Unraveling the Forced Labor Stitched Into the Textile Industry
The Department of Homeland Security ("DHS") recently announced an enhanced strategy to combat illicit trade in the textile industry, including violations of the Uyghur Forced Labor Prevention Act ("UFLPA").
In December 2021, President Biden signed into law the bipartisan UFLPA. Under the UFLPA, goods manufactured in Xinjiang, China, or by entities identified on the banned entity list are prohibited from importation into the United States unless the commissioner of Customs and Border Protection ("CBP") determines that they were not produced with forced labor. Since the UFLPA's passage, more than 8,000 shipments of goods valued over $3 billion have been stopped for potential UFLPA violations.
In April 2024, work gloves manufactured by a Shanghai-based safety products supplier, branded with the name of a U.S.-based heavy-duty power tool manufacturer, were detained at U.S. ports of entry. At least one major retailer thereafter blocked future sales of the gloves. While enforcement has been focused on international suppliers, U.S.-based corporate importers bear the financial and reputational costs from association with violating suppliers and supply chain interruptions.
The enforcement efforts are becoming more sophisticated and comprehensive. The DHS maintains a list of banned entities known to produce goods with forced labor in violation of the UFLPA. On May 16, 2024, DHS added 26 entities to the list, bringing the total number of banned entities to 65. CBP also requested an annual budget increase of $19.9 million for 2025 to be used for increased UFLPA enforcement.
Additionally, in early May 2024, the chair of the bipartisan Congressional-Executive Commission on China announced during a congressional hearing that he intends to ask the Securities and Exchange Commission to review disclosures by publicly traded companies to assess whether they contain any material misstatements or omissions with regard to forced labor in their supply chains—and if they do, to take enforcement action against them, levying fines.
In light of the increased attention on forced labor in supply chains, companies should closely monitor the UFLPA Entity List and thoroughly review public disclosures regarding supplier information and labor practices.
