US President to Enact Uyghur Forced Labor Prevention Law
The compromise version of Uyghur Forced Labor Prevention Law (HR 6256) (“Act”) was recently passed by both houses of Congress, and legislation is now approved for President Biden’s signature. He is expected that President Biden will soon be signing the legislation. With strong bipartisan support, earlier versions of this legislation had been passed by the United States House and Senate in previous months, and lawmakers reached an agreement that merged the versions of each chamber. Compared to previous versions of this legislation, the act no longer includes general notification requirements for filings with the United States Securities and Exchange Commission, but retains the earlier legislation’s establishment of a presumption rebuttable that all goods (i) “extracted, produced or manufactured in whole or in part” in the Xinjiang Uyghur Autonomous Region of China (“Xinjiang”), or (ii) produced by an entity on one of the required lists by law, are made with forced labor, and entry into the United States would be prohibited under Section 307 of the Tariff Act of 1930, enforced by United States Customs and Border Protection ( “CBP”). The law further requires a strategy to strengthen existing bans on the importation of goods extracted, produced or manufactured with forced labor, potential additional sanctions, and a diplomatic strategy to combat alleged forced labor in Xinjiang.
Below, we develop the main provisions of the law and summarize the main points to remember for companies:
Import ban and “rebuttable presumption” of CBP
The law would require CBP to presume that all goods made in Xinjiang, or by certain other entities, are made with forced labor and are not allowed to enter the United States unless the importer can, among other things, demonstrate “by clear and convincing evidence “that the goods are not made with forced labor. Demonstrating eligibility for CBP (i.e. demonstrating, by clear and convincing evidence, that a certain good is not manufactured with forced labor) requires overcoming an extremely high burden of proof which can essentially go back to trying to prove a negative. In light of these practical challenges and given Xinjiang’s role in the wider Chinese economy, the industry has expressed concerns over a broad import ban on all products made in Xinjiang or by labor. work of Xinjiang.
The “rebuttable presumption” standard generally against Xinjiang products under the Act is a significant development from previously issued restraint orders (WROs) by CBP regarding Xinjiang, such as those focused on specific products and entities. . (The issuance of WROs by CBP is the primary enforcement tool for CBP under Section 307 of the Tariff Act of 1930.)rebuttable presumptionIs similar to the provision of the Countering America’s Adversaries with Sanctions Act (PL 115-44) regarding North Korean labor. The alleged import ban will likely go into effect in mid-June 2022, if the legislation is enacted this week, as planned.
“Strategy” to provide advice to CBP and importers
After a public comment period, within 180 days of its enactment, the law would require the Forced Labor Enforcement Task Force (chaired by the US Department of Homeland Security) develop a strategy to support the application by CBP of section 307 of the Tariff Act of 1930. This strategy should include, for example, the designation (i) of specific entities in Xinjiang, or those that work with the Xinjiang government, which would engage in or source from entities allegedly engaged in forced labor practices, (ii) specific goods allegedly manufactured by forced labor, and (iii) entities that export goods allegedly manufactured by forced labor to the United States. This strategy would also include additional advice for importers with respect to CBP’s expectations regarding the level of due diligence, effective supply chain tracing and supply chain management measures, and the type, nature and extent of evidence that would allow overcome the “rebuttable presumption” standard.
These measures are in line with growing concerns from industry and lawmakers over the challenges of a broad import ban on all products made in Xinjiang or by Xinjiang labor. The public comment period provides a unique opportunity for the industry to help shape the effective implementation and compliance expectations of CBP under this Act.
Additional sanctions allowed
The law expands the list of reasons why sanctions may be imposed under the Uyghur Human Rights Policy Act 2020 (PL 116-145) to include serious human rights violations in connection with forced labor. The 2020 Uyghur Human Rights Policy Law authorizes President imposes sanctions on individuals, including Chinese government officials, held responsible for certain human rights violations and abuses committed against Muslim minority groups in China and elsewhere. The law requires the administration to sanction these people by freezing their assets and declaring them ineligible for visas or admission to the United States. The president can lift the sanctions if it is determined that it is in the national interest.
This means that within 180 days of promulgation, the president is required to identify every foreign person, including any Chinese government official, responsible for serious human rights violations related to forced labor in Xinjiang, and to impose the sanctions. required by law to these persons. people, unless those sanctions cannot be lifted. This could result in additional sanctions imposed by the Office of Foreign Assets Control (“OFAC”) of the US Department of the Treasury, such as adding new parties to the Specially Designated Nationals and Blocked Persons List (“SDN List” ) of OFAC.
The law requires the US State Department, within 90 days of its enactment, to submit to Congress a report on the US strategy to promote initiatives to increase international awareness and address alleged forced labor in Xinjiang. The report is also to include a list of entities in China that the U.S. government has determined to use or benefit from forced labor in Xinjiang, and a list of foreign individuals who act as agents of those entities to import goods to states. -United.. Listing by the US State Department could potentially result in additional restrictions targeting these parties. Finally, the report is to include a plan to work with the private sector to conduct a supply chain due diligence and an action plan taken by the federal government to address alleged forced labor in Xinjiang under existing authorities.
Take-out meals for businesses
- The most immediate compliance risk for companies because of the law is the “rebuttable presumption” that products made in Xinjiang, or by certain entities with ties to Xinjiang, are deemed to have been made with forced labor and are therefore inadmissible in the United States. We expect this to result in more audits, detentions, seizures and other enforcement activity by CBP.
- U.S. importers and other interested parties should consider actively engaging the U.S. government during the public comment period to help shape the effective implementation of this law, including the scope of the import ban, the processes of CBP’s forced labor enforcement and standard under which entities would engage in forced labor practices would be designated.
- Companies importing to the United States from China (not just Xinjiang) should assess their supply chains to identify potential vulnerabilities (for example, second or third tier suppliers who could source raw materials. in Xinjiang or who may have ties to the Xinjiang government) and proactively make plans to address these vulnerabilities. This could include, for example, refining supply chain mapping exercises, communicating policy changes to suppliers, and updating the policy or other agreements. Due to the cross-cutting nature of these risks, these efforts should ideally involve an intra-company working group of various stakeholders with responsibilities in the supply chain e.g. purchasing, supply chain / logistics , social and labor compliance, substantiality, legal aspects and trade compliance.
- Companies should assess whether their trade compliance programs include appropriate risk-based measures that seek to address the risks associated with SDNs and other sanctioned parties. As the law could result in additional penalties, now is the time for companies to assess their restricted party selection procedures, supplier / customer onboarding processes, periodic supplier due diligence reminder processes / clients and other relevant procedures.
- Companies considering compliance assessments and other actions in response to the law should also consider whether those actions could potentially create risks under Chinese law, such as under China’s Anti-Foreign Sanctions Law.
The content is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This may be termed a “lawyer advertisement” requiring notice in some jurisdictions. Past results do not guarantee similar results. For more information, please visit: www.bakermckenzie.com/en/disclaimers.