The US government’s enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) is resulting in an increased number of shipments being detained at the US border, costing importers millions of dollars. The Department of Homeland Security’s enforcement efforts are exposing the underlying forced labor connections of goods imported by US companies and putting these firms’ reputations at risk. FiveBy assesses that US companies that import apparel, footwear, textile, electronics, solar panels, and automotive parts from entities with ties to China, Malaysia, and Vietnam are most at risk of losing profits and having their shipments detained or confiscated.
- Since UFLPA went into effect last year, US Customs and Border Protection (CBP) has stopped more than 3,200 shipments, valued at more than $900 million, for inspection. Of these shipments 424—$23.82 million worth—were denied, resulting in losses for US importers. In addition, there are currently 1,723 shipments pending inspection with a total of $545.22 million hanging in the balance.
- Of the denied shipments, many included apparel, footwear, and textile products—not surprising considering that the Xinjiang region in China produces more than 20 percent of the world’s cotton.
- The vast majority of shipments currently pending with CBP—a total of 1,058—are electronic products, with industrial and manufacturing materials taking second place. These shipments mostly originating in Malaysia, Vietnam, China, and the Philippines, highlight the necessity of closer examination of goods with supply chains connected to these countries.
- Products from the pharmaceuticals, health and chemicals, industrial and manufacturing, agriculture and prepared products, consumer products and mass merchandising, machinery, and base metal industries were also stopped by the CBP. These shipments mostly originated in China, Vietnam, Malaysia, Cambodia, and Hong Kong.
Customs officials in January confirmed that the majority of imports detained since the UFLPA went into effect have been solar panels made with polysilicon that was assumed to have been produced in Xinjiang. However, a report released in December by a research team at Sheffield Hallam University’s Helena Kennedy Centre for International Justice and nonprofit human rights organization, NomoGaia, also suggests that most major car manufacturers are using parts that originated in Xinjiang and were made with forced labor.
- The exhaustive report—the culmination of a six-month investigation—found that 96 companies with ties to the auto industry were mining, processing, or manufacturing parts in the Xinjiang region, and that more than 100 international car and car part manufacturers were possibly sourcing from these companies.
- During a recent Forced Labor Technical Expo, keynote speaker and Sheffield Hallam University professor Laura Murphy also highlighted that the school by the end of the year plans to make available in pilot form a free supply chain mapping tool. FiveBy judges that the use of this and other, similar tools will become more critical as the United States more aggressively enforces the UFLPA.
The Department of Homeland Security has created a list of entities in China tied to forced labor practices, and adding more entities to this list is one of the department’s top priorities, according to the Undersecretary for Strategy, Policy, and Plans, Robert Silvers. Persuading US partners and allies to pursue similar enforcement regimes is also high on the department’s priority list, indicating that companies with branches and subsidiaries overseas will need to understand and obey import restrictions in those countries as well.
The unique nature of the UFLPA puts the onus on the importer to provide evidence that the goods they are bringing into the United States were NOT made with forced labor – a difficult task considering the complex nature of supply chains and murky origins of many products, as well as efforts to obscure the origins of many goods to hide questionable business practices. Expert investigators can help US companies importing goods from abroad identify the origins of not only the products being shipped, but also their component parts to ensure that US firms are not engaging—even indirectly—with entities that may be using forced labor. Red flags indicating links to forced labor include companies in China that hire workers through government recruiters, provide “vocational training” and “aid to Xinjiang,” source components or other goods from factories located near detention centers, or are connected to the government’s “reeducation” efforts.
Jurisdictional and linguistic expertise, as well as monitoring developments in China and the United States and media coverage of potential business partners are critical to ensuring that goods linked to forced labor are not imported into the United States or stopped at the border, causing financial losses to the importers. A periodic review of business partners’ compliance programs can help US firms avoid financial losses, and examining all entities in the supply chain can be critical to securing the evidence CPB needs to allow the goods to enter the country. Expert FiveBy analysts can help monitor, interpret, and adapt to constantly changing US sanctions and export controls, helping protect your company’s bottom line and reputation.
For a free consultation and help with in-depth analysis of your supply chain, business partners, and other entities that may link to forced labor in Xinjiang, please click below.