United States: U.S. Legislation Requires Enhancements To Modern Slavery Compliance Procedures To Address North Korean Labor Risks

On August 2, 2017, the Countering America's Adversaries Through Sanctions Act was signed into law in the United States. The CAATSA restricts entry into the United States of goods made with North Korean labor, wherever located, and imposes sanctions on foreign persons that employ North Korean labor. Beginning in November, U.S. Customs and Border Protection began efforts to enforce the CAATSA, and further enforcement activity is expected. In addition, many large companies have begun to enhance their modern slavery compliance procedures to address the CAATSA, which in turn will affect the compliance procedures their supply chains need to implement. In this Alert, we discuss the CAATSA and takeaways for both U.S. and foreign companies.

New Presumption that All North Korean Labor – Wherever Located – Is Forced Labor

The CAATSA amended the North Korea Sanctions and Policy Enhancement Act of 2016 by adding a new Section 302A, which creates a presumption that goods made with North Korean labor involve the use of forced labor. More specifically, the CAATSA provides that any significant goods, wares, articles and merchandise mined, produced or manufactured wholly or in part by the labor of North Korean nationals or citizens are deemed to be prohibited under Section 307 of the Tariff Act of 1930 and will not be entitled to entry at any of the ports of the United States. Section 302A applies to North Korean nationals or citizens anywhere in the world.

If CBP finds evidence of North Korean labor, it will deny entry of the goods into the United States, which may include seizure of the merchandise. CBP also may refer the issue to Immigration and Customs Enforcement Homeland Security Investigations with a request to initiate a criminal investigation for violation of U.S. law.

Pre-Existing Prohibition on Forced Labor Under the Tariff Act

Section 307 of the Tariff Act prohibits the importation into the United States of goods, wares, articles and merchandise mined, produced or manufactured wholly or in part in any foreign country by convict labor, forced labor or indentured labor under penal sanctions. Section 307 is not specific to North Korean labor.

When information reasonably but not conclusively indicates that merchandise within the purview of Section 307 is being imported, the Commissioner of CBP may issue a Withhold Release Order. To obtain entry of a shipment subject to a Withhold Release Order, the importer must, within three months, submit a certificate of origin and a detailed statement showing the merchandise was not produced with forced labor.

Until the first quarter of 2016, an exception to Section 307 – the "consumptive demand" clause – authorized U.S. customs authorities to allow goods made with forced labor to be imported into the United States if there was not sufficient domestic production of the goods to meet domestic demand. As a result of this exception, until early 2016, there were only 39 instances where goods were denied entry into the United States pursuant to Section 307 of the Tariff Act.

Effective March 11, 2016, the consumptive demand exception was repealed as part of the Trade Facilitation and Trade Enforcement Act of 2015. Since then, several shipments of goods have been subject to Withhold Release Orders under Section 307, including shipments of (1) calcium chloride and caustic soda, (2) potassium, potassium hydroxide and potassium nitrate, (3) stevia and its derivatives and (4) peeled garlic.

Rebutting the North Korean Forced Labor Presumption

The presumption under Section 302A can be rebutted. In order to rebut the presumption, the Commissioner of CBP must find, by clear and convincing evidence, that the goods, wares, articles or merchandise were not produced with convict labor, forced labor or indentured labor under penal sanctions.

Enforcement of the CAATSA to Date

On November 7, CBP issued a public notice reminding importers of their obligation to exercise reasonable care and take all necessary and appropriate steps to ensure that goods entering the United States comply with all laws and regulations, including Section 307 of the Tariff Act and the CAATSA.

In addition, CBP began outreach to individual importers. In order to assist CBP in its forced labor enforcement efforts, it sent requests for information to a significant number of importers, requesting the following information:

  • Whether the importer has a due diligence program that includes examining whether supply chains are free from forced child, convict or forced labor?
  • What supply chain audits have been done to ensure that the importer has an ethical (socially responsible) supply chain free of forced child labor and forced labor in order to ensure compliance with Section 307 of the Tariff Act?
  • How the importer identifies whether or not its supply chains include goods made wholly or in part by North Korean laborers, wherever located?
  • Whether the importer has conducted internal audits, and/or hired a third party to conduct an audit, to ensure there is no forced labor or forced child labor in its supply chain, and, if so, the dates of the audits, who conducted the audits, and what the findings were?
  • Copies of all forced labor and forced child labor supply chain audits, including findings and recommendations.

