What Should The Auto Industry Expect From CBP’s UFLPA Enforcement?

On February 14 of this year, news outlets began reporting on a significant new development in the Uyghur Forced Labor Prevention Act (UFLPA). The law, enacted in 2022, prohibits Chinese goods made or mined using forced labor from entering the U.S. Customs and Border Protection (CBP), the federal agency responsible for enforcing the UFLPA, had impounded thousands of vehicles being imported by Volkswagen. These included several hundred Bentleys, approximately 1,000 Porsches, and several thousand Audi vehicles (the Volkswagen Group owns a number of luxury automakers).

As it happened, the mass detainment of several thousand vehicles—by the far the largest action CBP has taken against the automotive industry under the UFLPA to date—was triggered by Volkswagen itself. The car manufacturer had learned that a specific subcomponent in the luxury cars had originated from a region in “western China,” and subsequently disclosed the discovery to the agency. Inside sources told the Financial Times, which first broke the story, that VW was “not aware of the origin of the part, which was sourced by an indirect supplier further down its supply chain, until the supplier alerted it to the issue.” In a letter issued to customers waiting for the impounded vehicles, Volkswagen stated that the detainment was triggered by a “small electronic component that is a part of a larger control unit.”

Inside sources told the Financial Times, which first broke the story, that VW was “not aware of the origin of the part, which was sourced by an indirect supplier further down its supply chain, until the supplier alerted it to the issue.”

It’s possible that this episode will exact some type of reputational cost on Volkswagen—a company that, of course, is no stranger to bombshell scandals set off by running afoul of U.S. regulations. What it almost certainly won’t result in, though, is the permanent seizure of the manufacturer’s luxury cars. The automaker is in the process of replacing the subcomponent with ties to forced labor in China, with the expectation that CBP will subsequently release its fleet of detained vehicles. Volkswagen’s customers will presumably get their orders, and the company will quietly move on. The agency’s actions are ultimately not particularly noteworthy for the specific cars CBP detained this past February; it’s the implications of the event for the automotive industry writ large, rather, that bear such a potentially profound significance.

The automaker is in the process of replacing the subcomponent with ties to forced labor in China, with the expectation that CBP will subsequently release its fleet of detained vehicles.

Leading up to the Volkswagen impoundment, there had been well over a year of revelatory investigations into the automotive industry. NGOs and academic institutions alike were reporting damning links between some of the world’s largest automakers and forced labor in Xinjiang. Politicians and federal officials had been closely following this evolving body of research, and whispers in Washington strongly suggested that the Department of Homeland Security was planning to begin targeting these corporations. Given the context in which it appeared, it seemed that the mass detainment could symbolize the beginning of a new phase of UFLPA enforcement, one with automakers at the center of it all.

Research Reveals Auto Industry's Ties to Xinjiang Forced Labor

While there was some level of awareness among those with knowledge of the forced-labor programs in Xinjiang that car manufacturers had ties to the region, it wasn’t until a meticulous and explosive 2022 exposé that these relationships were revealed to a larger audience. “Driving Force” was published in December 2022 by Sheffield Hallam University’s Helena Kennedy Centre for International Justice. The report used publicly available data, financial reporting, journalistic investigations, and sophisticated mapping, among other sources, to lay out the ways in which the XUAR had become deeply entrenched in the auto industry. 

The report used publicly available data, financial reporting, journalistic investigations, and sophisticated mapping, among other sources, to lay out the ways in which the XUAR had become deeply entrenched in the auto industry.

The report began with a few key details illuminating the reasons why many automakers have ramped up their operations in Xinjiang over the past half-decade. “The increased availability of processed raw materials in the Uyghur Region,” the authors explained, “coupled with extraordinary government incentives and lax implementation of labor and environmental protection laws, led auto parts manufacturers to expand production in the region in recent years.” Suppliers along the vast and highly globalized automotive supply chain began taking advantage of the highly favorable, business-friendly environment the Chinese government was cultivating in the XUAR. Within just a few years, the industry had fostered deep, complex, and all-but-inextricable ties to Xinjiang. 

