With the implementation of the Uyghur Forced Labor Prevention Act, importers of whole or component products from China should begin auditing their supply chains, purchase agreements, and all stages of production.
Beginning June 21, 2022, imports of all goods mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (Xinjiang) of the People’s Republic of China or by certain identified entities are presumed to be made with forced labor and are prohibited from entry into the United States. This presumption extends to those products from third countries with an indirect connection to Xinjiang and can be overcome only through an exception showing “clear and convincing evidence” to the contrary.
U.S. Customs and Border Protection Service (CBP) emphasized that all importers are expected to review their supply chains thoroughly and institute reliable measures to ensure imported goods are not produced with forced labor.
Below is the scope of the presumption, who is at risk, and what steps an importer should take to ensure compliance.
What is the UFLPA?
Signed into law in December 2021, the Uyghur Forced Labor Prevention Act (UFLPA) creates a rebuttable presumption that goods mined, produced, or manufactured wholly or in part in Xinjiang or by an entity on the UFLPA Entity List are prohibited from U.S. importation. The rebuttable presumption extends to downstream products that incorporate these goods as inputs, regardless of where the products are produced, i.e., to goods produced in China outside Xinjiang, as well as goods produced in third countries or shipped through third countries, if they contain inputs produced in Xinjiang or by an entity on the UFLPA Entity List.
Who is at Risk?
In advance of the June 21, 2022 effective date, CBP began issuing letters to importers identified as having previously imported merchandise that may be subject to the Act. Notably, for those importers who did not receive a letter, CBP cautioned that this does not mean that the importer’s supply chain is free of forced labor. Even companies that purchase raw or processed materials from third countries may, in fact, be indirectly procuring goods from Xinjiang.
Are Certain Products at Risk?
Certain types of products have already been identified as having links to forced labor in Xinjiang and other parts of China, including: textiles; clothing; apparel; computer parts; electronics; hair products; garments; silica-based products; rail transportation equipment; touch screens; polysilicon; and cotton. Of these, four high-priority sectors have been identified for enforcement:
- Cotton and Cotton Products
- Silica-Based Products (including polysilicon)
- Tomatoes and Tomato-Based Products (e.g., tomato paste)
Enforcement Action and Importer Guidance
To enforce the UFLPA, CBP will take specific actions, including identifying, detaining, and/or excluding or seizing shipments subject to the UFLPA’s rebuttable presumption.
Before the rebuttable presumption is applied, the importer may argue that its product is outside the scope of the UFLPA – that it does not contain components from Xinjiang or a list of companies that do business there.
If the goods are subject to the Act, then an importer must overcome the rebuttable presumption through a rigorous exception process with CBP. The importer must show that it has
- fully complied with the issued guidance;
- completely and substantively responded to all inquiries for information submitted by CBP; and
- proven by clear and convincing evidence that the good, ware, article, or merchandise was not mined, produced, or manufactured wholly or in part by forced labor.
To assist the trade community with compliance, CBP released importer guidance on June 13, 2022, followed by additional importer guidance from the Forced Labor Enforcement Task Force (FLETF) through DHS. The guidance details (1) the measures an importer should take to ensure it does not import goods produced with forced labor; (2) the type of evidence needed to demonstrate the goods were not produced in Xinjiang; and (3) the type of evidence to show goods were not produced with forced labor.
1. Due diligence, effective supply chain tracing, and supply chain management measures.
Due Diligence: This may include developing a code of conduct, communicating and training across the supply chain, monitoring compliance, performing an independent review, and reporting performance and management.
Effective Supply-Chain Tracing: This includes “mapping” the entire supply chain, up to and including suppliers of raw materials used in the production of the imported good or material. This also includes establishing a chain of custody of goods and materials from the beginning of the supply chain to the buyer of the finished product.
Supply-Chain Management Measures: This includes having a process to vet potential suppliers for forced labor prior to entering into a purchase agreement. It also requires that the supply contracts necessitate corrective action by the supplier if forced labor is found in the supply chain and outline the consequences if corrective action is not taken.
2. Evidence to demonstrate that a good was not produced in Xinjiang.
Supply-chain tracing is the general method to demonstrate that imported goods were not produced in Xinjiang. Documentation will include a detailed description of all stages of production, as well as sourcing from goods in third countries. Other evidence will include a list of all entities involved in production related to the goods and the origin of each component part.
3. Evidence demonstrating that a good originating in China was not produced by forced labor.
Evidence may include mapping the entire supply chain, including which entities were involved at each stage. Other evidence includes a complete list of all workers at an entity subject to the rebuttable presumption as well as evidence that none of the workers who were involved in the production of the product were (a) recruited, (b) transported, (c) transferred, (d) harbored, or (e) received with the involvement of the government of China, or entities on the UFLPA Entity List.
What Does All This Mean?
CBP recommends that importers undertake heightened due diligence to ensure compliance with U.S. law and to identify potential supply chain exposure to companies operating in Xinjiang, linked to Xinjiang, or using Uyghur or other minority laborers in China. The CBP and FLETF guidance should be analyzed based on individual products and business practices. Importers should consider an independent review and not wait to begin auditing their supply chain and implementing strenuous due diligence practices.