TEXT: TREASURY OFFICIAL ON U.S.-CHINA PRISON LABOR AGREEMENTS
(Approach to Beijing is one of diplomatic persistence)

Washington -- Implementing the U.S.-China Memorandum of Understanding (MOU) on exports of convict-made goods from China has been difficult, according to James Johnson, assistant secretary of the Treasury for enforcement.

In testimony before the Senate Foreign Relations Committee May 21, Johnson noted that the MOU, which the United States and China entered into in August of 1992, calls for prompt investigation of suspected violations of the either party's laws respecting prison labor products, exchange of information on enforcement efforts, and the prompt facilitation of visits to relevant facilities upon the request of either party.

"Our experience under the MOU has been mixed," Johnson said. "Over the last two years, Customs attaches at our embassy in Beijing have been permitted to make only one visit to a suspect facility, that visit occurring in April of last year. Twenty-seven detention orders have been issued since 1991, the year before the MOU was signed, and 20 of those are still in effect; 6 others were revoked after Customs determined that the facilities in question did not use convict labor and one was replaced with a finding."

Johnson also said that the Chinese Government has frequently denied that facilities in which Customs is interested are prisons, or, where facilities are conceded to be prisons, the government takes the position that the products of that prison are not exported to the United States.

"We intend continually to remind the Chinese Government of our expectation that they respect the agreements they have signed with us dealing with forced labor, and that they will cooperate to enable us to obtain the information we need to respond to allegations that convict-made goods from China are entering the United States," he said.

Following is the official text of Johnson's testimony, as prepared for delivery:

(begin text)

Text as Prepared for Delivery
April 10, 1997

TREASURY ASSISTANT SECRETARY (ENFORCEMENT)
JAMES E. JOHNSON
SENATE FOREIGN RELATIONS COMMITTEE

I appreciate the opportunity to discuss a very important trade issue, our critical enforcement responsibility to deny the U.S. market to products of forced labor manufactured in the People's Republic of China that may be intended for the United States. Key provisions of Federal law prohibit the importation of goods of any kind that are the product of forced or convict labor. The United States Customs Service enforces those laws along with over 400 other Federal laws and regulations at our borders. It is the responsibility of the Office of Enforcement of the Treasury Department to provide policy direction and regulatory oversight to the Customs Service in carrying out these important responsibilities.

Section 1307 of the Customs title of the U.S. Code prohibits the importation of merchandise mined, produced, or manufactured wholly or in part, in any foreign country by convict, forced or indentured labor. Another statute, section 1761 of Title 18, makes its a criminal offense to knowingly transport in interstate commerce or to import prison-made goods. These laws, originally intended solely as trade laws, now serve two roles; they protect the U.S. economy from unfair foreign competition and provide an important means of expressing our foreign policy concerns about certain human rights abuses abroad. In exercising these statutory powers, the Administration has imposed prohibitions against a broad range of trade goods from China.

Today, I would like to review with you a number of issues:

-- An overview of the Customs role in forced labor enforcement

-- The status and outlook for our enforcement arrangements with China, and

-- Avenues for strengthening our law enforcement measures

In carrying out its mandate to enforce the laws concerning forced labor, Customs has the power to take two types of action -- one provisional, one permanent -- that prevent forced labor merchandise from clearing Customs and entering the U.S. market. First, Customs can issue a detention order based on information that reasonably, but not necessarily conclusively, indicates that the merchandise is the product of forced or prison labor. Products subject to a detention order will not be released from Customs custody for importation while the order is in effect. Normally an investigation would follow to determine whether a detention order should be replaced by a "finding". If the Commissioner of Customs makes a determination based on probable cause, with the approval of the Secretary of the Treasury, that the merchandise falls within the purview of the statute, a "finding" to that effect is published in the Federal Register.

The publication of this finding has the effect of imposing a permanent ban on importation of merchandise from the facility until the finding is revoked. In practice, the Office of Enforcement has the responsibility for reviewing and approving these Customs actions for the Secretary of the Treasury.

The People's Republic of China (PRC) is currently the country most frequently associated with the export of products of forced or prison labor to the United States, although the former Soviet Union, Mexico, and Japan have been the subject of prison labor allegations. Of the 21 detention orders currently in effect, 20 apply to China and one applies to Japan. Of the six current findings, four apply to China and two rather old findings apply to Mexican facilities.

Administration's Commitment to Enforcement

I would like to outline our efforts to enforce the convict labor statute, particularly with respect to our current focus on China. Firm enforcement to prevent entry of convict-made goods into the United States is a matter on which there has long been bipartisan agreement. This Administration, from its first months in office, has used the legal tools available to deny the U.S. market to forced labor products, as did the previous Administration and others before it. Seven of the 20 detention orders in effect against Chinese merchandise, and two of the four "findings" have been issued under this Administration. These actions have barred a wide variety of goods -- electric fans, hoists, surgical gloves, raincoats, artificial flowers, tea, sheepskin and leather, and iron pipe fittings -- from entering the U.S. market.

Our Experience With Implementation of our Agreements with China

In an effort to improve enforcement with respect to exports of convict-made goods from China, the United States and China entered into a Memorandum of Understanding (MOU) in August of 1992. The MOU calls for, inter alia, prompt investigation of suspected violations of the either party's laws respecting prison labor products, exchange of information on enforcement efforts, and the prompt facilitation of visits to relevant facilities upon the request of either party.

