Our thanks to Advisory Board member Michael Littenberg for sending us his firm’s client alert on the new US Uyghur Forced Labor Prevention Act. In addition to a detailed analysis of the legislation, it offers recommended near term actions that companies should consider taking in advance of the June 21, 2022 statutory effective date of the forced labor rebuttable presumption and importation ban. These actions – included below in condensed form – could help mitigate impacts of the immediate company reactions we predict are likely.
Conduct a Risk Assessment. Importers and companies that are further downstream in the value chain should conduct a risk assessment of their supply chains. The near-term focus should be on goods produced in whole or part in the XUAR [Xinjiang Uyghur Autonomous Region of China] or outside the XUAR with Uyghur labor (or the labor of other groups enumerated in the Act), since that is the scope of section 3’s forced labor presumption. … Keep in mind that the strategy mandate of the [Forced Labor Enforcement] Task Force is not limited to the XUAR and Uyghur labor, as discussed earlier in this Alert. A supply chain review should therefore take into account other potential risk areas.
Assess Sufficiency of Existing Supply Chain Compliance Program. The Act’s forced labor presumption does not apply if the CBP [Customs and Border Protection] Commissioner determines that the importer has fully complied with guidance and implementing regulations issued pursuant to the Act. As a near-term action item, existing compliance measures – including policies, procedures, training, diligence and remediation measures – should be reviewed against current U.S. Government forced labor guidance, since current guidance will inform guidance and regulations ultimately published pursuant to the Act.
Forced labor compliance measures should be reviewed against the [U.S. Government’s July 2021 Supply Chain Business] Advisory … [and] the FAQs published by CBP in connection with its withhold release orders relating to XUAR cotton and tomato products and Hoshine Silicon Industry Co. Ltd (the cotton and tomato products WRO is discussed in our earlier Alert here). In particular, these FAQs describe the chain of custody documentation that may be required from importers who have goods detained pursuant to one of the WROs.In addition, compliance programs should be reviewed against the due diligence recommendations in the FAQs issued in connection with the CAATSA [The Countering America’s Adversaries Through Sanctions Act], and CBP’s forced labor reasonable care guidance, both of which are discussed in our earlier Alert here.
Consider Whether to Participate in the Public Consultation. Leading industry groups already engaged on this issue will no doubt provide comments to help ensure that regulations and guidance developed pursuant to the Act do not create unnecessary supply chain disruptions or compliance costs for their members. Other trade groups in potentially affected industries also should consider whether to submit comments. Large companies substantially impacted by the Act also should consider whether to comment directly.
Review Forced Labor Disclosures. Companies should ensure their forced labor disclosures match their practices, to mitigate both legal and reputational risk. In connection with a recent complaint brought by an NGO against several companies, the NGO alleged that the companies’ forced labor mitigation practices were not aligned with their disclosures. In addition, suits have been brought in several U.S. and European jurisdictions under consumer protection statutes, in which the plaintiffs have alleged discrepancies between actual and stated policies and procedures to address forced labor in supply chains.
Be Mindful of Developments in Other Jurisdictions. Over the last year, there have been developments in several other jurisdictions to address XUAR forced labor concerns, as well as to address forced labor more generally. [These include Canada, the UK, EU, Germany, Norway and Australia.]
The specter of an importation ban on company products, goods and materials is significant and very real. It would be prudent to begin planning for the law’s implementation, gain clarity on the company’s strategy and contingency plans, conduct appropriate reviews, identify potential program improvements and take action as soon as possible.