We write to alert you to a recent development on one of the topics discussed at the Bodman/Kharon/Miller & Chevalier Executive Briefing on Emerging Legal and Regulatory Issues Facing Automotive Companies held on May 23, 2023.

Our Briefing focused on two topics – 1) litigation in the automotive industry involving inflationary pressures and “requirements” contracts, and 2) the likely growing focus of US regulators on the automotive industry regarding potential violations of the Uyghur Forced Labor Prevention Act, also known as the UFLPA.

The UFLPA seeks to stop the importation of goods into the United States that were manufactured wholly or in part with forced labor in the People’s Republic of China, especially from the Xinjiang Uyghur Autonomous Region, or Xinjiang.  During our presentation, we warned that US Customs is likely to start quarantining shipments that have, or are alleged to have, components or material linked to forced labor.

A recent action confirms this warning.  While all the details are not clear, what is clear is that thousands of Porsches, Bentleys and Audis have been impounded in a US port after a supplier warned parent Volkswagen that a component in the vehicles was found to have come from “western China.”  The carmaker is currently working to replace the component as quickly as possible.  Deliveries of the impounded vehicles have been delayed until late March.  In this case, Volkswagen self-reported after its supplier reported to it, but the costs will certainly still be high and, despite the self-report, there will be damage to Volkswagen’s reputation.