New Forced Labor Presumption Creates New Challenges for Global Supply Chains
In Short
The Situation: The Uyghur Forced Labor Prevention Act's rebuttable presumption went into effect on June 21, 2022, presumptively excluding goods produced in China's Xinjiang region from entering the United States.
The Result: Companies should review recently published guidance and be prepared to respond to potential inquiries by U.S. Customs and Border Protection.
Looking Ahead: Combatting forced labor has been a central focus of the federal government in recent years, and signs indicate that further legislation and enforcement actions are likely. Companies should proactively review all steps in their supply chains accordingly.
The Uyghur Forced Labor Prevention Act ("UFLPA" or the "Act") imposes new obligations on companies producing or sourcing goods from the Xinjiang Uyghur Autonomous Region of the People's Republic of China ("Xinjiang"). The key provision of the Act establishes a rebuttable presumption that all items produced wholly or in part in Xinjiang are prohibited from entering the United States under 19 U.S.C. § 1307, which bars importation of goods produced with forced labor. This presumption also extends to select entities located outside of Xinjiang, further implicating global supply chains. U.S. Customs and Border Protection ("CBP") released its UFLPA Operational Guidance for Importers earlier this month, outlining the steps importers should take to comply with the new law.
The Operational Guidance states that to overcome the rebuttable presumption, importers must "respond to all CBP requests for information about merchandise under CBP review and demonstrate by clear and convincing evidence that the good, ware, article, or merchandise was not mined, produced, or manufactured wholly or in part by forced labor." Importers will also be required to demonstrate due diligence, effective supply chain tracing, and supply chain management measures to ensure they are complying with the UFLPA. This requirement applies to the entirety of the supply chain, including goods that may be shipped to third countries for additional processing and those shipped from elsewhere within the People's Republic of China. The Operational Guidance also provides additional guidance regarding specific commodities—tomatoes, cotton, and polysilicon—that have been identified as enforcement priorities.
The Department of Homeland Security has further released its Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People's Republic of China, which provides complementary guidance regarding how to comply with the Act's requirements. The Strategy also notes that CBP is assessing "cutting-edge technologies to identify and trace goods made with forced labor" in connection with its enforcement efforts.
Many questions remain concerning how CBP will administer the rebuttable presumption standard, including how it may differentiate between scenarios in which importers attempt to overcome the presumption and scenarios in which importers attempt to establish that the presumption should not apply in the first place (i.e., if the merchandise in question has no connection to Xinjiang). But because the UFLPA affords importers only 30 days to respond to a detention notice, companies should proactively document all steps in their supply chains and plan for how they would respond to a potential CBP inquiry to avoid potential delays, exclusion, or seizure of their products at the point of importation. The Act's imposition of stringent reporting requirements, including an obligation that CBP make public each instance in which it determines that an importer has overcome the UFLPA's rebuttable presumption, may result in more rigorous enforcement of the Act and disincentivize CBP from finding the presumption rebutted.
Industry should also consistently monitor for new guidance and agency rulemaking that reflects the United States' whole-of-government approach to combatting forced labor. For example, the United States Trade Representative has opened a public comment period through August 5, 2022, to help inform its "coordinat[ion] with all relevant United States federal agencies to develop a focused trade strategy to combat forced labor." Developing a comprehensive strategy that is cognizant of new and potentially overlapping regulatory requirements and guidance will be critical to effectively navigating U.S. requirements relating to supply chain traceability.
Two Key Takeaways
- The UFLPA's rebuttable presumption that goods produced in Xinjiang are excluded from entry into the United States is now in effect, and companies should proactively review their supply chains and be prepared to respond to inquiries arising from enforcement of the Act.
- The UFLPA is one of many recent steps the federal government has taken to combat forced labor, and companies should continue to monitor for new guidance, agency rulemaking, and legislation.
