by Source Intelligence
on October 9, 2020
In the past few years, the issue of forced labor has gained more and more attention and raised acute awareness as to its prevalence in some regions around the world, the most infamous and recent of which is the Xinjiang Uyghur Autonomous Region (XUAR) in China.
In July 2020, the US government issued a Xinjiang Supply Chain Business Advisory, highlighting the risks of outbound and inbound exposure to entities engaging or directly or indirectly supporting forced labor and human rights abuses in Xinjiang.
On September 22, 2020, the House unanimously passed the Uyghur Forced Labor Prevention Act, merely a week after the Department of Homeland Security had blocked imports from four specific entities located in the region. The barred goods produced and/or processed by these entities include cotton, apparel, and hair products.
How is the Uyghur Forced Labor Prevention Act different from other laws targeting modern-day slavery and human trafficking? What new challenges will businesses face and how will they ensure compliance if the Senate adopts the bill? Let’s dive in.
Before we go into the legal meaning of the Uyghur Forced Labor Prevention Act, we’ll quickly map the geopolitical environment of XUAR.
Annexed in 1949, the region is mainly composed of Muslim Uyghur, Kazakh, and Turkic minorities that the Chinese government is determined to “reform.” After Uyghur militants claimed responsibility for attacks in 2013 and 2014, the PRC has considered the Uyghurs a threat to security and has proceeded to a vast operation of repression and detention, extending to other Muslim minorities as well.
According to an article published in The Guardian, researchers have mapped more than 380 so-called Vocational Education and Training Centers. These detention camps are associated with forced labor, torture, abuse, among other appalling crimes.
In the wake of revelations that have shaken and shocked the world, rep. James McGovern presented the bill to the House. It is now under review by the Senate Committee on Foreign Relations.
If passed, the Uyghur Forced Labor Prevention Act would prohibit the importation of “goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part” using forced labor under rebuttable presumption.
In short, all goods from XUAR are considered tainted and denied entry on US soil unless companies can prove beyond doubt that they are not, and Customs and Border Protection is able to determine that they weren’t “manufactured by convict labor, forced labor, or indentured labor under penal sanctions.”
From an economic and industrial standpoint, Xinjiang is a precious region for China and, by extension, the world. It is rich in oil and mineral resources with the highest reserves of beryllium and mica, as well as deposits of coal, iron, nickel, and tungsten. Industries of note include iron, steelworks, and cement factories.
XUAR is also one of the main sources of cotton (80% of the national production). Beyond producing and supplying cotton on a global scale, China manufactures textiles and apparel with unparalleled production capacity and has established itself as the source of choice for variety, volume, and low costs. For perspective, in 2018 the US imported $42.5 billion worth of textile and clothing from China.
Finally, China is deploying vast efforts to further develop the exploitation and infrastructure of this “special economic zone”, which has become a key element of the Belt and Road Initiative.
Needless to say, such a new law would have a ripple effect on many supply chains.
Modern-day slavery is a deeply disturbing reality that organizations have no choice but to address.
The Uyghur Act may or may not become law this year, but in view of the support it receives from various groups, NGOs and lawmakers, the pressure is strong to make it happen sooner rather than later. Relentless opposition or lobbying from the most impacted industries could prove insufficient against the administration’s willingness to go after China’s dark side and public outrage likewise.
If the Act passes, companies or government programs doing business or associated with Xinjiang will be subject to the presumption of guilt.
Public companies will be required to file periodic reports disclosing any engagement with facilities/activities responsible for or complicit with, forced labor, human rights abuse, mass surveillance, and atrocities.
Non-compliance will result in the seizure of the goods and potential civil and criminal penalties against the importer.
Even if the bill is rejected, Custom and Border Protection will continue to issue Withhold Release Orders (WROs) involving XUAR goods.
Short of equipping every piece of material, cotton bale, and goods with a tracking device, the only option to eliminate forced labor and human trafficking from the supply chain is to acquire transparency. To reach transparency and visibility, businesses need data. Relying on suppliers’ honesty and a handshake is not wise, whether doing business with the XUAR, somewhere else in China, or anywhere in the world.
For years, Source Intelligence has been committed to assisting businesses with compliance requirements and due diligence efforts and determined to make a difference in corporate social responsibility. We are convinced that organizations with strong ESG ethics set themselves up for long term success.
Our Uyghur Forced Labor Prevention Act program is based on the lessons learned from years of running our award-winning Conflict Minerals Compliance Program for the world's biggest brands. The program combines an extensive due diligence and traceability process with high frequency comprehensive searches of your supply chain utilizing supplier location, names, alias and other data to deliver compliance.
Our platform offers the full power of AI technology, collecting massive volumes of supplier and geographic data, which we store and aggregate to identify red flags. Our dynamic and collaborative risk-mapping approach offers insights into your entire supply chain so you can proudly state your business is free of forced labor (including via our anti-human trafficking program).
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