For importers of Chinese products, this coming June 21 will be a critical date. On that day, a rebuttable presumption that all products made in Xinjiang violate the U.S. forced labor statute will come into effect. The rebuttable presumption is mandated by the Uyghur Forced Labor Protection Act (UFLPA), which was signed into law by President Biden last December 23.
In anticipation of this key date, U.S. Customs and Border Protection (CBP) is issuing “known importer letters” to importers that have previously imported merchandise subject to the impending presumption. CBP wants to “encourage those importers to address any forced labor issues in their supply chains in a timely manner.” The approach taken by CBP leaves no doubt that the agency has been doing its homework ahead of June 21.
Importers should not breathe a sign of relief just because they have not received a letter. According to CBP, importers are not in the clear just because they have not received a letter. Whether a product is covered by the presumption is a matter of fact, unchanged by the issuance or not of a letter. Plus, it is not clear that CBP’s intention is to write to all known importers. And even if it wanted to, no one should assume that the overburdened agency will achieve this logistical feat.
Some importers may think that they do not need to care about this issue because they do not import any merchandise made in Xinjiang. And in some cases it may, in fact, be the case that they have no supply chain exposure to Xinjiang. However, given the increasing attention being given in the United States and other countries to the forced labor problem, there are bound to be instances where suppliers mask the true origin of the products. Moreover, even if it can be ascertained that the products (nor any of their inputs) were not made in Xinjiang, the UFLPA presumption could still apply to them.
As we have previously explained, the Xinjiang forced labor problem transcends Xinjiang’s borders, with people from Xinjiang working under conditions of forced labor elsewhere in China. In addition to products made in Xinjiang, the UFLPA also prohibits the importation of goods made by entities that work with the Xinjiang government “to recruit, transport, transfer, harbor or receive forced labor” from Xinjiang. What this means in practical terms is that a company that arranges to have Xinjiang laborers work at their facility in, say, Shenzhen or Shanghai will be treated as if it was making its products in Xinjiang.
On June 21, 2021, exactly one year before the UFLPA presumption’s effective date, we warned:
The issue [of forced labor] is not going to go away, certainly in the context of China, and more specifically Xinjiang. In fact, enforcement is ramping up.
Forced labor WROs and findings are non-tariff trade weapons. As the Biden administration looks for ways to offer some tariff relief (such as the measures being considered as part of the Trade Act of 2021), forced labor enforcement offers a less controversial pathway to put pressure on importers of Chinese products to decouple, while placating the China hawks. Human rights efforts might also resonate more with core Biden constituencies than dry trade policy.
A year later, there is a de facto ban on all Xinjiang products, with clear statutory provisions addressing labor transfers to other parts of China. As talk of tariff rollbacks increases, forced labor may become a more prominent weapon in the ongoing trade war. Looking ahead to June 21, 2023, we can say two things with very high degrees of confidence. First, the issue of forced labor is not going to go away. Second, many importers are going to feel great pain in the coming year on account of UFLPA. It’s getting real. For just how real, I urge you to read yesterday’s post, Preparing for China Decoupling Should Start NOW, where a number of people posit that forced labor will be THE catalyst for true decoupling with China.