UFLPA Enforcement Is a Growing Threat To Manufacturers

It is now approaching two years since the Uyghur Forced Labor Prevention Act (UFLPA) first went into effect. The law, which was originally enacted on December 23, 2021 and entered into force six months later, prohibits U.S. companies from importing any goods that were mined, manufactured, or produced using state-sponsored forced labor in the Xinjiang-Uyghur Autonomous Region (XUAR) of China. 

Customs and Border Protection (CBP) is responsible for the enforcement of ULFPA, while an an interagency group known as the Forced Labor Enforcement Task Force (FLETF)—which is housed in the Department of Homeland Security and includes participants from six other federal agencies—monitors CBP’s implementation of UFLPA and shapes the overarching strategy of the law. 

In signing the UFLPA into law, the federal government was aspiring to achieve several objectives:

• First, it wanted to punish the People’s Republic of China (PRC) for carrying out a slew of forced-labor programs targeting persecuted groups, including Uyghurs, and using coercive tactics and the threat of internment to compel them to work in factories and at other industrial sites. 
• Second, it wanted to establish an aggressive policy of deterrence that strongly discouraged U.S. importers from doing business with companies involved in or benefiting from forced labor in the XUAR. 
• Finally, and more broadly, the DHS sought to enforce Section 307 of the Tariff Act of 1930 by ridding U.S. supply chains of products made through forced labor. 

As of April 1, CBP has detained over 8,000 shipments under the UFLPA, with a total value exceeding $3 billion (40 percent of the detainments have been permanently denied). High-priority sectors for enforcement include textile manufacturing, agriculture, and electronics, with the latter industry incurring over half of all CBP interdictions since the act went into effect. 

After unanimously passing in the Senate in 2021 before receiving just a single vote against in the House, the UFLPA has continued to enjoy a rare degree of vigorous bipartisan support. The House Select Committee on the Chinese Communist Party, as well as the bill’s original sponsors, have issued recommendations for strengthening the law and ensuring that the CBP continues to be held accountable to Congress for its enforcement. In short, prominent voices throughout Washington have coalesced around this issue, and there is a great deal of political momentum behind the effort to denounce the CCP’s sprawling human rights abuses in the XUAR by expelling its tainted goods from U.S. supply chains. 

The History and Rationale Behind the UFLPA

The CCP’s mass persecution and systematic exploitation of Uyghurs and other ethnic and religious minorities in the far western province of Xinjiang has been on the U.S. government’s radar since at least the late 2010s. 

In October 2019, Nury Turkel, a Uyghur American lawyer and human rights advocate and the Chairman of the Uyghur Human Rights Project, submitted written testimony to Congress laying out China’s sweeping, yearslong campaign to repress existing cultures and religions in the XUAR and force minority populations into industrial labor programs through coercion, intimidation, and the threat of internment. “Forced labor is a deeply embedded tool of control in China,” Turkel wrote. “Transforming the population from one largely made up of independent farmers and traders into industrial workers, subject to regimes of surveillance and control in factories far from their hometowns, is a major part of the government’s program of ‘stability maintenance.’”

Just a month later, in November 2019, the New York Times published a jolting report based on a trove of several hundred internal government documents that had been leaked to the publication. The unprecedented leak—which would later be cited by the DHS as it prepared for the UFLPA rollout—offered an extensive view into the CCP’s vast crackdowns in Xinjiang. The exposé included evidence of the mass internment of hundreds of thousands of ethnic minorities into camps and prisons, indoctrination efforts aimed at expunging heterogeneous cultures in the region, and forced labor initiatives. According to the Times journalists, the papers “offer a striking picture of how the hidden machinery of the Chinese state carried out the country’s most far-reaching internment campaign since the Mao era.”

Around the same time that these revelations were coming out, CBP began issuing a series of withhold release orders (WROs) on goods being imported from a number of Chinese companies implicated in the country’s state-sponsored forced labor. (WROs essentially function as targeted prohibitions, instructing CBP and customs officials to detain certain products from specific companies.) And by 2020, the uproar surrounding the CCP’s clandestine policies of oppression in Xinjiang had grown deafening. A steady current of expert testimonies, government reporting, and journalistic investigations were stoking a wave of international condemnation, with countries all over the world decrying what some were going so far as to call crimes against humanity, even genocide. A year later, buoyed by this accumulation of evidence and a swelling roster of governments rebuking China’s actions, the U.S. enacted the UFLPA. 

