7 Most Important Steps Your Business Should Be Taking for UFLPA Compliance

We are fast approaching two years since the Uyghur Forced Labor Prevention Act (UFLPA) entered into force on June 21, 2022. The law was enacted with the dual goals of holding Chinese companies accountable for sweeping, systemic forced labor practices in the Xinjiang Uyghur Autonomous Region (XUAR) of China, and detering American manufacturers and importers from doing business with these firms. As of May 1, 2024, Customs and Border Protection (CBP)—the agency responsible for enforcing the law—has detained over 8,000 shipments under the UFLPA, with a total value surpassing $3.3 billion. 

On June 5, Z2Data hosted a webinar focused on crafting an effective UFLPA response package in the event of a CBP detainment. The webinar featured two speakers with a wealth of experience advising companies on navigating compliance, detentions, and other issues related to the law: 

• Lindsay Wardlaw, a former international trade attorney and current consultant at Amalie Trade Compliance Consulting
• Mary Mikhaeel, a senior associate specializing in forced labor and human rights issues at Miller & Chevalier. 

Below, we summarize seven key UFLPA compliance measures outlined by the speakers during the event. 

1. Recognize the Products at the Highest Risk of UFLPA Detainment 

Companies looking to ramp up their UFLPA compliance efforts need to be aware of the products and materials that are most vulnerable to CBP detainment under the law. “The first thing that I’m seeing companies do is developing a process to identify their high-risk products and suppliers,” Mikhaeel said. There are myriad useful resources businesses can avail themselves of to get a clear picture of what these high-risk goods are. 

“The first thing that I’m seeing companies do is developing a process to identify their high-risk products and suppliers.”

When the ULFPA first went into effect in 2022, the Department of Homeland Security and the Forced Labor Enforcement Task Force (FLETF)—the interagency group tasked with shaping the law’s strategy and implementation—drew on the Department of Labor’s List of Goods Produced by Child Labor or Forced Labor. This list included 10 products connected to forced labor initiatives in Xinjiang—cotton, garments, electronics, and polysilicon were among them—and it heavily informed the DHS’s high-priority designations and broader enforcement strategy.

In addition to the Department of Labor’s list, businesses and other interested stakeholders can freely access CBP’s UFLPA Statistics Dashboard. This comprehensive tool publicly displays up-to-date figures on shipments the agency has detained under the UFLPA, with illustrative breakdowns based on month and year, specific industry, and country of origin (the majority of UFLPA detainments are actually shipments being imported from third or intermediary countries like Malaysia and Vietnam). Pairing the UFLPA Dashboard with CBP’s Data Dictionary, which provides clear examples of some of the most prominent products being detained in the industries outlined on the dashboard, can give companies a strong sense of the most at-risk products. 

Finally, firms determined to develop an assertive, proactive approach to the law should be aware of the steady flow of investigative research and reporting into forced labor practices in the XUAR. Academic institutions and non-governmental organizations like Sheffield Hallam University’s Helena Kennedy Centre and Human Rights Watch continue to publish in-depth exposés revealing new links to forced labor in Xinjiang and implicating more companies in China’s forced-labor schemes. 

Finally, firms determined to develop an assertive, proactive approach to the law should be aware of the steady flow of investigative research and reporting into forced labor practices in the XUAR.

Crucially, this is not just inert research sitting passively in NGO offices and the halls of academia, burnishing reputations and solidifying future funding. Rather, these reports have been critical resources for FLETF as the interagency group evolves UFLPA implementation and broadens its scope to encompass more industries and complicit organizations. Because of their importance to DHS strategy and the future direction of the UFLPA, these investigations can serve as meaningful precursors and even flashing warning signs for businesses, previewing what products, industries, and companies are likely to fall into federal agency crosshairs next. 

Because of their importance to DHS strategy and the future direction of the UFLPA, these investigations can serve as meaningful precursors and even flashing warning signs for businesses, previewing what products, industries, and companies are likely to fall into federal agency crosshairs next. 

2. Expand and Enhance Language in Supplier Contracts

The broadening scope of the UFLPA and the significant uptick in the frequency of detainments in 2024 provide businesses with an excellent opportunity to update their contracts with suppliers. U.S. manufacturers and importers would be well-served to incorporate language in those contracts that allow termination for cause if suppliers are exposed for using forced labor. This type of preventative measure gives companies solid leverage and legal standing in the event that their goods are detained. 

Wardlaw suggests that companies revise their contracts to give them the ability to send goods back to suppliers at no cost if they’re found to be made with forced labor or are detained under the UFLPA under suspicion of participating in such practices. “We want to think about how we can update our contract language to allow us some flexibility in these cases, and to notify our counterparties that this is a concern that we have,” she said. Wardlaw added that additional provisions could be layered into the contract to further insulate importers. One example is language characterizing the discovery of a supplier’s link to forced labor as “a material breach of contract” that would allow companies to “terminate without consequence or damages.”

Wardlaw suggests that companies revise their contracts to give them the ability to send goods back to suppliers at no cost if they’re found to be made with forced labor or are detained under the UFLPA under suspicion of participating in such practices.

