Uyghur Forced Labor Prevention Act Goes into Effect: What Companies Need to Know about U.S. Guidance on Implementation and Enforcement

Pillsbury - Global Trade & Sanctions Law

[co-author: Erin Kwiatkowski*]

Key Takeaways:

  • The Uyghur Forced Labor Prevention Act (UFLPA) went into effect on June 21,2022, and requires the U.S. Customs and Border Protection (CBP) to presume that all goods manufactured wholly or in part in the XUAR, or by the entities identified by the U.S. government on June 17, 2022, are made with forced labor and banned from import to the United States, unless the importer demonstrates otherwise (a “rebuttable presumption”).
  • Guidance and Reports published in the week leading up to June 21 identify key information for companies seeking to comply with the law, maintain U.S. imports, and understand the supply chain information that may be required by U.S. Customs and Border Protection (CBP)
  • Where the presumption of forced labor applies, rebutting it will require an importer to overcome a high bar by providing “clear and convincing” evidence; however, this same high standard will not necessarily apply to demonstrating that imports have no connection with the XUAR.

Effective June 21, 2022, the Uyghur Forced Labor Prevention Act (UFLPA) requires CBP to apply a rebuttable presumption that all goods imported from the Xinjiang Uyghur Autonomous Region (XUAR) of China are made with forced labor and banned from import to the United States under Section 307 of the Tariff Act of 1930. The presumption of forced labor also applies to goods made in, or shipped through, China and other countries that include inputs made in the XUAR. For further background on the Act, please see our prior posts here and here.

Prior to the June 21 implementation date, the U.S. government provided multiple sources of guidance. Customs and Border Protection (CBP) published explanatory documents, including Operational Guidance for Importers, on June 13. CBP also hosted multiple public webinars in May and June at which CBP personnel discussed implementation approach and evidentiary standards. Finally, the U.S. Forced Labor Enforcement Task Force (FLETF) released its “Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People’s Republic of China” (the “FLETF Strategy Report”) on June 17, 2022, a report directed by statute. The FLETF Strategy Report identifies entities that must be treated with the presumption of forced labor, provides additional guidance on implementation of the UFLPA, and describes compliance requirements for companies seeking to rebut the presumption of forced labor. Below are several takeaways:

  1. “Wholly or In Part”: No De Minimis

Importantly, CBP clarified that there is no de minimis exception to the applicability of the UFLPA. This means that even small or potentially trace amounts of a product from the XUAR in the imported product will be sufficient to bring the shipment within the presumption of forced labor. Thus, where the supply chain tracing reveals a nexus with the XUAR, companies should be prepared to provide documentation tracing to the earliest stages of the supply chain in order to demonstrate a complete absence of XUAR content.

  1. Publication of UFLPA Entity List

The FLETF Strategy Report introduced the UFLPA Entity List. The entities listed are subject to the presumption that their products are prohibited from entry into the United States due to forced labor. There are approximately thirty companies listed, which were selected from existing CBP Withhold Release Orders (“WROs”) and the Entity List issued under the Export Administration Regulations. (WROs were issued under a preexisting law and targeted imports from specific companies suspected of using forced labor, while the export control Entity List recently has been used, among other purposes, to sanction companies for participating in abuses of human rights.) The UFLPA Entity List may be expanded, and future entries will be published in the Federal Register. Thus, manufacturers and importers will need to assess their supply chains for touch points with these entities and monitor for updated listings.

  1. Importers May Demonstrate Merchandise Is NOT Subject to the UFLPA

Per the CBP Operational Guidance, if an importer believes that its importation has been wrongfully detained under the UFLPA, the importer may submit detailed documentation to prove that the goods and its components were produced outside of the XUAR and by entities not subject to the UFLPA Entity List. If CBP determines the UFLPA does not apply, the importer will not be required to overcome the rebuttable presumption regarding forced labor and the shipments will be released.

  1. Overcoming the Rebuttable Presumption: “Clear and Convincing” Standard

When merchandise is subject to the UFLPA, rebutting the presumption requires that an importer provide “clear and convincing” evidence that a product imported into the United States was not “mined, produced, or manufactured wholly or in part by forced labor.”