Who the UFLPA Legislation Impacts and Why 

When the ULFPA became effective in 2022, CBP designated a number of industries as “high priority” sectors for enforcement. Those sectors included polysilicon, cotton, and tomatoes. In the nearly two years since the law was entered into force, CBP has largely followed through on those initial prioritizations. As of April 1, electronics—which, according to ULFPA’s data dictionary, includes integrated circuits, automated data processing equipment, solar products, and consumer electronics—has accounted for over 4,000 detainments. Cotton-based goods like apparel, footwear, and textiles, meanwhile, have seen around 1,400 shipments detained. And 410 shipments of agricultural products, which encompasses the third high-priority sector, have been stopped by CBP. 

Do just a little bit of digging, and the reasons behind these designations quickly become clear. 

According to Sheffield Hallam University’s Helena Kennedy Centre for International Justice, roughly 45% of the world’s photovoltaic-grade polysilicon is manufactured in Xinjiang. The region is also responsible for a substantial proportion of the global production of cotton, around 20%, and a quarter of all tomato paste. The DHS directed CBP to focus on those sectors in part because of the relatively high chance that imports with those materials in them originated in the XUAR, or their supply chains touched the region in some way. 

Polysilicon: A Major Raw Material for the Solar Industry

The implications of just how integral Xinjiang is to the global polysilicon supply chain specifically is worth highlighting. While the Semiconductor Industry Association, a trade group representing the U.S. semiconductor industry, has argued that manufacturers in the XUAR are not producing polysilicon at the grade necessary to be incorporated into semiconductor fabrication, they are serving as major suppliers for the solar panel industry. While estimates, let alone exact figures, on how much polysilicon originally manufactured in Xinjiang ends up being incorporated into solar panels shipped to the U.S. are not available, an abundance of related data suggest that the region looms very large in the $30 billion sector. According to a study by S&P Global, four of the largest solar panel suppliers in the U.S. sourced polysilicon or other raw materials and components from the XUAR in 2020. 

Weaning themselves off these longstanding supply chain dependencies has proven difficult for many of these solar firms. Industry insiders have reported that several U.S. solar manufacturers and importers have had a substantial number of shipments carrying modules detained by CBP upon entering domestic ports. In some cases, these companies are adapting without necessarily cutting ties with XUAR manufacturers and restructuring their supplier networks. Instead, they’re diversifying their supply chain just enough to appear compliant with the UFLPA while maintaining the same Xinjiang sourcing for the rest of the world. Regardless of the countermeasures employed at the level of individual companies, though, the effects of the UFLPA are indisputably reverberating across the broader market. The Solar Energy Industries Association found that the sector experienced a 23% decline in solar installations in 2022, a surprising development for an otherwise surging industry that the trade group partially attributes to the new forced-labor restrictions. 

UFLPA Enforcement Goes Beyond Solar, Looks At Automakers

The past year or so has seen the scope of UFLPA enforcement expand beyond solar panels and the original high-priority sectors, too. On the heels of further investigations by congressional committees and academic researchers into U.S. manufacturers sourcing from suppliers in Xinjiang, the CBP’s dragnet now includes components used by major American automakers. The agency is reportedly detaining shipments of lithium-ion batteries, tires, aluminum, and steel. And there’s a growing sense among trade experts that the automotive industry’s connections to forced labor in the XUAR are turning into a new, critical area of focus for ULFPA and its advocates in Washington. 

UFLPA Obligations and Compliance Strategies for Manufacturers 

Manufacturers and importers looking to be granted an exception to the CBP’s rebuttable presumption have a high bar to clear, and it has three primary prongs:

1. First, the company must present clear and convincing evidence that the goods being imported were not mined, produced, or manufactured, in whole or part, through forced labor. This requires comprehensive documentation that goes beyond just a single supplier or isolated segment of the supply chain. As an official with one of the CBP’s Centers of Excellence and Expertise told American Global Logistics in a recent bulletin, “There should be a logical progression” to the paperwork submitted to the agency that tells a cohesive, legible story. Rather than a single exculpatory document, the official stressed that releases are contingent upon “the totality of the evidence.” 

2. Second, importers must “completely and substantively” respond to all CBP inquiries related to the shipment. This includes requests for additional information, documents, and transaction details.
   
   
3. Finally, companies need to demonstrate that they have fully complied with the guidelines set forth in the DHS’s 2022 report to Congress on UFLPA enforcement strategy. These requirements, which are set forth in Section VI of the congressional report, include supply chain tracing, due diligence, and supply chain management measures.  

Supply Chain Tracing

Deemed a “critical first step” for importers seeking to comply with DHS requirements, tracing requires companies to carry out a mapping of their supply chain. In addition, manufacturers must be able to produce a meticulously constructed chain of custody for the goods or materials being imported.

