The U.S. House of Representatives recently passed a new measure, H.R. 4039, which would prohibit any funding for programs within the State Department and the U.S. Agency for International Development (USAID) that involve materials or products with linkages to forced labor abuse of Chinese minority communities in the Xinjiang region.
 
The measure comes on the heels of laws passed by Congress to prohibit U.S. funding in other international settings where corruption, human rights, and rule of law are endemic challenges.

The fiscal year 2023 National Defense Authorization Act, for instance, was notable in its inclusion of a provision that forbids Defense funding and commercial ventures that support Russia’s hydrocarbon sector, although industry has found the statutory parameters of this prohibition frustratingly unnuanced and the measure’s enforcement scope remains subject to ongoing interpretation. 

As a result, companies that fear being ensnared by the law are looking for regulators to carve out some exemptions, either on a case-by-case basis or to allow types of commercial services that are sufficiently insulated from the Kremlin’s interests while supporting U.S. military objectives in the region. Some of these entities are also businesses in the process of winding down or significantly scaling back their operations in Russia, and looking for regulatory relief in anticipation of a lengthy phase-out process.

And in a preceding National Defense Authorization Act, lawmakers prohibited the Defense Department and its contracting firms from receiving any federal funds that would benefit Venezuelan President Nicolas Maduro and others sustaining his government.   

H.R. 4309 would have the same effect, with its prohibitions on funding potentially extending to the vast sector of commercial enterprises that support the United States’ development projects and diplomatic efforts the world over. 
    
H.R. 4309 does allow a contractor to submit a petition for an exemption if it can provide assurances that (1) it will not “use goods, wares, articles, or merchandise mined, produced, or manufactured wholly or in part in Xinjiang” in any of its contracts with State or USAID; and (2) it will develop a system to ensure compliance with these requirements. While not yet clear, there’s a chance that those provided an exemption will have this fact disclosed in public reporting by State. Additionally, the Act would also require the State Department to issue an annual report for three years to the Senate Foreign Relations Committee and House Foreign Affairs Committee regarding implementation of the bill. The legislative text does not state if this report will be held in confidence or shared outside the committees of jurisdiction.

As those monitoring U.S. efforts to eradicate forced labor will know well, precedential steps have been taken by Congress and the White House to stop the genocidal targeting of persecuted minority communities in China, particularly the Uyghur and other Turkic Muslims in the Xinjiang region. To date, the most consequential policy for companies is the bipartisan passage and enforcement of the Uyghur Forced Labor Prevention Act (UFLPA). At the heart of that effort is a broad prohibition on the importation of goods whose supply chains have a nexus with the Xinjiang region, as well as other places identified in China where these communities are known to be working under conditions of modern slavery.

Adding H.R. 4039’s federal funding restrictions to the UFLPA’s trade-focused framework signals that lawmakers are looking for ways to amplify the effects of the latter statute on the federal government’s approach to modern slavery prevention. 

It also coincides with increased frustration from Republicans, Democrats, and civil society organizations regarding the less than fulsome manner in which the Department of Homeland Security’s Customs and Border Protection (CBP) agency is enforcing the Uyghur forced labor import ban. Since the UFLPA went into effect, for example, CBP has released about half of all the imports it detained under the statute’s formidable presumption of forced labor. Several organizations, bipartisan clusters of Representatives and Senators, committees with jurisdiction over trade and international human rights, and anti-slavery activists have sent bevies of letters and provided formal testimony to identify weaknesses in the UFLPA, explore proposals to amend it, and strengthen agency enforcement practices.     

In tandem with this campaign, we strongly believe that as CBP and industry’s mapping of supply chains become more detailed over time, we should expect the enforcement standard to better align with the congressional intent of the statute. 
    
With respect to civil society, companies should be aware that human rights advocacy organizations are gaining more influence over U.S. forced labor policy. Indeed, CBP has emphasized that its own UFLPA guidance acknowledges the greater weight that civil society actors may play in the review of imports and decisions over whether to seize them. These same groups will now look at H.R. 4039 and other proposals to build on this momentum.

Given that the measure was approved without any opposition in both the House Foreign Affairs Committee and the House floor, it stands a good chance of clearing the Senate and being sent to President Biden’s desk for signature. If the Senate’s schedule in the waning days before the November election becomes too inundated, H.R. 4039 would be a good contender for insertion into a larger must-pass package – such as the fiscal year 2025 NDAA, the 2025 State Department funding bill, or the renewal of the U.S.-Mexico-Canada Agreement that expires this year.