3. Carry Out Supply Chain Mapping 

There’s no shortage of substantive steps companies can take to put themselves in a better position to achieve UFLPA compliance. Few of these measures, however, are as powerful and advantageous as broadening visibility into your supply chain. Businesses that comprehensively map their direct suppliers and sub-tiers down to the raw materials are able to definitively determine whether they have any exposure to Xinijang or any of the 68 PRC-based companies on the UFLPA Entity List.

Businesses that comprehensively map their direct suppliers and sub-tiers down to the raw materials are able to definitively determine whether they have any exposure to Xinijang or any of the 68 PRC-based companies on the UFLPA Entity List.

Because of the inherent complexities of highly globalized supply chains that span various countries and include multiple tiers of suppliers, supply chain mapping can be an onerous, logistically overwhelming undertaking. U.S. manufacturers and importers may endeavor to carry out this sprawling, multifaceted project on their own by reaching out to direct suppliers, issuing questionnaires, and taking a manual, gumshoe-style approach to illuminating this vast network. 

There are, however, alternative strategies aided by a higher level of technological heft. Companies might also consider employing a supply chain risk management (SCRM) platform. These software tools can gather and consolidate information from databases, publicly available records, and other data points into a coherent picture that traces your products and components back to manufacturing sites and countries of origins all over the world. By utilizing a SCRM solution, businesses are often able to access a more complete, all-encompassing map of their supply chain within a much shorter time frame, allowing them to identify and respond to potential forced-labor vulnerabilities and head off the costly chaos of a sudden CBP detainment. 

By utilizing a SCRM solution, businesses are often able to access a more complete, all-encompassing map of their supply chain within a much shorter time frame, allowing them to identify and respond to potential forced-labor vulnerabilities and head off the costly chaos of a sudden CBP detainment. 

Whatever the method a business chooses, though, what matters most is the precision and specificity in the mapping effort. “What’s really important here is understanding every single entity in that supply chain, including the traders, including where items were warehoused in between supply chain steps and in between manufacturing steps,” Mikhaeel said. This type of highly granular, meticulous mapping can give companies a “better overall sense of where the potential highest-risk components of the product are.”

4. Conduct a “Mock Detention”

Companies interested in testing out their direct and sub-tier suppliers’ capacity to respond to a UFLPA detainment may want to consider something called a “mock detention” (also referred to as a traceability audit). In a mock detention, an importer reaches out to its suppliers and has them pull together all the documentation that would be required in the event that a specific shipment was detained by CBP. These documents—which would hypothetically be used to build a response package and win a release—include invoices, transaction records, bills of materials, and certificates of origin. One benefit of a mock detention is that it functions as a kind of snap mapping of the supply chain. By conducting the audit, importers can see the full manufacturing arc of their product and determine whether any stage of its production cycle is tainted by Xinjiang or a PRC-based firm on the UFLPA Entity List. 

These documents—which would hypothetically be used to build a response package and win a release—include invoices, transaction records, bills of materials, and certificates of origin.

Assessing exposure to XUAR forced-labor inputs isn’t the only advantage conferred by a traceability audit, though. As Mikhaeel explained, this kind of exercise also allows companies to test the effectiveness of the processes in place within their supply chain if they do need to assemble a UFLPA response package within 30 days. “What sort of enhancements need to be made in terms of the documentation so that companies are ready if and when there is a detention?” she asked. “Also, are the suppliers really willing to communicate with you, and do they understand the expectations from the outset?” A mock detention can be a revealing way to provide importers with a kind of performance baseline for their suppliers. Examining the results of this type of audit can help firms identify what specific record-keeping and documentation practices their suppliers need to start implementing to put all stakeholders along the supply chain in a stronger position with respect to UFLPA compliance. 

A mock detention can be a revealing way to provide importers with a kind of performance baseline for their suppliers.

5. Identify Third Countries Being Targeted by CBP 

Aside from the rapid expansion of shipment detainments in 2024, one of the most striking aspects of CBP’s UFLPA Dashboard is the breakdown of the agency’s detentions by country of origin. A cursory glance reveals that most shipments being stopped by CBP are not actually coming from China. In fact, the nation doesn’t even rank among the top three countries of origin with the most detainments. Malaysia, Vietnam, and Thailand all rank ahead of China as top targets for CBP—collectively, the three nations account for nearly 90% of the agency’s detentions (as calculated by total shipment value).

In fact, the nation doesn’t even rank among the top three countries of origin with the most detainments. Malaysia, Vietnam, and Thailand all rank ahead of China as top targets for CBP—collectively, the three nations account for nearly 90% of the agency’s detentions (as calculated by total shipment value).

These statistics are communicating a crucial reality for importers interested in enhancing their UFLPA compliance. The majority of the goods coming to the U.S. that were mined, manufactured, or produced using forced labor in Xinjiang are not tracing a direct route from China. Rather, they’re being finished—or undergoing a subsequent manufacturing stage—in a third country. 

