How Should B Corps Respond to the Uyghur Forced Labor Prevention Act?
Regulations Reinforce the Importance of Supply Chain Mapping
Certified B Corporations can be leaders in moving their supply chains toward responsible sourcing practices. This is even more relevant now that the U.S. government is increasing its enforcement efforts to remove products tainted by human rights abuses from its stream of commerce.
The Uyghur Forced Labor Prevention Act (“UFLPA”) represents an important step in the U.S. government’s evolving approach to enforcing prohibitions against forced labor that have been a part of U.S. law since the 1930s. The act imposes a rebuttable presumption that any product (or component) with a supply chain connection to the Xinjiang region of China, or Uyghur laborers, has been produced using forced labor and thus cannot enter the U.S.
The U.S. Customs & Border Protection (“USCBP”) and the Forced Labor Enforcement Task Force (“FLETF”) issued guidance documents in June 2022. The guidance states “USCBP will implement an enforcement plan that identifies and interdicts goods from high-priority sectors that are found to have a nexus to production in Xinjiang.” The identified high-priority sectors are cotton, silica-based products (polysilicon, glass, etc.), tomatoes, and apparel.
The scope of goods falling under a high-priority sector is quite expansive as the FLETF guidance notes: “[s]ilica is a raw material that is used to make aluminum alloys, silicones, and polysilicon, which is then used in buildings, automobiles, petroleum, concrete, glass, ceramics, sealants, electronics, solar panels, and other goods.”
To make sure they do not run afoul of the UFLPA, companies must first consider whether their products are within the scope of the Act. If they are, they must demonstrate through clear and convincing evidence that the goods they seek to import are not tainted by forced labor.
Products within the scope of the UFLPA are those produced in Xinjiang, contain a component produced in Xinjiang, or produced by a prohibited entity designated as such by the U.S. government due to its ties to Uyghur labor.
Companies can demonstrate that their goods are not subject to the UFLPA by providing evidence of effective supply chain mapping, effective supply chain tracing, and documentary evidence supporting this.
Supply chain mapping requires a company to examine its supply chain to determine the origin of all components, materials, and products. An importer must “identify who is doing the work at each step of the process and the conditions under which the work is being done.”
Supply chain tracing is when a company ensures that the products and components in a particular shipment were produced in accordance with the company’s supply chain map.
Documentation should include information that shows “how the imported good was made from raw materials to finished good, by what entities, and where, including all in-house manufacturing, sub-assembly operations, and outsourced production related to the imported good.”
Although there is a presumption that goods with a supply chain nexus to Xinjiang have been produced through forced labor, this presumption can be overcome if a company can provide clear and convincing evidence that their goods are untainted. However, the standard required to overcome this presumption is likely to be highly burdensome because, as noted in the guidance documents, companies face several challenges in obtaining credible information regarding production processes. In fact, no company has attempted to overcome the rebuttable presumption in the months that UFLPA has been in effect.
If a company has no feasible alternative to sourcing goods with a supply chain nexus to Xinjiang, it can attempt to rebut the presumption by:
- demonstrating that it has complied with section VI of the FLETF guidance;
- responding completely and substantively to all requests by USCBP for information; and
- demonstrating through clear and convincing evidence that its imports were not mined, produced, or manufactured wholly or in part with forced labor.
When assessing goods within the scope of the UFLPA, the U.S. government will consider a company’s supply chain tracing and mapping, its human rights due diligence records, and its implementation of supply chain management strategies.
Companies should carefully assess whether their human rights due diligence system is sufficiently credible to rebut the UFLPA’s presumption given the challenges associated with the same. In FLETF’s guidance on human rights due diligence, it noted that the Department of Labor’s Comply Chain website provides detailed information for a company seeking to implement a due diligence system.
Additionally, FLETF guidance lists several key supply chain management measures such as carefully investigating suppliers before entering into contracts, requiring contracts that allow for corrective action and/or consequences in the event forced labor is identified, and having access to information such as documentation and personnel records that allow a company to successfully audit and monitor their suppliers’ conduct.
A useful resource to help companies implement supply chain contracts that conform to the best practices in business & human rights are the American Bar Association Business Law Section’s Model Contract Clauses (“MCCs”). The MCCs are a modular set of template contract clauses based on the UN’s Guiding Principles on Business & Human Rights as well as the OECD Guidelines for Multinational Enterprises. They are designed to be a resource for drafters of supply chain agreements at any tier in a wide variety of industries.
While the UFLPA is limited to a narrow region of China, many observers involved in the responsible sourcing movement believe this indicates there will be greater enforcement of U.S. prohibitions on products produced using forced or child labor going forward. B Corps should be the leaders in taking steps to monitor their supply chains for environmental and social impact — to avoid supply chain disruptions and ensure responsible globalization in the 21st century.
The information in this article is provided for informational purposes only. You should consult with an attorney before you rely on this information.
B The Change gathers and shares the voices from within the movement of people using business as a force for good and the community of Certified B Corporations. The opinions expressed do not necessarily reflect those of the nonprofit B Lab.
