Forced Labor Enforcement Task Force issues required enforcement strategy, including guidance to importers.
By Erin Brown Jones, Paul A. Davies, Sarah E. Fortt, Betty M. Huber, Nathan H. Seltzer, Michael D. Green, James Bee, and Angela Walker
On June 21, 2022, the key operative provision of the Uyghur Forced Labor Prevention Act (UFLPA) entered into force, introducing a “rebuttable presumption” that any goods mined, produced, or manufactured wholly or in part in the Xinjiang region of China are in violation of Section 307 of the Tariff Act of 1930. Under the rebuttable presumption, any such goods are — unless proven otherwise by importers who comply with specific due diligence guidance and submit “clear and convincing evidence” that the goods were legitimately manufactured — presumed to be produced using forced labor, and therefore cannot be imported into the US and will be detained at the border. For more information on the UFLPA, see this Latham blog post.
The UFLPA was enacted by a bipartisan Congress on December 23, 2021. Among its mandates, the UFLPA charged the Forced Labor Enforcement Task Force (FLETF) — a body chaired by the US Department of Homeland Security — with developing a strategy (the Strategy) to help support the enforcement of the UFLPA, including providing guidance to importers and other impacted stakeholders as to how the UFLPA should be applied in practice. (See this Latham Client Alert for a detailed discussion of the Strategy.) The FLETF published the Strategy on June 17, 2022, featuring a number of noteworthy provisions that will affect the practical impact of the UFLPA. The publication of the Strategy follows a period of public consultation earlier in 2022, which resulted in a public hearing on April 8, 2022 as well as 180 comments from a variety of stakeholders as to how to best ensure that goods mined, produced, or manufactured wholly or in part with forced labor in China are not imported into the US.
In addition to the Strategy, US Customs and Border Protection (CBP) issued its own UFLPA operational guidance for importers (the CBP Guidance) on June 13, 2022. The CBP Guidance, while lacking the same legal authority as the Strategy (i.e., compliance with the CBP Guidance is not one of the ways by which the rebuttable presumption under the UFLPA can be rebutted — see below), may still prove helpful for companies navigating the considerable impacts of the UFLPA’s rebuttable presumption.
This blog post considers some of the key items raised in the Strategy and the CBP Guidance for companies that will be affected by the UFLPA’s rebuttable presumption.
Content of the Strategy
The Strategy contains a number of important insights for interested parties, including:
- A comprehensive overview of the US government’s assessment of the risks of importing goods mined, produced, or manufactured, wholly or in part, with forced labor in China
- An evaluation and description of common forced-labor schemes, certain lists of entities and products impacted by forced labor in China (including the UFLPA Entity List, as described in greater detail below), enforcement plans, and lists of high priority sectors for enforcement that were required to be produced by the UFLPA
- Recommendations for efforts, initiatives, tools, and technologies to accurately identify and trace affected goods
- A description of how CBP plans to enhance its use of legal authorities and tools to prevent entry of goods into the US in violation of the Tariff Act
- A description of additional US government resources necessary to ensure that no goods made with forced labor enter US ports
- Guidance to importers regarding existing processes and the evidence required to demonstrate their products are either outside the scope of the UFLPA, or the nature of the evidence required to overcome the rebuttable presumption
- An overview of the US government’s plan to coordinate and collaborate with appropriate NGOs and private sector entities to help implement and update the Strategy
UFLPA Entity List
One of the most concrete aspects of the Strategy is the UFLPA Entity List. This list reflects organizations the FLETF has identified as being connected to forced labor and the Xinjiang region, and therefore any supply chain that involves these entities is subject to the UFLPA’s rebuttable presumption that forced labor was used. The UFLPA Entity List contains not only the names of organizations in Xinjiang that the FLETF has identified as alleging using forced labor, but also entities (i) working with the government of Xinjiang to recruit, transport, transfer, harbor or receive forced labor outside of Xinjiang, and/or (ii) sourcing material from Xinjiang or from persons working with the government of Xinjiang for the purposes of the poverty alleviation and mutual pairing assistance programs.
The UFLPA Entity List provides a list of organizations that are subject to the rebuttable presumption, even if the goods imported from those organizations have no other immediate connection to Xinjiang (e.g., through raw materials or factory locations).
At present, there are no new names on the UFLPA Entity List, which currently contains only organizations that were previously noted as subject to CBP’s Withhold Release Orders (WROs), and the Bureau of Industry and Security (BIS) Entity List (a list of entities and individuals subject to licensing requirements under the Export Administration Regulations). However, the Strategy also explicitly identifies a process to include additional organizations on the UFLPA Entity List, which will be regularly reviewed by FLETF agencies. Companies with supply chain activity in China should monitor this list.