The investigation focused on several key materials and parts used in automobiles, including steel, aluminum, copper, and batteries. Tracing these items back to their original manufacturers, it exhaustively documents how many of the world’s most prominent automakers draw on supply chains that run through Xinjiang and are tainted by the Chinese Communist Party’s systematic regime of forced labor there. The report also outlines various coercive practices that proliferate in the XUAR. By marshaling an abundance of credible evidence, the researchers convincingly demonstrate that the nation’s so-called labor transfer and government assistance programs are guises for schemes driven by the ever-present threat of internment, imprisonment, and other state punishments.

The investigation focused on several key materials and parts used in automobiles, including steel, aluminum, copper, and batteries.

Finally, “Driving Force” identifies a swath of major automakers headquartered all over the world with multiple supply chain exposures to companies based in Xinjiang. Some of the high-profile, industry-leading firms implicated in the report include Volkswagen, Honda, Ford, General Motors, and Toyota. In all, researchers found that over 100 carmakers and automotive parts manufacturers were incorporating parts or materials into their products that were made using Uyghur forced labor. The authors summarized the outcome of the investigation with definitive concision. “The results were startling—practically every major traditional automotive and electric vehicle manufacturer has significant exposure to forced labor in the Uyghur Region.”

Some of the high-profile, industry-leading firms implicated in the report include Volkswagen, Honda, Ford, General Motors, and Toyota.

“The results were startling—practically every major traditional automotive and electric vehicle manufacturer has significant exposure to forced labor in the Uyghur Region.”

The Impact and Implications of “The Sheffield Report”

“The Sheffield Report,” as it would become known in some circles, made waves almost immediately. The investigation was covered widely by a variety of media outlets, including major international publications, niche sites focused on the automotive industry, and non-governmental organizations and human rights groups. Laura Murphy, the head researcher for the study and a professor of human rights and contemporary slavery at Sheffield Hallam University, told the New York Times that “There was no part of the car we researched that was untainted by Uyghur forced labor.” Human Rights Watch called on automakers to “accelerate efforts” to implement supply chain tracing and more stringent oversight of their suppliers. And United Auto Workers, one of the largest labor unions in the U.S. that had its own stake in the disquieting discovery, implored the industry to extricate its supply chain from Xinjiang.

The sweeping, overwhelmingly affirmative response to the report served as a confirmation of the researchers’ findings: virtually every corner of the $2.5-trillion-dollar automotive sector was bound up with forced labor in China, and no amount of propaganda or countervailing narratives was going to obscure that fact. Beneath the collective condemnation, further, was the sense of a growing moral imperative on automakers to act swiftly and decisively. It was incumbent upon these powerful, well-heeled global corporations to clean up their unethical and largely illegal reliance on the systemic human rights violations embedded in manufacturing in the XUAR. 

Virtually every corner of the $2.5-trillion-dollar automotive sector was bound up with forced labor in China, and no amount of propaganda or countervailing narratives was going to obscure that fact.

The Sheffield Report, along with the chorus of indignation it provoked, was not lost on the U.S. government. The Department of Homeland Security, which houses the interagency task force responsible for overseeing implementation of the UFLPA, made clear that it planned to rely on reporting from NGOs and academic institutions when shaping strategy and enforcement of the law. The UFLPA was never intended to have a fixed, unalterable scope. Instead, the aim was for it to remain dynamic and mutable, responsive to the surfacing of new information regarding the presence of Chinese state-sponsored forced labor in global supply chains. In this way, the 2022 report represented something of a green light for DHS and CBP. The federal agencies now possessed a new level of permission—and perhaps a growing ethical responsibility—to go after complicit car manufacturers. 

The UFLPA was never intended to have a fixed, unalterable scope.

Laying the Groundwork for UFLPA Enforcement of Automakers 

Twenty-twenty-three did not see any major CBP enforcement actions against automobile manufacturers. The DHS did, however, take subtle measures to begin establishing a precedent for more serious scrutiny of the industry. In a UFLPA report to Congress in June, the agency indicated that it would be monitoring new “potential risk areas” for exposure to forced labor in China. These included aluminum, steel, copper, and batteries—materials and parts that had all been spotlighted in the Sheffield Report as items sourced by the automotive sector from Xinjiang-based suppliers with ties to forced labor. Even if the official UFLPA statistics were not yet demonstrating a shift in scope toward the auto industry, details like these spoke to the outsized influence the report was having on DHS’s thinking. 

In a UFLPA report to Congress in June, the agency indicated that it would be monitoring new “potential risk areas” for exposure to forced labor in China.

