June 24, 2022
December 14, 2022
4
Min Read

The Guide To UFLPA Regulation, Requirements, & Compliance

Woman Doing UFLPA Compliance
Blog
  • The Uyghur Forced Labor Prevention Act (UFLPA) - in effect as of June 21st, 2022 - prohibits any goods from entering the USA that were sourced in whole or in part in the Xinjiang region of China.
  • Consequences of non-compliance for companies include product seizure, loss, hefty fines, and reputational damage.
  • Companies importing any goods into the US - particularly fashion, electronic, and EV vehicle industries - should map & digitize their supply chains ASAP to ensure no touchpoints occur in the Xinjiang region (you’d be surprised how many do). 
  • Supply chain traceability solutions like BanQu can help capture source-level, audit-ready compliance data - and offer added business benefits - even beyond the UFLPA.

What is the UFLPA?

The Uyghur Forced Labor Prevention Act (UFLPA) builds on existing U.S. forced labor import bans by getting more regionally specific and strict—banning imports of any products that were fully or partially produced, mined, or manufactured in Xinjiang, a region of China where Uyghur Muslims are being subjected to forced labor. The act, signed into law on December 23rd and effective since June 22nd, 2022, enables Customs and Border Patrol to seize goods suspected of being - even in part - sourced from the region - and impose financial penalties.

Which products and industries are affected under the UFLPA?

When the UFLPA was issued, customs guidance included the top three products (and their downstream products) commonly sourced within the Xinjiang region of China by forced Uyghur labor (XUAR):

However, since 2022, we’ve seen just how many finished goods and raw materials are produced or manufactured in XUAR, and are thus affected under UFLPA:

  • Agriculture (including such products as raw cotton, hami melons, korla pears, tomato products, and garlic);
  • Textiles (including such products as apparel, bedding, carpets, wool, viscose); and
  • Auto parts; 
  • Cell Phones;
  • Cleaning Supplies;
  • Cotton, Cotton Yarn, Cotton Fabric, Ginning, Spinning Mills, and Cotton Products;
  • Extractives (including coal, copper, hydrocarbons, oil, uranium, and zinc);
  • Renewable Energy (polysilicon, ingots, wafers, crystalline silicon solar cells, crystalline silicon solar photovoltaic modules);
  • Stevia;
  • Sugar;
  • Toys.

*See the full list of goods and raw materials produced in XUAR here.

The Automotive Industry Takes a Big UFLPA Hit

“If you have bought a car in the last five years, some of its parts were likely made by Uyghurs and others forced to work in China.” - Helena Kennedy Centre

Perhaps the most impacted industry of the UFLPA, the automotive industry has taken large, unprecedented hits — even beyond silicon-based EV batteries. According to the Helena Kennedy Centre of International Justice, the link between Western Car Brands and forced-labor in the XUAR region is massive. From aluminium and steel, to copper and other car parts (e.g., tires), most car manufacturing historically sourced from China has come from or passed through the Xuar region in the last five years.

“Every major car brand – including Volkswagen, BMW, Honda, Ford, GM, Mercedes-Benz, Toyota, Stellantis brands (like Fiat, Chrysler, Dodge and Jeep), Tesla and NIO - is at high risk of sourcing from companies linked to abuses in the Uyghur region.” - Forced Labour Lab
Forced Labor Exposure in the Auto Industry
Source/Credit: Helena Kennedy Centre

Why is the UFLPA important?

This act is a huge step in governmental sustainability regulations and sets a precedent for how organizations will be required to source goods. Experts are keeping a close eye on industries that have long benefited from cheap, foreign labor, such as the fast fashion, electronics, and EV vehicle industries (the Uyghur region is a huge cotton and polysilicon exporter) and large corporations that have made sweeping sustainability claims without robust, data-driven proof.