High-Priority Sectors for Enforcement
The UFLPA required that the Strategy explicitly identify a list of certain high-priority sectors for enforcement in relation to alleged forced labor in China, as well as a specific enforcement plan for those sectors. This list needed to include “cotton, tomatoes and polysilicon,” in addition to other relevant sectors that were to be determined by the FLETF as part of the Strategy.
The Strategy broadens those three initial categories, and adds a further category. The expanded list now includes “cotton and cotton products,” “silica-based products (including polysilicon),” “tomatoes and downstream products,” and “apparel.”
According to the Strategy, the US government added apparel as a priority sector in light of reports that forced labor is allegedly used in the production of apparel in China, and that the garment and textile industry in Xinjiang is currently expanding. The Strategy also notes the role of the mutual pairing assistance program and poverty alleviation programs in the apparel section — under which programs workers can be placed at factories in Xinjiang or transferred to factories in Eastern China — as a key factor behind its inclusion on this list.
The Strategy clarifies that the rebuttable presumption under the UFLPA will be the enforcement process used by CBP to deal with goods in these sectors that are connected to Xinjiang, even if those goods were previously subject to WROs (tomatoes, cotton, etc.). The Strategy notes that CBP will implement enforcement plans that identify and prohibit goods from each of the high-priority sectors found to have a nexus to producers connected to Xinjiang, using a risk-based approach based on current data and intelligence. The precise details of these plans are not specified in the Strategy.
Guidance to Importers
The Strategy provides importers with two options if imported goods are seized by CBP pursuant to the UFLPA:
- First, the importer could demonstrate that the goods are not subject to the UFLPA, i.e., that the goods were not connected with Xinjiang and have no connection to the UFLPA Entity List.
- Second, for goods that are subject to UFLPA, an importer may request an exception requiring the importer to demonstrate that it (a) has complied with the due diligence guidance set forth in the Strategy, and (b) can demonstrate with “clear and convincing evidence” that the goods were not produced using forced labor.
The Strategy contains the following eight recommendations for conducting effective due diligence in relation to Xinjiang:
- Engaging stakeholders and partners
- Assessing risks and impacts
- Developing a code of conduct for suppliers
- Communicating and training across supply chains
- Monitoring compliance
- Remediating violations
- Undertaking independent review (third-party verification)
- Reporting performance and engagement
Consistent with prior US government guidance, the Strategy warns importers that, despite these recommendations, it may be very challenging in practice to perform effective due diligence of supply chain partners connected to Xinjiang. Indeed, certain recommended methods — including detailed supply chain tracing and supply chain management — are known to be difficult to execute successfully. However, the Strategy emphasizes that such barriers to effective due diligence are not a valid reason to not conduct such diligence, and that those barriers may therefore prevent an importer from qualifying for an exception. Put simply, the Strategy is advising importers to comply with eight diligence steps, while simultaneously acknowledging that compliance may not be possible in many circumstances.
While the detailed requirements for conducting effective diligence and providing satisfactory evidence set out in the Strategy are numerous, emphasis is placed on supply chain mapping and traceability, the use of codes of conduct containing specific reference to forced labor, and detailed unannounced and fulsome on-site audits of suppliers throughout China.
Further (non-binding) advice on how importers can demonstrate requisite evidence to support the release of goods is provided in the separate CBP Guidance, which largely reiterates the content of the Strategy in terms of advice for importers.
The Strategy, and particularly the guidance for importers, is a critical document for all companies that have supply chains extending into China, especially those in the apparel, cotton, polysilicon, and tomato sectors, and those seeking to move those goods into the US.
Given the complexity of supply chains in a number of these sectors, in addition to the high percentage of global supply (of cotton and polysilicon in particular) stemming from Xinjiang, the rebuttable presumption is likely to be a challenging bar to clear in order to import those products into the US. However, the Strategy now gives importers the ability to make informed decisions about their supply chain and their compliance systems, by clarifying a number of previous unknowns, such as which entities connected Xinjiang would be subject to the rebuttable presumption, which sectors will be subject to heightened scrutiny, and the exact nature of the required due diligence process and the standard of necessary rebuttal evidence.
The FLETF will revise the Strategy annually, and the exact impact and practical enforcement approach of the CBP with respect to the rebuttable presumption of the UFLPA will likely evolve over time.
Latham & Watkins will continue to monitor developments in this area.