CAATSA Title III Section 321(b) FAQs

On August 2, 2017, the President signed into law the “Countering America’s Adversaries Through Sanctions Act” (Public Law 115-44) (CAATSA), which imposes new sanctions on Iran, Russia, and North Korea. Various publications from the Department of State and the Treasury Department have provided program specific documents related to CAATSA.

This Department of Homeland Security (DHS) publication focuses on CAATSA Title III Section 321(b), which affects the entry of merchandise produced by North Korean nationals or citizens. CAATSA reiterates the need for comprehensive due diligence by and on behalf of U.S. companies involved in importing goods. Careful consideration of, and reasonable care with respect to, the different risks presented in your supply chain should always be taken into account when importing into the United States.

1. How does Section 321 of CAATSA affect the trade community?

CAATSA Section 321(b) (22 U.S.C. § 9241a), which amended the North Korea Sanctions and Policy Enhancement Act of 2016 (22 U.S.C. § 9241 et seq.), creates a rebuttable presumption that significant goods, wares, merchandise, and articles mined, produced, or manufactured wholly or in part by North Korean nationals or North Korean citizens anywhere in the world are forced-labor goods prohibited from importation under the Tariff Act of 1930 (19 U.S.C. § 1307). This means that these goods shall not be entitled to entry at any port of the United States and may be subject to detention, seizure, and forfeiture. Violations may result in civil penalties, as well as criminal prosecution. However, pursuant to CAATSA, such goods may be imported into the United States if the Commissioner of U.S. Customs and Border Protection (CBP) finds by clear and convincing evidence that the goods were not produced with convict labor, forced labor, or indentured labor.

It is important to note that the prohibition against the importation of goods produced with convict labor, forced labor, or indentured labor was created under the Tariff Act of 1930, and as such, has been in place for nearly 90 years.

2. What kind of information is required to rebut the presumption created by CAATSA Section 321?

CAATSA Section 321(b) provides that the presumed prohibition of merchandise mined, produced, or manufactured with North Korean nationals or citizens may be overcome by “clear and convincing evidence.” Clear and convincing evidence is a higher standard of proof than a preponderance of the evidence, and generally means that a claim or contention is highly probable. An importer who wishes to import merchandise that is subject to the rebuttable presumption under CAATSA Section 321 carries the burden to overcome the presumption by providing sufficient information to meet the clear and convincing standard.

3. What is the difference between the Tariff Act of 1930 and CAATSA Section 321(b)?

The Tariff Act of 1930, 19 U.S.C. § 1307, prohibits the importation of merchandise produced with forced labor. CAATSA Section 321(b) creates a presumption that North Korean labor is forced labor within the meaning of 19 U.S.C. § 1307, and thus that importation of merchandise produced with North Korean labor is prohibited. Importers have an obligation to exercise reasonable care and take all necessary and appropriate steps to ensure that goods entering the United States comply with all laws and regulations, including 19 U.S.C. § 1307 and CAATSA.

To assist importers in understanding these obligations, CBP recently updated and published an Informed Compliance Publication, What Every Member of the Trade Community Should Know: Reasonable Care. CBP has also published several fact sheets on various topics related to forced labor, including Forced Labor – Importer Due Diligence. These are also posted on CBP.gov.

4. How will the U.S. Department of Homeland Security (DHS) enforce the forced labor presumption in CAATSA Section 321(b)?

CBP and U.S. Immigration and Customs Enforcement (ICE), both components of DHS, will enforce the provisions of CAATSA Section 321(b) by engaging in civil enforcement actions and criminal enforcement actions, respectively. Where CBP finds evidence that goods have been produced with prohibited North Korean labor, CBP will deny entry, and undertake available enforcement actions which may include detention, seizure, and forfeiture of the goods. Civil penalties and may also be considered where appropriate. ICE Homeland Security Investigations (HSI) may initiate criminal investigations for violations of U.S. law. ICE HSI’s criminal enforcement authorities can lead to the criminal prosecution of individuals and/or corporations for their roles in the importation of goods into the United States in violation of existing laws. CBP and ICE HSI may consider a company’s due diligence when contemplating engaging in an enforcement action.

5. What should my company do if we find North Korean workers in our supply chain?

Your company should consider its potential liability for continuing to import goods produced by those individuals into the United States, as this prohibition is already in effect. Please report your findings to CBP’s E-allegations site, as well as ICE’s forced labor intake point of ICE.ForcedLabor@ice.DHS.gov.

