Here is what Importers should know:
Since 1930 the US has prohibited the importation of goods made with forced labor; the UFLPA takes this prohibition to a new level.
What is the UFLPA?
The Uyghur Forced Labor Prevention Act ("UFLPA") went into effect on June 21, 2022. As previously reported, this Act was the result of a bipartisan effort to respond to the use of forced labor in the Xinjiang Uyghur Autonomous Region in the People's Republic of China ("Xinjiang"). The United States has long prohibited the importation of goods made with forced labor. The UFLPA both strengthens and changes the way that the United States enforces this prohibition.
The UFLPA instituted a rebuttable presumption that all goods mined, produced, or manufactured, either wholly or in part, in Xinjiang are presumed to be made with forced labor. Therefore, these items are presumed to be prohibited from entry into the United States. This presumption also applies to (1) imports by all entities on an UFLPA Entity List ("UFLPA Entities") and (2) all goods made in, or shipped through China or other countries that include inputs made in Xinjiang.
This presumption is rebuttable, meaning, it is presumed unless clear and convincing evidence is provided to the contrary. This high bar must be met in a short timeframe - thirty days in most instances.
Enforcement of the UFLPA falls under U.S. Customs and Border Protection ("CBP"). In pursuit of enforcement the CBP may detain, seize, or exclude goods from importation into the US, and may issue civil penalties for companies found to be willfully non-compliant with the UFLPA.
What does this mean?
Any good suspected of containing a single input from Xinjiang may be seized by CBP, and the burden will be on the importer to prove that CBP is incorrect.
Compliance guidance for the UFLPA is outlined by the Department of Homeland Security ("DHS") in its Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People's Republic of China ("The Strategy") and by CBP in its Operational Guidance of Importers.
Certain goods will be subjected to additional scrutiny by CBP:
- Silica-based products: including polysilicon — a key material for the manufacture of solar panels.
- Apparel: including garments, textiles, thread, and yarn.
- Cotton/Cotton Products: including related downstream products.
- Tomatoes: including related downstream products.
It is especially critical that companies with goods in these sectors have their supply chains well documented.
Importer Proactive Next Steps:
Your company should begin to immediately implement the following in response to UFLPA:
First Basic Steps:
- Check all suppliers against the UFLPA Entities List
- Compare current supply chain due diligence process with The Strategy and note gaps
Requests for Certification
- Send formal requests to all suppliers - from raw material through to final product, including subcontractors - to certify they do not use forced labor.
- This is a valuable first step, but it is not a "get out of jail free" remedy.
Articulate a Policy Against Human-Trafficking and Forced Labor
- Provide the public (and regulatory authorities) with a vetted policy via website, social media, and company materials
Code of Conduct Clause
- Put a clause in all contracts specifying standards and all activities suppliers must partake in as part of your due diligence system (i.e. allowing auditors, ensure upstream suppliers)
- Require remedial corrective action by a supplier if forced labor issues arise
- Specify consequences for failure to remediate such issues (i.e. contract termination)
- Send request for indemnification to all suppliers or include in contracts – triggered if importer faces losing a shipment or civil penalties due to supplier using forced labor
Address Gaps in Process
- Any gaps found when comparing your Due Diligence process to The Strategy should be addressed to further mitigate risk of forced labor and prove good faith compliance activities
Communicate Goals and Cross-Train Employees
- Train all employees that interact with suppliers to spot signs of forced labor
Attempt to Audit Suppliers
- Auditing suppliers, especially in China, is not easy. However, taking the initiative where possible and creating contemporaneous documentation of efforts to comply with the UFLPA will be critical in proving compliance if goods are ever seized.
- Develop a Compliance Handbook
- Log all processes used in due diligence, supply chain tracing, and supply chain management, and have all employees and suppliers trained on your processes
- Supplier Data Archive
- Keep up-to-date data on all suppliers, from raw material to final product, including subcontractors
- Include documentation of employment, where available, from your suppliers – stated compensation, ability to leave, hours worked etc. – these statistics are often the best remote way to spot forced labor.
Full Supply Chain Map
- Complete a map of your entire supply chain from raw materials inputs through to a finished product to raw materials
- Third party evaluation of supply chain due diligence measures to ensure best practices is recommended
- Ultimate goal of full transparency of each product's supply chain
- Importers and Suppliers who have higher transparency may have a competitive edge in the market place and with regulators like CBP
Responses to a CBP Enforcement Action
Importers have three options in responding to a CBP enforcement action (i.e., detention, exclusion or seizure) under the UFLPA:
1. Seek Permission from Port Director to export detained shipment
- Importers can request that a detained product be sent to another country. This is only permitted prior to seizure or exclusion of the goods in question.
2. Prove No Connection to Xinjiang or UFLPA Entities
- Goods are considered outside the scope of UFLPA if it can be proven they have no connection to Xinjiang or an UFLPA Entity. If so, an importer does not need to rebut the presumption that the goods were produced with forced labor. CBP will release the goods if the lack of connection to Xinjiang can be proven by an importer.
- Evidence Required to Prove Lack of Connection:
- Complete supply chain tracking information for the goods and all components that substantiates the lack of connection to Xinjiang or any UFLPA entity
- Documentation should include:
- Provenance of each component within the good
- Detailed supply chain description from finished product to raw materials, including subcontractor inputs
- For comingled raw materials/ inputs from different suppliers – an importer must be able to confirm the origin and control of each
3. Rebut the presumption of forced labor/request an exception
- If imported goods/inputs are from Xinjiang or one of the UFLPA Entities then a supplier must rebut the presumptive use of forced labor (this also known as requesting an exception).
- Requirements to overcome the statutory presumption:
- Compliance with The Strategy
- Complete and substantive responses to CBP inquiries
- "Clear and Convincing Evidence" that the products
were not produced with forced labor
- Evidence proving absence/remediation of forced labor indicators
- Complete mapped supply chain
- List of all suppliers in production, a complete list of their
workers, and data demonstrating a lack of forced labor
- (Ex.) Voluntary recruitment practices, working conditions, and other evidence noted in The Strategy
- Evidence proving absence/remediation of forced labor indicators include:
- If an Exception is granted, pertinent information upon which the Exemption is granted must be submitted to Congress and publicized. Therefore, some information which an importer may consider confidential could become public.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.