Publications

On June 21, 2022, key provisions of the Uyghur Forced Labor Prevention Act (UFLPA) took effect. As a result, U.S. Customs and Border Protection (CBP) began to apply a presumption that all imports of goods mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (Xinjiang) of China, or by entities identified by the U.S. government on the newly-released UFLPA Entity List, are made with forced labor, and are therefore prohibited from entry into the U.S. (For reference, the UFLPA Entity List is reproduced at the bottom of this client alert.)

Over the past two weeks, the Forced Labor Enforcement Task Force (FLETF), a DHS-led interagency task force charged with implementing the UFLPA, has provided detailed guidance on complying with the act, including:

• What due diligence, effective supply-chain tracing, and supply-chain management measures importers are expected to take in order to ensure that they do not import any goods produced wholly or in part with forced labor from China, especially from Xinjiang;
• The type, nature, and extent of evidence that demonstrates that goods originating in China were not produced wholly or in part in Xinjiang or, if produced in Xinjiang, were not produced wholly or in part with forced labor; and
• High-priority areas for enforcement.

This client alert summarizes that guidance and highlights key elements that are relevant to U.S. importers. For additional information about how to comply with the UFLPA, contact Wiggin and Dana’s International Trade Compliance Group.

I. The Uyghur Forced Labor Prevention Act

Since the 1930s, the U.S. has prohibited the import of “all goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country by convict labor or forced labor . . . .” In December 2021, President Biden signed the UFLPA into law, which directs CBP to apply a presumption that “any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of . . . China or produced by [a party on the UFLPA Entity List]” were made with forced labor and therefore are not entitled to entry in the U.S. 

This presumption applies to downstream products that incorporate these goods as inputs, as well as goods produced in third countries or shipped through third countries, if they contain inputs mined, produced, or manufactured in Xinjiang or by an entity on the UFLPA Entity List. The UFLPA’s forced labor presumption is rebuttable, but to overcome it, importers must, among other requirements in the UFLPA, respond to all CBP requests for information about merchandise under CBP review and demonstrate by clear and convincing evidence that the good, ware, article, or merchandise was not mined, produced, or manufactured wholly or in part by forced labor. 

II. Agency Guidance to Importers

Under the UFLPA, FLETF was required to develop and publish a strategy for enforcement of the UFLPA, to include guidance to importers and high-priority areas for enforcement.

On June 17, less than a week before the forced labor presumption took effect,[1] FLETF released the Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People’s Republic of China (UFLPA Strategy), and on June 13, CBP released a complementary report, titled the Uyghur Forced Labor Prevention Act: Operational Guidance for Importers (CBP Operational Guidance). Companies that import goods from China and its trade partners should review these documents closely, specifically pages 40 to 52 of the UFLPA Strategy report and the entirety of the CBP Operational Guidance, for additional information. 

The UFLPA Strategy report identified the following high priority sectors for enforcement: (a) silica-based products (including aluminum alloys, silicones, and polysilicon, which are used in buildings, automobiles, petroleum, concrete, glass, ceramics, sealants, electronics, solar panels, and other goods); (b) apparel; (c) cotton and cotton products; and (d) tomatoes and downstream products. 

A. Trace Your Supply Chain

In order to identify those places along the chain with the greatest risks of forced labor, the UFLPA Strategy report directs importers to map their entire supply chain to identify who is doing the work at each step in the process, and the conditions under which the work is being done. The UFLPA Strategy report advises importers not to limit their due diligence to the primary stages of their supply chain, but to investigate suppliers throughout the supply chain, up to and including suppliers of raw materials used in the production of the imported good or material. 

After mapping their supply chain, importers are advised to take steps to demonstrate chain of custody of goods and materials from the beginning of the supply chain to the buyer of the finished product. Methods of demonstrating chain of custody include identity preservation (requiring each product input to be packaged, processed, and traced separately from other product inputs or modifications throughout the supply chain, and prohibiting commingling of product inputs at any point in the supply chain), which is the approach recommended in the UFLPA Strategy report, and segregation (permitting commingling of inputs, provided that each batch to be commingled is fully traced and documented to be free of forced labor prior to mixing).

The UFLPA Strategy report acknowledges that U.S. importers will face serious challenges gaining full visibility into their supply chain. Due to multi-tiered supply chains, a lack of tracing technologies, and restrictions on independent auditors in the region, importers may find it difficult to assess the raw (or near-raw) material supplier level of their supply chains, where forced labor often occurs. In addition, raw or processed materials manufactured in Xinjiang may be shipped to another region or province in China or to a third country for processing, and could be commingled with inputs from other regions and obscure the origin of the materials imported into the U.S. 

B. Establish Supply Chain Management Measures

To prevent and/or mitigate identified risks of forced labor, the UFLPA Strategy report instructs importers to establish supply-chain management measures, which may include the following elements: 

• Having a process to vet potential suppliers for forced labor risks before entering into a contract with them;
• Including clauses in supplier contracts requiring corrective actions by the supplier if forced labor is identified in the supply chain;
• Outlining the consequences if appropriate corrective actions are not taken, such as termination of the contractual relationship;
• Having access to documentation, personnel, and workers, in order to verify that forced labor indicators are not present;
• Establishing an information system to manage supply-chain management data, including mapping and risk and impact assessment information, which should be entered into the system and updated on a regular basis.

