Uyghur law on the prevention of forced labor: Congress finally takes action | Sheppard Mullin Richter & Hampton LLP

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[co-authors: Jonathan Wang*]

Today, in a rare display of bipartisanship, the United States Senate passed the Uyghur Prevention of Forced Labor Act (the “Law”) – the text of which was a compromise between Senator Marco Rubio (R-Fla.) And Rep. Jim McGovern (D-Mass.) – who had already passed the house on Tuesday of this week. Over the years, including most recently in February 2021 (see our article here), we have seen various attempts by both chambers to pass legislation banning imports of goods from Xinjiang or the Xinjiang Uyghur Autonomous Region. (“XUAR”) – an area in China where, according to the US Department of Labor and media, the Chinese government has detained and persecuted more than one million Uyghurs and other Muslim minorities. President Biden has signaled that he will sign this bill.

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In addition to the many legislative proposals emanating from Congress, the executive branch (i.e. CBP) has attempted to address the problem of imports from the United States of forced labor. Since 2019, we have seen a number of Stay Orders (“WROs”) issued against various products and companies related to XUAR. We also saw a more in-depth look at imports from or related to XUAR.

The law passed today and the WROs share an important element: they both presume that the imported product was made by forced labor, unless the importer can rebut this presumption. The difference, however, is that WROs are generally against a product and company (although we have seen broader WROs, for example cotton and tomatoes sourced from the region) while the law, which will soon become law, will essentially prohibit importers from importing all products from the region unless the importer cannot meet certain conditions.

Key aspects of the bill

  • Focus on third countries: The law in different areas contemplates the possibility for companies to use third country supply chains as a means of circumventing / circumventing the ban on imports from XUAR. We should expect regulations and guidance documents to address this point.
  • Designation of the list of products and entities: The law requires the creation of several lists, including: (1) a list of XUAR entities that produce or manufacture in whole or in part goods, commodities, articles and merchandise with forced labor; (2) a list of entities working with the XUAR government to recruit, transport, transfer, harbor or receive forced labor; (3) a list of products extracted, produced or manufactured in whole or in part by the listed entities; (4) a list of the entities which exported products extracted, produced or manufactured in whole or in part by the listed entities; (5) a list of facilities and entities, including the Xinjian Production and Construction Corps (“XPCC”), which source materials from the XUAR or XPCC for the purpose of any other government work program using the forced labor ; (6) a list of high priority sectors for application, which will include cotton, tomatoes and polysilicon (which has already been the subject of application); and (7) an enforcement plan for each entity which may include the issuance of WROs and an enforcement plan for each high priority area.
  • Importer instructions: ULTIMATELY! What importers have been asking for about two years of uncertainty should finally materialize. The law calls for the creation of guidelines addressing the following: (1) due diligence, supply chain tracing and supply chain management for compliance with due diligence obligations in relation to forced labor ; (2) the type of evidence that demonstrates that a good was not manufactured in the XUAR; and (3) the type of evidence that demonstrates that the good was not made from forced labor. Importer guidance will be essential for importers rebutting the presumption that a good was manufactured through forced labor, described below. These importer guidelines, whether in the form of regulations or official CBP guidance documents, will be issued within 180 days of the law being enacted.
  • Rebuttable presumption: Although the Law presumes that any good manufactured in whole or in part in the XUAR or any designated entity is the result of forced labor, this presumption can be refuted if the US importer a: (1) followed the importer’s instructions and (2) responded fully and substantially to all inquiries. While this presumption has existed in previous laws, what is different here is that a US importer will have direction from the government – in terms of documents, due diligence, etc. – on what he must have to rebut this presumption.

Our takeaways and recommendations

  • Supply chain due diligence: Now is the time to be proactive if your company’s supply chain involves China, especially in the XUAR. Consider performing a supply chain audit or assessment with the help of a third party. Audits may consist of on-site visits; interviews with workers and management; assessment of labor brokers and recruiters; and presentation of the final report and results. A full third-party audit and on-site visits with overseas suppliers may not always be feasible, but a lighter assessment involving questionnaires, high-level interviews, and document review might also prove useful. to provide high-level information and understanding of gaps and areas for improvement. Consider ranking vendors based on these ratings, so your sales teams can be empowered to work with the highest rated vendors.
  • Supplier relations: When checking your suppliers, make sure forced labor is part of your due diligence. Make sure that your contracts with your suppliers and subcontractors include explicit terms and conditions that prohibit the use of forced labor, a time frame for taking corrective action if forced labor is identified, and the consequences that may arise if any action is taken. corrective measures are not taken. Since your existing contracts don’t include such language, consider adding it when you renegotiate or make sure your suppliers agree to abide by your policies and code of conduct.
  • Map your supply chain: Consider a supply chain mapping exercise to identify your suppliers, subcontractors and if possible assess your supply chain at the raw material level. This exercise, while certainly a challenge for companies with complex supply chains, will help you assess risks and focus your compliance efforts where they are needed most. If you have to rebut the presumption, the exercise can be invaluable.

* Jonathan Wang is a legal assistant in Sheppard Mullin’s Washington, DC office.


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