On December 23, 2021, President Joe Biden enacted the Uyghur Forced Labor Prevention Act (âUFLPAâ). More specifically, the UFLPA strengthens the application of section 307 of the Tariff Act of 1930 by imposing a rebuttable presumption that goods, merchandise, articles and merchandise extracted, produced or manufactured in whole or in part from the region Xinjiang Uyghur Autonomous Authority (“XUAR”) are made with forced labor and therefore prohibited from being imported into the United States A company wishing to import XUAR goods will be required to demonstrate with “clear and convincing evidence” that the presumption is incorrect, and the standard of proof should be difficult to meet for most companies.The new law also contains new sanctions against foreigners responsible for serious human rights violations related to the XUAR.
On December 14, 2021, the U.S. House of Representatives and Senate reconciled their respective versions of the Uyghur Forced Labor Prevention Act (“UFLPA”) and unanimously passed the final version of the bill, the sending to President Joe Biden, who signed it. promulgated on December 23, 2021. UFLPA enters into force on June 21, 2022, 180 days after the date of promulgation, and expires after eight years, a period which may be shortened if the president determines that matters relating to the rights of the man in the Xinjiang Uyghur Autonomous Region (“XUAR”) are resolute.
UFLPA strengthens the existing ban against importing goods produced in XUAR using forced labor. UFLPA represents the latest statement by the US government on US trade policies towards Xinjiang since the release of the update to the administration’s Xinjiang Supply Chain Trade Notice in July 2021. UFLPA’s final version ignores the controversial Securities and Exchange Commission (âSECâ). the reporting requirements of U.S. securities issuers regarding XUAR-related activities or transactions with certain sanctioned parties, which were included in the House version of the bill. Either way, UFLPA is still likely to generate considerable challenges for many US importers of Chinese products, as discussed below.
Rebuttable presumption and clear and convincing evidence
Concerns about forced labor in the XUAR are longstanding. As early as September 2019, the United States Customs and Border Protection (“CBP”) began issuing withholding tax orders (“WROs”) pursuant to Section 307 of the Tariff Act of 1930. (19 USC Â§ 1307), prohibiting the importation of certain products. of the XUAR in response to these concerns. The WROs covered silica products, clothing, cotton and a few other types of goods, but they did not go so far as to ban all imports from the region. The ban on importing into the UFLPA is modeled on Article 307, which prohibits the importation of goods “extracted, produced or manufactured in whole or in part” in a foreign country by forced, contracted or condemned labor. . The UFLPA strengthens the implementation of Section 307 by imposing a rebuttable presumption that all XUAR products are made with forced labor. As of June 21, 2022, a company wishing to import goods from XUAR into the United States has the burden of demonstrating with “clear and convincing evidence” that its imports do not include forced labor in its supply chain. supply.
The bill also directs the Forced Labor Enforcement Task Force (âTask Forceâ), originally established by the United States-Mexico-Canada Agreement Implementation Act (19 USC 4681), to develop additional guidelines for importers, which companies must adhere to – in addition to responding to all CBP inquiries – if they plan to continue importing from XUAR.
The standard of proof should be difficult for most businesses to meet. If CBP determines that the standard is met in a particular case, the agency will be required to submit a report to Congress no later than 30 days after making that decision. UFLPA also demands that this report be made public, although it does not specify CBP’s method of doing so. This reporting requirement, and its implicit invitation to challenge CBP, will make an already difficult burden even more difficult.
In addition to the rebuttable presumption described above, the UFLPA also directs the task force, in consultation with the Secretary of Commerce and the Director of National Intelligence, to develop an implementation strategy for CBP.
The UFLPA specifies that the working group should develop a strategy, based on public comments and a hearing, that assesses the risk of importing goods produced by forced labor and identifies threats (including those via the chains of procurement) and the processes that could mitigate these threats. The strategy will include some of the key information that will help businesses and importers comply with the law:
a list of XUAR entities that use forced labor to extract or manufacture products;
a list of entities that work with the government to provide forced labor outside the XUAR;
a list of products produced by entities using forced labor; and
a list of high priority sectors for application, including cotton, tomatoes and polysilicon, with an application plan for each high priority sector.
