Supply chains in focus: Lessons from a recent enforcement action

A change in tariffs and duties can quickly bring a supply chain to a halt. As such, recent increases in trade barriers have led companies to reconsider and reshape their supply chains to minimize risk and costs.

A series of enforcement actions against a Dominican manufacturer of aluminum extrusions, beginning with a multi-year case related to countervailing duty evasion and culminating this September when a court vacated a forced labor finding, highlight how companies must look beyond tariff risk to fully account for the risks associated with regulatory compliance and enforcement in their supply chains.

In this alert, we discuss how the experience of this company illustrates the multi-dimensional supply chain challenges companies face, the varied enforcement tools available to the government, the value of a holistic approach to supply chain risk, and the importance of having a clear picture of your supply chain activities.

Background

In 2011, the US Department of Commerce determined that countervailable subsidies were being provided to producers and exporters of aluminum extrusions from the People's Republic of China (China).[1] The Commerce Department conducts administrative reviews during a period of review (POR) typically set for one year and ultimately imposes countervailing duties based on the findings.

As a result of a 2019 POR, US Customs and Border Protection's (CBP) found that Kingtom Aluminio SRL (Kingtom) had violated the Enforce and Protect Act (EAPA) because Chinese-origin extrusions were transshipped through Kingtom’s factory in the Dominican Republic to evade the Countervailing Duty (CVD) Order.[2] Based on this finding, on February 9, 2022, the Commerce Department imposed an Ad Valorem final countervailable subsidy rate of 242.56 percent on Kingtom for allegedly evading the CVD order.[3]

Kingtom joined a challenge in the Court of the International Trade (CIT) brought by importers of its products.[4] CBP sought voluntary remand to “correct certain procedural deficiencies in the administrative record,” including the omission of information from the record. Ultimately, CBP reversed its evasion finding and determined that there “was not substantial evidence to support a finding of evasion” by Kingtom. This change in finding followed the addition of data previously omitted from the administrative record. In June 2024, the CIT sustained CBP’s negative evasion determination.[5]

Relatedly, following a September 2021 EAPA inspection of Kingtom, CBP launched an investigation into forced labor at Kingtom’s facilities.[6] In December 2024, CBP issued a finding directing the seizure of any extrusion products exported by Kingtom to the US based on “information that reasonably indicates the use of forced labor in violation of 19 U.S.C. § 1307.”[7] In support of its finding, CBP stated in summary fashion that Kingtom produced its aluminum extrusions “using convict, forced, or indentured labor.”

Under § 1307, “goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country” may be barred from importation if produced with “convict labor or/and forced labor or/and indentured labor under penal sanctions.” If CBP determines that certain products are subject to § 1307, it will publish a finding and those products are prohibited from entry into the US, unless the “importer establishes by satisfactory evidence that the merchandise was not mined, produced, or manufactured in any part with the use of a class of labor specified in the finding.”[8] If the importer is unsuccessful, the products are subject to seizure and forfeiture proceedings.

Kingtom challenged that order in the CIT as arbitrary and capricious, and on September 23, 2025, the court vacated CBP’s determination on that basis. The court described CBP’s finding as “a barebones recitation of the statute and Customs’ regulations thereunder.” CBP’s finding “does not cite to documents in the administrative record, nor does it describe the circumstances of the investigation in any detail.”[9] CBP failed to show a sufficient “rational connection between the facts found and the choice made.”

Implications for companies

CBP’s case against Kingtom began as a CVD evasion case with substantial financial penalties and then became a forced labor case that risked a complete ban on its imports of aluminum extrusions.

While the CIT’s rejection of CBP’s forced labor finding may be an important precedent for future forced labor matters, it is not the only salient takeaway for companies. In addition, companies should take note of the variety of interrelated supply chain issues raised throughout these cases and the complex regulatory framework surrounding Kingtom’s activities, which are not uncommon in increasingly interconnected and global markets.

While tariff and sanctions concerns currently predominate for many organizations, companies are encouraged to also consider other regulatory concerns that may have an equally significant or greater impact on their supply chains. The Kingtom case illustrates how governments can utilize an expanding menu of enforcement tools to regulate supply chain flows, and companies should consider a more holistic approach to assessing regulatory compliance in their supply chains.

Key takeaways

In light of recent enforcement actions and complex regulatory environment, companies should consider the following key takeaways:

• Ensure understanding of the full set of relevant legal and regulatory risks. Supply chains are a critical component of business operations, and a comprehensive understanding of these risks can minimize supply chain disruptions.


• Consider measures to enhance resiliency. As companies consider supply chain adjustments to mitigate the impact of specific regulatory, operational, or financial risks, also evaluate these adjustments in the context of a broader range of legal and regulatory factors, including tax, trade, sustainability, and forced labor, among others. There may be opportunities to further optimize supply chain strategy or there may be unaccounted costs or impacts that could influence any ultimate decisions.


• Strategically manage risk. Any realignment of a supply chain is ideally managed in conjunction with effective compliance processes to mitigate risks and ensure companies are prepared to demonstrate that their activities are compliant with prevailing laws.


• Assess any changes for regulatory compliance and enforcement risks surrounding the company’s supply chain, including ongoing due diligence of partners, facilities, and jurisdictions. Verifying that operations and those of key supply chain partners are compliant with the relevant regulatory frameworks may help avoid enforcement actions.


• Develop and maintain critical supply chain compliance monitoring processes that preserve critical data and documents surrounding supply chain activities and diligence processes. Kingtom was able to refute the Department of Commerce and CBP evasion findings because they had the data and understanding of their own operations. Ensuring that any potential red flags are quickly identified and remediated will help safeguard supply chains from potential disruption to business activity. Should the company be subject to an inquiry by a regulatory enforcement authority or litigation claims from a business partner, this documentation may also assist in a company’s defense by demonstrating the steps taken to ensure compliance with applicable laws.

DLA Piper assists companies in assessing and navigating supply chain challenges in global, interconnected contexts using a comprehensive and multi-disciplinary approach.

For more information, please contact the authors.

 

[1] Countervailing Duty Order, 76 Fed. Reg. 30,653 (Dep’t of Commerce May 26, 2011)

[2] Notice of Determination as to Evasion: EAPA Case 7550 (Customs and Board Patrol Feb. 5, 2022)

[3] Final Results of Countervailing Duty Administrative Review and Rescission of Review, in Part (Dept. of Commerce Feb. 9, 2022)

[4] Slip Op. 24-73, H&E Home, Inc. and Classic Metals et al v. United States et al., (Ct Int’l Trade Jun. 17, 2024) 

[5] Id.

[6] Slip Op. 25-126, Kingtom Aluminio S.R.L. v. United States et al, (Ct. Int’l Trade Sept. 23, 2025)

[7] Notice of Finding, Customs and Border Protection (Dec. 4, 2024)

[8] 19 C.F.R. § 12.42(g)

[9] Slip Op. 25-126