  1. Strict Stance & Enforcement: The UFLPA takes an unprecendented, strict stance on forced-labor/unsustainable sourcing. While importers typically have 90 days to prove compliance with any relevant regulations in the past, under the UFLPA, importers will only have 30 days to prove compliance before goods are thrown out and fines are imposed. Additionally, the UFLPA has a “no de minimus” requirement. Meaning, evening if the smaller portion of your batch of goods is suspected of originating or touching the Xinjiang region, you are affected.
  1. Far-Reaching Affects on Commodities & Industries: While the main commodities affected are tomatoes, cotton, polysilicon, and their derivatives (sauce, clothing, EV batteries, etc.), the affected downstream products from these three raw materials are much more far-reaching. Multiple industries are affected under the UFLPA, including but not limited to the automotive industries, footwear & apparel industries, and many food & beverage industries.
  1. Rising Revenue Loss & Product Seizures: As with any new import/export or sustainability regulation, the actual impact of the regulation can be difficult to quantify or anticipate. However, since the UFLPA has been in effect since June 22nd, 2022, we’re able to see its effects on companies. Every year, more and more product and revenue loss has been recorded.

UFLPA Shipment Value by Month in USD
Source/Credit: Shipment Value Affected by UFLPA

Which suppliers are banned under the UFLPA?

In addition to commodity-specific bans and industry-specific ripple effects, the Department of Homeland Security published a list of suppliers whose ingredients and products are now completely banned from entering the United States. Suppliers not currently on the list but later found in violation of the act may be added in the future. To avoid supply chain disruptions, knowing who your suppliers are and who they’re sourcing from — all the way down to the first contributor will be key to avoiding border seizures. Most recently, 26 more entities were added to the list, so be sure to bookmark the site and check by often to stay up-to-date.

What are the requirements to comply with the UFLPA?

Under the Uyghur Forced Labor Prevention Act (UFLPA), goods produced wholly or in part in the Xinjiang Uyghur Autonomous Region (XUAR) of China, or by entities on the UFLPA Entity List, are presumed to be made with forced labor and are prohibited from entering the U.S. A simple, standard certification of origin is not enough to comply. Nor is re-routing shipments through Vietnam or Indonesia to hide XUAR sourcing. Here’s what in-scope importers need to know to maintain and prove compliance, particularly important in the case of product seizure:

General Provisions

General rules importers must know to prove compliance:

  • Presumption of Forced Labor: All goods from the XUAR or associated entities are presumed to be made with forced labor.
  • Challenging Detentions: Importers have 30 days to challenge a detention by U.S. Customs and Border Protection (CBP).
  • Clear and Convincing Evidence: Importers must provide clear and convincing evidence that their goods are not made with forced labor
  • Due Diligence and Traceability: Importers must demonstrate effective due diligence processes, supply chain tracing, and management measures.

Supply Chain Tracing Information

Importers must also provide detailed information about their supply chains, including:

  • Overall Supply Chain Evidence:
    • Description of the entire supply chain.
    • Roles of entities involved.
    • List of suppliers with contact information.
    • Affidavits from entities involved in production.
  • Merchandise-Specific Evidence:
    • Purchase orders, invoices, packing lists, and bills of materials.
    • Certificates of origin and payment records.
    • Shipping records and import/export documents.
    • End-to-end info to match & cover the specific product journey (i.e. for tomato products: info from tomato seed to finished products, affidavits, purchase orders, invoices, supplier lists, production process records and details)
  • Producer/Manufacturer Evidence:
    • Records tracing raw materials to the final product.
    • Production orders and factory capacity reports.
    • Site visit reports and evidence matching input volumes to output volumes.

To request release of any detained shipments, importers must submit their evidence to the port of entry, proving that goods are not produced with forced labor, and comply with the detailed requirements outlined in 19 CFR 12.43. By adhering to these requirements, importers can demonstrate compliance with the UFLPA and ensure their goods are admissible in the United States.

What are the consequences for UFLPA non-compliance?

