U.S. to intensify enforcing ban on imports made with forced labor
- On June 21, U.S. Customs and Border Protection (CBP) will begin enforcement of the Uyghur Forced Labor Prevention Act, which will effectively ban all goods from the Xinjiang region of China based on the presumption that they are made with forced labor.
- Guidance issued by CBP on June 14 provided additional guidance on how it would enforce the law, how to request exceptions, and the types of information CBP may require.
- The Chinese government has vowed to respond “forcefully” to implementation of the Act.
- The business community must continue to carefully manage supply chains while navigating an increasingly complex geopolitical and regulatory environment.
The Biden administration’s Uyghur Forced Labor Prevention Act (UFLPA) will be implemented on June 21 with no phase-in or transition period. The law effectively bars all products with a nexus to the Xinjiang region of China, a predominantly Muslim region, from being imported into the United States due to forced labor concerns. Given the Administration’s commitment to strengthening labor rights around the world, we expect CBP’s enforcement efforts to be vigorous.
The statute sets a high threshold that importers must meet to continue importing any products with links, even tangential, to labor from the region including via labor sharing programs in other areas of China. There is no “de minimis” exception, meaning that goods containing just a small percentage of inputs from the region could be denied entry. Xinjiang is a major producer of raw materials used in a variety of products, including cotton, polysilicon, and aluminum—the import ban or lengthy delays at port could have significant implications for a variety of supply chains. CBP's severe lack of resources raises additional questions on how it will be able to effectively enforce such a broad statute—bipartisan Congressional stakeholders have appealed for $70 million in additional funding to support CBP’s implementation.
Another major concern is how China will respond to enforcement and what that could mean for the broader bilateral relationship and commercial engagement.
What is the UFLPA and What Does it Do?
The Uyghur Forced Labor Prevention Act was signed by President Biden on December 23, 2021, less than two months before the Beijing Olympics which the United States boycotted diplomatically to protest human rights concerns in China. CBP already has authority to block imports of goods made with forced labor, known as Withhold Release Orders (WROs), and maintains a list of eleven WROs related to entities and products from the Xinjiang Uyghur Autonomous Region (XUAR). The new statue expands existing import bans to include all products with a nexus to the region.
The UFLPA also creates a higher burden of proof than under a traditional WRO for companies to get their products exempted from the import ban. There is no de minimis requirement, and CBP indicated in new guidance that it will require importers to trace and provide documentation for their entire supply chains—from raw materials to the final product—in order to prove no forced labor is involved in the production of imported products. For high-risk commodities (cotton, polysilicon, and tomato products) importers must be able to demonstrate that materials from XUAR have not been comingled with non-XUAR inputs. This is no small task, particularly for cotton supply chains as cotton from different regions is frequently mixed together before import into the U.S.
Companies with potential links to the region will need to prepare and submit detailed documentation on their supply chains to CBP in advance — purchase orders, third-party reports on factory conditions, contact information for suppliers, and other evidence to demonstrate their goods were not made with forced labor. Due to the lack of supply chain transparency and challenges conducting effective audits in China however, many goods with links to the region could still be detained at the port of entry.
Detained products will be held for 30 days during which parties can request exemptions— significantly less time than the 90-day period available for WROs. Should the CBP Commissioner determine that an exemption is warranted, CBP will notify the appropriate Congressional committee and make a public report available on the details of the case. If an importer is unable to prove their shipment contains no forced labor, the goods will be seized or exported back to the country of origin.
The statue also directs the Forced Labor Enforcement Task Force, led by the Homeland Security Department, to develop a strategy by June 21 for supporting enforcement of the existing ban on goods made with forced labor from China. The strategy must include a list of high-priority sectors for enforcement actions as well as sector-specific enforcement plans. High priority sectors include cotton, tomatoes, and polysilicon, an important material for the manufacture of solar panels.
Further Supply Chain Dislocation
Rigorous enforcement of UFLPA could strain already weak global supply chains and accelerate ongoing discussions about “near-shoring” and “friend-shoring” in certain industries. What happens with solar supply chains will be important to watch. Xinjiang is home to four out of five of the largest polysilicon factories in the world, a key input in solar cells. The solar cell supply chain is already under pressure from an existing WRO on a major silicon manufacturer, its subsidiaries, and the addition of polysilicon from China to a list of goods made with forced labor.
Potential Response from China
Implementation of the UFLPA will draw a strong response from the Chinese government. Ministry of Foreign Affairs spokesperson Zhao Lijian recently affirmed “China will take forceful measures to firmly defend its own interests and dignity” in response to a question about the law. In recent years, the Chinese government has developed a retaliatory toolbox to leverage against foreign sanctions and restrictions targeting China and Chinese companies, including the Unreliable Entity List—but has yet to use any of these authorities.
Firms will be increasingly challenged to balance compliance in both China and the U.S. while maintaining operational continuity. Going forward, companies will not only need a strategy to carefully manage and monitor the immediate supply chain issues but also be cognizant of rapidly changing geopolitical dynamics.
Contributions from: Camille Bryan and Everett Eissenstat
