UFLPA a Game Changer for U.S. Importers

The Uyghur Forced Labor Prevention Act (UFLPA) is a game changer for companies that import goods from China, particularly from Xinjiang Province. While Section 307 of the Tariff Act has long banned imports of goods made using forced or prison labor, the UFLPA raises the stakes by creating a “rebuttable presumption” that all goods from the Uyghur region of China, or containing inputs therefrom, are made using forced labor and are to be excluded from entry. The new law expands CBP’s authority to investigate and block imports of such goods. It also requires CBP to publish a list of all goods and companies whose goods have been blocked from entry due to forced labor concerns. It is crucial for importers to understand the implications of this new law and take the necessary steps to ensure compliance.

To prepare for potential investigations by CBP, it is essential for businesses to conduct supply chain audits and review their import procedures. This includes identifying potential risks of forced labor in the supply chain, implementing measures to mitigate those risks, and documenting these efforts. CBP has also imposed additional reporting requirements, including a controversial “UFLPA region alert” postal code reporting requirement applicable on certain imports beginning March 18, 2023.

CBP is likely to focus on goods produced in Xinjiang and may increase its use of Withhold Release Orders (WROs) to detain goods that are believed to be produced with forced labor. It is important for businesses to be prepared to respond to CBP investigations and allegations of non-compliance.

Notably, the ULFPA does not apply merely to goods produced in or shipped from Xinjiang province, but any goods with Xinjiang content—either materials or labor. So the fact that a producer is not headquartered in, or shipping from, the Xinjiang region does not provide shelter from the ULFPA. The product at issue need not even originate in China—importers of shirts made in, and shipped from, Australia have received UFLPA inquiries.

This point is driven home by the experience of apparel importers whose garments contain cotton. Approximately 60% of China’s cotton is grown and harvested in the Xinjiang region. To demonstrate the absence of forced labor material in a cotton shirt, an importer may likely need to delve into the source of the fabric in the shirt, the source of the yarn used to make the fabric, and to then determine where the cotton in the yarn was grown, harvested and ginned. This effort to prove by “clear and convincing evidence” the absence of Xinjiang region cotton may even need to involve the use of advanced forensic techniques.

The UFLPA amends the federal statute 19 U.S.C. § 1307 and creates a rebuttable presumption that forced labor affects all goods made in China’s Xinjiang Uyghur Autonomous Region (XUAR) or in whole or in part by entities that enable the use of forced Uyghur labor. Once Customs detains a shipment over a UFLPA inquiry, importers have 30 days to present “clear and convincing evidence” that the detained goods were not made, in whole or in part, in the XUAR/with forced Uyghur labor. CBP has released guidance on the implementation of the UFLPA, providing information on how CBP will process detentions, exclusions, and seizures; the types of evidence that CBP will expect importers to provide to overcome the rebuttable presumption of forced labor usage; and guidance on the enforcement of the UFLPA for specific products such as cotton, tomatoes, and polysilicon that are currently covered by existing WROs under 19 U.S.C. § 1307.

“Clear and convincing evidence” is an enhanced standard of proof, often very difficult to satisfy. To rebut the UFLPA rebuttable presumption, an importer may need to show that it has implemented a due diligence system to prevent forced labor from affecting its supply chains, can trace the supply chain for imported goods and materials incorporated therein, and, in the case of high-risk merchandise, kept production records that document the entire supply chain and demonstrate that raw materials or components from the XUAR or made with forced Uyghur labor have not been commingled with non-XUAR inputs.

To date, importers have had very little success in securing the release of imported goods which have been the subject of UFLPA exclusions. In reviewing ULFPA exclusions challenged in the U.S. Court of International Trade (CIT), the Court will impose the statute’s “clear and convincing evidence” standard—a difficult but not insurmountable climb for potential litigants. The better course for importers is to focus on serious pre-emptive planning efforts. Importers of Chinese-origin goods, or those made with Chinese inputs, will need to review their supply chains to determine if they have UFLPA risks; this may prompt firms to change their sourcing approaches, where possible, or to audit their supply chains to confirm the absence of forced labor content in their goods.

UFLPA is not going away. The recent Inflation Reduction Act authorized significant funding for CBP to expand its Forced Labor Division significantly. The requirement to list Chinese postal codes on certain entries will “flag” more entries for UFLPA review. And the requirement that importers, in effect “prove a negative” – the absence of forced labor content – by “clear and convincing evidence” is likely to mean that firms which do not map their supply chains now will be at a serious disadvantage when CBP challenges one of their shipments.

As a customs and international trade law firm, we understand the importance of staying compliant with the law and the potential consequences of non-compliance. Our experienced attorneys can provide guidance on how to review and update import procedures, conduct supply chain audits, and provide guidance on best practices to avoid forced labor. We can also assist with compliance documentation and support companies in responding to CBP investigations and allegations of non-compliance.

Now is the time for businesses to act to ensure compliance with the UFLPA. If you have any questions or concerns about how the UFLPA may affect your business, please do not hesitate to contact a Neville Peterson professional. We are here to help you navigate the new law and ensure compliance.