As we’ve seen, non-compliance with the Uyghur Forced Labor Prevention Act (UFLPA) can lead to significant repercussions for importers and their customers, including legal, financial, and reputational damage. Here are the key consequences:

Legal and Financial Consequences

  • Detention of Goods: U.S. Customs and Border Protection (CBP) will detain goods suspected of being produced with forced labor. For example, Volkswagen found UFLPA-non compliance in one of their small car batteries, resulting in a significant chunk of their parts being impounded.
  • Seizure and Forfeiture: If importers fail to provide clear and convincing evidence within the 30-day challenge period, detained goods can be seized and forfeited.
  • Fines and Penalties: Importers may face substantial fines and penalties for violating the UFLPA, impacting their financial stability.

Reputational Damage

  • Bad Press and Public Scrutiny: Companies found non-compliant face negative publicity and public backlash. Volkswagen’s detention case highlighted how harmful such reports can be, tarnishing the brand’s reputation and consumer trust .
  • Loss of Consumer Confidence: Ongoing association with forced labor can lead to a loss of consumer confidence and loyalty, affecting sales and market position.

Even if goods are held & eventually released, importers can face the following:

  • Termination of contracts
  • Products no longer timely and may lose value
  • High demurrage fees
  • Disrupted manufacturing schedules

Last, but certainly not least, failure to terminate a relationship with a supplier that uses forced labor or takes appropriate remedial action may result in criminal liability.

Best Practices for Companies to Achieve UFLPA Compliance

Achieving compliance with the Uyghur Forced Labor Prevention Act (UFLPA) is crucial for importers to avoid severe legal, financial, and reputational consequences. Here are some best practices to help companies ensure compliance:

1. Proactive Supply Chain Mapping

  • Thoroughly Map Your Supply Chain: Begin by mapping your entire supply chain, with a focus on gaining visibility into lower-tier suppliers. This includes tracing the origins of raw materials and identifying all entities involved in the production process. Bonus points if you can digitize your supply chain map.
  • Focus on High-Risk Areas: Pay special attention to any parts of your supply chain that may have connections to the XUAR. Even minimal involvement with XUAR can trigger enforcement under the UFLPA. So it’s important to map your supply chains end-to-end.

2. Implement Robust Due Diligence Processes

  • Engage and Diversify Suppliers: Regularly engage with your suppliers to assess and address the risks of forced labor. This includes conducting thorough audits and assessments of their operations. Diversifying your supplier portfolio as well is a great risk-mitigation strategy as well.
  • Require Supplier Code of Conduct: Develop and enforce a comprehensive supplier code of conduct that explicitly forbids the use of forced labor and addresses the risk of involvement in Chinese government labor schemes. Including a firm stipulation with supplier contracts will ensure that should anything go awry, you can quickly address the issue and pivot to another supplier.
  • Implement Continuous Training & Monitoring: Implement ongoing monitoring of supplier compliance with the established code of conduct. Use independent verification to ensure the effectiveness of your due diligence processes.

3. Digitize Supply Chain Traceability

  • Adopt Digital Tools: Invest in digital, data-driven systems to track and verify the origins of your goods in real time. This will help you uncover inefficiencies, ensure compliance, and take immediate action when risks are identified. Many digital tools can support your compliance efforts with automatic alerts and flagging to spot areas of concert swiftly.
  • Consider Supply Chain Traceability Partners & Solutions: Consider adopting an end-to-end supply chain traceability system to capture & report the data you need to prove UFLPA compliance while optimizing your supply chain.
  • Chain-of-Custody Tracking: In addition to proof of raw material origins, chain of custody tracking is a crucial ingredient to ensuring final products weren’t mixed with non-compliant commodities at any point in the supply chain journey. Remember: no de minimus!

4. Outline Internal Risk Mitigation Processes

  • Prompt Escalation: Be sure to put chain of command processes in place to escalate any potential compliance issues within your organization. In the chance of product seizure for UFLPA compliance, ensure that executives and senior management are aware ASAP and take necessary actions.
  • Practice Makes Perfect: Once you have a risk mitigation strategy and process in place, practice a mock, real-life situation. Have your teams act as if non-compliant commodities were discovered and seized. Evaluate your plan and smooth out any weak areas.

BanQu: Get the data you need to prove UFLPA compliance, while driving more resilient business.

