New Restrictions on Imports Manufactured With Forced Labor Take Effect

U.S. companies that import goods from the Xinjiang region of the People’s Republic China and other countries that manufacture goods with certain Chinese inputs must now contend with potentially onerous new import restrictions. As noted in prior Alerts, in December 2021, the Uyghur Forced Labor Prevention Act (“UFLPA”) became law, banning the importation of goods with components that are, in whole or in part, the product of forced labor, slavery or coercion, and raising a “rebuttable presumption” for the prohibition that became effective as of June 21, 2022, Public Law No. 117-78, 135 Stat. 1525 (2021). The primary focus of the statute is forced labor practices in the Xinjiang Uyghur Autonomous Region (hereinafter “Xinjiang”) of China, but the law also applies to imports that are made in whole or in part in Xinjiang, even if ultimately imported into the United States from other countries.

A Forced Labor Enforcement Task Force under the Department of Homeland Security (“DHS”) is charged with framing enforcement strategy under the UFLPA and, following public comment and discussion, issued a Strategy to Prevent Goods Mined, Produced or Manufactured with Forced Labor in the PRC on June 17, 2022 (“The Strategy Guidance”). The Strategy Guidance provides for enforcement by U.S. Customs and Border Protection (“CBP”) in conjunction with The Tariff Act, 19 U.S.C. Section 1307, including detention and seizure of goods, allowing importers 30 days to provide “clear and convincing evidence” that the subject goods are free of forced labor. CBP issued detailed Operational Guidance on UFLPA enforcement procedures on June 13, 2022, including an Appendix listing goods likely subject to detention by jurisdiction.

It is estimated that 10% of roughly 10 million U.S. importers will be impacted by the UFLPA sanctions, and CBP has increased its staff in anticipation of stepped up enforcement (the current administration has submitted a budget request for another 300 agents or import specialists for 2023). Commercial and trade groups have noted that the UFLPA potentially impacts very large portions of commerce in certain products or raw materials: 15% of industrial turbines, 40% of polysilcates (used in photovoltaic cells), 20% of cotton, 25% of tomato paste, and a sizeable percentage of precious and rare metals, rayon, walnuts, and peppers.

It is likely that imports into other countries may soon be subject to similar restrictions under measures under consideration in Australia, Canada, the UK, and European Union.

The Strategy Guidance offers importers suggestions for practices that will help support a showing of “clear and convincing” evidence to overcome the noted rebuttable presumption:

• Perform a forced labor risk assessment;
• Engage with stakeholders in the supply chain;
• Develop and enforce a written labor code of conduct;
• Communicate the code across the supply chain and conduct training;
• Monitor compliance in the supply chain and conduct unannounced audits; and
• Use of independent third-party audits (not mandatory).

The DHS has offered training and resources in advance of UFLPA implementation and will continue to do so during the balance of the year. But importers need to be prepared now for the noted detention of presumptively non-complying goods, including gathering evidence that will support release of such goods during the noted 30-day period before a notice of seizure is obtained.

The implications for importers are potentially significant, particularly those that import from China, or import goods from other regions that are made in whole or in part from Chinese inputs. The Strategy Guidance provides a starting point for assessing appropriate supply chain diligence.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Greta Lichtenbaum, an O’Melveny partner licensed to practice law in the District of Columbia, Eric Rothenberg, an O’Melveny of counsel licensed to practice law in the New York, Apalla U. Chopra, an O’Melveny partner licensed to practice law in California, Aparni B. Joshi, an O’Melveny partner licensed to practice law in the District of Columbia and Illinois, Adam Karr, an O’Melveny partner licensed to practice law in California, and John Rousakis, an O’Melveny partner licensed to practice law in the New York, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

© 2022 O’Melveny & Myers LLP. All Rights Reserved. Portions of this communication may contain attorney advertising. Prior results do not guarantee a similar outcome. Please direct all inquiries regarding New York’s Rules of Professional Conduct to O’Melveny & Myers LLP, Times Square Tower, 7 Times Square, New York, NY, 10036, T: +1 212 326 2000.