Countering America’s Adversaries Through Sanctions Act 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 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.), created 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 under penal sanctions (including forced or indentured child 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.

Affected importers will be advised via the CBP Form 6501D when their merchandise is detained and the reason for the detention.

To assist importers in understanding these obligations, CBP 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 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 into the United States goods produced by those individuals, as this prohibition is already in effect. Additionally, your company should report your findings of North Korean workers in your supply chain to CBP’s E-allegations site, https://eallegations.cbp.gov/, 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, https://eallegations.cbp.gov/, as well as ICE’s forced labor intake point of ICE.ForcedLabor@ice.DHS.gov. Under 19 U.S.C. § 1619 (the Moiety Statute), and CBP’s implementing regulations at 19 CFR § 161, Subpart B, informants who provide original information about any fraud concerning customs revenue, or any violation of customs or navigation laws, or any other laws administered or enforced by CBP or ICE, may apply for compensation provided a net amount is recovered based on the information. The maximum monetary award is limited to 25 percent of the net recovery and under no circumstance is the amount paid for any one claim to exceed $250,000 regardless of the amount of recoveries resulting from the information provided.

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).

U.S. Importers may elect to seek a binding advance ruling from CBP – visit www.cbp.gov/trade/rulings.

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

Under CAATSA, it is the importer’s responsibility to provide clear and convincing evidence that their merchandise was not produced with forced labor. 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.

CAATSA prohibits the importation of merchandise produced with forced labor and does not include a “safe harbor.” Importers may avail themselves of CBP’s prior disclosure process if they discover violations in their supply chain. However, prior disclosures only apply to civil violations related to false statements, omissions, or acts.

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]. On 23 July 2018, various U.S. Government Agencies, including components of DHS, produced the North Korea Sanctions and Enforcement Actions Advisory: Risks for Business with Supply Chain Links to North Korea.

The “Risks for Businesses with Supply Chain Links to North Korea” contains the most detailed information on known risks of DPRK citizens or nationals. As more information becomes available, DHS will work with its interagency partners to update the advisory.

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. Affected importers will be advised via the CBP Form 6501D when their merchandise is detained and the reason for the detention.

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.

12. Several years ago, CBP issued a flowchart that detailed its detention process under 19 CFR 12.42, which was very helpful in understanding this process, and the potential outcomes. A similar flowchart with the CAATSA process would be very helpful in making the similarities and differences clear.

CBP recently posted a forced labor process map. The CAATSA process is similar except CBP would not issue a withhold release order or a finding. The Forced Labor Process Map can be found at the following link: https://www.cbp.gov/sites/default/files/assets/documents/2019-Feb/Forced_Labor_Process_Map_PBRB.pdf.

13. What happens once a shipment is detained due to suspected violation(s) of CAATSA?

When a shipment is detained due to a suspected violation of CAATSA, it will conform to the provisions outlined in 19 U.S.C. § 1307. Importers and their brokers/filers will be notified of the reason for the detention, as well as a point of contact for additional information, on a CBP Form 6051D.

14. How can an existing social compliance program be adapted (or a new one created) to best address the requirements of the law.

CBP encourages the trade to visit CBP.gov and its Informed Compliance Publication on Reasonable Care (https://www.cbp.gov/sites/default/files/assets/documents/2018-Mar/icprescare2017revision.pdf), the Bureau of International Labor Affairs’ (ILAB) Comply Chain information (https://www.dol.gov/agencies/ilab/our-work/supply-chains), and CBP’s fact sheets on due diligence (https://www.dol.gov/agencies/ilab/our-work/supply-chains). CBP will continue to publish resource information on its website, such as the Responsible Business Practices on Forced Labor Risk in the Global Supply Chain fact sheet available via the following link: https://www.cbp.gov/sites/default/files/assets/documents/2018-Aug/CBP%20Responsible%20Business%20Practices%20on%20Forced%20Labor_v4%20%28FINAL%20with%20Publication%20Number%29.pdf.