Since the MOU was reached, we have experienced difficulties with China in implementation. The Chinese have been slow to respond to our requests and their responses lacked detail. Following complaints by the State Department, the U.S. and China negotiated a Statement of Cooperation (SOC) that was signed in March of 1994. The purpose of the SOC was to establish clear rules for implementation of the MOU.

Our experience under the MOU has been mixed. Since the MOU was signed, Customs has referred 58 inquiries to the Ministry of Justice for investigation, and has received responses to 52. Customs has requested inspection visits to 20 facilities and 13 have been conducted. Over the last two years, Customs attaches at our embassy in Beijing have been permitted to make only one visit to a suspect facility, that visit occurring in April of last year. Twenty-seven detention orders have been issued since 1991, the year before the MOU was signed, and 20 of those are still in effect; 6 others were revoked after Customs determined that the facilities in question did not use convict labor and one was replaced with a finding.

Notwithstanding the foregoing agreements, several problems have continued. The Chinese Government has frequently denied that facilities in which Customs is interested are prisons. On the other hand, where facilities are conceded to be prisons, the government takes the position that the products of that prison are not exported to the United States.

Commissioner Weise's prepared statement reports in greater detail our recent experience with the MOU and the SOC. Obviously that history is not a cause for rejoicing. Nonetheless, recent experience suggests to those who observe matters closely from our embassy in Beijing that a page may be turning.

The U.S. Embassy in Beijing has continued to raise the issue of implementation of the prison labor MOU with the Chinese. At the end of February, the Embassy was able to arrange with the Chinese Ministry of Justice for investigation of two new alleged cases of prison labor exports to the U.S. Although it is too early to tell whether this represents full cooperation on the MOU, the PRC appears willing to engage with the U.S. Government on this sensitive issue.

I would note more broadly that Treasury and State have raised U.S. concerns on human rights at every available meeting with the PRC. Treasury raised the issue with the Chinese Minister of Finance when he was in Washington in November for bilateral Joint Economic Commission discussions. Secretaries Christopher and Albright raised human rights at each of their meetings during their trips to Beijing, in November and February respectively. Finally, Secretary Rubin raised the issue during his bilateral with Vice Premier Qian Qichan in April in Washington.

More recent indications from our embassy are that the Chinese Ministry of Justice is expected to improve cooperation over the coming months. Customs attaches at the embassy are prepared to take advantage of this opening if it occurs. Our first objective is to clean up a backlog of over a dozen cases that require investigation in China. We are cautiously hopeful that the level of cooperation will improve somewhat.

Plans to Improve Enforcement Regarding Convict-made Goods from China

We intend continually to remind the Chinese Government of our expectation that they respect the agreements they have signed with us dealing with forced labor, and that they will cooperate to enable us to obtain the information we need to respond to allegations that convict-made goods from China are entering the United States. Thus our approach through our attache's office in Beijing should be one of diplomatic persistence. Among other things, if any provision of the MOU or the SOC seems to be unclear or is being interpreted by the Chinese in a way detrimental to our enforcement efforts, we will not hesitate to recommend consultations or renegotiation of these documents.

We also intend to continue cultivating strong working relationships with our counterparts in the Chinese Government, and particularly in China's customs administration. We expect that this cooperation will pay dividends across the spectrum of our enforcement concerns, including forced labor. The U.S. Customs Service has an excellent record of establishing strong working relationships with the services of other nations, through training and cooperation on enforcement matters. We want to cultivate the elements within China who see the obvious benefits of a cordial working relationship with a key U.S. agency such as Customs.

As we work to strengthen cooperative arrangements with the Chinese Government, we also expect that the broadening and deepening of U.S. business involvement in China as a result of normal trade relations will increase the amount and accessibility of information about China's business enterprises, for law enforcement purposes as well as business purposes.

In our efforts to enforce the law, we will continue to use the law enforcement sources and methods currently in place and expect to explore other avenues for obtaining better information. Among the most important resources we can draw upon are the competitors of forced labor facilities and competitors of those who import from them. It has been a consistent experience of the Treasury Department and the Customs Service that information from competitors plays an important role in making cases against violators of the Customs laws, the export and munitions control laws, and the economic sanctions programs.

Additionally, former employees or even current employees of U.S. firms often can be counted on to come forward with critical information if they perceive that their employers are profiting from international trade that violates our laws. To maximize the value of these law enforcement assets, we will strengthen our educational and outreach efforts in the forced labor area as we have in the areas of narcotics, money laundering, and sanctions enforcement.

Also, importers can be reminded of the legal risks that they take in not knowing their suppliers or others with whom they deal. Indeed, in some cases private businesses may have sufficient financial influence over their suppliers to be able to obtain information about the conditions under which their products are produced overseas or even to request plant visits. Failure on the part of U.S. importers to exercise reasonable care regarding those with whom they deal can increase their risk of Customs violations.

Conclusion

In conclusion, I would like to strongly reaffirm the importance that the Administration, the Treasury Department and the Customs Service attach to the enforcement of the forced labor laws. These laws are important instruments for the implementation of both our trade and economic policy and our foreign policy. We are going to do everything within our power to ensure that these laws are vigorously enforced.

I thank the Committee for its interest in our enforcement of the forced labor laws, and look forward to your questions.

(end text)

Return to The United States and China.

Return to IIP Home Page.