Responses to these information requests were due in late November.

In addition, some importers have been asked for even more detailed information, including, in addition to the above:

  • Information on manufacturers and suppliers in the supply chain, including contact information.
  • Corrective action taken to address forced labor.
  • Supply chain certifications received from manufacturers and suppliers.

Other Related Provisions of the CAATSA

Designation of Foreign Persons that Knowingly Employ North Korean Laborers

The North Korea Sanctions and Policy Enhancement Act of 2016 requires the Secretary of State, in coordination with other appropriate Federal departments and agencies, to submit to the Committee on Foreign Relations of the Senate and the Committee on Foreign Affairs of the House of Representatives a report that details a U.S. strategy to promote initiatives to enhance international awareness of and to address the human rights situation in North Korea. Among other things, the report is required to include a list of countries where North Korean laborers work, including countries where the governments have formal arrangements with the North Korean government or any person acting for or on its behalf to employ North Korean workers. The report must be submitted every 180 days. The most recent report was submitted on October 26.

The CAATSA added to the foregoing requirement, requiring that the report also include a list of foreign persons that knowingly employ North Korean laborers. In addition, pursuant to the CAATSA, the report is required to include a determination whether each identified person meets the criteria for sanctions under the Trafficking Victims Protection Act of 2000 or the North Korea Sanctions and Policy Enhancement Act of 2016.

Sanctions Against Foreign Persons that Employ North Korean Labor

Under the CAATSA, except in limited circumstances where there is reliable assurance that specified indicia of forced labor are not present, the President shall designate any foreign person identified in the report described above for the imposition of sanctions. The sanctions would block and prohibit transactions in property and interests in property of the person to the extent in the United States or within the possession or control of a U.S. person.

Compliance Takeaways

Assess the Risk of North Korean Labor in the Supply Chain. Areas of China and Russia in close proximity to North Korea are believed to present the greatest third-country risk of North Korean labor. However, other countries cited in the media and/or by U.S. government officials where North Korean labor is or recently has been present include the Gulf states, Malaysia, Malta, Mexico, Mongolia, Poland and Uruguay. In total, U.S. government officials have indicated that more than 40 countries have been identified as having, or as having had, North Korean forced labor. Many industries have been implicated.

Recent United Nations and European Union sanctions against North Korea, as well as action by the Chinese government, are believed to have at least in part reduced the presence of overseas North Korean labor. However, these do not negate the need for appropriate compliance procedures, since the risk has not been eliminated.

Enhance Compliance Procedures. Companies should consider whether to enhance supplier communications, supplier codes of conduct and manuals, supplier questionnaires and certifications, contractual terms and conditions, factory and other supplier audits, supplier intake procedures, training to specifically address this issue and/or migrant labor generally and risk mitigation procedures. Compliance procedures should be tailored to the individual company and the perceived risk.

To the extent that nationality information relating to workers is requested, applicable data privacy regulations also need to be taken into account. Anti-discrimination legislation and policies also need to be considered.

Expect More CBP Inquiries. Given recent events involving North Korea and related efforts to exert pressure on the North Korean government, companies should assume vigorous enforcement of the CAATSA. We expect that many companies that have already been contacted by CBP will receive follow-on information requests, as the comprehensiveness of the information provided to CBP varied greatly. In addition, as CBP continues to progress up the learning curve on this issue, we expect that additional companies will receive inquiries.

Inquiries also may arise out of allegations of forced labor submitted through CBP's eAllegation portal. Parties who provide original information that leads to the recovery of a penalty, fine or forfeiture of merchandise are eligible to seek compensation, which may be up to $250,000.

Be Mindful of Other North Korean Sanctions. This Alert only discusses restrictions relating to North Korean labor in supply chains. There are other sanctions regarding North Korean persons, North Korean imports and exports and non-U.S. persons, including financial institutions, doing business with North Korea, including recently adopted sanctions by the United States, the European Union and the United Nations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions