Forced Labor in China: Companies Need to Start Paying Attention

On July 14, the U.S. Senate passed the Uyghur Forced Labor Prevention Act. In an era of hyperpartisanship, the Act is a rare instance of truly bipartisan legislation. Cosponsors included figures from across the political spectrum, from Josh Hawley to Elizabeth Warren. This in itself is something businesses should take note of, as it is a clear sign of the climate in Washington when it comes to China.

The bill is a response to the human rights crisis in Xinjiang. Its most impactful provision would, in essence, impose a ban on all products from Xinjiang. More precisely, the new law would direct U.S. Customs and Border Protection (CBP) to apply a rebuttable presumption that any products made in Xinjiang were made using forced labor. Rebutting the presumption requires a determination from CBP that the goods were not in fact made using forced labor.

Companies with known Xinjiang exposure should by now realize they are playing with fire. The Act’s provisions, however, mean it is time for companies manufacturing or sourcing elsewhere in China to start paying attention as well.

Until now, the U.S. government’s responses to the Xinjiang forced labor program have centered on products from Xinjiang. However, under the Act, the presumption would apply to any entities included in a blacklist that is to be prepared by the government of “entities working with the government of the Xinjiang Uyghur Autonomous Region to move forced labor of Uyghurs, Kazakhs, Kyrgyz, or members of other persecuted groups out of the Xinjiang Uyghur Autonomous Region.” This recognizes that an important element of the forced labor crisis involves workers from Xinjiang who are taken to locations elsewhere in China, as best documented in the Uyghurs for sale report prepared by the Australian Strategic Planning Institute (ASPI).

It is worth noting that the bill’s plain language suggests that any transfer of Uyghur workers out of Xinjiang will get entities added to the blacklist. This is consistent with the proposed legislation’s “ask questions later” approach.

Regardless of where their suppliers (and their suppliers’ suppliers) are in China, U.S. companies need to start taking forced labor seriously. If a company fails to discover that there are Xinjiang workers at their supplier’s facility, no amount of “compliance” is going to cut it if a reporter publishes a story about it, or if CBP learns about it from a whistleblower.

For more than a year we have been warning about the risks presented by the forced labor issue to companies doing business in China. As we have noted, a great deal of the danger stems precisely from the broad appeal that an ever-tougher line on forced labor has across the political landscape. The fact that the Act’s bold proposals have the support of everyone from Cory Booker to Ted Cruz underscores this. Businesses might scream about the practical import of the Act, but clearly they’ll be screaming into the proverbial void.

When it comes to China, few inside the Beltway are in the mood for compromise.

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