Implications For U.S. Businesses Following the Enforcement Of The Uyghur Forced Labor Prevention Act
The U.S. law, which is very important to those who do trade business in U.S., came into force recently. Many of you may already know this, but since it is a very important issue, we have briefly summarized the core, main contents, and implications of the law below.
The Uyghur Forced Labor Prevention Act (“UFLPA”) came into effect on June 21, 2022. The core content of this Act is:
(i) Products produced in Xinjiang Uyghur Autonomous District, China, or (ii) Products produced by organizations/companies designated under this Act are basically presumed to be produced by forced labor (inmate labor, child labor, all forms of labor and services provided involuntarily under the threat of punishment) and are prohibited from being brought into the United States (import and port entry).
For your reference, prior to the enforcement of UFLPA, only U.S. customs laws have been applied in relation to forced labor. If a product was reasonably presumed to have been caused by forced labor, CBP could order a WRO (Withhold Release Order) for the product and release it only when additional instructions were given. Accordingly, the cases of major WROs related to forced labor in Xinjiang Uyghur Autonomous District so far are as follows.
Ban on imports of certain cotton textiles, clothing, computer parts and other items produced in Xinjiang Uyghur Autonomous District, and seizure of 13 tons of wig-related items
Ban on import of all cotton and cotton products produced by Xinjiang Production and Construction Corporation (XPCC) and its affiliates, and products (clothes, textiles, etc.) produced using the cotton
Ban on the import of tomatoes and their sub-items produced in Xinjiang
The types of businesses in the United States that would be significantly affected by this Act include:
Businesses that import, export, or distribute agricultural products produced in Xinjiang Uyghur Autonomous District
Businesses that produce, import, export, or distribute clothing, textiles (cotton, fabric), electronics, food, minerals, medical devices and/or chemical products using products produced in Xinjiang Uyghur Autonomous District
The following conditions must be met in order to bring applicable products subject to this Act into the United States:
CBP (U.S. Customs and Border Protection) Commissioner determines:
(1) the importer has
(A) Fully complied with guidance and related regulations under UFLPA, and
(B) completely and substantively responded to all inquiries for information submitted by the Commissioner to ascertain whether the goods were mined, produced, or manufactured wholly or in part by forced labor; and
(2) 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.
According to the U.S. Customs and Border Protection Operational Guidance for Importers for the UFLPA, in particular, the method of reversing the presumption of forced labor must comply with the following three methods.
Effective Due Diligence : engagement with suppliers and other stakeholders to assess and address forced labor risk, risk and impact analysis, Code of conduct establishment, resources for supply chain due diligence, tracing and management, monitoring compliance, remediation of violations, independent verification, reporting performance and engagement publicly on its due diligence system, etc.
Supply Chain Tracing : tracing on all stages of mapping, mining, production, and manufacturing of the entire supply chain, from raw materials to final products, and complete information about each participant (information on payment, shipment, inventory, import/export, order, etc.)
Supply Chain Management : internal controls to prevent or mitigate forced labor risk and remediate any use of forced labor, inspection of suppliers, requests for corrective actions and responses to violations, etc.
The same guidance provides the following example: if a product is produced in the Xinjiang Uyghur Autonomous District, documents regarding (1) supply chain map identifying all entities involved in production of the goods, (2) information on workers at each entity involved in the production of the goods in China such as wage payment and production output per worker, and (3) credible audits to identify forced labor indicators and remediation of these if applicable must be submitted to prove that forced labor is not involved.
On the other hand, you might consider making an argument that you are not covered by the UFLPA from the beginning.
In other words, it can be proved that the importer was involved in the supply chain tracking fo the product, and that the mining, production, and manufacturing processes at all stages of the supply chain were not related to Xinjiang Uyghur Autonomous District, and there was no involvement of any organization/enterprise designated in this Act.
For your information, this Act is expected to conflict with the China’s Anti-foreign Sanctions Law enforced in China.
China's anti-foreign sanctions law includes that (1) if a foreign law discriminates against a Chinese national or company, the foreign individual/company involved in the foreign law is added to the list of targets of retaliation and (2) If there is a Chinese national or company cooperating with the applicable discriminatory measure, a claim for damage can be made. The UFLPA can be considered to be subject to the application of China's anti-foreign sanctions law, and in the process of responding to this Act, there is a high possibility that the violation of the China’s anti-foreign sanctions law will become a problem. Therefore, when reviewing the countermeasures of this Act, it is necessary to be careful to avoid the violation of the China's anti-foreign sanctions law.
Lastly, the implications of the enforcement of this Act are as follows.
It is still only declaring general principles rather than specific guidelines, so it is necessary to monitor future cases.
It is necessary to thoroughly review the production and supply chains of products currently handled or to be handled in the future to check if forced labor was involved in the production of the product itself as well as the raw material
If the product may fall under the scope of this Act, the above-mentioned “clear and convincing evidence” should be prepared in advance.
As “clear and convincing evidence”, all relevant documents that trace the supply chain from the raw material of the product to the finished product must be submitted. The evidence includes raw material mining records, reports on factory production capacity of raw material, production, invoice for suppliers, packing lists, certificates of origin, etc.
*Please note that this article is for general informational purposes only and is not an official opinion or legal opinion. If you have any questions, please contact firstname.lastname@example.org or (424) 218-6562 to consult with Jinhee Lee. Thank you.
[Reference for the Uyghur Forced Labor Prevention Act]
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