The new criminal enforcement initiative seeks to leverage data about corporate supply chains to investigate financial flows and prosecute, under the Trafficking Victims Protection Act (TVPA), corporations that benefit from forced labor.
DHS's alliance with a Nongovernmental Organization (NGO) is an extraordinary step by the U.S. government that is expected to lead to a new era of international corporate crime enforcement in the area of corporate slavery and forced labor.
Companies whose supply chains rely on foreign components should consider incorporating TVPA-focused forced labor due diligence and supply chain compliance into their own compliance framework.
Last week, in a landmark moment for the global fight against corporate slavery and labor trafficking, the U.S. Department of Homeland Security’s (DHS) Homeland Security Investigations’ (HSI) Global Trade Investigations Division announced a first-of-its-kind partnership with Liberty Shared, a nonprofit organization with global coverage founded in Hong Kong, to combat forced labor in global commerce. This new alliance between DHS and the nonprofit world intends to both broaden and strengthen the U.S. government’s criminal enforcement efforts in investigating and prosecuting corporations that benefit financially from forced labor in the supply chain under the Trafficking Victims Protection Act (TVPA). The alliance could also lead to increased enforcement of the import ban under Section 307 of the Tariff Act of 1930 (Section 307) on goods made in whole or in part by forced labor.
Below, we provide more information about the new initiative and relevant legal authorities.
DHS’s New Criminal Enforcement Initiative
On July 31, 2019, Steve Francis, assistant director of HSI’s Global Trade Investigations Division, signed a memorandum of understanding with Liberty Shared, an organization which aims to prevent human trafficking through legal advocacy, technological interventions, and strategic collaborations with NGOs, corporations and financial institutions globally. Thus, through partnerships with organizations that investigate and collect data about corporate supply chains, forced labor and financial flows, HSI intends to gather information that will assist DOJ in successfully prosecuting corporations that benefit financially from forced labor.
As DHS noted during the announcement of its new enforcement initiative, “businesses and individuals profiting from forced labor should be held accountable and liable.” Indeed, “U.S. laws [such as the TVPA] provide a number of far-reaching mechanisms to hold accountable those engaging in and benefiting from forced labor.”
Criminal Prosecution Under the TVPA
As described in our prior alerts here and here, the TVPA is the first comprehensive federal law to address human trafficking. Its purpose is to combat trafficking of persons, especially into the sex trade, slavery, and slavery-like conditions through prevention, prosecution and enforcement against traffickers, and protection and assistance to victims of trafficking. As we have explained here and here, the TVPA imposes criminal liability upon corporations that benefit financially from human trafficking in “reckless disregard” that their business ventures engaged in such exploitation. And because the TVPA creates extraterritorial jurisdiction over trafficking offenses committed overseas, a corporation that is present in the United States, whether foreign or domestic, may still be held criminally liable for corporate human trafficking even where the exploitation occurs abroad.
Therefore, for instance, federal prosecutors may charge a multinational manufacturer operating in the United States with violating the TVPA if, following an investigation by DHS’s HSI, there is probable cause to believe that the company consciously disregarded a substantial risk that it was benefitting from the use of forced labor in its overseas supply chain.
Companies charged with criminal violations of the TVPA may face up to $500,000 in fines, or twice the economic benefit conferred from the violation. Moreover, executives and other company employees who cause the entity to engage in a TVPA criminal violation may also be prosecuted under the statute and, if found guilty, face up to 20 years of imprisonment if, for example, their company benefited from forced labor within the supply chain.
Import Bans under Section 307 of the Tariff Act of 1930
HSI’s investigations can also lead DHS’s Customs and Border Protection (CBP) to block imports o of the subject articles from entry into the United States. As we have discussed here and here, Section 307 prohibits the importation of merchandise mined, produced or manufactured, wholly or in part, “by convict labor or/and forced labor or/and indentured labor.” Under Section 307 and the implementing regulations, any person who has reason to believe merchandise produced by a prohibited form of labor is being, or is likely to be, imported into the U.S. may petition CBP to initiate an investigation. CBP may also initiate such investigations. If CBP finds that “information available reasonably but not conclusively” indicates that the merchandise is being made by a prohibited form of labor, it may issue a Withhold Release Order (WRO), blocking such goods from entry.
Because the standard of proof applicable to a WRO (“reasonabl[e] but not conclusive” indication of a violation) is lower than that applicable to criminal enforcement of the TVPA (“probable cause”), we can expect investigations under the TVPA to lead to increased enforcement of the Section 307 import ban.
The New Sheriff in Town: Homeland Security Investigations
Created in 2010 as an investigative arm of the Department of Homeland Security, HSI has been in the news for working alongside the U.S. Department of Justice (DOJ) to take down international movie piracy rings, return ancient artifacts to foreign governments and arrest Joaquin “El Chapo” Guzman, one of the world’s most wanted drug kingpins. But as a unique law enforcement division enjoying broad legal authority over a diverse array of cross-border criminal activities, HSI also focuses on investigating and, along with DOJ, prosecuting human rights violations and trafficking.
In particular, one of HSI's main objectives is the elimination of forced labor worldwide using existing enforcement mechanisms as well as criminal prosecution of U.S.-based firms benefitting from, or having knowledge of, forced labor in their supply chains. In recent years, HSI has conducted over 1,000 human trafficking investigations annually, with many cases referred to it from local task forces as well as NGOs providing community and victim services.
Forced Labor Compliance and Due Diligence
HSI's new enforcement initiative is the latest example of the U.S. government’s increasing focus on investigating and prosecuting corporations that benefit financially from forced labor. Accordingly, to avoid potentially significant criminal liability under the TVPA, disruptions to supply chains, reputational damage, and unintentionally contributing to human trafficking, foreign and domestic companies operating in the United States should consider incorporating appropriate TVPA-focused corporate slavery due diligence and supply chain compliance into their own compliance framework. For example, companies should proactively conduct TVPA-specific employee training on how to identify signs of forced labor, perform an internal review of existing policies and procedures to identify areas that may be subject to exploitation (and make needed corrections) and assess their existing and prospective suppliers’ and contractors’ labor practices.
Doing so is particularly critical for companies sourcing goods from high-risk countries that might benefit from forced labor. Within three months of the importation date, importers impacted by a WRO have the opportunity to submit information to CBP to prove admissibility of the product into the U.S. Importers may, for example, establish the correct country of origin of the product and/or the character of the labor used in production of the product. Companies that have a robust compliance framework for the intended purposes are more likely to detect forced labor in supply chains and better positioned to show that products in question may not be made by forced labor.
Forced labor and other instances of human trafficking constitute a multibillion-dollar criminal industry in which traffickers use force, fraud or coercion to control their victims. Proactively engaging in preventative compliance programs is thus advisable from both a corporate social responsibility and risk management perspective. Indeed, as reminded by HSI, benefitting from forced labor and labor exploitation “are matters of criminal and civil law, not just questions of ethical conduct.”