Preventing Forced Labor in Supply Chains: How SAP GTS Helps Address Ethical Challenges in Your Operations

Forced labor in supply chains is not just a grave ethical issue; it's a critical risk for your business. Are you fully equipped to identify and mitigate these risks in your operations?

This article explains how the Sanctioned Party List and Import Compliance functionalities of SAP Global Trade Services (GTS) can be your strategic tool in combating forced labor, ensuring compliance, and safeguarding your company's integrity.

The Legislative Landscape and Its Implications

Recent changes in laws and regulations have significantly impacted global supply chains, placing a sharp focus on human rights and labor practices. The Uyghur Forced Labor Prevention Act (UFLPA) and the Countering America's Adversaries Through Sanctions Act (CAATSA) are at the forefront. These directives target forced labor issues in international trade.

The UFLPA specifically addresses goods from the Xinjiang Uyghur Autonomous Region (XUAR) of China, known for forced labor concerns. This act prohibits the import of any goods from this region into the United States if they are suspected of being produced with forced labor.

CAATSA, on the other hand, is broader. It targets countries like Russia, Iran, and North Korea. It imposes sanctions for various reasons, including labor practices.

US Customs and Border Protection (CBP) manages the enforcement of these laws through Withhold Release Orders (WROs) and other actions. This means that businesses found to be violating these laws face serious consequences. These include the possibility of their goods being seized or excluded from the US market.

According to CBP statistics, 1,529 shipments were halted under the UFLPA in Fiscal Year (FY) 2022. Of these, 896 shipments, valued at more than $230 million, were rejected, and 53 still need to be solved or on hold. In FY 2023, the number of incidents increased, with 4,033 shipments stopped for UFLPA reasons. Out of these, 1,687 shipments, valued at more than $320 million, were denied entry, and 544 are pending resolution.

(Note: These figures represent current data and are subject to revision, as the status of ongoing or pending shipments could alter these totals in subsequent updates.)

Screening Parties: The Solution and the Dilemma

The challenge of preventing forced labor in supply chains, especially for companies with large or multi-layered networks, remains a daunting yet crucial task.

A 2021 Indago survey of supply chain executives underscored this difficulty. It revealed that 38% of respondents considered it "very/extremely difficult" to comply with regulations aimed at eliminating forced labor.

Such complexities arise not only from the vast number of parties involved. It also stems from how complex and opaque global supply chains are. Because of their intricacy, goods and services' real source may be concealed. So, while effective screening is critical, implementing comprehensive and practical solutions remains a significant challenge.

SAP GTS: A Strategic Compliance Ally

SAP GTS is a practical solution for these challenges. Its Sanctioned Party List and Import Compliance functionalities are specifically designed to assist businesses in adhering to global trade laws, including regulations related to forced labor.

GTS Sanctioned Party List

SAP GTS's Sanctioned Party List functionality screens and monitors the entities involved in a company's supply chain against a comprehensive database of restricted or denied parties.

GTS data providers like Descartes provide databases that encompass critical sanctions compliance lists. These lists include the Uyghur Forced Labor Entity List from the Department of Homeland Security (DHS) and the End-User Requiring License - Entity List from the Bureau of Industry and Security (BIS). These denied party screening lists are regularly updated to reflect the latest regulations and sanctions, ensuring that businesses always comply with current laws.

SAP GTS Sanctioned Party List screens not only suppliers but also customers, freight forwarders, and other partners involved in the supply chain. This thorough screening ensures that your company does not inadvertently engage with entities that are associated with unethical practices such as forced labor. By automating this screening process, SAP GTS significantly reduces the risk of non-compliance and the associated legal repercussions.

GTS Import Compliance

One of the most challenging aspects of maintaining an ethical supply chain is identifying and mitigating risks in regions known for labor violations. GTS Import Compliance can play an important role here.

The GTS Import Compliance module is instrumental in managing and screening suppliers from regions with heightened concerns about forced labor, such as the XUAR. It allows for the incorporation of regional alerts into the compliance process, ensuring that any suppliers located in these high-risk areas are subject to extra scrutiny. This is particularly relevant for industries where supply chains are extensive and multi-layered, making it difficult to track the origin of all components or raw materials.

Forced Labor Questionnaires and GTS Import Compliance: A Robust Duo

GTS Import Compliance enhances how forced labor questionnaires are used, helping to prevent violations. If your company collects these questionnaires from suppliers, this system can automate information gathering and analysis. This is especially useful for managing intricate, multi-tiered supply chains.

The integration of questionnaires into the GTS system transforms a traditionally labor-intensive process into a streamlined, efficient operation. By automating these tasks, GTS Import Compliance not only ensures thorough screening in regions that CBP flagged for labor concerns but also significantly reduces the time and effort involved.

Take Action Today

Taking a stand against forced labor in supply chains is a critical move for any responsible business. Ropaar is here to assist you in this journey.

As experts in SAP GTS, we offer consultations and demos to showcase how our approach can empower your organization in the fight against forced labor. Partner with Ropaar and join us at the forefront of ethical global trade practices.

Contact us today to take a proactive step toward a more transparent and responsible supply chain.