The Uyghur Forced Labor Prevention Act (UFLPA)

Overview

What does it mean ? 

The US Customs and Border Protection (CBP) issued a withhold release order (WRO) against cotton and its downstream products (such as textiles and apparel) produced in whole or in part in the Xinjiang Uyghur Autonomous Region (XUAR).

Under the WRO, the CBP can detain cotton, tomato and polysilicon products at US ports of entry if they are suspected of exploiting Xinjiang forced labor at any point in their supply chain. Importers are responsible for ensuring the products they are attempting to import do not exploit forced labor at any point in their supply chain.  The WRO also concerns downstream products produced outside the Xinjiang region that incorporate these inputs, for cotton as well as other products and industries. It means, that in practice, the scope of the Act extends to the whole territory of China.  

In addition, one of the Uyghur Forced Labor Prevention Act (UFLPA) mandates is to require the Forced Labor Enforcement Task Force (FLETF) to publish a strategy for supporting the enforcement of Section 307 of the Tariff Act of 1930, 19 U.S.C. § 1307. 

The EU Commission has proposal a law similar to UFLPA calling for a strict ban against products made with forced labor, and prohibiting such products from being sold in the EU. However unlike the UFLPA, the proposed EU law does not have any proposed restrictions on commodities or geographical region.

Who is concerned?

All cotton, textile and apparel importers to the US, whether publicly traded or not, will be concerned by the following requirements. The Act also targets another high risk sectors such as tomatoes, and silica-based products(solar). 

Under the UFLPA, only U.S Importers of Record (U.S IORs) are legally bound by the Act and may have potential legal liability. However, in practice, the scope of the Act extends to the suppliers of the U.S IORs, as they are asked to provide certain certifications and documents. 

Rebuttable Presumption 

Under the UFLPA, the CBP is required to apply the Rebuttable Presumption. The Rebuttable Presumption is triggered if there is any risk that the good is fully or in part made using forced labor. The CBP can detain the goods based on the "reasonable but not conclusive’’ suspicion that the good were made with forced labor. 

When goods are detained, the importer must present ‘clear and convincing’ evidence to prove goods were not made fully or partially by forced labor. It is required to prove that any part of the goods was not produced with the forced labor.  

CBP will review the evidence and decide to either release, exclude (the company will not be allowed to import it) or seize the detained goods. 

What are the critical dates to remember? 

The UFLPA law come into effect on June 21st, 2022. 

Learn more about how other companies are navigating the challenges of UFLPA with TrusTrace as part of their approach.

Requirements 

As there is no silver-bullet approach to comply with the requirements, the CBP in its guidance stresses the importance of effective due diligence as well as supply chain mapping and supply chain engagement as risk mitigation strategies.

Below we list the type of information that may be required by CBP, for importers to request an exception to the UFLPA's presumption, presented A to E.

1. Due Diligence System information
2. Supply Chain Tracing Information
3. Information on supply chain
4. Evidence Goods were not Mined, Produced, or Manufactured Wholly or in Part in the XUAR*
5. Evidence Goods Originating in China Were Not Mined, Produced or Manufactured Wholly or in part by Forced Labor

The documentation includes:

• • Certification of origin

  • Bills of lading

  • Purchase orders, invoices, and proof of payment

  • Production Records

  • Packing lists

  • Shipping records

  • Inventory records support production

  • Transportation documents

  • Daily manufacturing process reports

  • List of production steps and chain custody records for imported merchandise

If imported products originate from XUAR or are suspected of this, they will be detained by the CBP. To secure release, the importer is required to:

• Demonstrate that their shipment has not been produced in whole or in part in the Xinjiang Uyghur Autonomous Region using forced labor.
• Provide a certificate of origin, signed by the seller/manufacturer/owner of the article (19 C.F.R §12.43 (a) must be used, a standard certificate of origin is not acceptable).

• Accompany the import with a detailed statement which discloses the ultimate consignee of the merchandise and the merchandise’s entire supply chain, from bale to final product, including names, production process and addresses of each supplier.

   

UFLPA enforcement process

1. If the goods were detained by the CBP, the importers have 30 days to respond.
2. The importers can take two different paths while responding:
   1. Path one: Scope Review
      Importers use the traceability documentation to prove whether or not any of the products come from the XUAR or any of the entities included in the UFLPA Customs & Border Protection Entity List.
   2. Path two: Exception to Rebuttable Presumption
      The importer recognizes that the product’s material comes from XUAR or any entity from the list, but they rebut the presumption that the production in supplier involved forced labor.
3. In its review, the CBP decides whether detained goods shall be released, excluded or seized.
4. In case of exclusion, the importer has the option either to export the good to different country or file the suit at U.S Court of International Trade. (So far there are no cases under UFLPA)

Consequences

A company that fails to comply with this act will be subject to fines up to $250,000 or twice the amount of the transaction that is being withheld. Criminal penalties may also apply. (source: International Emergency Economic Powers Act (50 U.S.C. 1705))

Risk Mitigation

In order to mitigate the risk of products being detained, companies should consider following best practices for global supply chains outlined by CBP. These practices include developing a comprehensive supply chain profile, to understand the entirety of the supply chain, from raw materials to finished goods.

Learn more about UFLPA in this webinar by Marianne Uddman, Head of Sustainability, and Santosh Mohanram, Head of US Operations at TrusTrace - guiding Fashion Brands through the CBP Uyghur Forced Labor Prevention Act (UFLPA):

How can TrusTrace help?

TrusTrace provides actionable transparency of your entire supply chain and makes it easier to manage compliance, supply chain risk and communicate product origin easily and credibly.

Learn more about how other companies are navigating the challenges of UFLPA with TrusTrace as part of their approach.

Contact us for more information on how we can help your company.