Implementation Strategy for the New US Forced Labour Prevention Act

The US Department of Homeland Security-led Forced Labor Enforcement Task Force (FLETF) unveiled on 17 June 2022 a 68-page strategy to prevent the importation of goods mined, produced or manufactured with forced labour in mainland China, as required by the Uyghur Forced Labor Prevention Act (UFLPA).

This strategy, combined with US Customs and Border Protection (CBP)’s operational guidance released on 13 June 2022, provides the framework by which the US government will begin full implementation of the UFLPA effective 21 June 2022.

Pursuant to the UFLPA, the strategy, includes:

• A comprehensive assessment of the risks of importing goods mined, produced or manufactured with forced labour in mainland China, including issues related to the lack of supply-chain visibility, third country or province manufacturing processes, intentional transhipment and evasion, and mainland Chinese policies and practices that pose challenges to US forced labour enforcement;
  
  
• An evaluation and description of labour schemes and FLETF enforcement plans and plans to identify additional entities associated with these labour schemes in the future, UFLPA-required lists (including the UFLPA Entity List) and high priority sectors for enforcement, namely apparel, cotton and cotton products, silica-based products (including polysilicon), and tomatoes and downstream products;
  
  
  • Entities in the Xinjiang Uygur Autonomous Region (XUAR) that mine, produce or manufacture wholly or in part any goods, wares, articles and merchandise with forced labour (includes 10 entity listings);
    
    
  • Entities working with the XUAR government to recruit, transport, transfer, harbour or receive forced labour or Uyghurs, Kazakhs, Kyrgyz or members of other persecuted groups out of the XUAR (includes 10 entity listings);
    
    
  • Products mined, produced or manufactured wholly or in part by such entities (includes 19 entity listings as well as the following product descriptions: apparel, clothing, garments, textiles, cotton, processed cotton, cotton products, computer parts, electronics, hair products, silica-based products, polysilicon [including solar-grade polysilicon], rail transportation equipment, and touch screens for handheld devices and cars and other similar products); and
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  • Facilities and entities, including the Xinjiang Production and Construction Corps (XPCC), that source material from the XUAR or from persons working with the XUAR government or the XPCC for purposes of the ‘‘poverty alleviation’’ programme, the ‘‘pairing-assistance’’ programme or any other government-labour scheme that uses forced labour (includes 11 facility/entity listings).
    
    
• Recommended efforts, initiatives, tools and technologies to accurately identify and trace affected goods, including the assessment of new supply-chain tracing technologies and enhanced interagency collaboration on the identification and tracing of goods;
  
  
• A description of how the CBP plans to enhance its use of legal authorities and tools to prevent entry of goods at US ports in violation of Section 307 of the Tariff Act of 1930 (19 U. S. C. §1307), including potential regulatory revisions, clear guidance to importers and a more uniform implementation of admissibility determination processes;
  
  
• A description of additional resources necessary to ensure no goods made with forced labour enter US ports;
  
  
• Guidance to importers, including on due diligence, effective supply-chain tracing and supply-chain management measures to ensure that importers do not import any goods mined, produced or manufactured wholly or in part with forced labour from mainland China and especially from the XUAR, as well as on evidence requirements; and
  
  
• A plan to co-ordinate and collaborate with appropriate non-governmental organisations and private-sector entities.

Due Diligence, Supply-Chain Tracing and Supply-Chain Management

The UFLPA requires the FLETF to provide guidance to importers on (1) due diligence, effective supply-chain tracing, and supply-chain management measures to ensure that importers do not import any affected goods from mainland China, especially from the XUAR; (2) the type, nature, and extent of evidence that demonstrates that goods originating in mainland China were not in any way subject to the UFLPA, i.e., its importations and inputs are sourced completely from outside the XUAR and have no connection to the UFLPA Entity List; and (3) the type, nature, and extent of evidence that demonstrates that goods originating in mainland China were not mined, produced or manufactured wholly or in part with forced labour.