C. Establish a Due Diligence System

The UFLPA Strategy report states that importers should set up an effective forced labor due diligence system and directs importers to review the Department of Labor’s Comply Chain tool, which sets forth eight steps to establish a “social compliance” program. These steps include engaging stakeholders and partners; assessing risks and impacts; developing a code of conduct; communicating and training across supply chain; monitoring compliance; remediating violations; performing independent review; and reporting performance and engagement. See the Comply Chain tool for additional information.

III. Documentation and Evidence that CBP May Request

CBP has stated that it will take specific enforcement actions under the UFLPA, including identifying, detaining, and/or excluding, or seizing shipments subject to the UFLPA’s rebuttable presumption, depending upon the specific facts involved in each importation, and will review each shipment for UFLPA applicability, and appropriate action to be taken, on a case-by-case basis. In the event that CBP takes an enforcement action against an importer under the UFLPA, the importer should be prepared to provide the following documentation (translated into English if necessary).    

A. Evidence that the UFLPA Does Not Apply

Where an importer believes that its goods are outside the scope of the UFLPA (because the imported goods and their inputs are sourced completely from outside Xinjiang and have no connection to entities on the UFLPA Entity List), CBP advises importers to provide the following documentation:

• Evidence Pertaining to Overall Supply Chain: detailed description of supply chain including imported merchandise and components thereof, including all stages of mining, production, or manufacture; role(s) of the entities in the supply chain, including shippers and exporters; relationships between entities in the supply chain; list of suppliers associated with each step of the production process, including names and contact information; and affidavits from each company or entity involved in the production process.
• Evidence Pertaining to Merchandise or Any Component Thereof: purchase orders; invoice for all suppliers and sub-suppliers; packing list; bill of materials; certificates of origin; payment records; seller’s inventory records, including dock/warehouse receipts; shipping records, including manifests, bills of lading (e.g., airway/vessel/trucking); buyer’s inventory records, including dock/warehouse receipts; and invoices and receipts for all suppliers and sub-suppliers; import/export records.
• Evidence Pertaining to Miner, Producer, or Manufacturer: records to allow CBP to trace raw materials to merchandise mined, produced, or manufactured, such as production orders, reports on factory production capacity for the merchandise, reports on factory site visits by the importer, a downstream supplier sourcing from this factory, or a third party, and evidence that the volume of inputs of component materials matches the volume of output for the merchandise produced.

B. Additional Evidence to Rebut the Forced Labor Presumption

For goods made wholly or in part in the Xinjiang region of China, or by entities on the UFLPA Entity List, importers must provide clear and convincing evidence to rebut the presumption that they were made using forced labor. Evidence may include the information identified above, as well as the following:   

• A supply chain map identifying all entities involved in production of the goods;
• Information on workers at each entity involved in the production of the goods in China such as wage payment and production output per worker;
• Information on worker recruitment and internal controls to ensure that all workers in China were recruited and are working voluntarily; and
• Credible audits to identify forced labor indicators and remediation of these if applicable.

C. Evidence for High-Priority Sectors

The CBP Operational Guidance provides additional information about the types of evidence that may be requested for products of high-priority sectors for enforcement. For example, CBP provided the following guidance as to polysilicon:

• Importers need to provide complete records of transactions and supply chain documentation that demonstrate all entities involved in the manufacture, manipulation, or export of a particular good, and the country of origin of each material used in the production of the products going back to the suspected source of forced labor, i.e., production in Xinjiang or by an entity on the UFLPA Entity List.
• Provide a flow chart mapping each step in the procurement and production of all materials and identify the region where each material in the production originated (e.g., from location of the quartzite used to make polysilicon, to the location of manufacturing facilities producing polysilicon, to the location of facilities producing downstream goods used to make the imported good).
• Provide a list of all entities associated with each step of the production process, with citations denoting the business records used to identify each upstream party with whom the importer did not directly transact.
• Importers should be aware that imports of goods from factories that source polysilicon both from within Xinjiang and outside of Xinjiang risk being subject to detention, as it may be harder to verify that the supply chain is using only non-Xinjiang polysilicon and that the materials have not been replaced by or co-mingled with Xinjiang polysilicon at any point in the manufacturing process.

UFLPA Entity List

The following entities are included on the UFLPA Entity List, as of June 27, 2022.

[1] After the UFLPA was signed, but before the FLETF’s guidance was published, CBP sent many U.S. companies strongly-worded form letters, referred to as “known importer letters,” which stated that the company had previously imported merchandise from locations or entities potentially subject to the UFLPA, and warned that future entries of such merchandise “may be subject to CBP enforcement action, including seizure, forfeiture and/or penalties, or other appropriate action under the customs laws” and/or that “suspension or removal from the Customs Trade Partnership Against Terrorism (CTPAT) program.” These known importer letters did not provide information about the previous imports that caused the companies to come to CBP’s attention. This led to substantial confusion in industry.