UFLPA Comes Into Effect; Task Force Publishes Its Enforcement Strategy

The bipartisan Uyghur Forced Labor Prevention Act (UFLPA) went into effect on June 21, 2022. Moving forward, any goods mined, produced or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (XUAR) of the People's Republic of China (PRC), or by entities identified on the new UFLPA Entity List, will be subject to a rebuttable presumption that they were made with forced labor and thus barred from import into the U.S.

On June 17, 2022, the U.S. Department of Homeland Security (DHS), in its role as chair of the Forced Labor Enforcement Task Force (FLETF), issued the UFLPA Strategy, which provides a broad picture of ongoing and future enforcement of the UFLPA. It also complements the Operational Guidance for Importers (Operational Guidance) published by U.S. Customs and Border Protection (CBP) on June 13, 2022. Both the UFLPA Strategy and Operational Guidance are discussed at length in previous Holland & Knight alerts (see "Breaking Down the Uyghur Forced Labor Prevention Act for U.S. Importers," Jan. 24, 2022, and "CBP Issues Operational Guidance to Importers for the Uyghur Forced Labor Prevention Act," June 17, 2022).

UFLPA Strategy Development

The UFLPA required the FLETF to publish a strategy for supporting the enforcement of U.S. forced labor laws – namely, "Section 307"¹ – to prevent the importation into the U.S. of goods mined, produced or manufactured wholly or in part with forced labor in the PRC with a particular focus on XUAR. The FLETF, initially established in January 2020 under the United States-Mexico-Canada Agreement Implementation Act, is responsible for monitoring the enforcement of Section 307. The FLETF is chaired by DHS and includes 12 other U.S. government agencies.²

The FLETF formulated the UFLPA Strategy in consultation with other U.S. government stakeholders and the public. Specifically, the FLETF sought input from interested parties through a public comment period and public hearing that took place on April 8, 2022. Public commentary focused on a variety of issues related to the UFLPA and forced labor in the XUAR; namely, the transshipment of materials produced by forced labor, labor conditions in the XUAR and other parts of mainland China, innovative supply chain tracing technologies, reports of labor transfers and other programs connected to forced labor in the region, and Chinese government retaliation against businesses. Additionally, commenters provided recommendations on implementation of the UFLPA and raised questions regarding the information required to overcome the UFLPA's rebuttable presumption (discussed more fully in Holland & Knight's previous alerts).

Generally, the UFLPA Strategy includes the following:

• a comprehensive assessment of the risk of importing goods mined, produced or manufactured, wholly or in part, with forced labor in the PRC
• an evaluation and description of forced labor schemes, UFLPA-required lists (including the UFLPA Entity List), UFLPA-required plans and high-priority sectors for enforcement
• 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 at U.S. ports in violation of Section 307
• a description of additional resources necessary to ensure no goods made with forced labor enter U.S. ports
• guidance to importers, including the type, nature and extent of evidence that demonstrates that goods originating in the PRC were not made with forced labor
• a plan to coordinate and collaborate with appropriate nongovernmental organizations and private-sector entities

The Threat of Forced Labor

Particularly relevant to importers, the UFLPA Strategy provides further insights into what the U.S. government views as the most pertinent threats to forced labor-free U.S. supply chains.³

The UFLPA Strategy assesses the risk of importing goods made with forced labor in the PRC and highlights four threats in particular that increase the risk of such goods entering U.S. supply chains:

1. Lack of Supply Chain Visibility: The UFLPA Strategy warns that complexity in global supply chains is a key challenge faced by importers. Complexity in the production, processing and manufacturing of goods may obscure the origins of goods sourced from the XUAR and make it more difficult for importers to adequately trace their supply chains, especially for raw materials.
2. Third Country or Province Manufacturing Processes: In 2019, exports from the XUAR totaled nearly $18 billion and, in 2020, the region had direct exports to 177 countries and regions. The UFLA Strategy warns that materials produced in the XUAR may become commingled with inputs from other regions and obscure the origin of the materials imported into the U.S. Thus, companies that purchase raw or processed goods from third countries may be at risk of indirectly procuring goods produced in the XUAR with forced labor.
3. Intentional Transshipment and Evasion: In an effort to circumvent Section 307 and avoid CBP enforcement actions, some companies have attempted to use illegal transshipment to conceal the origin of entries with inputs from XUAR. For example, CBP has found that the Xinjiang Production and Construction Corps (XPCC) has evaded U.S. law by transhipping goods through third countries in which it maintains relationships with commercial entities.
4. PRC Policies and Practices Pose Challenges to U.S. Forced Labor Enforcement: Suppliers and manufacturers operating in China may face pressure or retaliatory action from the Chinese government under its Anti-Foreign Sanctions Law if they attempt to comply with U.S. import laws and restrictions. These actions will likely persist as enforcement of the UFLPA advances and could complicate U.S. enforcement efforts.

In light of the risks identified by the FLETF, importers should be aware that shipments coming through third countries or manufactured in third countries will not necessarily be immune from UFLPA enforcement. Companies with touchpoints to China should conduct heightened due diligence to identify potential supply chain exposure to companies operating in the XUAR or using Uyghur, Kazakh, Kyrgyz, Tibetan or other minority labor in China, or sourcing from those regions.

