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This presumption may be rebutted if the U.S. Customs and Border Protection (CBP) certifies that the seized goods are known to not have been made with forced labor. While not explicitly spelled out in the UFLPA, it is expected that this will be a very high burden for importers to meet in practice. To obtain such certification, the importer will most notably have to demonstrate by “clear and convincing evidence” that the goods in question were not – in whole or in part – made with forced labor. Following a public comment period, a task force chaired by the U.S. Department of Homeland Security will develop a strategy and issue a guidance document (expected May 2022) to clarify how importers should conduct their supply chain due diligence and the kinds of evidence that can be provided to demonstrate that goods imported from China were not made in Xinjiang or with forced labor.
The UFLPA builds on the U.S. policy codified in section 307 of the Tariff Act 1930 (19 U.S.C. § 1307) that already has a generalized prohibition on the import of goods mined, produced, or manufactured (wholly or in part) with forced labor. This U.S. policy gained further specificity and traction when the CBP issued a Withhold Release Order (WRO) that, from January 2021, directed personnel at U.S. ports to detain shipments of cotton and tomato products originating from Xinjiang. Another similar WRO was issued in June 2021 concerning silica-based products. The UFLPA applies much more broadly than the WROs (i.e., to all imports originating from Xinjiang), but does identify cotton, tomatoes, and polysilicon as “high-priority” goods for the purposes of enforcement.
In addition, the UFLPA expands on the reasons for which sanctions may be imposed under the Uyghur Human Rights Policy Act of 2020. Sanctions including asset freezes and visa restrictions may be imposed due to any observed human rights abuses in connection with forced labor. Moreover, the UFLPA requires the President to report the entities and persons who are sanctioned for such human rights abuses to Congress within 180 days of the Act’s enactment. The UFLPA also requires the U.S. State Department to submit a report to Congress within 90 days that includes a list of entities determined to be using or benefitting from forced labor in Xinjiang, as well as a list of non-U.S. persons determined to be acting as agents for these entities in their import operations into the United States.
Due to the extremely wide scope of products potentially captured under the UFLPA, as well as the heavy evidentiary burden to discharge once subjected to the “forced labor” presumption, companies are advised to invest rigorously in the mapping out of their supply chains in order to identify whether the chain at any point passes through Xinjiang and even China – where certain materials could have been locally sourced from Xinjiang. The knowledge of this information is even more crucial given that the UFLPA applies to goods mined, produced, or manufactured in whole or “in part” in Xinjiang. In the era of complex and ever-evolving supply chains, companies are further advised to not only engage in due diligence checks as to new suppliers but also implement a continuous auditing mechanism for existing suppliers. The due diligence should also extend to the screening of Specially Designated Nationals and other parties that may be sanctioned under the UFLPA.
Engaging in proactive risk assessment has never been more important and timely as geopolitical tensions across the globe continue to rise, impacting all players and sectors in the wider international trade spectrum. Companies should reach out to legal advisors to minimize the exposure of their goods being captured by the UFLPA, but also by other similar legislation that is in place – as well as in the process of making – in various jurisdictions, such as the UK and the EU.
Client Alert 2022-004