United States: CBP Cites Inconsistencies And Lack Of Clear And Convincing Evidence In Denying Protest From Manufacturer Accused Of Using Forced Labor

On March 5, 2021, U.S. Customs and Border Protection ("CBP") issued a ruling that denied a protest from Dandong Huayang that clothing made at its Chinese factory was not produced by North Korean employees.

The clothing in question was seized by CBP on December 23, 2020, under the authority of the Countering America's Adversaries Through Sanctions Act ("CAATSA"), which prohibits goods mined, produced, or manufactured by North Korean citizens and nationals from importation into the United States.

CBP requested documentation of Dandong Huayang's HR records – how employees are recruited, copies of identification cards, and payroll records – to verify the status of employees, which the company provided. Shortly after, CBP excluded the shipments, and on February 4 the company protested the CBP's classification of its merchandise as prohibited.

To substantiate its claims that it does not use North Korean labor, Dandong Huayang provided CBP with a 2020 Worldwide Responsible Accredited Production ("WRAP") report, which found that the manufacturer employs Chinese nationals, along with photocopies of its employees' Resident Identity Cards.

CBP determined that there were important inconsistencies between the WRAP report and the protest made by Dandong Huayang, particularly over the number of employees at the company. In addition, CBP found that photos included in the WRAP report, including one that shows company employees standing next to boxes of personal protective equipment ("PPE"), strengthen rather than refute CBP's position that the company used North Korean forced labor: in November 2020, The Guardian ran an expose detailing evidence that PPE produced by the company for the U.K., U.S., and several other countries was manufactured using North Korean forced labor.

Importantly, when responding to CAATSA allegations with respect to the use of North Korean labor, importers must meet the rigorous standard of "clear and convincing" evidence. Any companies facing similar CAATSA claims by CBP should ensure their evidence and supporting arguments meet this high standard to avoid the results of this protest.

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