CBP Updates Operational Guidance for Importers; Clearer Distinction Drawn Between Exception Reviews and Applicability Reviews

In June, CBP released an updated version of its Operational Guidance for Importers. Compared to the previous version published in 2022, the updated Operational Guidance draws a much clearer distinction between an exception review (previously referred to as an admissibility review) and an applicability review, as well as providing best practices and clarification regarding which regulatory circumstances importers must apply this guidance document. Here's what you need to know.

Untranslated documents are insufficient when submitting as evidence to CBP

The updated guidance states that no matter what type of review an importer is undergoing, untranslated documents, redacted documents or simple affidavits are insufficient when submitting to CBP. In previous iterations of the Operational Guidance this language around translation was less explicit and suggested that translation to English was "recommended" to expedite review.

CTPAT Trade Compliance Program promoted as a best practice for importers

CTPAT (Customs Trade Compliance Against Terrorism) Trade Compliance members are not exempt from detentions and seizures by CBP, however if members do face a detention or seizure their case can move to the front of the line provided they request prioritized review at the time that evidentiary documentation is submitted to CBP.

Other benefits for CTPAT Trade Compliance members include: redelivery benefits, advance notice about detentions "to the best of CBP's ability" and 48 hour advance notification of new WRO findings.

Operational Guidance applies to detentions and seizures conducted under: UFLPA, Withhold Release Orders (WROs), and Customs Trade Partnership Against Terrorism (CAATSA)

The previous operational guidance was to be applied to detentions and seizures made under the UFLPA, as well as Withhold Release Orders (WROs). This updated guidance may also be applied to the Customs Trade Partnership Against Terrorism (CAATSA).

CAATSA establishes a rebuttable presumption that goods produced wholly or in part by North Korean nationals or North Korean citizens are prohibited under 19 U.S.C. § 1307 (i.e., made with forced labor) and are not entitled to entry at any of the ports of the United States. Effective 2024, CBP will exclude shipments when enforcing the CAATSA rebuttable presumption.

Exception Review vs Applicability Review

The Operational Guidance draws a much clearer distinction between the evidentiary documentation needed for an exception review (previously referred to as an admissibility review) and an applicability review under the UFLPA and CAATSA. An exception review means that the product(s) in the detained shipment were manufactured whole or in part in the XUAR (or by North Korean nationals, in the case of CAATSA), therefore the rebuttable presumption of forced labor does apply. However, in this case the importer is attempting to prove that despite this rebuttable presumption, they have sufficient evidence to prove that forced labor was not used in the manufacturing of this product.

The evidentiary burden in an exception review is much higher due to the rebuttable presumption. The types of evidentiary documentation that can be provided to and/or requested by CBP include:

Due Diligence System Information

• Engagement with suppliers and other stakeholders to assess and address forced labor risk.

• Mapping of the supply chain and assessing forced labor risks along the supply chain from raw materials to production of the imported good.

• Written supplier code of conduct forbidding the use of forced labor and addressing the risk of use of Chinese government labor schemes.

• Training on forced labor risks for employees and agents who select and interact with suppliers.

• Monitoring supplier compliance with the code of conduct.

• Remediation of any forced labor conditions identified or termination of the supplier relationship if remediation is not possible or is not timely completed.

• Independent verification of the implementation and effectiveness of the due diligence system.

• Reporting performance and engagement publicly on its due diligence system.

Documentation on Supply Chain Management Measures

• Internal controls to prevent or mitigate forced labor risk and remediate any use of forced labor identified in the mining, production, or manufacture of imported goods.

• An importer should be able to demonstrate that documents provided are part of an operating system or an accounting system that includes audited financial statements.

• Note: Financial audits, environmental audits, or audits that do not specifically look at theILO indicators of forced labor will not be considered sufficient to mitigate forced labor risk in production processes.

Evidence Goods Originating in China were Not Mined, Produced or Manufactured Wholly or in Part by Forced Labor

• Supply chain map identifying all entities involved in production of the goods.

• Information on workers at each entity involved in the production of the goods in China such as wage payment and production output per worker.

• Information on worker recruitment and internal controls to ensure that all workers in China were recruited and are working voluntarily.

• Credible audits to identify forced labor indicators and remediation of these, if applicable.oAll audits should be unannounced and conducted by independent or third-party auditors that can conduct reviews on the ILO 11 indicators of forced labor.

  
  

An applicability review, on the other hand, means that the importer is attempting to prove that the UFLPA (or CAATSA) does not apply to the detained products. This involves proving where the detained products were manufactured, at every step. The following evidentiary documentation can be used in the case of an applicability review:

Supply Chain Tracing Information Documentation Demonstrating Goods Were Not Mined, Produced, Or Manufactured Wholly or In Part in the XUAR or by any entity on the UFLPA Entity List

Evidence Pertaining to Overall Supply Chain

• Detailed description of supply chain, including imported merchandise and components thereof, including all stages of mining, production, or manufacture.

• The role(s) of the entities in the supply chain, including shippers and exporters. For example, CBP will need to determine whether a supplier is also a manufacturer.

• For entities in the supply chain, identify any relationships in accordance with 19 C.F.R. §152.102(g).

• A list of suppliers associated with each step of the production process, including names and contact information (addresses, email addresses, and phone number).

• Affidavits from each company or entity are involved in the production process.

Evidence Pertaining to Merchandise or Any Component Thereof

• Purchase orders

• Invoice for all suppliers and sub-suppliers

• Packing list

• Bill of materials

• Certificates of origin

• Payment records

• Seller’s inventory records, including dock/warehouse receipts

• Shipping records, including manifests, bills of lading (e.g., airway/vessel/trucking)

• Buyer’s inventory records, including dock/warehouse receipts

• Invoices and receipts for all suppliers and sub-suppliers

• Import/export records

Evidence Pertaining to Miner, Producer, or Manufacturer

• Evidence listed in the previous sections above pertaining to merchandise or any component thereof for raw materials

• Mining, production, or manufacturing records

• Documents should allow CBP to trace raw materials to merchandise mined, produced, or manufactured

• Production orders

• Reports on factory production capacity for the merchandise

• Reports on factory site visits by the importer, a downstream supplier sourcing from this factory, or a third party

• Evidence that the volume of input of component materials matches the volume of output for the merchandise produced

Any other evidence to demonstrate that a good was not mined, produced, or manufactured wholly or in part by forced labor

• All audits should be unannounced and conducted by independent or third-party auditors that can conduct reviews on the International Labour Organization’s (ILO)11 indicators of forced labor.

• Note: CBP generally does not consider financial audits, environmental audits, or audits that do not specifically look at the ILO indicators of forced labor to be sufficient to mitigate forced labor risk in production processes.

The June publication represents the first update to the Operational Guidance in years. To learn more about how Sourcemap can test your supplier readiness in the event of a detention by U.S. Customs and Border Protection, reach out to our team of experts today.