In a global supply chain with a sprawling division of labor for complex products like solar panels, consumer electronics, and integrated circuits, it’s hardly uncommon for goods to travel to several manufacturing sites across multiple countries before reaching an original equipment manufacturer (OEM). U.S. importers need to be aware of this, though, and understand that while their goods’ official country of origin may be Malaysia or Vietnam, there’s still a strong possibility that earlier manufacturing inputs may be traced to China and Xinjiang. “Products from third countries are really important,” Mikhaeel noted. Do some digging into your specific product, she said, and “you can understand which third party countries CBP is targeting.”

6. Secure Alternative Sourcing 

One of the most important preventative steps companies can take to fortify themselves and their operations against a CBP detainment is a broader SCRM strategy that existed long before the rise of the UFLPA. Dual sourcing—in which importers and their procurement teams identify and secure alternative suppliers for a specific component, service, or raw material—is part of the larger concept of supply chain diversification. It’s also a core practice for cultivating a resilient, flexible supply chain that’s capable of weathering sudden changes triggered by evolving regulations, trade conflicts, and other disruptions that can imperil supplier relationships. Dual sourcing figures prominently in the current wave of supply chain trends spurred by the reemergence of trade wars and the growing skepticism toward globalization, including nearshoring, onshoring, de-risking, and China Plus One. More broadly, it’s becoming an increasingly integral part of many strategic sourcing playbooks. 

It’s also a core practice for cultivating a resilient, flexible supply chain that’s capable of weathering sudden changes triggered by evolving regulations, trade conflicts, and other disruptions that can imperil supplier relationships.

For UFLPA compliance specifically, securing alternative sourcing can be vital to minimizing the fallout from a CBP detention. If a shipment gets stopped by the agency under suspicion of being tied to forced labor in the XUAR, businesses with dual sourcing have the luxury of simply re-exporting those goods and tapping their alternative supplier. As we outlined in a previous piece on navigating UFLPA compliance, this adaptability is far preferable to the alternative scenario, in which importers with single source dependencies have no choice but to mount a costly and uncertain response to the detainment. 

If a shipment gets stopped by the agency under suspicion of being tied to forced labor in the XUAR, businesses with dual sourcing have the luxury of simply re-exporting those goods and tapping their alternative supplier.

Drawing on dual sourcing is especially important when companies find themselves negotiating with unaccommodating suppliers who appear loath to participate in audits, mock detentions, and other UFLPA compliance strategies. In such cases—where calls for enhancing transparency and strengthening crisis management plans across stakeholders go ignored or unheeded—Wardlaw said it makes sense to reach out to “an alternative source of supply that’s clean.”

7. Utilize an Industry Group to Increase Supplier Accountability 

Major industries with large markets and significant global footprints often have powerful, well-heeled trade groups that function as professional advocates for their interests. These trade associations may serve as de facto lobbying arms for their respective industries, representing companies in Washington and seeking favorable outcomes in policy discussions; work to establish standards and benchmarks within the industry; and foster collaboration between companies that spurs innovation and competitiveness and advances the sector as a whole. Examples of such trade groups within the electronics field include the Electronic Component Industry Association (ECIA) for electronic component manufacturers, and the Semiconductor Industry Association (SIA) for chip firms.

Although industry groups may not seem like obvious assets for companies interested in pushing for greater UFLPA adherence, they can actually play a critical role in tightening trade compliance. Many of these bodies represent scores of companies with total market share well into the tens of billions of dollars. Consequently, they can wield outsized influence with suppliers and other supply chain stakeholders that depend on those firms for revenue. 

Although industry groups may not seem like obvious assets for companies interested in pushing for greater UFLPA adherence, they can actually play a critical role in tightening trade compliance.

Businesses looking to compel their suppliers and sub-tiers to be more cooperative and forthcoming in UFLPA compliance efforts that require an all hands on deck should consider looking to trade groups to exert a healthy degree of pressure. “You can support industry groups that leverage their size to demand more transparency and accountability from your suppliers,” Wardlaw said. Bolstered by the solidarity of the companies they represent and their collective economic force, these associations can crystallize for suppliers the urgency of participating in compliance measures in a way that a single questionnaire or the odd phone call might fall short of. “One way we can see movement over time on forced labor is to work together to demand better behavior from suppliers,” she said. 

Businesses looking to compel their suppliers and sub-tiers to be more cooperative and forthcoming in UFLPA compliance efforts that require an all hands on deck should consider looking to trade groups to exert a healthy degree of pressure.

Dive Deeper with Z2Data’s UFLPA Webinar 

Want to learn more about how to build your due diligence with Z2Data’s supply chain risk management solution? Schedule a one-on-one demo with our product experts to get started. 

If you’d like to see more of the original webinar featuringMikhaeel, Wardlaw, and Z2Data Senior Customer Success Manager Oliver DeThier, visit our webinar resources page. The presentation looks at:

• Key triggers for a CBP shipment detainment
• Recent enforcement trends in the electronics industry
• Best practices for putting together a comprehensive due diligence package