01/03/2022

U.S. Will Ban Goods Made In The Xinjiang Uyghur Autonomous Region in China

On December 23rd, President Biden signed into law H.R. 6256, the “Uyghur Forced Labor Prevention Act”, which effectively presumes that all goods mined, produced, or manufactured in the Xinjiang Uyghur Autonomous Region (XUAR) are produced by forced labor in China. The Uyghur Forced Labor Prevention Act is part of the U.S. pushback against Beijing’s treatment of China’s Uyghur (pronounced wee·gr) Muslim minority, which Washington has labeled as genocide. It’s important to note that this new law covers not only finished goods manufactured in the XUAR but also raw materials manufactured in the XUAR that are used to produce finished goods in other parts of China as well as secondary countries.

Xinjiang, the largest region of China, is bordered by eight countries including the former Soviet Central Asian republics, Mongolia, Afghanistan, Pakistan and India.
It experienced a brief period of independence in the 1940s, but China regained control after the Communists took power in 1949. Its full name is the Xinjiang Uighur Autonomous Region (XUAR). It is home to the Turkic-speaking Muslim Uighur minority, who make up about eight million of its 19 million people. Many Uighurs complain of discrimination and marginalization by the Chinese authorities. In August 2018, a UN human rights panel cited “credible reports” that more than one million people were being held in counter-extremism centers in Xinjiang, raising concerns that China had turned the region into “a massive internment camp shrouded in secrecy”.

The new law will become effective on June 21, 2022 and under the law goods from the XUAR will not be allowed to be imported unless:

1. The importer of record has fully complied with relevant guidance to be provided by CBP, as well as any regulations issued to implement that guidance;
2. The importer has completely and substantively responded to all inquiries for information submitted by CBP to ascertain whether the goods were made wholly or in part with forced labor; and
3. By clear and convincing evidence, the goods were not made wholly or in part by forced labor.

If CBP determines that an importer has met these conditions (a determination characterized as an “exception”), then CBP must submit a report to Congress, and make it available to the public, within 30 days after making the determination.

The ACT requires the Forced Labor Enforcement Task Force which was established under Section 741 of the USMCA to solicit public feedback in developing an enforcement strategy to prevent the importation of forced labor goods from XUAR. Specifically, by January 22, 2022, the task force must publish in the Federal Register a notice soliciting public comments on how best to ensure that goods made wholly or in part with forced labor in China are not imported into the United States. After the 45 day comment period closes, the task force will conduct a public hearing for witnesses to testify on the use of forced labor in China and “potential measures” to prevent the importation of goods made by forced labor. Potential measures include those “that can be taken to trace the origin of goods, offer greater supply chain transparency, and identify third country supply chain routes for goods mined, produced, or manufactured wholly or in part with forced labor in XUAR.” The final strategy to be developed by the Task Force must be in place by June 21, 2022 and will include among other things, the following:

> a list of entities that use forced labor in XUAR
> a list of entities that work with the XUAR government to facilitate the use of forced labor
> a list of products made by forced labor
> a list of entities that exported products made by forced labor from China to the United States
> a list of facilities and entities that source material from XUAR or from persons working with the XUAR government
> an enforcement plan for each identified entity
> a list of high-priority sectors and an enforcement plan for each sector (e.g., cotton, tomatoes, polysilicon)
> recommendations for initiatives, tools and technologies that CBP can use to accurately identify and trace goods made in XUAR
> a description of how CBP plans to enhance its use of legal authorities and other tools, including additional resources that it may need to prevent the importation of forced-labor goods

Additionally, the enforcement strategy must also include guidance to importers with respect to:

> due diligence, effective supply-chain tracing, and supply-chain management measures to ensure that they are not importing goods made by forced labor goods in China
> the type, nature, and extent of evidence that demonstrates that goods originating in China were not made in XUAR
> the type, nature, and extent of evidence that demonstrates that goods originating in China, including goods detained or seized pursuant to the presumption of having been made by forced labor, were not mined, produced, or manufactured wholly or in part with forced labor

It is important to note that CBP already has tools at their disposal to enforce this law and has used them in the past. According to the CBP website, CBP has issued 49 Withhold Release Orders (WRO) for products suspected to have been produced using forced labor. From October 2020 until September 2021, CBP has detained 1469 shipments pursuant to these WRO’s.

So, what should an importer do now? Importers would be wise to review their supply chain, increase supply chain visibility where necessary, and communicate directly with suppliers to confirm that goods they purchase are not produced using forced labor. Additionally, now would be a good time to evaluate and put into place due diligence and reasonable care processes to determine if the necessary documents can be provided to CBP to rebut a claim of forced labor.

The below link will take you to the CBP website which is their FAQ from December 2021 on forced labor. We would encourage all importers to read through the FAQ as it contains very valuable information concerning much of the above.
https://www.cbp.gov/trade/programs-administration/forced-labor/frequently-asked-questions
The below link from the CBP website provided a separate FAQ relating to the XUAR region specifically:
https://www.cbp.gov/trade/programs-administration/forced-labor/xinjiang-uyghur-autonomous-region-wro-frequently-asked-questions

We will continue to monitor this issue and provide updates as necessary.

Please contact your V. Alexander account team, or you may also contact our Trade Compliance team directly at tradeinsights@valexander.com with any questions, and you can always follow us on our website www.valexander.com for updates on this and other topics.

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