Background

On 23 December 2021 President Biden signed the UFLPA that strengthens existing prohibitions on the importation of goods mined, produced, or manufactured with forced labor, and potentially imposing additional sanctions on Chinese parties to address alleged forced labor in Xinjiang, as previously informed in Trade Sanction Update No. 200. The UFLPA has now entered into force and requires President Biden to identify each foreign person, including government officials, responsible for alleged serious human rights abuses in connection with alleged forced labor in Xinjiang, and to impose sanctions required by law on those persons, unless such sanctions can be waived. This could result in additional sanctions imposed by the US Treasury Department’s Office of Foreign Assets Control (OFAC).

Development

(a)    What is the new development?

The UFLPA establishes a rebuttable presumption that the importation of any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China, or produced by certain entities, is prohibited by Section 307 of the Tariff Act of 1930 and that such goods, wares, articles, and merchandise are not entitled to entry to the United States. The presumption applies unless the Commissioner of US Customs and Border Protection (CBP) determines that the importer of record has complied with specified conditions and, by clear and convincing evidence, that the goods, wares, articles, or merchandise were not produced using forced labor.

The UFLPA also requires the interagency Forced Labor Enforcement Task Force, chaired by the Secretary of Homeland Security, and in consultation with the Secretary of Commerce and Director of National Intelligence, to develop and submit to Congress a strategy for supporting CBP’s enforcement of Section 307 of the Tariff Act of 1930 with respect to goods, wares, articles, and merchandise produced with forced labor in the People’s Republic of China. 

The CBP issued operational guidance for importers to assist the trade community in preparing for the implementation of the UFLPA. In the operational guidance for importers the CBP states that in instances in which CBP has taken an enforcement action under the UFLPA on an importation, but an importer believes that its importation is outside the scope of the UFLPA, an importer may provide information to CBP to that effect. That means the importer may provide information that the imported goods and their inputs are sourced completely from outside Xinjiang and have no connection to entities on the UFLPA Entity List. An importer must provide documentation that substantiates the absence of inputs subject to UFLPA from its supply chain.

(b)    What should companies do?

Companies should review their supply chains related to the Xinjiang Uyghur Autonomous Region, to determine whether the new regulation might lead to any implications.

In particular, companies should be aware of potential future designations due to UFLPA, and should also ensure that they have proper trade compliance clauses in place with all third parties carrying out business in China, so that they may suspend or even terminate such business in the event that performance is hindered by the new restrictive measures.