Recent U.S. Congressional Actions Likely to Spur Increased UFLPA Enforcement

One action involves an investigation by Sen. Ron Wyden, D-Ore., into automotive supply chains and possible links to the Xinjiang Uyghur Autonomous Region (XUAR). Sen. Wyden, who chairs the Senate Finance Committee, has sent two rounds of letters to eight major auto manufacturers, and one round of letters to five major Tier 1 auto suppliers, seeking detailed information about their supply chains, internal mapping/tracing practices, interactions with sub-suppliers, whether the company has had any shipments detained by CBP, and more. The letters were motivated, at least in part, by a third-party report published in December 2022 that attempted to draw connections between auto industry supply chains and the XUAR. Additional information on Sen. Wyden’s investigation, including the letters to the companies, can be found here.

The other action involves a letter the Congressional-Executive Commission on China (CECC) sent to the Department of Homeland Security (DHS) Under Secretary for Strategy, Policy, and Plans (who chairs the Forced Labor Enforcement Task Force (FLETF)) outlining concerns they have with how the administration is implementing and enforcing the UFLPA. The letter (a copy of which is available here) was signed by the lead sponsors of the UFLPA. The letter sets forth a number of concerns about the “applicability reviews” CBP has been conducting after detaining merchandise under the UFLPA — whether those reviews are appropriate and, if so, why the results are not being reported to Congress or to the public: “While we appreciate the difficulty and scope of enforcing UFLPA, we seek greater transparency about this review process and more clarity why goods stopped based on evidence of a link to the XUAR or labor transfer programs outside the XUAR are being cleared without congressional or public reporting.”¹

The CECC’s letter also calls out DHS/FLETF for not having expanded the UFLPA Entity List to date: “For us, the volume and scope of entity listing is an important measure of the FLETF’s commitment to implementing UFLPA. Therefore, we request that the FLETF accelerate its efforts to expand the Entity List as soon as possible, and to continually update that list during the year as circumstances require, utilizing fully the data provided by reputable civil society organizations.” The letter asks DHS for additional information on how CBP is addressing enforcement when articles are produced in third countries using China-origin inputs, how Canada and Mexico are doing with forced labor enforcement in relation to the commitments those countries made under the United States-Mexico-Canada Agreement, and how CBP is enforcing/plans to enforce the UFLPA with regard to de minimis value shipments under Section 321.

Key Takeaways

What are the takeaways from this? First, forced labor compliance as an issue is here to stay. While there was little doubt about this, when you have a bipartisan group of lawmakers from both chambers pushing this issue, it should remove any lingering doubt. Second, forced labor enforcement is likely to ramp up even further. Sen. Wyden is the chair of the Senate Finance Committee (i.e., the committee responsible for trade, which covers much of DHS and CBP), so his investigation into possible connections between the auto industry’s supply chains and XUAR is likely going to spur CBP into action — auto manufacturers and suppliers are likely going to see increased UFLPA detentions. In addition, the CECC letter indicates that these lawmakers (again the lead sponsors of the UFLPA) expect DHS/CBP to be doing more (more quickly and more publicly). At a minimum, the UFLPA Entity List will be expanded relatively soon.

This is a difficult issue — tracing the supply chain of a product back to its raw materials (particularly when there may not have been a commercial or other reason to do so before the UFLPA came into effect less than a year ago) is challenging. That said, all companies that import articles from China, or articles produced elsewhere using at least some China-origin inputs, need to be prepared to meet the challenge. CBP enforcement has expanded to include more than just the “high-priority sectors” identified in the UFLPA (e.g., cotton/apparel, polysilicon/solar, and tomatoes) to include products that contain polyvinyl chloride and contain aluminum based on third-party reports. We expect that the scope of enforcement will expand further based on these recent congressional actions.

¹ “Applicability review” refers to the process by which an importer can attempt to show that the UFLPA should not apply to merchandise that CBP has detained pursuant to the UFLPA. The importer must submit documentation that traces the detained merchandise back to the source of the raw materials to demonstrate that the merchandise does not contain XUAR content and that its production did not involve any of the entities identified on the UFLPA Entity List. If the importer submits sufficient documentation, then CBP will release the merchandise. If the importer is unable to provide documentation that sufficiently traces the supply chain to show the absence of XUAR content or listed entity involvement, then the UFLPA requires CBP to apply a rebuttable presumption that the merchandise was made using forced labor and, therefore, is inadmissible into the United States. Additional information on the UFLPA’s rebuttable presumption can be found in this Sidley Update.