On June 21, 2022, the Uyghur Forced Labor Prevention Act1 (UFLPA) came into force after being signed into law on December 23, 2021, by President Biden. The legislation reflects the US government’s commitment to combating forced labor in the People’s Republic of China (China), particularly in the country’s Xinjiang Uyghur Autonomous Region (Xinjiang). Pursuant to the UFLPA, US Customs and Border Protection (CBP) will apply a “rebuttable presumption” that goods made in whole or in part in Xinjiang or produced by a party on the UFLPA Entity List2 were made with forced labor and therefore should not be entitled to entry into the United States. The importer can challenge the application of the rebuttable presumption, but the evidentiary standard for prevailing on such a challenge is demanding, and it will likely be difficult for companies importing goods from China to meet it. Therefore, importers with supply chains that touch China should proactively prepare for possible UFLPA enforcement actions and a risk that the law will disrupt trade flows.
In advance of the UFLPA’s effective date, the US government issued guidance to importers; CBP issued the UFLPA Operational Guidance for Importers (Operational Guidance), and the Forced Labor Enforcement Task Force (FLETF) issued the Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured With Forced Labor in the People’s Republic of China (UFLPA Strategy). Both documents provide information about how the US government will enforce the UFLPA. Key takeaways include the following:
- If goods are detained at the border, importers can choose to either prove the goods are outside the scope of the UFLPA or request an exception to the rebuttable presumption in accordance with Section 3(b) of the UFLPA. In either case, the importer’s submission is due within 30 days of presentation of the goods for CBP’s examination.
- To prove that goods are outside the scope of the UFLPA, importers will need to demonstrate that the goods were not made wholly or in part in Xinjiang or by a party on the UFLPA Entity List. This will generally require providing a supply chain map and tracing the production process for the product at issue.
- At least initially, the UFLPA Entity List is narrow. It only includes entities that were previously subject to a Withhold Release Order (WRO) or are currently on the Bureau of Industry and Security’s Entity List. In addition, it only includes Chinese parties (whereas in principle it could also include non-Chinese entities). However, it is possible that the US government will expand the list over time.
Importation and Enforcement Process
According to CBP’s new UFLPA Operational Guidance, CBP will use its existing detention framework under 19 U.S.C. 1499 to administer the UFLPA. Imports suspected of containing products produced wholly or in part in Xinjiang or produced by an entity or facility on the UFLPA Entity List will be detained at the port of entry. Importers will have 30 days after the merchandise has been presented for CBP’s examination to submit (1) information that demonstrates the goods are outside the scope of the UFLPA (i.e., they were not produced wholly or in part in Xinjiang or by an entity or facility on the UFLPA Entity List), or (2) “clear and convincing” evidence the goods were not produced with forced labor. If CBP decides to exclude the goods or fails to make a decision within 30 days, the importer will have the opportunity to protest the decision under normal customs procedures.
This process supersedes the existing Xinjiang-related WROs.4 As a result, goods that previously fell within the scope of a Xinjiang-related WRO will now be subject to the UFLPA’s higher evidentiary burden. (Other WROs will remain unaffected by the UFLPA’s entry into force.)
Proving Goods Are Outside the UFLPA’s Scope
In deciding which goods to detain, CBP will employ a risk-based approach that prioritizes the highest-risk goods based on current data and intelligence. However, it is possible that CBP will detain goods that are outside the scope of the UFLPA, i.e., goods that do not contain any inputs from Xinjiang or a party on the UFLPA Entity List. In such cases, CBP has stated it will be the importer’s burden to prove its goods are outside the UFLPA’s scope.
Importers whose goods are detained should be prepared to present a detailed supply chain map and complete supply chain tracing report. The supply chain map should document how the imported good was made (from raw materials to finished good), by what entities, and where it was made, including all in-house manufacturing as well as Tier 1 and sub–Tier 1 production. Additionally, the supply chain tracing report should provide documentation that traces a specific batch step-by-step through the entire production process.
Rebutting the Presumption of Forced Labor
By statute, in order to grant an exception to the rebuttable presumption, CBP must determine that an importer has done three things:
- Demonstrated that it has fully complied with the UFLPA Strategy’s due diligence guidance;
- Completely and substantively responded to all CBP requests; and
- Provided “clear and convincing” evidence that the goods were not made with forced labor.
CBP will assess what constitutes “clear and convincing” on a case-by-case basis. In public presentations, CBP has warned that finding evidence sufficient to rebut the presumption will be very difficult. Such information may include a complete supply chain map; information on each worker, such as wage payment and production output per worker; information on worker recruitment; and credible audits to identify forced labor indicators and remediate any problems that are discovered.
For many companies, collecting such documentation is an onerous task. Therefore, importers should begin assembling the documentation in advance in order to ensure that they can respond to a request from CBP within the 30-day window.
Importer Guidance on Due Diligence
As noted above, in order to grant an exception to the UFLPA’s rebuttable presumption, CBP must determine that the importer has complied with the UFLPA Strategy’s due diligence guidance. This guidance largely tracks the US Department of Labor’s Comply Chain. The key elements of a supply chain due diligence program are as follows:
- Identify and engage with relevant stakeholders, including suppliers and workers;
- Perform a risk assessment to identify those places in the supply chain where there is an elevated risk of forced labor;
- Develop a code of conduct that provides a framework for addressing the risk of forced labor;
- Communicate the standards included in the code of conduct across all tiers of the supply chain;
- Monitor supplier compliance with the code of conduct using credible audits;
- Fully remediate any identified indicators of forced labor;
- Enlist independent third-party verification to assess the effectiveness of the importers due diligence system; and
- Provide regular and timely public reporting on the due diligence system.
In practice, some importers have found that it is difficult to perform a credible audit in China, due in part to the Chinese government’s restrictions on access to high-risk facilities and other legal limits on conducting investigations. However, the UFLPA Strategy makes it clear that such barriers do not relieve importers of their due diligence obligations.
In addition to the importation impacts detailed in the recent CBP and FLETF guidance, the statute also amends the Uyghur Human Rights Policy Act of 2020 (22 U.S.C. 6901) by adding “serious human rights abuses in connection with forced labor” as a basis for the act’s mandatory sanctions. As a result, there is a risk that parties included on the UFLPA Entity List will also be designated as targets of the sanctions programs administered by the Office of Foreign Assets Control.
Early Enforcement Actions
Reports indicate that CBP has already begun seizing shipments of solar panels subject to the UFLPA. The detained shipments are being held until the importer provides documentation showing the source of the quartzite, the raw material for making polysilicon. This initial enforcement action indicates that CBP is already deeply investigating importers’ supply chains, at least for high-risk industries.5
The UFLPA magnifies the legal and commercial risk of importing products that are produced wholly or in part in China. It also reflects a broader US policy shift toward a more proactive stance against forced labor abroad, following new forced labor protections in the 2020 US-Mexico-Canada Agreement, renewed focus by US Department of Homeland Security leadership on human trafficking, and a surge of WROs by CBP in recent years targeting imports from China. Consistent with this trend, on July 6, 2022, the Office of the US Trade Representative published a request for comments on a focused trade strategy to combat forced labor.6
Companies with supply chains that run through China should assess their potential exposure to UFLPA-related risk—even if the goods are imported from a third country. Additionally, companies should consider reviewing and updating their compliance programs and due diligence processes to ensure that their supply chains are compliant with all applicable US laws and regulations regarding forced labor and human trafficking, and to prepare for the possibility of enforcement action pursuant to the UFLPA.