Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
On December 23, 2021, President Joe Biden signed into law the Uyghur Forced Labor Prevention Act (the “Act”),1 which bars the importation into the United States of products made from forced labor in the Xinjiang region of China. This Act will significantly impact many multinational employers’ supply chains because raw materials from this region – such as cotton, coal, chemicals, sugar, tomatoes and polysilicon (a component in solar panels) – have found their way into many global supply chains. Indeed, these materials arrive on U.S. shores directly from China, as well as via third countries, like Vietnam, which imports Xinjiang cotton for manufacturing textiles that eventually reach the United States.2
The United States, United Kingdom, Canada, as well as other countries, have alleged that these materials have been produced through the Chinese government’s wide-scale repression of Uyghurs and other predominantly Muslim ethnic minorities in Xinjiang. The U.S. Department of State has gone so far as to declare that this repression amounts to genocide and crimes against humanity.3 China has flatly denied these allegations.4
Critically, the Act places a novel burden on multinational employers to overcome a presumption that products from Xinjiang are made with forced labor. The Act is thus one of the latest in a series of various global legislative measures that have placed enhanced due diligence and other obligations on multinational employers to ensure that their supply chains are devoid of forced labor.
What Does the Act Do?
The Act has four main functions:
(1) Enforcement Strategy: The Act requires the Forced Labor Enforcement Task Force5 established under the U.S.-Mexico-Canada Agreement Implementation Act, to solicit comments and conduct public hearings to develop a government strategy to prevent the importation into the United States of products made “wholly or in part with forced labor” in China.
Of importance for companies, this strategy involves the Task Force’s identifying and publishing the following lists:
- entities in the Xinjiang region that produce goods with forced labor;
- entities that work with the Chinese government to “recruit, transport, transfer, harbor or receive forced labor” in the region;
- products that are produced by the above entities;
- entities that export the above products; and
- facilities and entities that “source material” from the region.
These lists will allow companies, in doing their due diligence, to ensure that these entities, facilities, and products have not entered their supply chains.
Also, the Task Force is required to issue “guidance to importers” specifying:
- “due diligence, effective supply chain tracing, and supply chain management measures” to ensure that companies do not import products made with forced labor in China;
- “the type, nature and extent of evidence” that demonstrates that products from China are not produced in the Xinjiang region; and,
- “the type, nature and extent of evidence” that demonstrates that products from China are not produced with forced labor.
Following this “guidance” will be critical for companies in meeting their burden of proof, which is established as part of the next main function of the Act, described below.
(2) Rebuttable Presumption That Goods from Xinjiang Are Barred from Import: The Act requires that the U.S. Customs and Border Protection (CBP) apply a presumption that any products produced in the Xinjiang region, or by any entity in the lists mentioned above are barred from importation into the United States. This presumption can be overcome only if the company importing the goods can prove, by “clear and convincing evidence” that it has followed the “guidance to importers” and the products were not produced by forced labor. In doing so, the importing company may have to present to the CBP policies, supply chain audit reports, remediation plans, and other evidence that map the origin of the goods. If the company fails to rebut this presumption under the demanding “clear and convincing” standard, then the goods will be subject to exclusion or seizure at the port of entry.
Thus, the Act imposes a novel burden of proof on companies seeking to import goods that – at some point in the supply chain – were produced in Xinjiang.
(3) Diplomatic Strategy: The Act requires that the Department of State shall, inter alia, compile a list of:
- entities in China or affiliates of such entities that use or benefit from forced labor in the Xinjiang region; and,
- foreign persons who act as agents of such entities and affiliates in importing goods into the United States.
These lists should also assist in companies’ due diligence efforts. Moreover, the State Department is also tasked with developing a plan for “working with” companies conducting such due diligence.
(4) Sanctions: Finally, the Act incorporates the Uyghur Human Rights Policy Act of 2020 in requiring the president to identify and sanction any foreign person, including Chinese governmental officials, who are involved in forced labor in the Xinjiang region. These sanctions may include asset blocking, U.S. visa restrictions, and criminal and civil penalties.
