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DHS Offers Guidance on Examining Supply Chains for Prohibited North Korean Labour

The U.S. Department of Homeland Security has published a list of frequently-asked questions that provide further guidance on complying with an August 2017 law that generally prohibits imports of goods made by North Korean workers. U.S. law (19 USC 1307) prohibits the importation of goods mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured labour, including forced child labour. The Countering America’s Adversaries Through Sanctions Act enacted in 2017 created a rebuttable presumption that significant goods, wares, merchandise and articles mined, produced or manufactured in whole or in part by North Korean nationals or citizens anywhere in the world are forced labour goods under Section 1307. As a result, such goods are not entitled to entry at any U.S. port and may be subject to detention, seizure and forfeiture. Violations may result in civil penalties as well as criminal prosecution.

However, such goods may be imported if U.S. Customs and Border Protection finds by clear and convincing evidence that the goods were not produced with convict labour, forced labour or indentured labour. The FAQ states that this is a higher standard of proof than a preponderance of the evidence and generally means that a claim or contention is highly probable. CAATSA places the burden for providing such evidence on the importer.

One of the FAQs states that, to ensure there are no North Korean workers in their supply chains, companies should review due diligence best practices and closely re-examine their entire supply chains against countries and sectors that are at high risk for North Korean workers. The FAQ lists the following as examples of actions that may be taken to ensure due diligence but notes that due diligence is a flexible, risk-based process and that additional steps may be required.

  • a high-level statement of policy demonstrating the company’s commitment to respect human rights and labour rights
  • a rigorous continuous risk assessment of actual and potential human rights and labour impacts or risks of company activities and relationships that is undertaken in consultation with stakeholders
  • integrating these commitments and assessments into internal control and oversight systems of company operations and supply chains
  • tracking and reporting on areas of risk

The FAQ adds that to demonstrate reasonable care to CBP an importer may include comprehensive due diligence efforts that may have been undertaken, including the following.

  • information demonstrating that the company engaged meaningfully with affected stakeholders, including workers and trade unions, as part of the due diligence process
  • workforce composition at the location in question
  • training materials on North Korean forced labour prohibitions that have been provided to suppliers and subcontractors
  • company policies, and evidence of implementation, on using North Korean laborers
  • contracts with suppliers and sub-contractors that state the company’s policy on North Korean forced labour
  • publishing the full names of all authorised production units and processing facilities, worksite addresses, the parent company of the business at the worksite, the types of products made and the number of workers at each worksite
  • information on how and to whom wages are paid at the location
  • information demonstrating that recruitment agencies are within the scope of any third-party audit with the company’s suppliers
  • documents verifying the use of authorised recruitment agencies and brokers
  • documents verifying that the fee structure presented by the recruitment agency is transparent and has been verified through worker interviews
  • verification of any reimbursement of fees paid
  • demonstrated commitment to human rights and labour due diligence at the highest levels of the company
  • results of human rights and labour impact assessments

Sandler, Travis & Rosenberg attorney Elise Shibles points out that CBP does not appear to be taking the position that each of these items is required of every company to meet a reasonable care standard. One of the FAQs states that if a company finds North Korean workers in its supply chain it should “consider its potential liability for continuing to import goods produced by those individuals” and report its findings to CBP and U.S. Immigration and Customs Enforcement. However, Shibles recommends that companies counsel to determine appropriate next steps if such circumstances arise.

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