CPA Conference Final Day: From Fraud To Forced Labor, How To Stop It

The number of textiles coming in through Mexico and the Central American Free Trade Agreement that is counterfeit and outright fraud is “staggering,” said Dan Nation, division president of Parkdale Mills, a yarn manufacturer and CPA member from North Carolina.

“A couple of years ago, a major retailer came to our business with some yarn they said was ours and we told them that was not ours. I’ve seen falsified certificates of origin, I’ve seen documents that were so obviously fraudulent that it was pitiful that it got into the U.S. market,” Nation said during the final panel on Customs Enforcement on day four of the CPA Annual Conference. “We know how much fraud there is from NAFTA and CAFTA and it is staggering.”

He said that textile duties are nearly 40% of the total duties the government collects at the border. He was wondering what the Customs and Border Protection (CBP) agency was doing to stop the fraud. There would surely be a financial benefit if they could do so, he thought.

One thing that’s being looked at to better trace things like food, e-commerce trade, and even the yarn that Parkdale makes, is using a blockchain platform. The idea is to have traceable sources along the supply chain, all on a public blockchain system.

There’s just one problem, said Vincent Annunziato, a CBP director: no money.

“Funding has dried up. We need a viable proposal based on the impact it would have if we used a blockchain system to track a particular good from beginning to end. Someone would have to come in from the outside, and then there would have to be someone of influence inside the Department of Homeland Security to get it moving forward. I don’t want to do proof of concept anymore. I want to get the whole thing rolled out.”

From fraudulent goods to forced labor, the CBP has its hands full. Over the last year and a half, the CBP has had a spotlight shone on them due to their Withhold Release Orders against several China companies in Xinjiang, all banned due to forced labor allegations of Uyghur Muslims held against their will.

According to Parkdale, a large chunk of the yarn made in China comes from cotton sourced in Xinjiang.  How is the CBP seriously able to police that, even after an industry-wide WRO order against Xinjiang cotton-made goods was introduced late last year.

Therese Randazzo, director of the forced labor division at CBP said, they can’t possibly tackle every cotton buyer at once. Nor do they even know who is buying cotton from whom.

“The sum of what we see happening right now is that shipments often stop as a result of these orders,” she said. “But there is no silver bullet.”

In case you thought all of this was on the CBP or even on the CCP to change its behavior, it might be worth reading this article in Friday’s South China Morning Post.

The Chinese subsidiary of Hugo Boss is going against their German corporate headquarters, which said they will stop buying from Xinjiang because of the Uyghur issue. On Thursday, Hugo Boss of China said it would continue to buy cotton from the region.

“We have always respected the one-China principle and resolutely defend its sovereignty and territorial integrity,” the unit said in Chinese on Weibo, the country’s Twitter-like platform, obviously terrified of running afoul of the CCP.

“Xinjiang long cotton is one of the best in the world, we believe quality raw materials would show its value. We will continue to buy and support Xinjiang cotton,” they said.

CPA has an ask for Mrs. Randazzo on behalf of human rights advocates and responsible companies who don’t use products made with forced labor: Please make sure any Hugo Boss gear coming from Asia is blocked unless they can prove within the time period allowed that cotton from Xinjiang was not used in their latest summer fashion line.