The Act Enhances Already Restrictive Customs Practices
Even before the Act was passed, the U.S. government took measures to restrict imports from Xinjiang. Indeed, in one of its last acts under the Trump administration, on January 13, 2021, the CBP issued a “Withhold Release Order” (WRO) on imports of cotton and tomatoes from Xinjiang, disrupting the supply chains for many apparel and food product companies.6 This was not the first WRO aimed at this issue. To date, there have been 11 WROs on products suspected to have been made with forced labor in Xinjiang; these products include cotton, cotton products, tomatoes, tomato products, certain garments, hair products, apparel, and computer parts. The Biden administration has continued these WROs.7
Thus, the Act constitutes the next – albeit the most comprehensive – U.S. governmental measure in eliminating the import of products made with forced labor from Xinjiang.
What Should Multinational Employers Do?
The Act may spawn similar laws in other jurisdictions. Canada has also recently started to seize goods from China it identified as being made with forced labor, and debate has already begun on imposing a U.S.-style burden of proof on importers.8 Further, the U.K. government has stated that it seeks to amend the U.K. Modern Slavery Act 2015 to impose similar corporate obligations on U.K. companies, including levying hefty fines on companies that cannot show their supply chains are from forced labor tied to Xinjiang.9
In light of these developments, multinational employers should carefully scrutinize their global operations to identify any risk of involvement with forced labor in Xinjiang, and audit their current policies dedicated to prevent, mitigate, and redress adverse human rights impacts. This due diligence process should be conducted in light of the United Nations Guiding Principles on Business and Human Rights, as well as the many other mandatory disclosure and due diligence laws that exist or are being developed in jurisdictions such as Australia,10 California,11 the U.K.,12 France,13 Germany,14 the European Union,15 and the United Nations.16
Employers should also pay close attention to the lists of violative entities, persons, and products, and the “guidelines for importers” that the Forced Labor Enforcement Task Force is developing under the Act, and the “plan” for due diligence that the State Department is developing. This information is slated to be published by these respective government agencies in the first half of 2022. This information will be vital to employers’ ongoing human rights due diligence of their operations and those of their suppliers. Littler will be carefully monitoring these developments and publications.
1 Public Law No. 117-78.
2 The Economist, Can American firms rid their supply chains of Xinjiang goods? (Jan. 1, 2022).
3 Michael R. Pompeo, Determination of the Secretary of State on Atrocities in Xinjiang, U.S. Dept. State, Jan. 19, 2021.
4 Ana Swanson, Catie Edmondson and Edward Wong, U.S. Effort to Combat Forced Labor Targets Corporate China Ties, The New York Times, Dec. 23, 2021.
5 The Task Force is chaired by the Secretary of Homeland Security and is composed of representatives from the Department of State, the Department of the Treasury, the Department of Justice, the Department of Labor, and the Office of the United States Trade Representative.
6 CBP Issues Region-Wide Withhold Release Order on Products Made by Slave Labor in Xinjiang, U.S. Customs and Border Protection, Jan. 13, 2021. The CBP has issued several other WROs related to forced labor in Xinjiang.
7 Withhold Release Orders and Findings List, U.S. Customs and Border Protection, Jan. 2, 2022.
8 Steven Chase, Canada seizes goods made with forced labour from China; MPs urge more action for Uyghurs, The Globe and Mail, Nov. 15, 2021.
9 Jon Stone, UK Targets Chinese Goods Made With Uighur Forced Labor As Johnson Takes Swipe At ‘Demented’ Traditional Medicine, Independent, Jan. 13, 2021.
10 Naomi Seddon et al., Australia Passes Law Requiring Large Companies to Report on Modern Slavery, Littler Insight (Dec. 4, 2018).
11 John Kloosterman, California Employers Have Another Notice Posting Obligation – Have You Posted Your Human Trafficking Notice?, Littler Insight (Apr. 13, 2013).
12 Tahl Tyson, United Kingdom: New Law to Combat Supply Chain Slavery and Human Trafficking, Littler Insight (July 14, 2015).
13 Michael Congiu et al., Dutch and French Legislatures Introduce New Human Rights Due Diligence Reporting Requirements, Littler Insight (Mar. 13, 2017).
14 Jan-Ove Becker et al, Germany Seeks to Mandate Human Rights Due Diligence for Companies and Their Global Partners, Littler Insight (Apr. 25, 2019).
15 Ionel Zamfir, Towards A Mandatory EU System Of Due Diligence For Supply Chains, European Parliament, Oct. 2020.
16 Lavanga V. Wijekoon et al., United Nations Takes Another Step in Developing a Treaty on Business and Human Rights, Littler Insight (Nov. 5, 2019).