This is a high standard. In CBP’s webinars, CBP staff directed importers to look to the Countering America’s Adversaries Through Sanctions Act (CAATSA), which applies a similar rebuttable presumption and standard that goods manufactured in North Korea or by North Korean nationals are made with forced labor.

The CBP applied an exacting standard under CAATSA, and in CBP Headquarters Ruling H317249, CBP noted that the “clear and convincing evidence is a higher standard of proof than a preponderance of the evidence, and generally means that a claim or contention is highly probable.” Information provided to rebut the presumption should show that the evidence is “substantially more likely to be true than untrue.”

  1. Overcoming the Rebuttable Presumption: Compliance Requirements

In addition, rebutting the presumption of forced labor requires that CBP determine—among other things—that an importer has “fully complied” with the FLETF guidance and any regulations issued to implement that guidance, as well as responded completely and substantially to all CBP requests for information.

In this regard, the FLETF Strategy includes guidance to importers on due diligence, effective supply chain tracing, and supply chain management measures.

An effective due diligence system includes, for example, the following elements:

  • Engagement with relevant stakeholders in the supply chain;
  • Assessment of risks associated with the supply chains;
  • A written code of conduct which provides a framework for addressing the risk of forced labor;
  • Communication of standards and providing training across the supply chain regarding the risks of forced labor in the supply chain; and
  • Monitoring of compliance. This may be done through “credible audits” or processes “that go beyond traditional auditing and may involve the use of technology or partnerships with civil society.” A creditable audit can include unannounced arrivals at the worksite at a time when the workforce should be present, for example.

For purposes of supply-chain tracing, importers must know their suppliers and labor sources at all levels of the supply chain, including demonstration of supply chain mapping, and a chain of custody. Separately, supply chain management includes supplier vetting, and contractual requirements for corrective action, as well as an information system to manage supply chain data.

  1. Types of Evidence Expected by CBP

CBP’s Operational Guidance for Importers highlights the following non-exhaustive categories of evidence that importers can provide. These largely overlap with the categories provided by the FLETF Strategy discussed above.

  • Supply Chain Tracing Information: evidence pertaining to overall supply chain, manufacturer/producer and the merchandise and its components. Specifically, CBP will review the role of shippers and exporters, assess whether any entities in the supply chain are related/affiliated, require a list of suppliers associated with each step of the production process and affidavits from each company or entity involved in the production process. CBP will review evidence such as certificates of origin, purchase orders, invoices, bill of materials, invoices, buyer and seller inventory records, production records, and reports on factory site visits by importer.
  • Evidence that Goods of Chinese Origin Are not Produced with Forced Labor: evidence may include supply chain maps identifying all entities involved in production of the goods, information on Chinese employees, such as wage payments and production output per worker, information on worker recruitment to ensure personnel are working voluntarily, and credible audits to identify forced labor indicators.
  • Due Diligence System Information: documentation demonstrating engagement with suppliers to assess and address forced labor risk, a written supplier code of conduct, training of employees and agents who interact with suppliers on forced labor risks, independent verification of the effectiveness of the due diligence system and reporting performance and engagement publicly on its due diligence system.
  • Information on Supply Chain Management Measures: documentation on supply chain management measures, such as internal controls to prevent or mitigate forced labor risk and remediate any use by the company of forced labor identified in the mining, production, or manufacture of imported goods. Importers who contend their imports are not within the purview of the UFLPA because they are not produced wholly or in part in XUAR still will be required to substantiate their claims through the supply chain tracing documentation.
  1. Known Importer Letters

Separately, CBP has also issued “known importer” letters to importers that have been identified as having previously imported merchandise which might be subject to the UFLPA. These letters encourage importers to address the question of forced labor in their supply chains and offer insight into the kinds of actions businesses might take to come into compliance with law. CBP has provided examples of the letter on its UFLPA Resource Page. Importantly, the letters state that CBP will take into consideration the fact that an importer was provided notice through a Known Importer Letter in determining appropriate administrative remedies for future enforcement actions.

Conclusion

U.S. Government guidance has provided helpful information to businesses seeking to understand U.S. implementation of the UFLPA effective June 21, 2022. However, this is a new statute and importers and CBP are expected to encounter a number of questions for the first time.

*The authors would like to thank summer law clerk Erin Kwiatkowski for her contributions to this update.

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