15. What happens when a U.S. importer is not aware of the presence of North Korean labor in their supply chain (through deception of a supplier or lack of sufficient information to make a judgement)? Is this a mitigating factor in determining if the U.S. importer made sincere efforts to investigate the presence of North Korean workers and only found out after the fact or cannot otherwise prove the opposite?

CAATSA deems goods produced by North Korean nationals or citizens as prohibited under restrictions of imports sourced wholly or in part from forced labor. The statue does not make exceptions for lack of knowledge or intent. CAATSA reiterates the need for comprehensive due diligence by and on behalf of U.S. companies involved in importing goods.

16. What if a North Korean citizen has sought asylum or otherwise has evidence that they are not remitting payment back to the government of North Korea?

CAATSA does not provide statutory qualifications/exceptions. An individual’s status as a North Korean national or citizen is the sole element to be satisfied in the determination of applicability of CAATSA.

17. What is the definition of forced labor to be used under CAATSA?

Forced Labor is defined by the International Labour Organization’s Convention on Forced Labor. Additional information can be found on the U.S. Department of Labor’s website (https://www.dol.gov/agencies/ilab/our-work/child-forced-labor-trafficking). Additional resources are available there to assist importers to understand the phenomenon of forced labor.

18. Does CAATSA’s prohibition on the importation of goods sourced wholly or in part from North Korean nationals or citizens apply to low value shipments?

There is no de minimis for CAATSA. CAATSA’s prohibition applies to all shipments, regardless of value.

19. Does CAATSA’s prohibition on importation of goods sourced wholly or in part from North Korean nationals or citizens apply to in-bond and/or FTZ (Free Trade Zone) movements?

CAATSA’s prohibition on the importation of goods sourced wholly or in part from North Korean nationals or citizens applies to all importations of merchandise including merchandise that moves in-bond, is warehoused, and/or moved into an FTZ.

Appendix - Tools, Reports and Guidance

U.S. Government-Developed Information and Tools

North Korea Sanctions and Enforcement Actions Advisory: Risks for Business with Supply Chain Links to North Korea.

U.S. Department of Justice Evaluation of Corporate Compliance Programs - Resource for U.S. companies in evaluating a corporate compliance program—root causes, prior indicators and remediation.

The OECD Guidelines for Multinational Enterprises - The OECD Guidelines for Multinational Enterprises are recommendations addressed by governments to multinational enterprises operating in or from adhering countries. They provide non-binding principles and standards for responsible business conduct in a global context consistent with applicable laws and internationally recognized standards. The Guidelines are the only multilaterally agreed and comprehensive code of responsible business conduct that governments have committed to promoting.

U.S. Department of State Human Rights Report - The annual Country Reports on Human Rights Practices – the Human Rights Reports – cover internationally recognized individual, civil, political, and worker rights, as set forth in the Universal Declaration of Human Rights and other international agreements. The U.S. Department of State submits reports on all countries receiving assistance and all United Nations member states to the U.S. Congress in accordance with the Foreign Assistance Act of 1961 and the Trade Act of 1974.

U.S. Department of State Trafficking in Persons Report - Comprehensive resource of governmental anti-trafficking efforts whereby the Department of State places each country onto one of four tiers based on the extent of their governments’ efforts to meet the “minimum standards for the elimination of trafficking” found in Section 108 of the Trafficking Victims Protection Act.

U.S. Department of Labor List of Goods Produced with Child or Forced Labor - The U.S. Department of Labor maintains a list of goods and their source countries which it has reason to believe are produced by child labor or forced labor in violation of international standards, as required under the Trafficking Victims Protection Reauthorization Act (TVPRA) of 2005 and subsequent reauthorizations. As of September 30, 2016, the List of Goods Produced by Child Labor or Forced Labor comprises 139 goods from 75 countries.

Responsible Sourcing Tool - The Responsible Sourcing Tool, funded by the State Department, is an online platform with resources to help federal contractors, acquisitions officers, and businesses identify, prevent, and address human trafficking risks in their global supply chains. The site contains information on sectors and commodities at risk for trafficking or trafficking-related activities, as well as 10 risk management tools and a set of seafood sector specific tools.