On Due Diligence

To overcome the rebuttable presumption, importers must conduct due diligence including assessing, preventing and mitigating forced labour risk in the production of goods imported into the US. While systems may vary from industry to industry, an effective due diligence system in any industry may include the following elements as laid out in detail in the US Department of Labor’s Comply Chain, a guide for labour compliance in global supply chains, which may include the following elements.

• Engage stakeholders and partners
• Assess risks and impacts
• Develop a code of conduct
• Communicate and train across supply chain
• Monitor compliance
• Remediate violations
• Independent review
• Report performance and engagement

On Supply Chain Tracing

The first step in conducting supply-chain tracing is “mapping” the entire chain, which includes an exercise by which a company or a third-party collects information on the suppliers throughout the supply chain, up to and including suppliers of raw materials used in the production of the imported good or material and the chain of custody of goods and materials from the beginning of the supply chain to the buyer of the finished product, to identify those places along the chain with the greatest risks of forced labour.

Some established methods for supply-chain tracing include identity preservation and segregation. Identity preservation requires each product input to be packaged, processed and traced separately from other product inputs or modifications throughout the supply chain. Most importantly, it does not allow any commingling of product inputs at any point in the supply chain. Alternative approaches such as segregation permit commingling of inputs, provided that each batch to be commingled is fully traced and documented to be free of forced labour prior to mixing. Segregated products must be kept separate from other products that cannot be identified as free of forced labour both physically and in documentation.

Importers should be aware that if their importations involve inputs from factories that source materials both from within the XUAR and outside of the XUAR, they risk having their importations subject to detention, as it may be harder to verify that the supply chain for imports to the US is using only non-XUAR materials that have not been replaced by or commingled with XUAR materials at any point in the manufacturing process.

On Supply-Chain Management Measures

As part of due diligence, effective supply-chain management measures include having a process to vet potential suppliers for forced labour prior to entering a contract with them; requiring that supplier contracts necessitate corrective action by the supplier if forced labour is identified in the supply chain; and outlining the consequences if corrective action is not taken, such as termination of the contractual relationship. They also include having access to documentation, personnel and workers for verification of the absence of forced labour indicators, including at the recruitment stage.

Importers should have an information system to manage supply-chain management data, including all mapping and risk and impact assessment information, which should be entered into this system and updated on a regular basis. Importers should be able to demonstrate how risk and impact assessment information is used to inform forced labour risk prevention and mitigation.

Importers may leverage international standards such as United Nations Guiding Principles on Business and Human Rights, US government and NGO publications and other information to assist in implementing due diligence, effective supply-chain tracing and supply-chain management measures to limit risks of forced labour in their supply chains.

Evidence Demonstrating Non-Applicability and Compliance

The CBP is responsible for determining whether goods are admissible under the UFLPA. The type, nature and extent of evidence required from the importer, however, will vary based on the facts and circumstances of the import in question. This section outlines the forms of evidence, though non-exhaustive, that typically facilitate the determination.

Demonstrating Non-Applicability: Goods Falling Outside the Scope of the UFLPA

Supply-chain tracing is the general method to demonstrate that imported goods were not mined, produced or manufactured in the XUAR – an importation that is not subject to the UFLPA as the shipments and their inputs are sourced completely from outside the XUAR and have no connection to the UFLPA Entity List.

Based on the facts and circumstances of a particular entry, the CBP may request evidence to demonstrate tracing of the entire supply chain of an imported good or a specific component of the good. When requested, importers should be able to trace the complete supply chain of the good under CBP review. Documentation should include:

• A detailed description of the supply chain for the imported good and components thereof, including all stages of mining, production or manufacture, including any step of the sourcing, manufacturing or processing of goods in third countries. This includes documenting how the imported good was made from raw materials to finished good, by what entities, and where, including all in-house manufacturing, sub-assembly operations and outsourced production related to the imported good. This also includes documenting the roles of the entities involved at each stage of the supply chain, as well as the relationship between the entities (e.g., whether a supplier is also a manufacturer).
  
  
• Evidence that indicates the provenance of each component of the imported good. When possible, unique identifiers should be used to track raw materials and other inputs through the supply chain. When raw materials/inputs from different suppliers are commingled, there should be an auditable process for demonstrating the origin and control of each raw material or input.

