What’s Next for the Uyghur Forced Labor Prevention Act?
June 21 marks one year since the Department of Homeland Security (DHS) began enforcing the import control requirements of the Uyghur Forced Labor Prevention Act (UFLPA). The law aims to deter and punish companies participating in or benefiting from Chinese state-sponsored forced labor in the Uyghur region of Western China (referred to in the law as the Xinjiang Uyghur Autonomous Region, or XUAR). The UFLPA requires DHS to adopt a rebuttable presumption that all goods produced in that region are made with forced labor and therefore are ineligible for entry into the United States.
In the first year of enforcement, U.S. Customs and Border Protection (CBP) detained more than $1.3 billion worth of products at the border under the UFLPA. At least 679 shipments have been denied entry thus far, while nearly 2,000 are still being held for what can be a lengthy review process to determine eligibility. Despite a quick ramp-up in enforcement in the early months, members of Congress have nevertheless expressed frustration at the pace and scope of CBP’s enforcement actions over the past year, arguing that CBP is catching only a fraction of the goods containing components originating in the XUAR. Both the House Select Committee on China as well as the UFLPA’s House and Senate sponsors have offered proposals to expand UFLPA enforcement, and several additional measures to counter China’s ongoing abuses against the Uyghur population have been introduced. Despite frustration by some companies about these new requirements, this issue continues to garner widespread bipartisan support in Congress and is a top priority for the DHS.
Q1: How has the UFLPA been enforced to date?
A1: In June 2022, CBP identified 20 Chinese entities and four high-risk priority sectors (apparel, cotton, tomatoes, and polysilicon) it planned to target for enforcement under the UFLPA’s import control provisions. In the first full quarter of enforcement, from July 1 to September 30, 2022, the CBP stopped more than 1,500 shipments, including more than 1,000 in the electronics sector alone (most of which, according to public reporting, were solar panels). Notably, just 26 percent of these shipments originated in China; 69 percent came from Malaysia and Vietnam, where nearly all solar panels destined for the United States are now manufactured, containing components from China, as a result of U.S. tariffs on Chinese solar panels.
After an initial surge, however, detentions declined and leveled off for these priority sectors, presumably as a result of increasing clarity around CBP’s documentation requirements: importers who could clearly demonstrate their products did not originate in the XUAR arrived more prepared with appropriate evidence; those who could not have most likely begun redirecting those products to markets that have not adopted similar bans.
Enforcement has not been limited to these sectors, however. As evidence has emerged that additional goods are being produced in or with components from the XUAR, CBP has expanded its targets to include automotive parts, metals, pharmaceuticals, and other products. Detentions in those sectors are rising. As of May 29 (roughly two-thirds of the way through the current quarter), detentions in non-priority sectors outnumbered those of priority sectors, even using an expansive definition of priority sectors that includes all electronics (not just solar panels), all apparel, footwear, and textiles (not just apparel), and all agricultural products (not just cotton and tomatoes). This increase has primarily been in detentions of industrial and manufacturing materials, which rose from just 4 percent of detentions in the first full quarter of enforcement to 29 percent in the current quarter.
The UFLPA allows companies to rebut the presumption that goods from the XUAR are made with forced labor by documenting the conditions of workers and providing evidence that no forced labor was utilized in the production of the good or any of its components. Both the law and the DHS’s enforcement strategy have made clear, however, that the bar for proof is high. Any exceptions granted by the DHS must be reported to a skeptical Congress and will be carefully scrutinized, providing an additional disincentive for the DHS to grant such exceptions. As of May 1, 2023, the DHS stated that three importers of agricultural and pharmaceutical products have requested exceptions; no determinations had been made as of that time.
Q2: What changes are being proposed to the UFLPA’s import requirements?
A2: Enforcement of the UFLPA has been a careful balancing act by DHS, which seeks to facilitate legitimate trade while preventing illegal goods from entering the United States. Since the moment its strategy was released, DHS has been under pressure to expand the list of Chinese entities known to use forced labor and the list of priority sectors for enforcement. The auto industry, particularly battery manufacturing, has come under scrutiny for its links to component production in the XUAR, and this year CBP has begun detaining shipments containing “automotive and aerospace” products for the first time.
On June 9, DHS added two additional companies—Xinjiang Zhongtai Chemical Co., Ltd, and Ninestar Corporation (and eight subsidiaries) to its UFLPA entity list. Xinjiang Zhongtai is a state-owned enterprise and the largest producer of PVC plastics in China. According to Sheffield Hallam, it has employed more than 5,000 transferred laborers from XUAR and runs ideological and vocational schools in the region. Ninestar is one of the world’s largest laser printer manufacturing companies, and owns a majority stake in U.S.-based Lexmark; it too has been accused of participating in the Uyghur forced labor transfer program.
This limited expansion of the entity list fell far short of activists’ expectations. In May 2023, Sheffield Hallam University’s Helena Kennedy Centre for International Justice, a leading research organization on forced labor in the XUAR, identified at least 31 types of products alleged to be sourced from the XUAR and indicated available information on thousands of companies alleged to do business in or source from the region. Even with the additional enforcement resources provided by Congress to support UFLPA implementation, however, stopping goods across so many categories would be an impossible task for CBP. At the same time, as detentions rise across non-priority sectors, additional clarity from CBP on its enforcement targets would benefit U.S. importers seeking to determine which supply chains to prioritize for mapping and analysis.
