Two Important Trade Developments

On June 16, President Joe Biden signed the Ocean Shipping Reform Act of 2022 (OSRA22, S. 3580) into law. This followed the House’s June 13 passage of the Senate version 369-42 in response to White House pressure for House Democrats to accept the Senate bill and quickly get a much-needed victory to the President’s desk. This rare and meaningful bipartisan achievement will strengthen Federal Maritime Commission oversight and enforcement authority to crack down on ocean carriers’ business practices, including shipping containers, which have contributed to the supply chain woes that have been raising costs for shippers and consumers.

This marks the fourth time the House passed OSRA since it was introduced as H.R. 4996 in 2021 when IHA was listed by Reps. John Garmendi (D-CA) and Dusty Johnson (R-SD), the lead sponsors, as one of the bill’s original endorsers. IHA also was active in coalition efforts to build and maintain support for OSRA, and individual IHA members played a key role in OSRA’s success by using an e-platform to urge their respective members of Congress to vote for the bill.

Another trade-related bill that became effective June 21 is the Uyghur Forced Labor Prevention Act (UFLPA) which Congress passed almost unanimously last year. The UFLPA essentially makes it illegal to import anything produced in or using materials from the Xinjiang region of China, assuming that any imports that can be traced to Xinjiang involve the forced labor of ethnic Uygur Muslims in the region.

The Biden Administration has said that it intends to fully enforce the law so the onus will fall on importing companies to prove otherwise. On June 13, Customs and Border Protection (CBP) released its Operational Guidance for Importers (https://www.cbp.gov/sites/default/files/assets/documents/2022-Jun/CBP_Guidance_for_Importers_for_UFLPA_13_June_2022.pdf) and on June 17, the inter-agency Forced Labor Enforcement Task Force (FLETF) issued its strategy as mandated by the UFLPA.

The FLETF Strategy identifies four high-priority sectors for enforcement: cotton, tomatoes, silica-based products (including polysilicon used in solar panels) and apparel. The UFLPA establishes a “rebuttable presumption” where any shipment from Xinjiang will be blocked unless the importer can prove the product (and all its components) are not made with forced labor. But before the  rebuttable presumption is applied to a detained shipment, CBP Guidance also provides companies the opportunity to prove that their products are outside the scope of the Uyghur Act.

CBP has stated it will employ a risk-based enforcement approach suggesting the focus of initial enforcement will be on FLETF’s four high-priority sectors and goods imported directly from the Xinjian region and/or on the UFLPA’s Entity List.  CPB Guidance recommends that importing firms should have sourcing documents ready for every material in their products’ supply chain in case of detention, and trade experts say the connections between the Xinjiang region and global supply chains are far more expansive than just the FLETF’s four priority industries.

CPB will require months to fill the additional 300 positions it needs in Fiscal Year 2023 (which starts October 1) in order to have the capacity to fully implement and enforce the UFLPA. However, it should be noted that under the UFLPA, an importer can incur civil penalties retroactively for shipments that have entered the U.S. and are later deemed subject to the law.

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