In February 2021, just a month after taking office, President Biden issued an Executive Order (EO) aimed at increasing the resilience of US supply chains. The EO instructs the heads of numerous agencies, including the Departments of Commerce, Defense, Health and Human Services and Energy, to conduct a 100-day review of supply chain risks related to such goods as semiconductors, batteries, minerals and other rare earth elements, and pharmaceuticals. One understated, but very real, risk is the risk of forced labor and other human rights abuses in these supply chains. This EO is an important opportunity for the US government to assess social and environmental compliance in these supply chains, which not only pose risks to workers in producing countries, but may also pose supply side risks where those conditions are not addressed.
Reading this EO to include labor rights risks is consistent with the Administration’s position on workers’ rights globally. The Biden administration has repeatedly stated that it has a “worker-centered” trade policy:
Trade must protect and empower workers, drive wage growth, and lead to better economic outcomes for all Americans. … Workers will have a seat at the table as the Biden Administration develops new trade policies that promote equitable economic growth by including strong, enforceable labor standards in trade agreements that protect workers’ rights and increase economic security. The Administration will engage allies to secure commitments to fight forced labor and exploitative labor conditions, and increase transparency and accountability in global supply chains.
This blog post identifies two areas--enforcement of the Executive Order on America's Supply Chains and enforcement of Section 307 of the Tariff Act--where the Biden administration could take action to support global workers, consistent with the administration’s “worker-centered” approach. The post begins by discussing a recent Executive Order that President Biden issued on America’s Supply Chains and encourages the Biden administration to focus on human rights abuses in supply chains. It then examines how the Biden administration could improve enforcement of Section 307 of the Tariff Act and be more worker-centered in its enforcement.
The Executive Order: America’s Supply Chains
On February 24, 2021, President Biden signed the Executive Order on America’s Supply Chains, which mandates that the federal government carry out a comprehensive review of supply chains. This was the second EO President Biden signed on global supply chains. It came just one month after he signed an Executive Order on strengthening “Buy American” provisions, which mandated that the federal government buy American goods and made it more difficult for agencies to provide waivers for foreign goods.
The February 24 EO requires the federal government to undertake a 100-day review of four supply chains: semiconductors; high-capacity batteries; critical minerals, including rare earth elements; and pharmaceuticals and active pharmaceutical ingredients. These products and raw materials are currently difficult to source. There is a shortage of semiconductors, leading to longer lead-times for auto production, while critical minerals are sourced from only a few countries. China dominates the supply chains for rare earth minerals, and Covid-19 has shown the weaknesses in the pharmaceutical supply chain.
The Executive Order also mandates an in-depth, year-long review of the global supply chains for six sectors: defense, public health, information and communications technology, energy, transportation, and agricultural commodities and food products. The report for the year-long review is broad and will focus on “the defense, intelligence, cyber, homeland security, health, climate, environmental, natural, market, economic, geopolitical, human-rights or forced-labor risks or other contingencies that may disrupt, strain, compromise, or eliminate the supply chain.”
While the inclusion of the words “environmental” and “human-rights or forced labor risks” in an EO on supply chains is a step in the right direction, the administration must take concrete action. If the Biden administration is serious about a “worker-focused” trade policy, then human rights must be a central part of this review. There are pragmatic reasons for focusing on human rights. Cheap wages, forced labor, and child labor all allow companies to produce goods abroad for less money than they would have to pay in the US, giving them a competitive advantage over US-produced goods. Such human rights abuses in supply chains also mean that corporations are profiting off of exploitative labor conditions, making millions – or even billions – in profits while workers often struggle to feed their families, work under dangerous conditions, and are otherwise exploited.
The Biden administration has stated that the Executive Order’s call for “resilient, diverse, and secure supply chains” is not a call for protectionism. Instead, it implies that goods will be produced in “friendly” countries. But “friendly” countries – even the United States’ closest allies – often have human rights and labor abuses in their supply chains (as does the US). (For example, the clothing company Boohoo was recently alleged to have “endemic problems” in a factory in Leicester, England. Meanwhile, there is ample documentation of exploitative labor conditions in the agricultural industries in both Spain and Italy.) Resilient supply chains cannot merely be supply chains that do not pass through China; they must be clean and free of labor abuses, regardless of where the goods are produced.
Section 307 of the Tariff Act
Section 307 of the Tariff Act of 1930 provides the Biden administration with a powerful tool to advocate for a “worker-focused” trade policy. Under Section 307, it is illegal to import goods produced in whole or in part with forced or prison labor into the United States. Customs and Border Protection (CBP) has the authority to issue a Withhold Release Order (WRO) against goods for which there is reasonable suspicion that the goods were produced with forced or prison labor.
Enforcement under Section 307 has increased in the past few years, with CBP issuing 15 WROs in 2020. While we encourage CBP to issue more WROs, our goal in using Section 307 as a human rights tool is broader than individual enforcement actions: we aim to change corporate behavior. The risk of losing access to the US market provides a strong incentive to companies to clean up their supply chains. In some cases this may mean improving supply chains before CBP issues a WRO against their goods, while in others it could lead companies to remediate workers to have a WRO lifted.
The Biden administration should make sure that companies’ attempts to clean up their supply chains are legitimate and not merely cosmetic, and it should ensure that remediation in these cases is truly worker-focused. CBP should not rely on third-party auditors hired by the companies to show that companies have provided remediation or improved working conditions. Instead, workers must be at the table and take part in these conversations, which will often mean ensuring that local unions are involved. Remediation must be swift and complete. This could include paying back recruitment fees in a timely manner (and with interest), improving living and working conditions, paying a living wage, and generally making workers whole for the exploitation they have suffered.
Looking forward
As the pandemic begins to come to an end, the United States has a rare opportunity to restart and reshape its trade policy. The Biden administration is taking important steps to identify and address some of the illegal supply chain practices that plague the global economy. The EO on America’s Supply Chains and Section 307 of the Tariff Act provide distinct opportunities for the Administration to take action consistent with its worker-centered trade policy. We hope to see evidence of that in the months to come.
Allie Brudney is a Staff Attorney at Corporate Accountability Lab.