Perhaps equally telling, last November, DHS made the decision to bring on Laura Murphy, the report’s chief author, as a policy advisor specializing in forced labor. Since her hiring, Murphy has been outspoken about her and the agency’s intention to continue ratcheting up the UFLPA’s scope of enforcement. “We’re really focused on enhancing and expanding the entity list,” she said during a CBP trade event in Philadelphia earlier this year, referring to the UFLPA Entity List. “We expect many more entities to be coming in the next few months.” 

Since her hiring, Murphy has been outspoken about her and the agency’s intention to continue ratcheting up the UFLPA’s scope of enforcement.

Along with the impoundment of thousands of Volkswagen’s vehicles in February, these actions seemed to strongly indicate that DHS and CBP were evolving their enforcement strategy. It looked as though the troubling reporting from “Driving Force” and other, subsequent human rights investigations were spurring the federal government to start holding automakers accountable for their sourcing practices. That is, at least, how things appeared at the time. 

The Emerging Impasse Between Automakers and DHS 

For their part, auto manufacturers have been largely reticent about their capacity to root out forced labor within their supplier networks. As the Sheffield Hallam University researchers noted in their report, myriad car companies have stated that comprehensively mapping their supply chains—including identifying potential sub-tier suppliers operating in Xinjiang—is “out of reach.” 

A more recent study, carried out by Human Rights Watch and published in February, added further context to this industry quandary. The report shed light on the thorny, opaque corporate strategies global automakers employ to carry out operations in China. Several companies, including Toyota, Volkswagen, and GM, operate in the country through joint ventures with Chinese firms that manufacture and sell their cars in the nation’s market of 1.4 billion people. Because of the way the joint ventures are structured, these automakers have claimed that they have little visibility or control over their partner companies’ actions and suppliers. Volkswagen, for example, told Human Rights Watch that it had “no transparency about the supplier relationships” of its joint venture in China. A 2022 annual report from GM, meanwhile, admitted that the corporation had “limited control over the actions of a joint venture,” and would therefore struggle to “prevent violations of applicable laws or other misconduct” by that company. 

Because of the way the joint ventures are structured, these automakers have claimed that they have little visibility or control over their partner companies’ actions and suppliers.

A second major obstacle to combating forced labor raised by Human Rights Watch was arguably even more dispiriting: the specter of government retaliation. Experts interviewed for the report, all of whom requested anonymity, said that car companies operating in China often declined to engage in discussions with their Chinese suppliers and joint ventures about forced labor issues because they feared the government would punish them. The CCP has a track record of carrying out criminal investigations into parties aiding companies in assessing their exposure to human rights abuses in the country. There’s also the ever-present prospect of the government taking more explicit, unilateral action by simply expelling a car manufacturer from China if it decides that the company has proven itself detrimental to the state.

The CCP has a track record of carrying out criminal investigations into parties aiding companies in assessing their exposure to human rights abuses in the country.

The implications of these statements from automakers and industry insiders is difficult to definitively parse. Companies are proceeding with caution and restraint as they carry out their own evaluations of a sensitive, intractable situation and the range of potential responses to it. Nevertheless, the tack companies and their representatives are taking speaks to a sector assuming a measured, even equivocal stance on the issue of forced labor in their supply chains. While no car companies have publicly criticized the UFLPA or openly argued against its prohibitions, there have also been precious few declarations expressing anything resembling a resolute commitment to address the industry’s entanglements in Xinjiang. 

What Will Happen Next?

The current moment—a peculiar combination of regulatory momentum against carmakers and taciturn ambiguity from the industry itself—may represent a quiet but crucial impasse between the powerful federal agencies enforcing the UFLPA and the multi-trillion-dollar auto industry. The question is, what comes next? Will a major car manufacturer announce plans to fully extricate itself from the XUAR, or will CBP execute another large-scale impoundment of vehicles? Whichever side makes the next move, and whatever that next move is, it will be a fascinating expression of the power dynamics between two commanding public and private forces. 

The lone sign of where this compelling, consequential standoff may be headed is, in some ways, the demonstrable lack of one. Since the February impoundment of Volkswagen’s vehicles three months ago—which was, if you remember, triggered by the carmaker’s own voluntary disclosure—no major auto industry detainment has been reported.