Slave-labor loophole closed by US Senate after 8 decades

For 85 years, the U.S. government has turned a blind eye to companies that import goods derived from slavery – so long as domestic production couldn’t meet demand for those goods. That’s about to change.

The U.S. Senate on Thursday voted to close a loophole in the Tariff Act of 1930, which bars goods made by convict, forced or indentured labor, amid a new focus on slavery in the supply chains of global companies. Almost 21 million people are enslaved for profit worldwide, the United Nations says, annually providing $150 billion in illicit revenue.

The legal gap has been in place for so long that politicians who pushed for the change aren’t exactly sure how it will affect businesses cited by human rights groups or the agencies responsible for blocking goods derived from slavery.

“The old system that leaves the door open to child or slave labor if it’s used to make a product that isn’t made here in the U.S. — that system absolutely must end, and it will,” U.S. Sen. Ron Wyden, an Oregon Democrat who spoke against the loophole on the Senate floor, said Thursday in a statement.

The Senate vote was part of a wide-ranging trade enforcement bill approved 75 to 20, its passage led by Republicans. The House of Representatives passed the bill last year. A statement from the White House on Thursday said President Barack Obama intended to sign the bipartisan legislation. It didn’t mention the language to close the loophole, one of many amendments to the bill.

Game changer

The act may be a game changer for U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement, the agencies responsible for preventing goods derived from slavery from entering the country. Kenneth Kennedy, a senior policy adviser for ICE, has called the loophole “the Achilles heel” of the Tariff Act. To illustrate his point, he has used well-documented problems with the cocoa industry that supplies candy companies.

“If we know cocoa is being produced on plantations in West Africa using slave labor, and then being imported into the U.S., we still have to allow it in because the U.S. cannot produce enough cocoa to meet U.S. demand,” Kennedy said in a December interview.

Wyden’s spokesman, Keith Chu, said the senator hopes the closure of the loophole will allow enforcement agencies to crack down on slave labor, though he didn’t say which industries or companies might be targeted. Wyden and Sen. Sherrod Brown, a fellow Democrat from Ohio, offered the amendment behind the loophole’s closure.

“Ending this provision gives those fighting forced labor the confidence they can challenge imports of these products without fear of being undermined by an archaic and outrageous provision of U.S. trade law,” Chu said in an email.

California cases

The removal of the legal gap follows damning exposes in recent years by the Associated Press and the Guardian, though politicians had already been trying to close the loophole. Lawyers have also gone to court to take on slavery, citing the news reports and State Department data on forced labor.

Lawsuits filed in California accuse Hershey Co., Mars Inc. and Nestle SA of ignoring slave labor in their West Africa cocoa plantations. Nestle has said it has set up pilot monitoring programs on some Ivory Coast farms, with plans to extend them to all suppliers by the end of the year. Hershey and Mars have made similar statements, saying that while the lawsuits are without merit, they’re spending hundreds of millions of dollars to eradicate the practice from their supply chains.

The lawsuits were inspired in part by California’s supply-chain transparency law, the first of its kind, which in 2012 began requiring companies with more than $100 million in revenue to publicly disclose their efforts to fight slave labor.

Investor scrutiny

In Washington, U.S. Rep. Carolyn B. Maloney, a New York Democrat who has made supply-chain slavery one of her causes, wants to apply the California example nationwide and expand it. Her proposal would require companies to regularly tell the U.S. Securities and Exchange Commission what they’re doing to eradicate forced labor, creating a new avenue for investor scrutiny – and litigation.

The California law has also inspired change in the U.K., where the Modern Slavery Act passed in 2015. The law applies to companies with global annual revenue of at least 36 million pounds ($52 million), half the revenue cutoff under California law. It also requires board members to sign off on the statements.

EU rules requiring supply-chain transparency in all member states take effect in 2017, while individual member nations including France are considering legislation of their own.

The U.S. bill is H.R. 644.