circuit’s July 27 decision involves a challenge to a U.S. Customs and Border Protection determination under the Enforce and Protect Act that an importer evaded antidumping duties on pencils from China by transshipping them through the Philippines. CBP’s determination relied on evidence (including photographs, information about invoices and purchase orders, and verification reports) that was redacted from the information provided to the importer. The importer was also denied the opportunity to rebut this evidence.

The CAFC held that CBP’s failure to provide the importer with access to this information was “a clear violation” of the importer’s due process rights under the Constitution. “One relatively immutable principle of due process is that ‘where governmental action seriously injures an individual, and the reasonableness of the action depends on fact findings, the evidence used to prove the [g]overnment’s case must be disclosed to the individual so that he has an opportunity to show that it is untrue,’” the court said. “This immutable principle applies to cases where facts have been withheld from an entity during an administrative proceeding.”

CBP said it did not provide the redacted information to the importer because it was confidential business information and neither the applicable law nor regulations provide for a mechanism (e.g., an administrative protective order) for disclosure of CBI to interested parties. However, the CAFC responded that “because the Constitution authorizes, and indeed requires, the release of confidential business information in this case, the Trade Secrets Act does not stand in the way of such release.” Further, the court said, the EAPA law and regulations do not bar protective orders, and CBP has the inherent authority to issue them even if they are not explicitly authorized by law.

The court’s reasoning could potentially be applied to CBP detentions of imports under the Uyghur Forced Labor Prevention Act, which establishes a rebuttable presumption that goods made wholly or in part in China’s Xinjiang Uyghur Autonomous Region are made with forced labor and are therefore excluded from entry into the U.S. Companies dealing with affected goods have long complained that CBP provides little to no information about why it detains specific shipments under the UFLPA or what companies can do to secure their release. The CAFC ruling could be used to argue that CBP has an obligation to provide companies with the information upon which a UFLPA detention decision is based as well as the opportunity to refute it.

The decision could also help companies that repeatedly receive detentions yet subsequently prove there is no UFLPA connection for suppliers that are not on any withhold release list or any of the UFLPA lists. CBP has been withholding evidence on shipments claiming that the goods are violating the UFLPA but has not been providing the importers with any information as to why the suppliers are repeatedly targeted even though the supply chain has cleared many times.

Sandler, Travis & Rosenberg has a robust program to assist companies on forced labor issues. ST&R also maintains a frequently updated web page offering a broad range of information on forced labor-related efforts in the U.S. and around the world. For more information, please contact ST&R at supplychainvisibility@strtrade.com.

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