More importantly, as noted above, the strategy will also include additional guidelines that importers must adhere to if they intend to import from XUAR in the future, including guidance on:
due diligence, effective supply chain tracing and supply chain management measures;
the type, nature and extent of the evidence demonstrating that the goods originating in China were not extracted, produced or manufactured in whole or in part in the XUAR; and
the type, nature and extent of the evidence demonstrating that the goods originating in China were not extracted, produced or manufactured in whole or in part by forced labor.
In terms of timing, the Working Group is to âpublish in the Federal Register a notice seeking public comment on how best to ensure that goods extracted, produced or manufactured in whole or in part with forced labor in the People’s Republic of China, including by Uyghurs, Kazakhs, Kyrgyz, Tibetans and members of other persecuted groups in the People’s Republic of China, and in particular in the [XUAR], are not imported into the United States âwithin 30 days of enactment, which is January 22, 2022. The scope of public comment will likely cover the entire implementation strategy, including advice to importers.
After publication of the notice, the public will have at least 45 days to submit comments. No later than 45 days after the comment period closes (potentially around mid-late April), the task force is to hold a hearing with testimony on the use of forced labor in China and potential measures to ban it. importation of goods made with forced labor into the United States. If the working group meets this schedule, the final report will likely be released at the end of June.
Imposition of sanctions
The UFLPA is also amending the Uyghur Human Rights Policy Act of 2020 (Public Law 116-145; 22 USC 6901 note) to require the president, within 180 days of the enactment of the UFLPA, to identify and impose sanctions against foreign persons responsible for serious human rights violations. abuse related to XUAR. Unlike many statutory sanctions mandates in different contexts, the UFLPA does not allow the president to waive the imposition of sanctions on the basis of the US national interest. An earlier version of House of Representatives legislation provided for such a waiver power. We note that sanctions against certain parties involved in human rights violations in the XUAR had previously been imposed by the US Treasury’s Office of Foreign Assets Control (âOFACâ) under the Global Magnitsky Executive Order. UFLPA grants additional authority to OFAC to impose sanctions on parties involved in sanctionable activities in or involving the XUAR.
Next Steps and Concerns for Businesses
With its imposition of the rebuttable presumption, the UFLPA shifts the burden of proof to demonstrate the involvement of forced labor in the supply chain of a good from government to companies and to individual importers. Importers should ensure that they diligently monitor their products and raw materials throughout their supply chains and assess their methods of identifying vulnerabilities. In addition, they should prepare their compliance programs to include appropriate due diligence procedures.
UFLPA affects a wide range of industries and products, but specifically requires the working group to develop implementation plans for “high priority” sectors such as cotton, tomatoes and polysilicon. Companies importing materials into these high priority sectors must anticipate and prepare for rigorous application targeting their operations. Notably, UFLPA does not restrict the application of existing WROs, and new WROs may be imposed at any time.
Congress specifically included provisions in UFLPA that allow industry groups and businesses to participate and provide feedback as the working group develops application standards. Companies should consider submitting comments or testimonials to shape the Working Group’s implementation of these enforcement standards.
Holding China accountable for alleged human rights violations has been a top priority in Congress with broad bipartisan support. The United States’ scrutiny of China’s human rights record, the implementation of the UFLPA, and the Biden administration’s imposition of export controls and executive action , such as the diplomatic boycott of the upcoming Beijing Olympics, will further fuel tensions in US-China relations in 2022.
Chinese government officials have sharply criticized the UFLPA and have repeatedly threatened to retaliate against U.S. restrictions, prompting Beijing to strengthen its ability to retaliate by blocking statutes in 2021. Businesses should expect this. that complying with US laws may present potential risks under Chinese laws, including Chinese laws. Anti-Foreign Sanctions Law.
Indeed, complying with UFLPA comes with its own risks, as it invites a backlash in China for companies that have significant sales, operations, and staff there. While businesses must comply with US law, they should try to do so in a way that avoids further aggravating the problem or drawing attention to their actions and policies in a way that invites a reaction. negative consumer or government retaliation in China.