Far more significant than the addition of new priority sectors or companies, however, are proposals to eliminate the UFLPA’s de minimis exception. In 2016, Congress raised the de minimis threshold from $200 to $800, meaning that shipments valued at $800 or less and shipped to individual consumers are not subject to U.S. tariffs, and because little data is required about them, cannot practically be subjected to UFLPA or broader Tariff Act enforcement. The number of these shipments has dramatically increased with the rise in e-commerce, particularly during the Covid-19 pandemic: in FY 2018 there were 410.5 million shipments that fell under the de minimis exception; by FY 2022 there were more than 685 million. Purchases on U.S.-based e-commerce sites such as Amazon and Wayfair fall under this exemption when a product is shipped directly from the country of origin to the consumer. When retailers ship foreign-made products in bulk to the United States and store them in local warehouses, as they often do as part of a fast-delivery business model, they are subject to the UFLPA. Foreign-based e-commerce sites often avoid the cost of maintaining U.S. warehouses by shipping products directly from the country of origin to the consumer. Two such companies—Chinese ultra-fast fashion retailers Temu and Shein, are now the first- and second-most downloaded shopping apps in the United States, and have drawn the ire of U.S. lawmakers for avoiding U.S. tariffs on Chinese products through the de minimis exemption and, in the case of Shein, having found to be selling goods in the United States containing cotton from the XUAR.
Concern about companies avoiding the UFLPA’s forced labor import ban by shipping products worth less than $800 at a time is helping drive bipartisan efforts to eliminate the de minimis exception altogether for certain countries—a move that would have dramatic consequences for online direct-to-consumer companies. While CBP takes preliminary steps to test processes for tracking de minimis shipments entering the United States in the first place (such shipments are not currently subject to normal entry reporting requirements), two bipartisan bills have been introduced in both the House and Senate that would limit the applicability of the de minimis exception to goods from China or eliminate it altogether.
Q3: What other actions are being considered to combat forced labor in the XUAR?
A3: Several other pieces of bipartisan legislation have been introduced, most of which seek to close perceived gaps in enforcement of existing sanctions regimes against Chinese leaders and companies complicit in forced labor in the XUAR and to more broadly deny these entities access to U.S. consumer and financial markets. The most comprehensive of these bills—the Uyghur Genocide Accountability and Sanctions Act (UGASA) would also require new reporting to the U.S. Securities and Exchange Commission (SEC) by companies listed or seeking to be listed on U.S. stock exchanges.
- Global Magnitsky Act
UGASA would require the Treasury Department to consider expanding the number of Chinese entities sanction under the Global Magnitsky Act for their complicity in forced labor in the XUAR. It would build on the 2020 Uyghur Human Rights Policy Act by requiring consideration of seven specific Chinese technology companies, most of which have been implicated in the mass surveillance of Uyghurs.
To date, the Treasury Department has imposed sanctions on 12 Chinese officials and entities for conduct related to the XUAR, including companies involved in the production or sale of surveillance technology used by the Chinese government and the Xinjiang Production and Construction Corps (XPCC), a party-affiliated paramilitary organization that supported the “comprehensive surveillance, detention, and indoctrination program targeting Uyghurs and members of other ethnic minority groups.” While XPCC was designated for its affiliation with the Chinese Communist Party Secretary of XUAR, it is also a major manufacturer and beneficiary of the forced labor transfer program. Only two companies—neither associated with forced labor in the XUAR—have been designated by the Treasury Department under Global Magnitsky for forced labor abuses; if passed, UGASA could significantly expand this category of sanctioned companies.
- Federal Procurement Restrictions
The UGASA proposes to expand existing restrictions on federal contracts with entities associated with labor rights abuses. Federal procurement law prohibits U.S. government contractors from engaging in forced labor and requires certain contractors to draft compliance plans and certify that these requirements have been met. This bill would broaden restrictions on contracting with any companies associated with the abuse of Uyghurs. It would also apply the UFLPA standard—a rebuttable presumption that any goods from the XUAR or produced using Uyghur labor are made with forced labor—to all goods procured by U.S. departments and agencies, whether or not they are imported into the United States. This means that contractors, who already have to ensure their imports are free of connection to the XUAR under the UFLPA, would need to do the same for goods delivered overseas, such as to U.S. military bases or embassies. The bill also proposes a ban on working with contractors who violate any internationally recognized labor rights in China, not just those that benefit from forced labor—a potentially much broader enforcement approach that would implicate a much larger number of U.S. government contractors, depending on how such rights are ultimately defined (as the United States is among a small minority of countries that has not ratified several of the International Labor Organization’s core workers’ rights conventions, such as those covering freedom of association and nondiscrimination).
- SEC Disclosures for New and Existing Filers
Finally, the draft legislation proposes new requirements for companies applying to be listed on U.S. stock exchanges. The bill would require potential new issuers to report to the Securities and Exchange Commission on any business relationships with entities under U.S. sanctions for, or otherwise known to be, benefiting from forced labor by Uyghurs. These provisions are likely a result of reports that Shein is considering a U.S. initial public offering. Existing stock issuers would also be required to report quarterly or annually on whether they benefit from business relationships in the XUAR or with companies utilizing Uyghur labor, a requirement reminiscent of efforts to address the trade in conflict minerals from the eastern Democratic Republic of the Congo under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. A more limited version of this bill has also been introduced in the House.
While provisions on Global Magnitsky and federal procurement (other than the broad ban on contractors violating internationally recognized labor rights in China) are largely extensions of current law intended to fill perceived gaps in enforcement of existing executive branch authorities, the SEC disclosure rules would result in a significant expansion of the number of companies required to trace and analyze their supply chains to determine any connections to the XUAR.
Marti Flacks is the Khosravi Chair in Principled Internationalism and director of the Human Rights Initiative at the Center for Strategic and International Studies in Washington, D.C.