Supply chains widely tainted by forced labor in China, witnesses say

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Washington – Human rights activists, labor leaders and others urged the White House on Friday to put its weight behind a coming ban on products made with forced labor in the Xinjiang region of China, saying that slavery and coercion taint company supply chains that run through the region and China more broadly.

The law, the Uyghur Forced Labor Prevention Act, was signed by U.S. President Joe Biden in December and is set to go into effect in June. It bars all goods made in Xinjiang or with ties to certain sanctioned entities or programs that transfer minority workers to job sites, unless the importer can demonstrate to the U.S. government that its supply chains are free of forced labor.

It remains to be seen how stringently the law is applied and if it ends up affecting a handful of companies or far more. A broad interpretation of the law could cast scrutiny on many products that the United States imports from China, which is home to more than one-quarter of the world’s manufacturing. That could lead to more detentions of goods at the U.S. border, likely delaying product deliveries and further fueling inflation.

The law requires that a task force composed of Biden administration officials produce several lists of entities and products of concern in the coming months. It is unclear how many organizations the government will name, but trade experts said many businesses that rely on Chinese factories may realize that at least some part or raw material in their supply chains can be traced to Xinjiang.

“I believe there are hundreds, perhaps thousands, of companies that fit the categories” of the law, John M. Foote, a partner in the international trade practice at Kelley Drye & Warren, said in an interview.

The State Department estimates that the Chinese government has detained more than 1 million people in Xinjiang in the past five years — Uyghurs, Kazakhs, Hui and other groups — under the guise of combating terrorism.

China denounces these claims as “the lie of the century.” But human rights groups, former detainees, participating companies and the Chinese government provide documentation showing that some minorities are forced or coerced into working in fields, factories and mines, in an attempt to subdue the population and bring about economic growth that the Chinese government sees as key to stability.

Rushan Abbas, founder and executive director of the nonprofit Campaign for Uyghurs, who has written about the detention of her sister in Xinjiang, said at a virtual hearing convened by the task force Friday that forced labor had become a “profitable venture” for the Chinese Communist Party and was meant to reduce the overall population in Xinjiang’s villages and towns.

“The pervasiveness of the issue cannot be understated,” she said, adding that forced labor was made possible by “the complicity of industry.”

Gulzira Auelkhan, an ethnic Kazakh who fled Xinjiang for Texas, said in the hearing that she had been imprisoned for 11 months in Xinjiang alongside ethnic Kazakhs and Uyghurs who were subject to torture and forced sterilization. She also spent 2½ months working in a textile factory making school uniforms for children and gloves, which her supervisors said were destined for the United States, Europe and Kazakhstan, she said through a translator.

It is already illegal to import goods made with slave labor. But for products that touch on Xinjiang, the law will shift the burden of proof to companies, requiring them to provide evidence that their supply chains are free of forced labor before they are allowed to bring the goods into the country.

Supply chains for solar products, textiles and tomatoes have already received much scrutiny, and companies in those sectors have been working for months to eliminate any exposure to forced labor. By some estimates, Xinjiang is the source of one-fifth of the world’s cotton and 45% of its polysilicon, a key material for solar panels.

But Xinjiang is also a major provider of other products and raw materials, including coal, petroleum, gold and electronics, and other companies could face a reckoning as the law goes into effect.

In the hearing Friday, researchers and human rights activists presented allegations of links to forced labor programs for Chinese manufacturers of gloves, aluminum, car batteries, hot sauce and other goods.

Horizon Advisory, a Washington-based consultancy, claimed in a recent report based on open-source documents that the Chinese aluminum sector had numerous “indicators of forced labor,” like ties to labor transfer programs and the Xinjiang Production and Construction Corps, which has been a target of U.S. government sanctions for its role in Xinjiang abuses.

Xinjiang accounts for about 9% of the global production of aluminum, which is used to produce electronics, automobiles, planes and packaging in other parts of China.

“China is an industrial hub for the world,” Emily de La Bruyère, a co-founder of Horizon Advisory, said at the hearing.

“Forced labor in Xinjiang and elsewhere in China not only constitutes a grave human rights transgression but also taints international supply chains,” she said. “And this is true across sectors ranging from solar energy to textiles and apparel to aluminum.”

The law had been the subject of fierce lobbying by corporations and others, including critics who fear that a broad interpretation of the statute could put the U.S. ability to combat climate change at risk, or further scramble supply chains and stoke inflation.

Congress has devoted significant funds to the law’s enforcement. It appropriated $27.5 million this year to carry out the act, funding that is probably enough to devote more than 100 full-time employees to enforcing the ban on Xinjiang products alone, according to Foote.

Companies and trade groups said they were willing to follow the restrictions but wanted to avoid unnecessary harm to their businesses.

Vanessa Sciarra, a vice president at the American Clean Power Association, which represents solar and wind companies, urged the government to issue detailed guidance to importers about how to audit their supply chains, and use only carefully verified information to make its decisions.

“Detention of cargo for weeks or months at a time is a serious commercial matter,” she said in the hearing.

Many companies have been carrying out due diligence of their ties to Xinjiang, and some major industry associations say they have eliminated forced labor from their supply chains.

But some activists express skepticism, saying the lack of access to the region has made it difficult for companies to conduct independent audits. It is also not yet clear exactly what kind of scrutiny the government will require, or what kind of business ties will be permitted under the law.

For example, some companies have been bifurcating their supply chains, to ensure that material from Xinjiang goes to produce goods for China or other parts of the world, not for the United States — a practice that Richard Mojica, a trade lawyer at Miller & Chevalier Chartered, said should suffice under the letter of the law but would be “reviewed further in the months and years to come.”

Mojica said in an interview that many companies were expecting the government to provide clear and practical guidance in the coming months about how to comply with the law, but “that expectation may be misguided.”

“I don’t think we’re going to get the level of clarity that some companies expect,” he said.