Due Diligence 

The DHS lays out a series of interrelated measures importers can take to implement a comprehensive due diligence system. These include engaging with direct suppliers, producers of raw materials, and other key stakeholders along the supply chain to determine whether there is a risk of forced labor, and carrying out related risk assessments through supply chain mapping. Other measures include—but are not limited to—developing a code of conduct for suppliers forbidding the use of forced labor; communicating that code of conduct across the supply chain; monitoring compliance through audits and other processes; and performing remediation through the execution of a corrective action plan when a given supplier is found to be using forced labor. 

Supply Chain Management Measures

Actions manufacturers and importers are responsible for implementing to mitigate the risk of forced labor in their supply chains, supply chain management measures are intended to give companies leverage and visibility with their suppliers. Vetting stakeholders along the supply chain, incorporating specific consequences into supplier contracts if forced labor is discovered, and ensuring access to materials and personnel are among the primary supply chain management measures outlined by the DHS. 

Companies should view fulfilling these requirements as serving dual purposes. While adherence is obviously a necessary component to being granted a UFLPA exception—should an importer’s shipment get stopped by CBP—it can also form the foundation of a strong trade compliance strategy. Implementing the tracing, due diligence, and supply chain management tools outlined by the DHS can help manufacturers keep their supply chains clean, their sourcing ethical, and their supplier relationships transparent and forthcoming.  

The Unique Obstacles to Achieving UFLPA Compliance 

Even those companies committed to carrying out due diligence measures in the best faith possible and rooting out materials and components manufactured through China’s forced labor programs will face several imposing obstacles in their efforts to reach compliance. 

Because of the complexity, sprawl, and opacity inherent in global supply chains, many manufacturers struggle to carry out mapping that goes beyond direct suppliers. While direct relationships may be easy to identify and vet, seeing into the vast, labyrinthine network of sub-tiers that sustain many of the world’s largest industries is a far more arduous task. 

Unfortunately, much of the systematic forced labor linked to the XUAR takes place at the level of raw materials, or in the earliest stages of manufacturing production chains. As a result, U.S. importers need advanced visibility to determine whether their supply chains are contaminated with forced labor. But without what the DHS calls “adequate tracing technologies”—otherwise known as supply chain visibility tools—American manufacturers won’t have the means to comprehensively source their shipments and understand their level of exposure to these increasingly critical risks. 

Equally pervasive—though far more insidious—is the issue of intentional transshipment. As the DHS’s UFLPA report to Congress explains, “In efforts to circumvent 19 U.S.C. § 1307, companies attempt to use illegal transshipment to conceal the origin of goods or inputs from Xinjiang.” The practice is deceptively simple. Chinese companies on the U.S. Entity List or with known connections to Xinjiang can evade import restrictions—and potentially mislead importers—by transshipping goods to third countries, who then reexport these shipments to the U.S. While hardly an infallible strategy, intentional transshipment can conceal original suppliers under an artificial country of origin, effectively laundering tainted goods and circumventing trade restrictions. 

Importers seeking to replace culpable suppliers also face the daunting prospect of rebuilding their networks within a dynamic, ever-shifting global supply chain that may not reward such measures for long. A U.S. manufacturer will need to expend considerable resources to determine whether it’s at risk for connections to forced labor, and further time and expertise still to identify the guilty party along their supply chain. But even if the company removes a specific supplier or sub-tier source and reconstructs that piece of their manufacturing network, there’s no guarantee that their supply chain will remain clean for long. Suppliers’ sub-tiers are perpetually in flux, and the upshot of that fluidity is that entities using forced labor are always a threat to enter—or re-enter—a fold importers thought had been purged of such abuses. 

The Risks of Ignoring UFLPA and ESG Regulations 

In the 2022 fiscal year, there were around 39 million imports processed by CBP. During the UFLPA’s first year of implementation, the agency detained around 4,200 shipments under the new law. The juxtaposition speaks for itself: the UFLPA only impacts a diminutive sliver—a fraction of a fraction of one percent—of the total number of imports entering the U.S. 

What’s critical for manufacturers to bear in mind, however, is that this miniscule proportion of detainments is not distributed equally across all industries. High-priority sectors and the materials those sectors use to manufacture components and final products—including solar panels and, to a rising degree, lithium-ion batteries and automotive parts—are at a substantially elevated risk of UFLPA interdiction. 

The more crucial point, though, lies in seeing the forest for the trees within the global regulatory landscape. In addition to the abundance of evidence suggesting that the scope of UFLPA will almost certainly widen in the months and years to come, the larger environmental, social, and governance (ESG) philosophy out of which the law stems is steadily gaining traction on the world stage. Trade compliance laws built on ESG principles are only going to grow more expansive, rigorous, and punitive in the latter half of the decade. Sooner or later, the legal, financial, and reputational pressures on importers to thoroughly scour their supply chains for human rights abuses and permanently, definitively expel forced labor from them will eventually become too powerful to ignore.