A new law that went into effect June 21 makes it essential for all companies with a global footprint to reevaluate their supply chain due diligence and documentation practices to demonstrate the absence of forced labor.

The Uyghur Forced Labor Prevention Act (UFLPA), signed into law by President Joe Biden in December 2021, establishes a presumption that any goods mined, produced, or manufactured in whole or in part in the Xinjiang Uyghur Autonomous Region of China (Xinjiang) or by certain designated entities are made with forced labor and, thus, banned from entering the United States.

The Forced Labor Enforcement Task Force recently released an implementation strategy for the UFLPA that, in part, contains a list of entities in Xinjiang that use forced labor to mine or produce goods. The strategy also provides a list of foreign persons that acted as agents of entities that work with the regional authorities to supply forced labor outside of Xinjiang.

If an importer believes imported items fall outside the scope of the UFLPA and the designated entities list, or plans to rebut the presumption of forced labor, it must be prepared to demonstrate to Customs and Border Protection “clear and convincing evidence” the goods were not produced wholly or in part by forced labor and be prepared to respond to all inquiries for information by the CBP commissioner.

To better understand what constitutes “clear and convincing evidence,” the CBP encourages importers to rely on past statements it has made, which essentially clarify establishing “clear and convincing evidence” is a higher standard of proof than the “preponderance of the evidence” standard.

Evidence must demonstrate the absence of forced labor—including intimidation and threats, abuse of vulnerability, restriction of movement, isolation, abusive living and/or working conditions, and excessive hours.

Undertaking heightened due diligence is essential to demonstrating the absence of forced labor, with supply chain tracing being a critical first step.

“Supply chain tracing is the ability to demonstrate chain of custody of goods and materials from the beginning of the supply chain to the buyer of the finished product,” said Matthew Caligur, a partner at law firm BakerHostetler. “Without question, importers face several challenges in tracing their supply chains.”

Mapping the entire supply chain, including raw material suppliers used in the production of imported goods or materials, is also an important part of due diligence in being able to prove an absence of forced labor.

Importers should expect increased compliance costs associated with CBP document requests, Caligur advised, and be prepared to provide the following documentation:

  • How the imported good was made from raw materials to finished good;
  • The entities who performed the operation(s);
  • Where the operation(s) occurred, including all in-house manufacturing, sub-assembly operations, and outsourced production;
  • The roles of the entities involved at each stage; and
  • The relationship between the entities (e.g., whether a supplier is also a manufacturer).

“Importers should have an information system to manage supply chain management data, including all mapping and risk and impact assessment information, which should be entered and updated on a regular basis,” Caligur said. “If a company is unable to perform due diligence to determine that its goods are not made with forced labor, it may be prudent to conclude certain supplier relationships and explore alternative sourcing strategies.”

Companies must also have in place a supplier code of conduct that, in part, explicitly forbids the use of forced labor and provides a framework for addressing potential forced labor in the supply chain.

“Most companies that are a certain size have a supplier code of conduct, but this is the time to make it more robust and flesh out the forced labor language,” said Greenberg Traurig Shareholder Laura Siegel Rabinowitz. “For all suppliers, importers should draft a very basic letter stating they acknowledge there is no forced labor in their supply chain and have them sign and date it.”

“If a company is unable to perform due diligence to determine that its goods are not made with forced labor, it may be prudent to conclude certain supplier relationships and explore alternative sourcing strategies.”

Matthew Caligur, Partner, BakerHostetler

To the extent an importer relies on its direct suppliers to ensure upstream suppliers employ standards consistent with the importer’s code of conduct, such expectations should be spelled out in the supplier contract.

Providing training and educational programs on the supplier code of conduct and the new requirements under the UFLPA is another step companies should implement. Training should integrate efforts to eliminate forced labor risk into the supplier selection and contracting process.

Moving forward, the CBP will exercise its authority under customs laws to detain, exclude, or seize and forfeit shipments that are within the scope of the UFLPA. That could also create the potential for bad publicity, Rabinowitz said.

Before, if there was a detention, customs never released the names of the companies. Under the UFLPA, however, “if the company files a submission for an exception, customs must produce that list to Congress multiple times a year and publish the list in the Federal Register,” Rabinowitz said.

Additionally, the CBP will periodically publish the entity list of manufacturers found to have engaged in forced labor and those found to have received exceptions. So, even if the company can prove its supply chain doesn’t use forced labor, the reputational damage alone of even being associated with the forced labor issue “could hurt a brand significantly,” Rabinowitz said.

The Department of Homeland Security (DHS) urged importers to follow the operational guidance issued June 13 by the CBP and comply with the UFLPA strategy to ensure their goods are fully compliant and able to be imported into the United States. The DHS and CBP have released additional resources, including a list of frequently asked questions, and the CBP said it will continue to provide assistance and support to companies and importers with questions on implementing the UFLPA.