After more than a year of enforcement of the Uyghur Forced Labor Prevention Act (UFLPA), the U.S. law has not only raised awareness of the problem but made major impacts on supply chain management and international trade.
Enacted in June 2022, the UFLPA targets goods made, wholly or in part, in the Xinjiang Uyghur Autonomous Region (XUAR) of China and includes a “rebuttable presumption” that places the onus on businesses to prove incoming shipments are not associated with forced labor in that region.
Exiger recently hosted a panel discussion with trade, technology and security experts to reflect on the law’s enforcement and what lies ahead. Key insights emerged on why the law is so significant and what supply chain lessons businesses can learn today to continue to comply with the UFLPA. See the highlights below.
[Watch the Webinar Replay | UFPLA: One Year In and Looking Ahead]
The human harm — and criminal gain — is extensive.
The scope of the human rights problem was called out in 2000 with the Palermo Protocol, signed by United Nations members to combat slavery and trafficking. Today the effort continues with global trade laws against modern slavery, including the UFLPA.
“Recent figures estimate the total number of people who are held or enslaved across the globe as somewhere close to 50 million,” said Tim Nelson, CEO of Hope for Justice and Slave-Free Alliance. In China, over 1 million Uyghurs and other mostly Muslim minorities are arbitrarily detained, many of whom are coerced into strenuous labor.
“This industry generates over $150 billion a year for those who are prepared to traffic and enslave individuals across the globe,” he added, citing recent estimates.
UFLPA enforcement actions have been robust and costly.
Since the law went into effect, the U.S. Customs and Border Protection (CBP) agency has detained over 5,000 shipments suspected to have links to forced labor in China. The total value of the detained goods is nearly $1.8 billion.
The threat is mutating; it’s not about just one region or one tier.
Some Chinese companies have had incentives to transfer slave labor to areas outside of the XUAR. Many also ship materials and inputs for manufacture to other countries, like Malaysia or Vietnam, to try to disguise supply origins.
Eric Choy, Executive Director of the Office of Trade at CBP, added: “The goods may not come directly from the Xinjiang region, but inputs and commodities that come from the Xinjiang region that go into further downstream manufacturing processes are affected by the UFLPA.”
In fact, most of the shipments that customs has stopped and inspected haven’t been from China, said Nazak Nikakhtar, Chair of the National Security Practice at Wiley Rein LLP. “They’ve been from Malaysia, Vietnam, and then China, then Thailand and Mexico. This also tells us supply chains are moving. It’s spreading beyond Xinjiang.”
China has staked ground in parts of Africa, like Zambia and the Democratic Republic of Congo (DRC), for mining metals with labor practices that also violate modern slavery laws. “China’s made significant investments into the DRC, and that’s the place where the largest volume of cobalt gets pulled out of the ground, and it’s subject to child enforced labor,” said Brandon Daniels, CEO of Exiger.
The scope of targeted sectors reaches beyond electronics and agriculture.
In recent months, customs actions have extended beyond the initial focus on cotton, tomato products and polysilicon. Shipments of industrial manufacturing materials, apparel, consumer products, pharmaceuticals, base metals, automotive and aerospace parts have also been investigated.
“If you’re a car manufacturer and you have not started mapping your supply chains for the critical minerals and the parts of the sub-assemblies that are going through China and where they are getting their goods from, you are running a real peril as we go into the back half of the year,” Exiger CEO Brandon Daniels said in a recent Reuters interview.
Technology can strengthen UFLPA compliance and risk mitigation.
Technology is essential for multi-tier visibility into suppliers so businesses can gain assurance that all levels in their supply chains are compliant.
“I don’t think medium to large companies can get their forced labor [due diligence] and their supply chains under control without technology anymore. It’s just too much,” said Cindy Deleon, Founder and Managing Director of Deleon Trade LLC.
Choy added that “the use of technology and AI tools may provide a useful source of reference” — especially to highlight the supply chain risks to importers.”
The experts said a good first step is to do a risk assessment on the countries you’re doing business with and the goods you’re sourcing in that country. Then probe lower-tier levels to get item-level visibility and map third-party relationships, which can also shed light on beneficial ownerships, added Daniels. These tasks are made easier with tech tools from Exiger, like SDX and Supply Chain Explorer.
“Multi-tier supply chain tools are the future because you’re going to be able to manage that entire production line, which is a virtual production line,” Daniels said. “It’s a digital twin, and that’s going to help us to increase innovation and industry, which allows us to reduce dependence on some of these economically coerced supply chains.”
Noncompliance can result in steep losses and reputational damage.
Many companies have taken a wait-and-see approach on complying with the UFLPA, rather than address head-on the forced labor risks that may lurk in their supply chains. Experts strongly advise against that, as companies may learn hard lessons from a UFLPA-related detention.
Choy stressed the importance of doing due diligence to avoid delays or detention at U.S. ports of entry. The investment and effort can be challenging, but they pale in comparison to the possible costs of detention and storage fines — on top of lost revenues, operational disruption and reputational damage.
Deleon said companies that delay being proactive are taking an unfortunate detention risk with the CBP.
“Once you get a detention notice, it is miserable. It is too late,” she said. “It’s like saying, ‘I’m going to cook Thanksgiving dinner for a party of 50 in an hour, and I’m going to go shopping right now for groceries.’”
For more insights, watch the full replay of UFLPA: One Year In and Looking Ahead.