DNA traceability or isotopic testing may make it possible to identify the origin of particular goods or materials without tracing the supply chain. For such evidence to be considered, its reliability must be demonstrated; it must relate to the part of the supply chain for which the alternative evidence is being substituted, and the test results must be traceable to the specific import under CBP review.

Demonstrating Compliance: Goods Not Made With Forced Labour

To obtain an exception to the rebuttable presumption, the importer must provide to the CBP “clear and convincing evidence that the good, ware, article or merchandise was not mined, produced or manufactured wholly or in part by forced labour”.

Evidence must demonstrate that indicators of forced labour, including intimidation and threats, abuse of vulnerability, restriction of movement, isolation, abusive living and/or working conditions, and excessive hours do not exist or are fully remediated.

Evidence to demonstrate that goods were not made with forced labour may include:

• Evidence mapping the entire supply chain, and transport along the supply chain, including which entities were involved at each stage;
  
  
• A complete list of all workers at an entity subject to the rebuttable presumption in the production of the imported goods, including:
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  • Evidence to demonstrate how and to whom wages are paid at each workplace;
    
    
  • Evidence to identify whether each worker comes from the XUAR, as well as the worker’s residency status;
    
    
  • Evidence to demonstrate that output is consistent with the documented workers, including:
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    • The number of workers in each job category, total volume of material or goods input, and total volume of outputs of materials or goods; and,
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    • Documents relating to hours worked and daily production output of goods.
      
      
• Evidence that none of the workers who were involved in the production of the product were a) recruited, b) transported, c) transferred, d) harboured, or e) received with the involvement of the mainland government, the XPCC, or entities on the UFLPA Entity List. Evidence should specifically address the controls each entity has in place to ensure that all workers are recruited voluntarily;
  
  
• Evidence that reliably demonstrates that every worker from the XUAR is working voluntarily, and without menace or threat of penalty, including credible evidence that demonstrates for each such worker that:
  
  
  • Recruitment to work, including recruitment to any job fair, was fully voluntary;
    
    
  • Recruitment and continuation at the job were and are not subject to government or entity coercion;
    
    
  • Recruitment was free of any forced labour indicator (see Strategy Section II), including detention, prior detention or threats of detention, detention or threats of detention of family members, or forced transfer of land to the government;
    
    
  • Transport from the XUAR was voluntary and free of any forced labour indicator, including government surveillance or control of worker movements during transport from the XUAR;
    
    
  • Transfer to the entity was voluntary and free of any forced labour indicator, including government surveillance;
    
    
  • Living and working conditions at the entity are free of any forced labour indicator, including government surveillance or reporting by the entity to the government, restriction of movement or required activities such as political, language or cultural classes; and,
    
    
  • Receipt of the worker by the entity was undertaken voluntarily and without any indicators of forced labour, including government surveillance or reporting.

Any audit performed to demonstrate that goods originating in mainland China were not made wholly or in part with forced labour (including such evidence) must explain its methodology, how it determined the presence or absence of forced labour indicators, a description of all evidence upon which the determination was based, and a description of how the auditor determined the reliability of the evidence used to reach the audit’s conclusions.

​​​​​​​The Way Forward

The UFLPA will affect any goods made in any country that may incorporate an input that was produced, mined or grown in the XUAR. In other words, if a product manufactured in Hong Kong incorporates a component from the XUAR, that product is subject to the law.

Hong Kong exporters and manufacturers should prepare to assist their customers in the US by gaining visibility in their supply chain and logistics arrangements. As a rule of thumb, knowing where these goods came from and obtaining assertions that each shipment does not involve forced labour will be essential in gaining access to the US market.

Pursuant to the Act, the FLETF will update its implementation strategy annually in co-ordination and collaboration with appropriate NGOs and private-sector entities, while intending to update the UFLPA Entity List multiple times per year. A long-term de-risking programme shall therefore be put in place to ensure continued compliance and uninterrupted businesses with US buyers.