6. Where do I report information on suppliers overseas who are using North Korean labor?

All information should be reported using CBP’s E-allegations site, as well as ICE’s forced labor intake point of ICE.ForcedLabor@ice.DHS.gov. Although there is absolutely no guarantee that tip information provided will result in monetary payments, ICE has the discretion and statutory authorization to pay for information and/or evidence that is used in support of criminal investigations.

7. If merchandise is produced without North Korean nationals or citizens, but North Korean nationals or citizens are present at the docks or otherwise involved in the movement and shipping of the merchandise, is the merchandise prohibited by CAATSA Section 321(b)?

Generally, if North Korean nationals or citizens are not involved in the mining, or production, or manufacturing of imported merchandise, that merchandise it is not prohibited under CAATSA Section 321(b). However, as the rebuttable presumption clause was only one part of the CAATSA, the scenario provided above may violate other provisions of CAATSA, or other U.S. laws and regulations, such as the North Korea Sanctions Regulations (31 C.F.R. part 510) administered and enforced by Treasury’s Office of Foreign Assets Control, even if it is not subject to Section 321(b).

8. What steps should my company take to ensure North Korean workers are not in our supply chain?

Your company should review due diligence best practices and closely reexamine your entire supply chain with the knowledge of high risk countries and sectors for North Korean workers.

Due diligence will likely vary based on the size of the company and industry. Generally, human rights due diligence and related practices identify, prevent, and mitigate actual and potential adverse impacts, as well as account for how these impacts are addressed. The below steps are merely examples of actions that may be taken to ensure due diligence as it is a flexible, risk-based process and not a specific formula for companies to follow; additional steps may be required:

• a high-level statement of policy demonstrating the company’s commitment to respect human rights and labor rights;
• a rigorous continuous risk assessment of actual and potential human rights and labor impacts or risks of company activities and relationships, which is undertaken in consultation with stakeholders;[1]
• integrating these commitments and assessments into internal control and oversight systems of company operations and supply chains; and,
• tracking and reporting on areas of risk.

In addition, importers have the responsibility to exercise reasonable care and provide CBP with such information as is necessary to enable CBP to determine if the merchandise may be released from CBP custody. To demonstrate reasonable care, an importer may present any material that it chooses to, which may include comprehensive due diligence efforts that may have been undertaken, such as:

• Information demonstrating that your 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 labor prohibitions that have been provided to suppliers and sub-contractors;
• Company policies, and evidence of implementation, on using North Korean laborers;
• Contracts with suppliers and sub-contractors that state your policy on North Korean forced labor;
• Publishing the full names of all authorized production units and processing facilities, the 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 your suppliers;
• Documents verifying the use of authorized recruitment agencies and brokers or that you use direct recruitment;
• Documents verifying that the fee structure presented by the recruitment agency is transparent and has been verified through worker interviews;
• If you have reimbursed any fees paid, verification of such reimbursement,
• Demonstrated commitment to human rights and labor due diligence at the highest levels of your company; and,
• Results of your human rights and labor impact assessments.

9. Where can I find information on which countries are at high risk for North Korean labor?

The State Department regularly reports on countries and sectors hosting North Korean workers in its annual reports, including the Country Reports on Human Rights Practices and Trafficking in Persons Report. In addition, a number of non-governmental organizations (NGOs) have conducted extensive research on this topic and have released public reports. These NGOs include the Database Center for North Korean Human Rights, the ASAN Institute, C4ADS, and the Committee for Human Rights in North Korea[2].

10. What government resources provide information on goods created by forced labor?

The Department of Labor (DOL) includes goods produced by forced labor in its List of Goods Produced by Child Labor or Forced Labor (the List). The List includes goods that DOL has reason to believe are produced by forced labor or child labor in the country listed. The List includes the country where the exploitation is taking place, regardless of the nationality of the workers. As a result, the North Korean goods listed are goods produced in North Korea. While DOL may have evidence that goods produced in other countries are produced by North Korean workers, those goods are listed under the country where the production is taking place. Please see the appendix for additional resources.

11. Will shipments detained in violation of CAATSA Section 321(b) be made public?

CBP generally does not publicly report information on specific detentions, seizures, enforcement actions, and other pending cases until the enforcement action is complete. If a detention leads to a penalty proceeding, after the proceeding is closed, CBP may disclose the identity of the violator, the section of the law violated, the amount of the penalty assessed, loss of revenue, mitigated amount, and amount of money paid in response to any properly submitted requests for such information under The Freedom of Information Act, 5 U.S.C. § 552.