Can a Forced Labour Ban Protect Vulnerable Workers?
On 23 August 2021 the Australian Senate passed the Customs Amendment (Banning Goods Produced by Forced Labour) Bill 2021 containing provisions that would prohibit the importation of goods produced or manufactured using forced labour. The Bill follows moves by Canada, the US and the UK to prohibit the importation of products from the Xinjiang region of China suspected of being made using Uyghur forced labour following global attention on the plight of the Uyghur people.
The provision, originally tabled in late 2020, is in response to advocacy efforts by human rights groups and Uyghur activist networks to highlight the detention of Uyghur people in China and the use of forced labour linked to the supply chains of Australian companies. While the provisions originally proposed specifically targeted Uyghur forced labour, the Bill has been expanded to capture all products made using forced labour, regardless of the geographic location of the supplier. This was in response to calls from unions, human rights groups and labour rights advocates to recognise that the issue of forced labour reaches well beyond the Uyghur people in China.
The proposed Australian reform would amend the Customs Act 1901 to prohibit the importation into Australia of goods produced or manufactured, in whole or in part, using forced labour. The wording of the Australian Bill mirrors that of US legislation, the Trade Facilitation and Trade Enforcement Act, introduced in 2015 as an amendment to the Tariff Act of 1930.
With many of Australia’s largest businesses struggling to map their supply chains and understand their modern slavery risk as required by the Modern Slavery Act 2018 (Cth), it will be essential for the government to provide support and practical guidance for businesses to assess the forced labour risks of their imports and avoid falling foul of any new legislation.
The US Trade Facilitation and Trade Enforcement Act 2015
The US Trade Facilitation and Trade Enforcement Act prohibits the entry of goods, wares, articles and merchandise that were mined, produced or manufactured wholly or in part in a foreign country by forced labour. This provision is enabled by additional powers and resources given to the US Customs and Border Protection (CBP) to hold and investigate items suspected of being produced in slavery-like conditions. Up until 2016, the ban was subject to domestic supply and allowed goods to enter the US where domestic production was not sufficient to meet demand. However, enforcement of the prohibition has increased since this condition was removed.
The US forced labour ban has been used 65 times in total, with 26 of those enforcements occurring in the last five years. For example, in August of 2020 the CBP prevented seafood supplies from a particular fishing vessel, harvested using forced labour, from entering the US. The Withhold Release Order (WRO) was issued against the seafood as the CBP had information that reasonably indicated the use of forced labour, including physical violence, debt bondage and other indicators of slavery. In the same month clothing produced by China-based Vero Vast Group was prevented from entering the US after information reasonably indicated prison labour was used to manufacture the products.
The US system works as follows:
1. Any person can report to a CBP officer that goods produced by forced labour are being imported.
2. If there is reasonable suspicion of the report being true, the CBP officer must report the incident to the CBP Commissioner.
3. The Commissioner investigates the report and considers information from foreign interests, importers, domestic producers, or other interested persons.
4. The Commissioner has powers where the evidence reasonably indicates the products were produced using forced labour.
Implementation of the US Trade Facilitation and Trade Enforcement Act is supported by additional government funding and is also reinforced by significant powers afforded to customs officers to investigate and enforce the ban. These supplementary enforcement mechanisms have not been included in the current Australian Bill and are being called for by advocacy organisations. In its current form, the Australian Bill introduces an absolute ban on goods entering the country but does not include amendments that would enable its enforcement through additional powers provided to customs officers.
Politics, human rights and trade barriers
As has been written about before, the political nature of trade decisions raises another challenge for the Australian Bill. China has already stated that it will implement economic sanctions against Australia for any disruption to trade between the two countries, stating that it will expand sanctions beyond Australia’s export of wine, barley, timber and red meat to include other industries. While the import ban is directed at protecting vulnerable workers, it remains a trade instrument and therefore cannot be removed from the political environment in which it exists. There is considerable risk that legislation can be used to reinforce political rivalries or ensure ongoing trade advantages. For example, of the 15 WROs issued in 2020, nine related to violations against the Uyghur people at a time when the US-China trade war reached its peak.
In fact, many of the products banned by the US were manufactured in China (44 WROs since 1991 and ten of those in last two years). Since 2019 five products have been banned from Malaysia (disposable gloves and palm oil both receiving high media coverage), one product from Brazil and gold from the Democratic Republic of the Congo.
The political nature of the enforcement of these provisions raises concerns that the legislation could become a mere political tool (directed almost exclusively at China) that promises much but delivers little. It follows that the difficult task of tracing and mapping supply chains only increases the scope for political influence. This in turn undermines the key principle of provision, which is the protection of vulnerable people.
Are Import Bans an Effective Tool?
Supply chains are notoriously complex and opaque making CBP investigations challenging, time intensive and expensive. Recent studies by the Policy and Evidence Centre found that there is limited evidence to support the efficacy of import bans and that as a tool to combat modern slavery, they are very resource intensive. The study found that spot-banning imports through a single regulatory intervention is unlikely to cause sustainable change of forced labour practices.
However, a study by the European Parliament has argued that the considerable market share of the US makes import bans that are regularly enforced a significant deterrent and motivates companies to operate more ethically. It remains to be seen whether the Australian market has the necessary fiscal power to change international supplier practices regarding forced labour in their operations.
While Australian companies continue to work towards meeting the mandatory requirements of the Modern Slavery Act 2018, it is questionable whether an import ban will support these efforts. Most large Australian companies are struggling to map their supply chains beyond the first or second tier, which is seldom where the greatest risk of forced labour lies. To have any tangible impact, it is important to consider just how far along the supply chain the new Bill will require importers to look. What level of certainty (i.e burden of proof) will be required? And what implications will it have on bilateral trade?
Current Modern Slavery Legislation
The existing Modern Slavery Act 2018 (Cth) falls short of its promises to incentivise companies to take decisive action on modern slavery and forced labour, with many companies continuing to opt for minimal ‘tick the box’ compliance. While the legislation encourages companies to take stronger action to respect and establish remedy pathways for vulnerable workers, its ability to make this a corporate and executive/board priority is unproven.
While the financial risks of having goods withheld – essentially a ‘big stick’ approach - would galvanise Australian companies to engage with current legislation and more rigorously map and evaluate their supply chain, the sheer resources required to investigate this kind of allegation means that it is likely that, without adequate resourcing, only high profile or documented cases of forced labour will be enforced. Combined with the potential cost to business and the political nature of trade decisions it remains to be seen whether, like other legislation before it, this will become a law with all bark and no bite.
If the amendment to the Customs Act is to proceed it will need to be accompanied by the provision of significant additional power to Australian customs officers to effectively investigate and enforce the ban. In addition to powers of enforcement, the legislation will require significant funding by the government to ensure that customs officials are adequately trained and resourced to undertake supply chain investigations. Without this, the ban may become a mere mechanism of political will and trade influence.
While importers will be responsible for understanding the modern slavery risks posed by international suppliers, the government must provide additional support to ensure importers have the tools, knowledge and skills needed to effectively assess modern slavery risks in their supply chains.
Customs officials who ban products reasonably suspected of being made using forced labour must base their decisions on effective due diligence processes, not political point scoring.