International Trade & Compliance and Environmental, Social & Corporate Governance Alert
On December 23, 2021, the President signed into law the Uyghur Forced Labor Prevention Act of 2021 (the “Uyghur Act”). The Uyghur Act, effective June 21, 2022, will strengthen the prohibition on U.S. imports of goods made through forced labor by focusing on goods mined, produced or manufactured in whole or part in the Xinjiang Uyghur Autonomous Region in China (“Xinjiang”), or by entities to be specified by the U.S. government that use forced labor. U.S. importers should bear in mind the following key points about the Uyghur Act:
The Uyghur Act builds on an existing prohibition on imported goods made wholly or in part by forced labor (Section 307 of the Tariff Act of 1930), which is subject to stiff penalties, with a focus on goods mined, produced or manufactured in Xinjiang. Beginning June 21, 2022, U.S. Customs and Border Protection (“CBP”) is to deny entry of goods made in Xinjiang unless CBP determines that the goods were not made using forced labor.
The Uyghur Act instructs the U.S. government to publish a list of entities that use, source material from or otherwise engage with forced labor in Xinjiang. Any goods produced by these specified entities will also be subject to the rebuttable presumption.
The presumption that an imported product was made using forced labor is similar to current CBP withhold release orders, such as CBP’s January 2021 order with respect to cotton and tomato products produced in Xinjiang and CBP’s June 2021 order with respect to silica-based products produced by Hoshine Silicon Industry Co. Ltd. and its subsidiaries. The burden will be on the importer to establish that any goods originating in Xinjiang are free from forced labor. CBP will make admissibility determinations based on a review of the specific facts and circumstances associated with each particular shipment.
The Uyghur Act provides that the Forced Labor Enforcement Task Force (the “Task Force”), established under the United States-Mexico-Canada Agreement Implementation Act, is to develop guidance for importers on how to rebut the presumption under the Uyghur Act. As a first step, by January 22, 2022 the Task Force is to solicit public comment on how best to ensure that goods made by forced labor are not imported into the United States. The Task Force is also to conduct a public hearing with respect to the use of forced labor in China and potential measures to prevent the importation of goods produced wholly or in part with forced labor in China. Between late April and June 2022, the Task Force is to develop a strategy for supporting enforcement of Section 307 of the Tariff Act of 1930 with respect to products made with forced labor in China, including publication of guidance regarding:
CBP is not to deny entry for goods if the importer complies with the guidance and responds to all related inquiries from CBP, and CBP determines, by clear and convincing evidence, that such goods were not made using forced labor. Upon such a determination, CBP is to submit to appropriate congressional committees a publicly available report identifying both the goods and the evidence considered.
In anticipation of expected guidance on the Uyghur Act, it would be useful for U.S. importers to take the following steps:
Importers can consult prior guidance from the U.S. government to inform their next steps, to the extent they are not already following such recommendations. For example, in 2017, CBP issued supply chain due diligence guidance on detecting goods manufactured by forced labor.
In July 2020, the U.S. government issued the Xinjiang Supply Chain Business Advisory warning companies about the reputational, economic and legal risks of exposing their supply chains to forced labor in Xinjiang, and recommending that companies conduct human rights-related due diligence to mitigate those risks. According to this advisory, the industries most at risk for forced labor likely include electronics, solar energy, motor vehicles, agriculture, coal, uranium and asbestos.
Based on CBP’s prior guidance in connection with the withhold release orders, to rebut the presumption of use of forced labor, importers may need to provide documents such as: affidavits from suppliers that identify goods’ sources, along with purchase orders, invoices, proof of payment and production records and transportation documents at all stages of the supply chain. This may be burdensome for importers that have not conducted comprehensive reviews or audits of their supply chains.
As noted in an Orrick article last year, companies would be well advised to stay apprised of requirements relating to sourcing from China and take the steps described above in order to mitigate risk and avoid contributing to alleged human rights abuses in China.
Before the Uyghur Act, the U.S. government took several steps in response to alleged human rights abuses in Xinjiang.
The Uyghur Human Rights Policy Act of 2020 authorizes imposition of sanctions against foreign persons who are found to be responsible for serious human rights abuses in connection with forced labor in Xinjiang.
In 2021, the U.S. Commerce’s Bureau of Industry and Security expanded its use of the Entity List, designating Chinese companies allegedly active in Xinjiang. United States and non-U.S. persons are generally forbidden to transfer items from the United States to Entity List designees or to supply to designees items that originated in the United States or that are connected to the United States in certain other ways.
Similarly, the Treasury Department’s Office of Foreign Assets Control has designated as Specially Designated Nationals and Blocked Persons parties that are found to be associated with human rights abuses in Xinjiang. United States persons are generally prohibited from dealing directly or indirectly with listed parties or parties that are, directly or indirectly, 50%-or-more owned by one or more listed parties.
Finally, the Uyghur Act instructs the Secretary of State to develop a diplomatic strategy to address forced labor in Xinjiang.
 “Forced labor” is defined as “all work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily,” including forced or indentured child labor. 19 U.S.C. § 1307.
 For example, in case of the withhold release order relating to products produced by Hoshine Silicon Industry Co. Ltd., if an importer fails to export the goods or to provide the necessary information for admissibility within three months after CBP detains the shipment, the shipment will be excluded from entry. Once CBP excludes a shipment, the importer has another 60 days to re-export the shipment. If the merchandise is not exported during this timeframe, it will be deemed abandoned, and CBP will take the necessary steps to destroy the merchandise.