29 December 2021

US Bans Xinjiang Imports Connected to Forced Labor

President Biden has signed the Uyghur Forced Labor Prevention Act (UFLPA) into law, requiring importers from the Xinjiang province to provide “clear and convincing evidence, that the good, ware, article, or merchandise was not mined, produced, or manufactured wholly or in part by forced labor.” 

Enforced by the Customs and Border Protection (CBP) agency, the Act effectively bans imports from Xinjiang unless an exception is granted by the CBP Commissioner. The UFLPA also stipulates that, following a public consultation, a cross-government strategy should be published that includes:

  • An assessment of the risk of importing goods produced with forced labor, and how to reduce these threats
  • A list of entities working with the Xinjiang government to move forced labor out of the region
  • A list of facilities and entities that source material from Xinjiang, and persons working with the Xinjiang government on projects related to forced labor
  • Guidance for importers relating to:
    • Due diligence, supply chain tracing, and supply chain management 
    • The “type, nature, and extent of evidence” required to demonstrate goods were not produced in Xinjiang and/or using forced labor

The Act specifically references exports of cotton and tomatoes. Xinjiang produces almost 90 percent of China’s cotton. In addition to being used to produce clothes, unprocessed cotton is exported to 14 countries including Vietnam, Thailand, India, Pakistan, and Bangladesh. Yarn is exported to 190 countries. 

The depth and complexity of Xinjiang’s cotton industry alone highlight the challenges of monitoring and enforcing a ban on forced labor imports. Analysis by the Center for Advanced Defense Studies found that the Xinjiang Production and Construction Corps (XPCC), a regional governing body, remains able to access global markets despite international sanctions. XPCC is also named explicitly in the UFLPA.

Writing in the Global Times, a Chinese Foreign Ministry spokesperson strongly criticized the Act: “It seriously violates international law and basic norms governing international relations and grossly interferes in China’s internal affairs. China deplores and firmly rejects this.”

The UFLPA comes amid continued “tit for tat” measures between the US and China. On December 20th the US Treasury Department added five Chinese officials to its Specially Designated Nationals (SDNs) list, meaning they will have any US assets frozen. US citizens are also not permitted to have business dealings with them. In the same week, China announced sanctions on four members of the US government’s Commission on International Religious Freedom, imposing asset and travel restrictions. 

Days after President Biden signed the UFLPA into law, state news agency Xinhua reported that Xinjiang’s Communist Party chief, Chen Quanguo, was to leave his post. Chen was the primary target of international sanctions in the province. However, his replacement, Ma Xingrui, has pledged to follow President Xi Jinping’s policy, and analysts say the shift is more likely to relate to style than substance.

The UFLPA builds on the 2020 Uyghur Human Rights Policy Act, signed into law by President Trump in 2020. The Act authorized sanctions against Chinese officials in relation to the Uyghurs. It also requires the submission of regular reports to Congress on human rights abuses in Xinjiang, ensuring the issue retains prominence in the media and among policymakers. 

With further measures and countermeasures likely in 2022, firms should keep their suppliers, supply chains, and wider connections to major export markets in Xinjiang under continuous review. Exposure to industries such as cotton could require the introduction of enhanced due diligence processes. Firms should also review the importer guidance set to be published by the US government, to ensure they’re able to comply with the details of the requirements.  

To stay ahead of the latest trends and developments in the US-China relationship, and the global move toward human rights-based sanctions programs, pre-register now for our 2022 State of Financial Crime report.

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