Costa Rica Moves to Restrict Imports Linked to Forced Labor

Costa Rica is setting up a new system to keep goods made with forced labor from entering, a move that comes a little more than two months after the United States imposed an additional tariff on Costa Rican exports over the same issue. President Laura Fernández signed the Executive Decree, which was published in an extraordinary supplement to the official La Gaceta newspaper. The decree orders the Ministry of Foreign Trade (COMEX) and the Ministry of Labor and Social Security (MTSS) to create and maintain a public list of goods considered at risk of being produced, extracted or manufactured, in whole or in part, using forced labor. The important point for importers is that the list does not exist yet. The two ministries now have 60 calendar days to establish the rules and criteria that will be used to build it. Hacienda, Costa Rica’s Finance Ministry, will also be involved when customs, tax or government purchasing issues come into play. Products from any country could eventually be included. Authorities will be allowed to use reports from international organizations, investigations by foreign governments, court and administrative decisions, specialized studies and other technical information. The decree says those decisions must be based on information that is objective, verifiable and sufficient to show a risk that forced labor was used somewhere in the production process. The rules also call for avoiding arbitrary discrimination between countries facing similar circumstances. Once the list is established, it will be published on the COMEX and Labor Ministry websites. Importers will also have a new responsibility to check the products they bring into Costa Rica. At a minimum, businesses will be expected to verify that the merchandise they are importing does not appear on the government’s forced-labor list. If a listed product is presented for import, the appropriate Costa Rican authorities will be able to apply monitoring and control measures already available under national law. The decree itself does not mean every product placed on the list will automatically be confiscated or rejected at the border. The rules will also reach government purchasing. Public institutions will be required to check the list when planning purchases, preparing bidding requirements, reviewing possible risks and setting contract conditions. However, a product appearing on the list will not automatically disqualify a company from a government contract. That would require support in the bidding rules, existing law or a formal administrative decision. The new policy follows a major trade dispute with the United States. In March, the Office of the U.S. Trade Representative opened investigations into 60 economies, including Costa Rica, to determine whether they prohibited imports made with forced labor and whether those restrictions were actually enforced. U.S. trade officials concluded in June that Costa Rica did not have an effective prohibition in place. On July 23, the USTR announced its final action, placing a 12.5% Section 301 tariff on Costa Rican goods that were not covered by exemptions. The additional duty took effect July 24. Costa Rica had argued during the U.S. investigation that its exports should be excluded from the additional tariffs and that existing trade conditions under the CAFTA-DR free trade agreement should be preserved. The Costa Rican decree does not explicitly state that it was issued because of the U.S. tariff decision. However, it addresses the same issue identified by U.S. trade officials: the lack of a system designed to prevent goods made with forced labor from entering Costa Rica. The U.S. tariff does not apply equally to every Costa Rican export. Washington established exemptions for a range of products when it announced the Section 301 measures. For businesses importing goods into Costa Rica, as of now the change is mainly procedural because there is not yet a published list of affected merchandise. The more important stage will come once COMEX and the Labor Ministry establish the criteria, begin naming products and explain how the list will be updated and enforced.