Enhanced Enforcement Methods

The UFLPA Strategy presents ways to enhance CBP's enforcement capacity and ensure that the agency can accurately identify and trace goods made in the XUAR upon arrival at any port of entry in the U.S. The FLETF notes that CBP is assessing new technologies that can be used to identify and trace goods made with forced labor, specifically those technologies that support enhanced visibility into trade networks, supply chains, high-risk regions and ownership structures. CBP is also pursuing technologies that can expedite the translation of documents.

Due to a growing enforcement burden, CBP is also working to enhance its existing automated systems. This includes updating its case management system to include an official record of each forced labor investigation's life cycle, which will be visible CBP-wide. Additionally, CBP will collaborate with other FLETF agencies to gain commodity expertise and supply chain insights for specific goods or production inputs.

CBP is also considering a revision to its regulations to allow the agency to respond more quickly to allegations of forced labor.

High-Risk Industries and the UFLPA Entity List

The UFLPA Strategy identifies industries with a high risk of exposure to XUAR forced labor that will be treated as priority enforcement sectors: apparel, cotton and cotton products, silica-based products (including polysilicon), and tomatoes and downstream products. Going forward, any updates to these lists will be published in the Federal Register.

The Strategy also includes the UFLPA Entity List. It is presumed under Section 307 that all products from entities included on the UFLPA Entity List are prohibited from entry into the U.S. Listed on the UFLPA Entity List are 10 entities in the XUAR determined to mine, produce or manufacture wholly or in part any goods, wares, articles and merchandise with forced labor; 10 entities working with the government of the XUAR to recruit, transport, transfer, harbor or receive forced labor or Uyghurs, Kazakhs, Kyrgyz or members of other persecuted groups out of the XUAR; and 11 entities or facilities that source material from the XUAR or from persons working with the government of Xinjiang or the XPCC for use in any government-labor scheme that utilizes forced labor.

Likewise, the UFLPA Entity List includes a list of the products mined, produced or manufactured wholly or in part by entities on the list, including: textiles, clothing, garments and other apparel; computer parts and electronics; hair products; rail transportation equipment; silica-based products; polysilicon, including solar-grade polysilicon; and cotton. Importers conducting business with entities operating in these sectors should undertake thorough supply chain due diligence to ensure that they are not directly or indirectly engaging with entities on the UFLPA Entity List.

Further Guidance to Importers

The FLETF also provides additional guidance to importers on overcoming the UFLPA's rebuttable presumption. Discussed at length in CBP's Operational Guidance, the UFLPA Strategy reiterates the importance of due diligence, effective supply chain tracing and supply chain management measures to ensure that importers do not import any goods produced wholly or in part with forced labor from China, particularly the XUAR.

The UFLPA Strategy, however, also includes guidance on how to demonstrate that goods originating in the PRC more widely were not made wholly or in part with forced labor. Evidence must show that indicators of forced labor, including intimidation and threats, abuse of vulnerability, restriction of movement, isolation, abusive living and/or working conditions, and excessive hours, do not exist or are fully remediated. The types of evidence vary from industry to industry and business to business. Examples are provided in the UFLPA Strategy.

The FLETF likewise emphasizes that any forced labor and supply chain audits must be independent and explain the methodology used to determine the presence or absence of forced labor indicators.

Takeaways

CBP enforcement of the UFLPA at U.S. ports of entry began on June 21. Since then, companies – particularly smaller ones and those that did not adequately prepare – have already reported challenges meeting FLETF requirements and managing relationships with Chinese suppliers. With enactment of the UFLPA, importers will no doubt continue to face an ongoing and significant burden in compliance. The UFLPA Strategy, in conjunction with the CBP Operational Guidance, makes clear that the U.S. government will require comprehensive due diligence and supply chain tracing to meet UFLPA requirements and overcome the rebuttable presumption, particularly if imports are from high-risk sectors or in any way connected to entities on the UFLPA Entity List. It is recommended that businesses that import any goods or products from China – or from third countries with any Chinese inputs – undertake a comprehensive review of their supply chains in order to uncover any touchpoints to the XUAR and forced labor and begin to thoroughly develop and document compliance procedures.

If you are seeking assistance in preparing for enhanced UFLPA enforcement procedures, expanding your business' supply chain due diligence system or understanding the implications of the UFLPA Strategy, reach out to the authors or another member of Holland & Knight's International Trade Group.

Notes

¹ Section 307 of the Tariff Act of 1930, 19 U.S.C. § 1307.

² The FLETF includes DHS as the chair, six other active members (the Office of the U.S. Trade Representative and U.S. Departments of Commerce, Justice, Labor, State and the Treasury) and six observers (the U.S. Departments of Agriculture and Energy, U.S. Agency for International Development, U.S. Immigration and Customs Enforcement, the National Security Council, and CBP).

³ Note: This guidance builds upon the interagency Xinjiang Supply Chain Business Advisory published in July 2021.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.