The Uyghur Forced Labour Prevention Act and its effects on importers

The Uyghur Forced Labour Prevention Act (UFLPA) is legislation signed into law by the Biden administration. Effective 21 June 2022, the UFLPA has deterred US businesses from sourcing from Xinjiang Uyghur Autonomous Region (XUAR).

Companies subject to the law face strict restrictions on imports of goods mined, produced, or manufactured with forced labour in the People’s Republic of China. In this article, we explore the scope of UFLPA and its implications for businesses.

What is the Uyghur Forced Labour Prevention Act?

The Uyghur Forced Labour Prevention Act (UFLPA) is a law that aims to stop the use of forced labor by reducing the demand for products made under such conditions. It operates on the assumption that all goods sourced from the Xinjiang Uyghur Autonomous Region (XUAR) are produced with forced labor unless proven otherwise. Importers have the responsibility to demonstrate that they have conducted proper investigations and that the goods they import meet specific criteria.

It's important to note that this law is not just about protecting human rights but also aligns with the economic and foreign policies of the United States. While forced labor exists in supply chains worldwide, this law specifically targets the Xinjiang region due to political reasons as well as ethical concerns.

The UFLPA has significant implications for US industries, particularly those that rely on cotton, polysilicon, tomatoes, and apparel. These industries will be impacted by the requirements and regulations set forth by the UFLPA.

What are the implications for importers?

The Uyghur Forced Labour Prevention Act bans any and all goods made in part or whole from forced labour. The Uyghur Forced Labour Prevention Act has made it a lot harder for US companies to import affordable materials from XUAR. This affects supply stability, pricing strategy, and production output.

If you wish to continue importing materials from XUAR, you will need to provide evidence that the imports are free from forced labour. This would require extensive supply chain traceability and due diligence. And even then, supply chains could become unstable or collapse altogether.

What does it apply to?

Four types of products have been identified as high-risk:

• Cotton
• Polysilicon
• Tomatoes
• Apparel

These products are not only exposed to high risks of human rights violations, as investigated by the US Department of Homeland Security (DHS), they also represent major exports for XUAR. XUAR supplies about half of the global polysilicon and approximately 20% cotton.

A vast range of products is made from these materials, making the scope of coverage extremely wide. These are a few industries that are impacted by the UFLPA:

• Solarpanels
• Fashion/Apparel
• Sauces

DHS has identified a red list of companies with evidence of forced labour, whose definition encompasses companies partaking in the infamous state-sponsored poverty alleviation programmes, which are interpreted by many as a veiled institution for forced labour.

In addition to those explicitly on the list, any shipment from Xinjiang is denied entry by significant release orders.

What companies can do to prove a goo was not made with forced labour?

To prove that a good was not made with forced labour, companies must demonstrate the following:  

• Conduct due diligence on the supplier
• Ensure supply chain traceability
• Have in place prevention and mitigation measures for human rights violations

Basically, if you source or import anything from XUAR, you can consider your company in violation of the Act. There are two routes to take at this point: source from a different supplier outside XUAR, or request an exception to the rebuttable presumption.

The latter can be done during detention, exclusion, or seizure of a good. These three processes are ways in which the enforcement agency, the US Customs and Border Protection (CBP), implements the Act. Companies must respond to the detention, exclusion, or seizure notice within the appropriate time frame. A request for exception must be made along with the relevant supporting evidence to show an ethical supply chain.

The CBP requires “clear and convincing” evidence that products are free from forced labour. Guidelines on how exactly to satisfy this vaguely articulated requirement can be found in a guidance document drawn up by the Forced Labour Enforcement Task Force (FLETF).

Specific guidance is provided on how to conduct due diligence. Companies must have a due diligence system that should include:

• Supplier engagement
• Supply chain mapping and risk assessment for forced labour
• Written supplier code of conduct, containing provisions for forced labour and the use of labour in state-sponsored labour programmes
• Training for employees responsible for due diligence and supplier engagement
• Monitoring for supplier compliance with the code of conduct
• Remediation measures to address forced labour risks or termination of the relationship with an at-risk supplier
• External verification of the due diligence system
• Reporting on the performance of the due diligence system

The supply chain traceability requirements are much more specific and extensive, requiring documents and records showing supplier profiles, merchandise details, labour practices and employment processes, and supply chain risk management measures. Some of the information that would be valuable for an assessment include:

• Merchandise mined, produced, or manufactured
• Internal controls to prevent and mitigate the risk of forced labour
• Supply chain tracing
• Audits conducted by trusted parties

Each of the four high-risk goods has specific documentation requirements. For example, records for tomatoes must show their origins from seed to finished product, while polysilicon importers need to know the location of quartzite, the location of manufacturing, and the location of downstream production.

As the rebuttable presumption is rebuttable, the law still leaves room for XUAR imports that meet human rights standards. The challenge is in tracing each point in the supply chain to ensure no forced labour takes place. Whatever the agenda, there is no denying the effect the UFLPA has on human rights in global supply chains.

How we help you

• We guide you to achieve legislative compliance with the Uyghur Forced Labour Prevention Act by contacting your suppliers and simplifying the collection of relevant data internally and along the whole supply chain.
• We receive information from your suppliers without jeopardising business-critical information about their supply chain from exposure, only showing one level up and one level down.
• We facilitate data exchange with suppliers and ensure that necessary and accurate information from the supply chain arrives with minimal effort.
• We conduct risk assessments of your supply chain and set up a grievance mechanism.
• We provide a centralised platform to manage all your data, pulling data from enterprise software such as ERP, HRM, EMS, etc.
• We offer insights powered by data analytics, enhancing your understanding of your supply chain, ESG performance, and reporting strength.
• We automate follow-ups to data sources, reminder emails and calculations and free up more time for you to do other things.

Reach out to us and we are happy to help you!