Staying On Top of the Uyghur Forced Labor Prevention Act

The past couple of weeks have seen a flurry of important Uyghur Forced Labor Prevention Act (UFLPA) developments. This post flags the things importers need to know now in a way that links back into the bigger picture of what importers need to be doing to achieve UFLPA compliance.

Let’s start with the latest UFLPA developments:

1. CBP’s Release of Additional UFLPA Guidance & Resources

This release builds on the operational guidance and strategy documents supplied to the trade last year by adding the following:

• Guidance: The guidance provided by this release comes in two parts. The first part addresses the entity, transaction, transportation, and payment documentation importers must furnish in order to overcome a UFLPA detention. The second part illustrates the organizational format CBP would like to see in connection with applicability review submissions.

• Resources: The resource component of this release consists of an expanded set of UFLPA FAQs. These FAQs can be used by importers to gain a better sense of how CBP is enforcing the UFLPA.

2. Forced Labor Enforcement Task Force’s (“FLETF”) First Biannual Public Meeting on UFLPA Enforcement

Several important developments flow from the FLETF’s recent UFLPA enforcement meeting. The key takeaways are as follows:

• Enforcement Scope: The scope of UFLPA enforcement is expanding beyond the products, materials, and sectors originally defined by CBP as being “high priority” (cotton, tomatoes, polysilicon, and silica-based products). New products and materials of interest include aluminum, steel, auto parts, and PVC. FLETF is expected to officially update its list of high priority products, materials, and sectors this summer. Companies that import these products should, on a going forward basis, anticipate CBP forced labor detentions.

• Detention Practice: Clearing one shipment through a CBP UFLPA applicability review will not necessarily insulate subsequent shipments from detention, at least for the time being. While there has been some discussion of whether there is any possibility of CBP using the insight it gains with respect to an importer’s supply chain through a prior applicability review to reduce or even eliminate the likelihood/necessity of downstream detentions, the agency intends to maintain its focus on high risk entities/sectors until such time that it is able to confirm the absence of linkages in a specific supply chain to the XUAR.

• Expansion of the UFLPA Entity List: The FLETF has prioritized expanding the UFLPA Entity List. The expanded list is expected to be published this June. Importers with concerns regarding the inclusion of particular suppliers on the expanded entity list should communicate same to the FLETF before the updated list goes into effect.

3. Forced Labor Technical Expo

Highlights from this first-of-its-kind event include:

• Showcasing of Technological Solutions Available for UFLPA Compliance: The Forced Labor Technical Expo provided a platform for 18 different solution providers to demonstrate how their data-centric tools can be used to conduct supply chain mapping, DNA/isotopic testing, supplier due diligence, and entity list screening. While none of these tools is foolproof (all have reliability limitations and/or affordability issues), these do represent the current state of the art when it comes to the means that are available for maximizing UFLPA compliance. Presentations made at the expo can be viewed here.

• New Interactive UFLPA Dashboard and Data Dictionary: CBP used the Forced Labor Technical Expo to unveil its new interactive UFLPA Dashboard and Data Dictionary. Unlike the forced labor statistics previously made available by CBP, the UFLPA Dashboard disentangles WRO from UFLPA actions and allows users to filter data elements by year, fiscal quarter, industry, country of origin, value, primary HTS chapter, and exam outcome. While this is a significant improvement relative to the quality and quality of data previously made available on the subject, it is important to recognize that the dashboard does not, in its current form, allow for more granular inquiries keyed to specific HTSUS headings or subheadings.

• SME Supply Chain Mapping Relief: The last noteworthy development to come out of the Forced Labor Technical Expo involves the announcement made by keynote speaker Professor Laura Murphy regarding the free supply chain mapping tool her team at Sheffield Hallam University plans to make available in pilot form by the end of this year. Given the high screening costs charged, on a per shipment basis, by most solution providers, this will prove to be an important means of ensuring that UFLPA compliance is within the grasp of big and small importers alike.

Having laid out the latest developments, let’s tie it all together by linking back into the bigger picture of what importers need to be doing to achieve UFLPA compliance. Forced labor is now, per FLETF, a “top tier” compliance and enforcement issue for CBP and the trade. This is not changing or going away. Importers who recognize the magnitude of the “sea change” that is playing out in real time and stay abreast of the fast moving developments that characterize the practice space stand the best chance of avoiding the costly supply chain disruptions that can be occasioned by forced labor-driven detentions. As importers operate in this tougher trade environment, they will do well to keep in mind the following practice points:

• The UFLPA supersedes, effective 21 June 2022, the adjudicative processes used by CBP in connection with forced labor WROs and Findings.

• CBP and DHS have provided a foundation for UFLPA compliance through the June 2022 publication of, respectively, the Operational Guidance for Importers and the Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People’s Republic of China. The guidance/resource documents and other materials that are the principal focus of this blog post flesh out and build on the content set forth in these earlier publications. Importers can manage UFLPA enforcement risk by adopting and implementing the supply chain due diligence, tracing, and management measures identified in this expanded set of guidance and resource materials.

• It is hard to overcome the information requirements associated with the making of claims in opposition to UFLPA enforcement actions. CBP acknowledges as much when it notes that the UFLPA’s information requirements “may make it difficult for importers to comply.”

• This difficulty is exacerbated by five considerations: (i) the possibility that China’s Anti-Foreign Sanctions Law will, in the absence of compelling long-term supply commitments, disincentivize supplier cooperation; (ii) the challenge of finding reliable, independent third-party verification services; (iii) the significantly shortened timeframe importers have, on a pre-admissibility decision basis, for securing and submitting information in support of UFLPA claims; (iv) the fact that the UFLPA does not provide a mechanism for obtaining de minimis relief; and (v) the evolving nature of the UFLPA Entity List and the set of products, materials, and sectors which CBP sees as being “high priority.” Importers must keep their eye on this ball.

• There has been some delay in the UFLPA’s full implementation as CBP builds up its enforcement capabilities from a manpower and training perspective. That said, enforcement activity is on the rise with respect to an expanding set of products, materials, sectors, and entities.

• Ambiguity with respect to the way in which the UFLPA does or does not apply to an importer’s particular transactional circumstances can be preemptively resolved pursuant to the filing of a ruling request with CBP.

• UFLPA enforcement actions can be challenged in one of two ways. The first is by presenting evidence showing that the merchandise is outside the UFLPA’s scope. The second involves presenting a claim that merchandise which is otherwise in scope nonetheless qualifies for an exception to the UFLPA’s rebuttable presumption. The latter claim must be supported by clear and convincing evidence and requires, if successful, CBP to submit a report to Congress.

• UFLPA claims submitted by CTPAT-certified entities are, to the extent practicable, given priority processing.

• Importers whose merchandise has been detained under the UFLPA have the option of exporting same, provided the goods have not yet been made the subject of an exclusion or seizure action by CBP.

• Importers should, in light of the elevated costs (i.e., tariffs, shipping, etc.) and risks associated with Chinese merchandise, continue to diversify their supply chains and production processes. Onshoring, nearshoring, and operational engineering are strategies that can, in this connection, be used by importers to control the costs and mitigate the risks associated with the importation of Chinese merchandise.