On June 21, 2022, the Uyghur Forced Labor Prevention Act (UFLPA) went into effect. The law – which was passed nearly unanimously by Congress and signed by President Joe Biden – represents the United States’ latest effort to curb forced labor in China’s Xinjiang region. Specifically, the law creates a rebuttable presumption that any goods mined, produced or manufactured in whole or in part in Xinjiang were done so with forced labor, and are thus ineligible for entry into the U.S. This rebuttable presumption places an affirmative burden on importers to establish by clear and convincing evidence that goods produced in, or sourced from, the Xinjiang region are entitled to entry into the U.S. To do this, importers are responsible for proving that imported goods from the region are not the product of forced labor.
Automotive importers should take notice. While finished automotive parts are rarely sourced from the Xinjiang region, raw materials and components integrated into automotive parts are. Indeed, nearly half of the world’s polysilicon comes from the region, as do aluminum and aluminum alloys. The UFLPA looks at every part of the supply chain up to the point of importation. This means that importers are responsible for ensuring that no part of any material imported from Xinjiang (including sub-components, raw materials, etc.) is the result of forced labor.
Because the threshold for overcoming the law’s rebuttable presumption is “clear and convincing evidence,” those suppliers responsible for importing goods into the U.S. must be prepared to present evidence that the goods are eligible for entry, and documentary evidence regarding the materials’ source may not be enough by itself. Instead, some experts are suggesting that importers collect sworn affidavits from suppliers at every level of the supply chain establishing unequivocally that the plants where the parts were made or sourced did not engage in, or otherwise utilize, forced labor in connection with the imported goods.
Failing to prove with sufficient evidence that goods are eligible for entry into the U.S. will result in goods being detained, seized by and/or forfeited to U.S. Customs and Border Protection right at the port. In the automotive industry, where time is of the essence, the detention or seizure of goods could result in a catastrophic disruption of the supply chain causing various production line shutdowns. To avoid those devastating losses, importers should begin implementing practices and policies aimed at disproving the forced labor presumption long before the goods arrive to the U.S. Below are some steps to consider:
- Determine your forced labor risk profile. The UFLPA puts the burden on importers to proactively engage in due diligence to ensure that goods are not the product of forced labor. Does your supply chain import anything that may contain at-risk materials? Have you developed a policy for mapping out the supply chain, so as to effectively trace the source of each part, material and/or component being imported? Can you say for sure that no part of your supply chain is sourced from Xinjiang?
- Implement supply chain management and mitigation measures. If your supply chain includes at-risk suppliers (i.e., suppliers located in the region or sourcing from the region), does your supply chain mapping go beyond identifying the names of suppliers and sub-suppliers? Does it also include accounts of the working conditions at each step in the sourcing process?
- Update your supply contracts. In the event that you lack the ability to assess the risk of your supply chain, there are other ways to attempt to protect yourself. Importers should consider whether their supplier contracts require compliance with all U.S. federal laws and the UFLPA specifically. Other relevant contractual provisions might include a requirement that suppliers and sub-suppliers avoid sourcing from the Xinjiang region or otherwise implement codes of conduct that prohibit forced labor and other human rights violations.
Warner’s automotive and supply chain attorneys are staying on top of news related to government actions that could impact the way you do business. We’re here to assist and advise you through these uncertain times and potential curves in the road. For questions concerning the UFLPA or other automotive supply issues, please contact Zainab Hazimi, Adam Ratliff or your Warner attorney.