US Proposes Ban on Imports from Uyghur China Presumed to be Made with Forced Labor

On February 18, 2021, the United States announced proposed legislation that would ban the import of goods produced in China’s Xinjiang Uyghur Autonomous Region (XUAR), which are presumed to be made using forced labor. The pending bill, which appears to enjoy bipartisan support, would require that U.S. Customs and Border Protection (CBP) issue a strategy report and “regular updates” on its steps taken to enforce the ban on XUAR goods from the Forced Labor Enforcement Task Force established under the 2020 U.S.-Mexico-Canada Agreement Implementation Act. The bill would create a rebuttable presumption that XUAR goods are made with forced labor and prohibit them from entering the United States absent “clear and convincing” evidence to the contrary.
 
Separately, CBP issued a Withhold Release Order (WRO) on January 13, 2021 on cotton and tomato products (including downstream products that incorporate such raw material inputs) produced in Xinjiang based on information it received during its investigation regarding the apparent use of forced labor. This was the fourth WRO CBP issued since the beginning of FY 2021; CBP issued 13 WROs on products from China during FY 2020, including certain hair products, apparel, computer parts and cotton.
 
The use of forced labor is one of CBP’s top priority trade issues. CBP has increased its enforcement actions and is detaining shipments when information “reasonably” (but not conclusively) indicates the merchandise was produced in XUAR or by companies that have known XUAR affiliations. Importers with goods subject to a WRO must produce documents for each level of the supply chain to prove that the finished goods or inputs were not made with forced labor. For example, cotton produced in the U.S. and processed in China’s XUAR may nonetheless still be subject to the WRO absent the necessary documentary proof required under the WRO.

 

Supply Chain Planning Considerations

Potentially affected businesses may wish to consider taking the following steps to better understand supplier relationships and sourcing methods for high-risk raw material inputs that could trigger additional CBP scrutiny:

• Confirm suppliers can document the provenance of raw material inputs used in the production of U.S. imported goods
• Establish procedures and processes to assess new and current suppliers labor practices
• Confirm that supplier contract language sufficiently covers the prohibition on forced, convict and child labor and the applicable wage and hour requirements
• Consult the DOL’s list of Goods Produced by Child and Forced Labour and CBP’s List of Withhold Release Orders to assess supplier relationships
• Consider hiring a third party to conduct a risk assessment of current supply chain procedure and processes
• Confirm that social compliance programs address all of the eleven factors set forth in the International Labour Organization’s (“ILO”) indicators of Forced Labor via a specific audit with documented findings

 

How BDO can help

BDO can help clients assess their supply chain risk and confirm current procedure and processes are effective in preventing subject products or component materials from appearing in U.S. supply chains. BDO’s staff is fluent in Mandarin and can work with suppliers in China to gather information to confirm they are able to document the provenance of material inputs to avoid violations.