Background

The U.S. government is intensifying its efforts to persuade businesses to exit supply chains connected to China’s Xinjiang Uyghur Autonomous Region in light of increasing concerns about the use of forced labor in that area. Broader and stronger warnings about doing business in the XUAR, particularly in specified industries, are included in an updated business advisory issued July 13.

The advisory warns businesses, individuals, and others (including investors, consultants, labor brokers, academic institutions, and research service providers) that do not exit supply chains, ventures, and/or investments connected to Xinjiang that they could run a high risk of violating U.S. law and triggering criminal or civil enforcement actions. Potential legal risks include violation of statutes criminalizing forced labor (e.g., knowingly benefitting from participation in a venture while knowing it has engaged in forced labor), sanctions violations if dealing with designated persons, export control violations, and violations of the prohibition on imports of goods produced in whole or in part with forced or convict labor.

As a result, the advisory urges businesses and individuals to undertake heightened human rights due diligence to identify potential supply chain links to entities operating in Xinjiang, linked to
Xinjiang (e.g., through supply chain inputs), or utilizing Uyghur or other ethnic and Muslim minority laborers from Xinjiang. Supply chain exposure could come from sourcing labor or goods from Xinjiang or from entities (1) elsewhere in China connected to the use of forced labor of individuals from Xinjiang or (2) outside of China that source inputs from Xinjiang. The advisory newly adds that exposure could also come from supplying U.S.-origin commodities, software, and technology to entities engaged in surveillance and forced labor practices.

The advisory identifies the following industries as being at particular risk concerning the use of forced labor in Xinjiang.

  • agriculture (including raw cotton, hami melons, korla pears, tomato products, and garlic)
  • cell phones
  • cleaning supplies
  • construction
  • cotton, cotton yarn, cotton fabric, ginning, spinning mills, and cotton products
  • electronics assembly
  • extractives (including coal, copper, hydrocarbons, oil, uranium, and zinc)
  • fake hair and human hair wigs, hair accessories
  • food processing factories
  • footwear
  • gloves*
  • hospitality services
  • metallurgical grade silicon*
  • noodles
  • printing products
  • renewable energy (polysilicon, ingots, wafers, crystalline silicon solar cells and photovoltaic modules)*
  • stevia
  • sugar
  • textiles (including apparel, bedding, carpets, wool, and *viscose)
  • toys

* newly added since last advisory

However, the advisory notes that this list is non-exhaustive and does not confirm that all goods produced in these industries in Xinjiang involve forced labor.

The advisory adds that raw and refined materials, commodities, intermediate goods, byproducts, and recycled materials may all have connections to forced labor and human rights violations in Xinjiang, regardless of the final product and region of origin or export.

The updated advisory adds a number of warnings signs of forced labor in the operating environment in Xinjiang. These include the involvement of (1) affiliates of Xinjiang Production and Construction Corps, which are part of the prison labor system and manufacture goods beyond cotton products, (2) goods included on the Department of Labor’s list of goods produced by forced or child labor, (3) companies on the Department of Commerce’s Entity List, and (4) companies and products subject to U.S. withhold release orders.

Sandler, Travis & Rosenberg offers a comprehensive suite of services to help companies address forced labor concerns, including supply chain reviews, due diligence strategies, and proactive remediation. In addition, ST&R has launched a new web page offering a broad range of information on forced labor-related efforts in the U.S. and around the world. ST&R also has an on-demand webinar on forced labor and supply chain transparency available online.

For more information on any of these initiatives, please contact Amanda Levitt (at (212) 549-0148) or via email), David Olave (at (202) 730-4960 or via email), or Nicole Bivens Collinson (at (202) 730-4956 or via email).

Copyright © 2021 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.

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