The Uyghur Forced Labor Prevention Act (UFLPA) supports the existing prohibition on the importation of goods into the United States made with forced labor under Section 307 of the Tariff Act of 1930 (19 U.S.C. § 1307). Enforcement of the UFLPA began on June 21, 2022. Companies with supply chains that have links to Xinjiang specifically and China more generally should be concerned about the implications of UFLPA enforcement.
The UFLPA requires U.S. Customs and Border Protection (CBP) to apply a presumption that imports of all goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of China (Xinjiang), or by entities on the UFLPA Entity List (described below), are prohibited from entry into the United States under 19 U.S.C. § 1307. The scope of the UFLPA extends to goods made outside of or shipped through China that include inputs made wholly or in part in Xinjiang. There is no de minimis exception. Priority enforcement areas include polysilicon, cotton, and tomatoes.
Section 2(c) of the UFLPA requires the Forced Labor Enforcement Task Force (FLETF) to develop a strategy to support enforcement of Section 307 to prevent the importation into the United States of goods mined, produced, or manufactured wholly or in part with forced labor in China. This responsibility includes the development of five lists of entities/products subject to the presumption, notably the “Entity List”, comprised of entities in Xinjiang that mine, produce, or manufacture wholly or in part any goods, wares, articles and merchandise with forced labor. These lists were published in the UFLPA Strategy (Strategy), released on June 17, 2022, and are critical for companies to review. The Entity List, which was sourced from existing Withhold Release Orders (WROs) and the BIS Entity List, names ten entities. FLETF agencies will be able to recommend the addition, removal, or modification of entities on the Entity List.
The UFLPA presumption is rebuttable, but the evidentiary standard to obtain an exception is high: importers must demonstrate by “clear and convincing evidence” that the imports are not made wholly or in part by forced labor, and must also respond to all CBP requests for information about merchandise under CBP review and comply with importer guidance contained in the Strategy. The UFLPA requires that any exceptions granted by CBP to the rebuttable presumption be made public and reported to Congress. Importers may also seek to establish that their imports are outside the scope of the UFLPA entirely.
CBP released operational guidance to importers on June 13, 2022 (CBP Guidance). The CBP Guidance must be read together with the Strategy, as both discuss the types of information and documentation that importers will need to provide to either demonstrate that their goods are outside the scope of the UFLPA or that they qualify for an exception to the rebuttable presumption, as well as general expectations for supply chain due diligence.
The illustrative lists of information provided under the CBP Guidance and the Strategy are extensive and will require importers to go deep into their supply chains, tracing back from the imported goods and components all the way through to the raw materials. For example, importers may need to provide detailed information on their overall supply chain, including a list of suppliers associated with each step of the production process and affidavits from each company or entity involved, as well as documentation specific to the detained goods and components (e.g., purchase orders, invoices and receipts for all suppliers and sub-suppliers, production orders, etc.).
In addition to general and specific supply chain information, CBP may also request supply chain due diligence system information, including evidence that the company has assessed and mitigated forced labor risks along the supply chain; maintains and monitors enforcement of a written supplier code of conduct that forbids the use of forced labor; provides training on forced labor risks; and that the implementation and effectiveness of the company’s due diligence system has been independently verified. The requirements for conducting a “creditable audit” in Xinjiang are detailed and in practice will likely be extremely difficult, if not impossible, for many importers to satisfy. In light of the extremely detailed supply chain information necessary to qualify for an exception, importers should evaluate carefully whether they can avoid having to utilize this option.
As of June 21, CBP is authorized to begin detaining and excluding and/or seizing shipments that it suspects fall within the scope of the UFLPA. Over the past several months, CBP has conducted extensive outreach to educate members of the importing community as to the UFLPA, and as a result, CBP has indicated that there will be no “grace period” for enforcement. CBP will target shipments for detention based on origin (i.e., goods imported directly from Xinjiang and from entities on the Entity List), illegally transhipped goods with inputs from Xinjiang, goods imported into the United States by entities outside Xinjiang but related to an entity in Xinjiang, importers known to CBP from the enforcement of existing China WROs, and other sources of information, such as public reports from NGOs. As noted above, priority areas of enforcement include polysilicon, cotton, and tomatoes, however products falling outside of these categories may still be detained. The fact that a shipment is not exported directly from Xinjiang or that previous shipments of a product with links to Xinjiang have not been stopped by CBP does not guarantee that such shipments will not be detained by CBP going forward.
Companies importing products with links to China generally and Xinjiang specifically should be prepared to respond to all potential documentation requests from CBP to avoid disruption to their supply chains. And all companies involved in supply chains exporting products to the United States from China, or with components made in China, need to be preparing documentation to respond to potential information requests from downstream purchasers, importers, and consumers preparing for UFLPA enforcement.
Importers of goods in priority enforcement areas, including downstream products (e.g., cotton-based textiles) need to be especially proactive in identifying risks and preparing documentation to support claims that their products are either outside the scope of the UFLPA or that the requirements for an exception to the rebuttable presumption are satisfied. Notably, even if the relevant supply chain is using only non-Xinjiang inputs, there may be risks of comingling if suppliers source in part from Xinjiang. Importers may need to demonstrate that they maintain an auditable process for demonstrating the origin and control of each raw material or input. Importers of goods in priority enforcement areas can expect particularly close scrutiny of the product’s entire supply chain if detained, and requests for detailed documentation concerning, e.g., the involvement of all direct and indirect suppliers.
To prepare for UFLPA implementation, some steps companies should take include:
- Evaluating the effectiveness of the existing company-wide supply chain due diligence system for assessing and mitigating forced labor risks – including, e.g., all internal and independent third-party risk assessment/auditing systems; supplier code of conduct monitoring and enforcement; engagement with direct and indirect suppliers; forced labor risk training, etc. – and determining whether the individual components and due diligence system as a whole are likely to satisfy the CBP Guidance/UFLPA Strategy guidance and what modifications/additional processes, if any, may be needed;
- Developing detailed supply chain maps for products imported into the United States in order to identify and assess the risks of any links to Xinjiang or listed entities/facilities/products and develop mitigation strategies;
- Developing an efficient approach for gathering and preparing necessary supply chain documentation for potential submission to CBP in the event any shipment is detained and the company seeks to demonstrate the shipment is outside the scope of the UFLPA or that it qualifies for an exception to the rebuttable presumption; and
- Monitoring developments on UFLPA implementation, including additional guidance from CBP, likely to be released over the coming months.