The Uyghur Forced Labor Prevention Act Could Be a Game Changer

The Act requires the Forced Labor Enforcement Task Force to solicit public feedback in developing an enforcement strategy.² Specifically, by January 22, 2022, the task force must publish in the Federal Register a notice soliciting public comments on how best to ensure that goods made wholly or in part with forced labor in China are not imported into the United States. After the comment period closes, the task force will conduct a public hearing for witnesses to testify on the use of forced labor in China and “potential measures” to prevent the importation of goods made by forced labor. Potential measures include those “that can be taken to trace the origin of goods, offer greater supply chain transparency, and identify third country supply chain routes for goods mined, produced, or manufactured wholly or in part with forced labor in [China].”

After receiving public comments and holding the public hearing, the Act requires the Forced Labor Enforcement Task Force, in consultation with the Secretary of Commerce and the Director of National Intelligence, to develop an enforcement strategy. The strategy must include, among other elements,

• a list of entities that use forced labor in XUAR
• a list of entities that work with the XUAR government to facilitate the use of forced labor 
• a list products made by forced labor 
• a list of entities that exported products made by forced labor from China to the United States 
• a list of facilities and entities that source material from XUAR or from persons working with the XUAR government 
• an enforcement plan for each identified entity 
• a list of high-priority sectors and an enforcement plan for each sector (e.g., cotton, tomatoes, polysilicon) 
• recommendations for initiatives, tools and technologies that CBP can use to accurately identify and trace goods made in XUAR 
• a description of how CBP plans to enhance its use of legal authorities and other tools, including additional resources that it may need, to prevent the importation of forced-labor goods

Importantly, the enforcement strategy must also include guidance to importers with respect to

• due diligence, effective supply-chain tracing, and supply-chain management measures to ensure that they are not importing goods made by forced labor goods in China
• the type, nature, and extent of evidence that demonstrates that goods originating in China were not made in XUAR
• the type, nature, and extent of evidence that demonstrates that goods originating in China, including goods detained or seized pursuant to the presumption of having been made by forced labor, were not mined, produced, or manufactured wholly or in part with forced labor

The deadline for the task force to submit the strategy report to Congress is June 21, 2022, which is the same day the import prohibition goes into effect. Therefore, companies will have limited time to react to the report in advance of the Act going into effect. There are three key takeaways for importers assessing the impact of the Act:

1. The breadth of the prohibition creates risk for importers that do not have full visibility into their supply chains. XUAR is a vast region that supplies many different types of materials that are used as inputs in the production of components and finished goods. Companies in “high-priority sectors” (i.e., industries that use cotton, tomatoes, polysilicon, etc.) will likely have their shipments targeted first, but all companies with supply chains that (directly or indirectly) touch XUAR should consider how they would demonstrate to CBP that their products do not contain materials produced in XUAR (or by any listed entities) or, if they do, that their merchandise was not made with forced labor. Companies that have robust forced labor controls as an element of their corporate social responsibility program, for example, are better positioned than companies that do not.
2. The public comment and hearing processes are opportunities for companies and trade associations to provide feedback on developing an enforcement strategy that imposes reasonable requirements that can be applied consistently across products and importers. For example, while the Act establishes a “clear and convincing” evidentiary standard, it does not contain guidance on the type of evidence that would be needed to meet this standard. Given the inherent difficulties associated with having to prove a negative (i.e., that forced labor is not used in the supply chain), companies should consider using this opportunity to help ensure that the evidence required comports with commercial realities (or, put differently, to help ensure that the task force does not impose an unreasonably high evidentiary burden). For example, how much evidence, if any, should an importer of finished consumer goods have to provide in order to demonstrate that the raw materials used to produce the goods were not mined in XUAR? In addition, the Act does not impose any time constraints on CBP to make a decision on whether materials submitted by an importer are sufficient to rebut the presumption. So even if the forthcoming enforcement strategy contains a clearly defined evidentiary standard, this alone would not be much help to importers if CBP is not required to respond within a reasonably short period of time (during which time the importer incurs daily storage fees for the detained merchandise).
3. Companies should prepare for aggressive enforcement. This legislation comes on the heels of 11 withhold release orders (WROs) issued by CBP over the past two years on products from XUAR, including cotton and cotton products, tomatoes and tomato products, certain garments and apparel, hair products, and computer parts. Since July 30, 2021, CBP has detained more than 1,100 shipments pursuant to existing WROs, which is more shipments than it detained during all of 2017 through 2020. Also, companies affected by existing WROs should note that the Act does not limit the application of those preexisting WROs.

If you have any questions on how to navigate the issues associated with increased forced-labor enforcement (e.g., updating procedures and controls on responsible sourcing, implementing traceability procedures, responding to CBP detentions), please reach out to the authors of this alert or your Sidley contact.

¹ Section 307 of the Tariff Act of 1930 makes it illegal to import into the United States “goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part” by forced labor. 19 U.S.C. 1307.

² The Forced Labor Enforcement Task Force was established under Section 741 of the United States-Mexico-Canada Agreement (USMCA) Implementation Act (19 U.S.C. 4681) for the purpose of implementing Article 23.6 of the USMCA, which prohibits the importation of goods produced in whole or in part by forced labor.