The Uyghur Forced Labor Prevention Act and what it means for retailers and product manufacturers

On December 23, 2021, President Biden signed into law H.R. 6256, known as the Uyghur Forced Labor Prevention Act (UFLP). The UFLP requires companies to avoid importing goods to the US that were made with the forced labor of Uyghurs and other persons or groups in China's Xinjiang Uyghur Autonomous Region (XUAR).

The UFLP follows a number of other US executive actions targeting alleged abuses in the XUAR. Since 2019, US Customs and Border Protection (CBP) has issued several Withhold Release Orders (WROs) against certain goods produced by specific companies in the region and, in January 2021, went as far as issuing a WRO against all cotton and tomato products from the region.

The UFLP also follows other state and federal regulations that have generally sought to restrict supply chain abuses. For example, the California Transparency in Supply Chains Act (TSCA) of 2010 requires certain large retailers and manufacturers to publicly disclose any efforts they are taking to identify and eliminate the use of human trafficking and forced labor in their product supply chains.

As explained further below, however, the UFLP is much broader than these prior efforts. The UFLP potentially clouds the import of all products that are derived from goods or services in the XUAR, and requires companies to take significant affirmative steps to overcome that presumption. The UFLP will require many companies to first determine their supply chain links to XUAR and then, if such links exist, to prepare to reassure regulators that such links are not affected by forced labor.

Key aspects of the Uyghur Forced Labor Prevention Act

Rebuttable presumption that imports from the XUAR are prohibited

Section three of the UFLP creates a presumption—which takes effect 180 days after the UFLP's enactment—that goods, wares, articles and merchandise mined, produced, or manufactured wholly or in part in the XUAR are made with forced labor and may not be imported to the US.

A US importer may rebut this presumption in two ways:

• First, by fully complying with the Forced Labor Enforcement Task Force's (FLETF) forthcoming regulations and guidance to importers and by "completely and substantively" responding to all information requests from the FLETF Commissioner regarding the use of forced labor.
• Second, establishing "by clear and convincing evidence" that an imported good, ware, article, or merchandise was not made with any forced labor.

Lists of entities, products, and sectors that rely on forced labor

The UFLP requires the FLETF to create lists identifying various entities that use or rely on the forced labor of Uyghurs and other persecuted groups in China, especially in the XUAR. Goods produced by entities appearing on any of the lists described below are also subject to the above rebuttable presumption, regardless of whether they are produced inside or outside of the XUAR.

In particular, FLETF must create a list of entities in the XUAR that mine, produce, or manufacture wholly or in part any goods, wares, articles, and merchandise with forced labor as well as entities working with the government of the XUAR to recruit, transport, transfer, harbor, or receive forced labor. Moreover, the FLETF must create a list of products that these entities mine, produce, or manufacture wholly or in part, as well as a list of entities that export those products from China to the US.

The FLETF will also create a list of facilities and entities that source material from the XUAR. This list will include entities and facilities that source material from persons working with the XUAR government or the Xinjiang Production and Construction Corps for purposes of any government labor scheme that uses forced labor, such as the "poverty alleviation" and "pairing-assistance" programs.

Additionally, the FLETF must create a list identifying high-priority sectors for enforcement, which shall include cotton, tomatoes, and polysilicon.

Develop enforcement plan for exporters and sectors that rely on forced labor

The FLETF shall develop an enforcement plan for each entity listed above whose goods, wares, articles, or merchandise are exported into the US, which may include issuing WROs. The FLETF must also develop an enforcement plan for each high-priority sector it identifies (which sectors shall include cotton, tomatoes and polysilicon).

Forthcoming guidance to US importers

The FLETF shall provide guidance to US importers with respect to due diligence, effective supply chain tracing, and supply chain management measures to ensure their supply chains do not involve forced labor from China. Guidance shall also address the type, nature, and extent of evidence that demonstrates that goods originating from China were not mined, produced, or manufactured wholly or in part in the XUAR or with the use of forced labor. The guidance to US importers will be issued within 180 days after the UFLP's enactment.

Public comment and hearing opportunity

Before the FLETF creates lists identifying entities that use or rely on forced labor from the XUAR or develops enforcement plans, it must provide the public with an opportunity to submit comments and attend a public hearing.

Within 30 days of the UFLP's enactment, the FLETF must publish a notice in the Federal Register soliciting public comments on potential measures to prevent the import of goods made with forced labor in China into the US. The public will have 45 days to submit such comments. Within 45 days after the public comment period has ended, the FLETF shall conduct a public hearing on the matter.

Takeaways and recommendations for retailers, manufacturers, and related companies

Over the last several years, companies have been required to exercise increasingly robust vigilance over their supply chains, not only to satisfy new regulations, but also to comply with their Environmental, Social, and Governance (ESG) commitments to stakeholders. The UFLP represents a further development of this trend and will require companies to take proactive measures relative to possible integration of XUAR-derived goods in their supply chains. Among other steps, companies should prepare to comply with the UFLP as follows:

• If there is any chance that companies' supply chains include links to the XUAR, those companies should promptly begin to fully assess those links. Companies should soon be prepared to either firmly indicate the absence of XUAR supply chain ties or to understand the nature and quantity of those links.
• Companies should carefully review the FLETF's upcoming guidances on how to investigate and conduct due diligence on supply chain and vendor issues. Companies should ensure that their internal compliance, due diligence, whistleblower/complaint review, and vendor selection and monitoring procedures, among other processes, are consistent with those guidances.
• Listed companies should ensure that their public statements under the UFLP reflect a sufficient amount of internal investigation and diligence as well as publicly-available reporting about XUAR entities and vendors. For listed companies that may have supply chain connections to XUAR, such statements may become a new area of shareholder litigation and governance disputes. In fact, listed companies may consider taking this opportunity to review and update their ESG programs more generally.
• If companies take any action to comply with the UFLP, they should prepare to note the same in their California Transparency in Supply Chain Act Disclosures

A previous version of the UFLP, which was introduced in the House of the 116th Congress in September 2020 but was not ultimately signed into law, contained an additional provision requiring US issuers to make quarterly reports about their dealings (if they had any) with certain Xinjiang-based entities. This requirement no longer appears in the UFLP, although listed companies should continue to be particularly conscious of any of their supply chain links to XUAR. Such issues will continue to garner significant public discussion among shareholders, investors and regulators.

Special thanks to law clerk Michelle Avidisyans (Los Angeles) for her assistance in the preparation of this content.