U.S. Department of Labor Comply Chain App - The app is designed to help companies and business groups develop robust social compliance systems to root out child labor and forced labor from global supply chains.

U.S. Department of Labor Sweat and Toil App - The app is a comprehensive resource developed by DOL documenting child labor and forced labor worldwide. Data and research in this app are taken from DOL’s Bureau of International Labor Affairs three flagship reports: Findings on the Worst Forms of Child Labor; List of Goods Produced by Child Labor or Forced Labor; and List of Products Produced by Forced or Indentured Child Labor.

U.S. Customs and Border Protection Informed Compliance Publication - This publication provides guidance on the use of reasonable care in entering merchandise. It is part of a series of informed compliance publications advising the public of CBP regulations and procedures.

U.S. Customs and Border Protection Supply Chain Due Diligence - Fact sheet on supply chain due diligence with links to many of the resources in this Appendix.

Non-U.S. Government Tools, Reports, Initiatives, and Guidance[3]

Best Practice Guidance on Ethical Recruitment of Migrant Workers - Guidance developed by the Interfaith Center on Corporate Responsibility highlights steps companies could take to implement ethical recruitment policies.

The Asian Institute for Policy Studies: Beyond the UN COI Report on Human Rights in North Korea - 2014 report which highlights the labor conditions faced by overseas North Korean laborers. Its investigation concludes that North Korean workers are subjected to slavery and forced labor conditions.

Dhaka Principles Implementation Guidance - Provides guidance on implementation of the Dhaka Principles, a set of human rights based principles to enhance respect for rights of migrant workers.

Committee for Human Rights in North Korea - Statement of Greg Scarlatoiu, Executive Director, at the hearing of the Tom Lantos Human Rights Commission entitled, “North Korea’s Forced Labor Enterprise: A State-Sponsored Marketplace in Human Trafficking” on April 29, 2015

C4ADS - Several reports from 2016-2017 on North Korea’s overseas economic activities, including the use of export labor.

Selected International Principles and Guidance

UN Guiding Principles on Business and Human Rights - Endorsed by consensus by the UN Human Rights Council in 2011, the Guiding Principles are a set of global guidelines for states and business to prevent, address, and remedy human rights impacts which involve business enterprises.

International Labor Organization Declaration on Fundamental Principles and Rights at Work - Originally adopted by governments, employers, and workers close to 40 years ago, the Declaration was updated in 2017. It provides direct guidance to enterprise on social policy and inclusive, responsible and sustainable workplace practices.

OECD Guidelines for Multinational Enterprises - Multilateral and comprehensive code of responsible business conduct for multinational enterprises covering issues such as human rights, environment, labor, anti-bribery, corporate governance, disclosure, supply chain management and taxation. The OECD Guidelines draw upon and are aligned with the UN Guiding Principles on Business and Human Rights.

The OECD has sector-specific guidelines as well for: agricultural supply chains, extractive sector stakeholder engagement, financial sector due diligence, mineral supply chains, and textile and garment supply chains.

International Labor Organization General Principles and Guidelines for Fair Recruitment - Developed by business, governments, and labor unions to assist member States, social partners, labor recruiters and other key stakeholders in developing effective labor recruitment policies and practices in compliance with internationally recognized human rights and labor standards.

ILO Forced Labor Protocol of 2014 to the Forced Labor Convention - A legally binding instrument that requires States to suppress forced labor by taking prevention, protection, and remedy. It supplements ILO Convention 29.

Protocol to Prevent, Suppress, and Punish Trafficking in Persons Especially Women and Children, supplementing the United Nations Convention against Transnational Organized Crime - The first global legally binding instrument with a definition on trafficking in persons that requires states parties to make trafficking in persons a crime, in accordance with that definition, among other provisions.

 

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[1] A stakeholder typically is a person, organization, or group that has a direct or indirect stake in an organization because it can affect or be affected by an organization’s action. Stakeholders can include governments, local business partners, and members of civil society such as local communities, workers, trade unions, vulnerable groups, and non-governmental organizations.