October 20, 2020

By Kenneth Rapoza, CPA Industry Analyst

Is the sugar substitute stevia being harvested and produced through forced labor in China? Homeland thinks so. And Customs & Border Protection agrees.

The US Department of Homeland Security said on Tuesday that some of the sugar substitute stevia that comes from China is being harvested and packed by forced labor. The move sets the table for more China import bans and seizures by Customs and Border Protection (CBP) if US companies are caught importing it.

The note listed one company in particular, called the Inner Mongolia Hengzheng Group Baoanzhao Agriculture, Industry, and Trade Co. The general notice of a forced labor finding essentially puts Baoanzhao on notice. Homeland says that their products “are being, or are likely to be, imported into the United States.”

“It’s good they are focusing more on forced labor. Next up is to move towards national orders because these companies can evade Customs’ Withhold Release Orders with a keystroke,” says Michael Stumo, CEO of the Coalition for a Prosperous America (CPA).

Today’s “Notice of Finding” warns US importers who fail to eliminate forced labor from their supply chains “that their shipments may be subject to seizure and forfeiture,” said Brenda Smith, Executive Assistant Commissioner of CBP’s Office of Trade. “We hope this action encourages importers to take a close look at their supply chains to ensure that they meet the humane and ethical standards of the United States Government.”

The agency initiated an investigation into Baoanzhao after receiving an allegation from a Non-Governmental Organization. That investigation led CBP to issue a Withhold Release Order (WRO) against Baoanzhao back in May 2016 based on information reasonably indicating the use of forced labor in the production of stevia and stevia extracts.

The May 2016 WRO instructed CBP port directors to temporarily detain shipments containing stevia and stevia extracts produced by Baoanzhao. That WRO cited “reasonable but inconclusive” evidence to Baoanzhao’s use of forced labor. And now the CBP investigation resulted in “conclusive evidence”, which confirmed the use of forced labor in Baoanzhao’s production of stevia.

This company is not alone.

Around 9 Chinese companies have had WROs placed on them in the last two months. This is extraordinary, when judged against recent history. President Clinton had several, President Bush none, President Obama four, and now President Trump’s Administration has issued 22 WROs in less than four years.

Today’s Finding sheds another light on ways in which the US government is targeting China trade, using human rights as a potential hammer.

Last month, the Department of Labor put out a 104-page report on child and forced labor in dozens of countries, including those in which the US has special trading relationships with under the Generalized System of Preferences. You can find that report here. China was mentioned in that report, but not for stevia.

Much like our anti-dumping orders that are limited to specific corporate entities, any specific corporate target can be easily evaded. China did this with solar, for example, by moving to companies off the mainland, but using the same parts. Same with shrimp. Only the country of origin changed.

Charles Benoit, CPA Trade Counsel, argues that we need to move to a system whereby forced labor WROs have the same effect as counterveiling duties against a government subsidy. This means the WROs would stop all imports of the product from the country using forced labor, as opposed to just individual producers. One could make a technical argument that the state’s condoning of forced labor is a form of subsidy, but why not just make the moral and practical argument instead: it’s the right thing to do if we’re serious about stopping modern day slavery.

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