CF 28s Related to North Korean Labor
Any importer who receives a CF 28 (Request for Information) from U.S. Customs, referencing the issue of "North Korean forced labor" should be interested in the contents below.
In August 2017, Congress passed a new law, entitled the "Countering America’s Adversaries Through Sanctions Act", also known as the CAATSA, this piece of legislation requires that U.S. Customs and Border Protection ("CBP") undertake new efforts to enforce sanctions against the North Korea, a regime that is known to employ forced labor as an economic lever.
Specifically, the CAATSA requires that importers establish by "clear and convincing evidence" that their supply chains are free from involvement by North Korean nationals, wherever located. This high burden of proof (greater than merely a "preponderance of the evidence", means that importers need to have access to extremely through, and consistent supply-chain documentation.
In enforcement, Customs will be particularly sensitive to exploring the possibility that North Korean labor might have be employed in labor camps in countries closely bordering North Korea, such as (A) Northeastern China (Liaoning and Jilin provinces), and/or (B) areas near the border of North Korea and Russia (such as the Vladivostok area).
To undertake such reviews, U.S. Customs has already begun issuing CF 28 requests for importers to document the full extent of their supply chains, so that it can be established whether their supply inputs may have included North Korean labor.
If poor or contradictory documentation is presented, then CBP may conclude that the importer has either not met it's burden of proof, or that the goods contain North Korean labor or inputs. Then Section 302A of CAATSA allows CBP to take action to prohibit the entry of such goods as being "contrary to law." In this regard, CBP would be expected to detain, seize and forfeit individual shipments, and to similarly refuse admission of future shipments from the same source. It is also theoretically possible that re-delivery orders could be issued, and civil penalties assessed.
The precise documents necessary to satisfy the new CAATSA standard will obviously vary from case to case, and may include any number of documents created by a business in the normal course of activities. Documentation of, and photographs during, factory visits and inspections play an obvious role in due diligence for all importers; and certifications from suppliers may also be a helpful part of the due diligence efforts.
Importers of goods from such areas closely bordering North Korea should be particularly diligent and may wish to undertake regular due diligence activities that may include more extensive record reviews. For example, Customs has long reviewed country of origin claims by auditing foreign supplier production records, including: employee lists, time sheets, wage records, bills of materials, inventory records, utilities records, and other similar types of documentation to establish the fact of production in a given factory. Now within that level of detail, Customs may be routinely looking to confirm worker nationalities.
Customs Guidance on the CAATSA: https://www.cbp.gov/newsroom/national-media-release/cbp-combats-modern-day-slavery-passage-countering-america-s
Updated: Reasonable Care Checklist: https://www.cbp.gov/sites/default/files/assets/documents/2017-Oct/Reasonable%20Care%20FINAL.pdf
January 31, 2019: DOJ: Enforcement against cosmetics importer regarding eyelash kits tied to North Korea. Due to a prompt voluntary self disclosure and remedial actions, the settlement penalty was reduced from a maximum $40 million, to approximately $1 million. This represents a first public enforcement fine for a violation of the Countering America's Adversaries Through Sanctions Act (CAATSA), as it applies to North Korean labor under the North Korean Sanctions Regulations (NKSR).
July 23, 2018: Treasure/State/DHS: North Korea Sanctions & Enforcement Actions Advisory.
March 30, 2018: DHS: FAQ on CAATSA.
January 24, 2018: USCIB Trade and Investment Agenda 2018 cites a "lack of clear standards at U.S. customs for forced labor."
January 13, 2018: CBP spokesman indicates that 15 shipments have been blocked due to concerns of North Korean labor.
November 7, 2017, U.S. CBP press release reminds “importers of their obligation to exercise reasonable care and take all necessary and appropriate steps” to comply with the forced labor import ban and North Korean sanctions.
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