US Reports Aggressive Approach On Forced Labor And New Risks For Businesses | Arent Renard


Amid daily reports of human rights atrocities in the Xinjiang Uyghur Autonomous Region (XUAR) of the People’s Republic of China (PRC), the Biden administration is living up to its G7 pledge to end forced labor in chains. global supply. In the past few weeks alone, the US government has taken action against forced labor by passing the Uyghur Forced Labor Prevention Law in the Senate; the publication of an updated Xinjiang Supply Chain Business Notice to highlight the increased risk of doing business in XUAR; the issuance of a restraint order (WRO) on silica produced by Hoshine Silicon Industry Co., Ltd. which can impact a wide range of electronic products, cell phones and solar products; and adding additional entities to the list of Commerce Department entities.

These actions go beyond the restrictions on cotton products and silica; they create supply chain risks for any business related to XUAR, whether they know it or not. Many other products, such as cellphones, electronics, shoes, and food (a detailed list of products is shown below) are made in XUAR and may soon be banned from entering the United States. These actions underscore the immediate need for companies to conduct supply chain due diligence to identify the risks of forced labor and take action before goods are stopped at the border.

U.S. Senate Unanimously Passes Uyghur Forced Labor Prevention Law (UFLPA; S. 65)

On July 14, 2021, the US Senate unanimously passed the UFLPA, which effectively bans US imports of products made in whole or in part in the XUAR or by Uyghurs and other persecuted groups subjected to organized forced labor. by the state through the PRC. This legislation would create a “rebuttable presumption” that products made at XUAR or by workers forcibly displaced from that region are made with forced labor, and therefore prohibited unless the importer can affirmatively prove that the products are not produced with forced labor. This bill requires notice and comment as well as hearings on how to apply these bans, develop lists of entities involved, identify tools that U.S. customs and border protection can use to trace goods manufactured in XUAR and to provide advice to importers to do their due diligence and prove that the goods are not produced by forced labor.

The bill must also pass the House of Representatives before it can be sent to the White House for President Joe Biden to sign. The timetable for passage in the House is unclear, but there are strong indications that the bill will pass, as forced labor legislation enjoys bipartisan support.

Updated Xinjiang Business Advisory Lifts Warnings Against Doing Business in XUAR

Just one day before the adoption of the UFLPA, on July 13, 2021, the US State Department, together with other government agencies, issued an updated Xinjiang Business Advisory that strongly warns companies against doing business in XUAR:

Given the gravity and extent of these abuses, including the widespread state-sponsored forced labor and intrusive surveillance taking place in connection with the ongoing genocide and crimes against humanity in Xinjiang, the companies and individuals who do not exit Xinjiang-related supply chains, businesses and / or investments could be at high risk of violating US law.

This document provides an update regarding government actions related to XUAR forced labor, including new WROs and Entity List additions. This may serve as a warning to companies that all of XUAR’s products may soon be banned in the United States.

Industries at risk of forced labor

Significantly, in Annex 2, the notice identifies industries in the XUAR that allegedly use forced labor. Any business potentially exposed to or related to the following industries in XUAR should assess their supply chains, as these products may be subject to future WROs or bans under UFLPA.

  • Agriculture (including products such as raw cotton, hami melons, Korla pears, tomato products and garlic);
  • Mobile phones;
  • Cleaning supplies;
  • Construction;
  • Cotton, cotton yarn, cotton fabric, ginning, spinning and cotton products;
  • Electronic assembly;
  • Extracted products (including coal, copper, hydrocarbons, petroleum, uranium and zinc);
  • False hair and human hair wigs, hair accessories;
  • Food processing plants;
  • Shoe;
  • Gloves;
  • Hospital services;
  • Metallurgical grade silicon;
  • Noodles;
  • Printing products;
  • Renewable energy (polysilicon, ingots, wafers, crystalline silicon solar cells, crystalline silicon solar photovoltaic modules);
  • Stevia;
  • Sugar;
  • Textiles (including products such as clothing, bedding, rugs, wool, viscose); and
  • Toys.

Highest Value US Imports from Xinjiang in 2021: By Chapter Code of the United States Harmonized Tariff List (“HTSUS”)

We also used XUAR 2021 trade data to identify other products made in the region that could be threatened by government action. We have identified the highest value product groups, based on the HTSUS chapter codes, which are imported into the United States from XUAR. While cotton and silica received the most press, other products such as lamps, chemicals, polymers / plastics, food, furniture, etc. represent the highest import value in this region. Companies that import these products should be aware of the risk to their supply chains.

Chapter Title HTSUS

Description of chapter title HTSUS

HTSUS Product Category

9405

Lamps and lighting apparatus and parts thereof, nes; illuminated signs, etc. with a fixed light source and parts thereof nes

Miscellaneous manufactured items

2933

Heterocyclic compounds with nitrogen heteroatom (s) only

Products of chemical or related industries

2922

Amino compounds with oxygen function

Products of chemical or related industries

3913

Natural polymers and modified natural polymers (including hardened proteins and chemical derivatives of natural rubber), nes, in primary forms

Plastics and articles thereof and articles thereof

2106

Food preparations nes

Prepared foods; Beverages, spirits and vinegars; Tobacco and manufactured tobacco substitutes

9403

Furniture, nes (other than seats, medical, surgical, dental or veterinary furniture) and parts thereof

Miscellaneous manufactured items

9503

Toys nes; scale models, etc. ; puzzles; their parts and accessories

Miscellaneous manufactured items

8518

Microphones and their stands; speakers; headphones, earphones, etc. ; audio-frequency electric amplifiers; sets of electric sound amplifiers; rooms

Machines and mechanical devices; Electrical equipment; Parts of it; Sound recording and reproducing apparatus, Image and sound recording and reproducing apparatus for television, and parts and accessories thereof

6702

Artificial flowers, foliage and fruit and parts thereof; articles made of artificial flowers, foliage or fruit

shoes, headgear, umbrellas, parasols, walking sticks, siege sticks, whips, riding crops and their parts; Prepared feathers and articles made therefrom; Artificial flowers; Human hair items

3926

Articles of plastics and articles of polymers and resins of headings 3901 to 3914, nes

Plastics and articles thereof and articles thereof

What these developments mean for American businesses

Recent US government action demonstrates an intensification of enforcement against forced labor. These actions can prevent US companies from fulfilling contracts, stocking shelves, or obtaining critical manufacturing materials. U.S. businesses must act proactively by implementing internal forced labor controls, mapping their supply chains to identify forced labor, and taking whatever action is necessary before further government action puts the chains on. supply in danger. Companies need to confirm whether their products are exported from the XUAR region – we have obtained trade data to help us with this exercise.

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