US President set to sign Uyghur Forced Labor Prevention Act

The compromise version of the Uyghur Forced Labor Prevention Act (HR 6256) (“Act”) was recently passed by both houses of Congress, and the legislation is now approved for President Biden’s signature. President Biden is expected to sign the legislation soon. With strong bipartisan support, earlier versions of this legislation had been passed by the U.S. House and Senate in previous months, and lawmakers reached an agreement that merged each chamber’s versions. Compared to earlier versions of this legislation, the act no longer includes general notification requirements for filings with the United States Securities and Exchange Commission, but retains the earlier legislation’s establishment of a presumption rebuttable that all goods (i) “wholly or partially mined, produced or manufactured” in the Xinjiang Uyghur Autonomous Region of China (“Xinjiang”), or (ii) produced by an entity listed on any of the required by law, are made with forced labor and would be barred from entry into the United States under Section 307 of the Tariff Act of 1930, enforced by the Customs and Environmental Protection Service borders (“CBP”) of the United States. The law further requires a strategy to strengthen existing prohibitions on the import of goods mined, produced or manufactured with forced labor, potential additional penalties, and a diplomatic strategy to address alleged forced labor in Xinjiang.

Below, we expand on the key provisions of the law and summarize key takeaways for businesses:

CBP’s Import Ban and “Rebuttable Presumption”

The law would require CBP to presume that all goods made in Xinjiang, or by certain other entities, are made with forced labor and are barred from entering the United States unless the importer can, among other things, demonstrate “by clear and convincing evidence” that the goods are not made with forced labour. Demonstrating CBP eligibility (that is, demonstrating, by clear and convincing evidence, that a certain good is not made with forced labor) requires overcoming an extremely high burden of proof that can essentially consist of trying to prove a negative result. In light of these practical challenges, and given Xinjiang’s role in the broader Chinese economy, industry has raised concerns against a broad import ban on all goods made in Xinjiang or by labor. Xinjiang artwork.

The standard of “presumption rebuttable” generally against Xinjiang goods under the law is a significant development from previously issued CBP release orders (“WROs”) relating to Xinjiang, as those focused on specific products and entities. (CBP’s issuance of WROs is CBP’s primary enforcement tool under Section 307 of the Tariff Act of 1930.)rebuttable presumptionis similar to the provision of the Countering America’s Adversaries with Sanctions Act (PL 115-44) regarding North Korean labor. The alleged import ban will likely come into force in mid-June 2022, if the legislation is enacted this week, as expected.

“Strategy” to Provide Guidance to CBP and Importers

Following a public comment period, within 180 days of its enactment, the law would require the Forced Labor Enforcement Task Force (chaired by the U.S. Department of Homeland Security) to develop a strategy to support CBP’s enforcement of Section 307 of the Tariff Act of 1930. This strategy includes, for example, designating (i) specific entities in Xinjiang, or those working with the Xinjiang government, that would engage in or source from entities that engage in forced labor practices, ( (ii) specific goods allegedly made by forced labor, and (iii) entities that export goods allegedly made by forced labor to the United States. This strategy would also include additional guidance for importers with respect to CBP’s expectations regarding the level of due diligence, effective supply chain tracing and supply chain management measures, and the specific type, nature and extent of evidence that overcome the “rebuttable presumption” standard.

These measures are in line with growing industry and lawmaker concerns about the challenges of a broad import ban on all products made in Xinjiang or by Xinjiang’s workforce. The public comment period provides a unique opportunity for industry to help shape the effective implementation of this Act and CBP’s compliance expectations under this Act.

Additional Penalties Allowed

The law expands the list of reasons for which sanctions may be imposed under the Uyghur Human Rights Policy Act of 2020 (PL 116-145) to include serious human rights violations in connection with forced labour. The Uyghur Human Rights Policy Act 2020 allows the The president will impose sanctions on individuals, including Chinese government officials, believed to be responsible for certain human rights violations and abuses committed against Muslim minority groups in China or elsewhere. The law requires the administration to sanction such individuals by freezing their assets and declaring them ineligible for visas or admission to the United States. The president can waive sanctions if deemed to be in the national interest.

This means that within 180 days of promulgation, the president is required to identify every foreign person, including any Chinese government official, responsible for serious human rights violations in connection with forced labor in Xinjiang, and to impose the penalties required by law on those persons, unless such penalties cannot be waived. This could result in additional sanctions imposed by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), such as adding new parties to the Specially Designated Nationals and Blocked Persons List (“SDN List”). ) from OFAC.

Diplomatic strategy

The law requires the U.S. Department of State, within 90 days of its enactment, to submit to Congress a report on U.S. strategy to promote initiatives to raise international awareness and address allegations of forced labor in Xinjiang . The report must also include a list of entities in China that the U.S. government has determined to use or benefit from forced labor in Xinjiang, and a list of foreign persons who act as agents for those entities to import goods into the states. -United.. Listing by the US Department of State could potentially result in additional restrictions targeting these parties. Finally, the report must include a plan for working with the private sector to conduct supply chain due diligence and an action plan taken by the federal government to address alleged forced labor in Xinjiang under the authorities. existing.

Takeaway meals for companies

  • The most immediate compliance risk for businesses due to the law is the “rebuttable presumption” that goods made in Xinjiang, or by certain entities with ties to Xinjiang, are deemed to have been made with forced labor, and are therefore inadmissible in the United States. We expect this will result in more audits, detentions, seizures, and other enforcement activities by CBP.
  • U.S. importers and other interested parties should consider actively engaging the U.S. government during the public comment period to help shape the effective implementation of this law, including the scope of the import ban, processes CBP’s Forced Labor Enforcement Standard and the standard under which entities allegedly engaged in forced labor practices would be designated.
  • Companies importing to the United States from China (not just Xinjiang) should assess their supply chains to identify potential vulnerabilities (e.g. second or third tier suppliers who may source raw materials of Xinjiang or who may have ties to the Xinjiang government) and proactively establish plans to address these vulnerabilities. This could include, for example, improving supply chain mapping exercises, communicating policy changes to suppliers, and updating policy or other agreements. Due to the cross-functional nature of these risks, these efforts should ideally involve an intra-company working group comprised of various stakeholders with supply chain responsibilities, e.g., procurement, supply chain/ logistics, social and labor compliance, materiality, legal aspects and commercial compliance.
  • Companies should assess whether their trade compliance programs include appropriate risk-based measures that aim to address the risks associated with SDNs and other sanctioned parties. Given that the law could result in additional penalties, now is a good time for companies to assess their restricted party screening procedures, supplier/customer onboarding processes, periodic due diligence refresher processes suppliers/customers and other relevant procedures.
  • Companies considering compliance assessments and other actions in response to the law must also consider whether those actions could potentially create risks under Chinese law, such as under China’s Alien Sanctions Law.

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