Non-compliance with the UFLPA can lead to severe legal, financial, and reputational consequences, including product seizures and hefty fines. Companies - especially in the fashion, electronics, and automotive industries - must proactively map and digitize their supply chains to ensure no touchpoints occur in Xinjiang. BanQu's supply chain traceability solutions help capture audit-ready compliance data, ensuring adherence to UFLPA while enhancing supply chain efficiency and resilience. To see if BanQu could be right for your business, schedule a free UFLPA consultation with us today.

Download The Guide To UFLPA Regulation, Requirements, & Compliance

The UFLPA came into effect in June of 2022. Learn how brands can comply with customs requirements to avoid costly fees and seizures.

Download the Guide

Resources
The Guide To UFLPA Regulation, Requirements, & Compliance
  • The Uyghur Forced Labor Prevention Act (UFLPA) - in effect as of June 21st, 2022 - prohibits any goods from entering the USA that were sourced in whole or in part in the Xinjiang region of China.
  • Consequences of non-compliance for companies include product seizure, loss, hefty fines, and reputational damage.
  • Companies importing any goods into the US - particularly fashion, electronic, and EV vehicle industries - should map & digitize their supply chains ASAP to ensure no touchpoints occur in the Xinjiang region (you’d be surprised how many do). 
  • Supply chain traceability solutions like BanQu can help capture source-level, audit-ready compliance data - and offer added business benefits - even beyond the UFLPA.

What is the UFLPA?

The Uyghur Forced Labor Prevention Act (UFLPA) builds on existing U.S. forced labor import bans by getting more regionally specific and strict—banning imports of any products that were fully or partially produced, mined, or manufactured in Xinjiang, a region of China where Uyghur Muslims are being subjected to forced labor. The act, signed into law on December 23rd and effective since June 22nd, 2022, enables Customs and Border Patrol to seize goods suspected of being - even in part - sourced from the region - and impose financial penalties.

Which products and industries are affected under the UFLPA?

When the UFLPA was issued, customs guidance included the top three products (and their downstream products) commonly sourced within the Xinjiang region of China by forced Uyghur labor (XUAR):

However, since 2022, we’ve seen just how many finished goods and raw materials are produced or manufactured in XUAR, and are thus affected under UFLPA:

  • Agriculture (including such products as raw cotton, hami melons, korla pears, tomato products, and garlic);
  • Textiles (including such products as apparel, bedding, carpets, wool, viscose); and
  • Auto parts; 
  • Cell Phones;
  • Cleaning Supplies;
  • Cotton, Cotton Yarn, Cotton Fabric, Ginning, Spinning Mills, and Cotton Products;
  • Extractives (including coal, copper, hydrocarbons, oil, uranium, and zinc);
  • Renewable Energy (polysilicon, ingots, wafers, crystalline silicon solar cells, crystalline silicon solar photovoltaic modules);
  • Stevia;
  • Sugar;
  • Toys.

*See the full list of goods and raw materials produced in XUAR here.

The Automotive Industry Takes a Big UFLPA Hit

“If you have bought a car in the last five years, some of its parts were likely made by Uyghurs and others forced to work in China.” - Helena Kennedy Centre

Perhaps the most impacted industry of the UFLPA, the automotive industry has taken large, unprecedented hits — even beyond silicon-based EV batteries. According to the Helena Kennedy Centre of International Justice, the link between Western Car Brands and forced-labor in the XUAR region is massive. From aluminium and steel, to copper and other car parts (e.g., tires), most car manufacturing historically sourced from China has come from or passed through the Xuar region in the last five years.

“Every major car brand – including Volkswagen, BMW, Honda, Ford, GM, Mercedes-Benz, Toyota, Stellantis brands (like Fiat, Chrysler, Dodge and Jeep), Tesla and NIO - is at high risk of sourcing from companies linked to abuses in the Uyghur region.” - Forced Labour Lab
Forced Labor Exposure in the Auto Industry
Source/Credit: Helena Kennedy Centre

Why is the UFLPA important?

This act is a huge step in governmental sustainability regulations and sets a precedent for how organizations will be required to source goods. Experts are keeping a close eye on industries that have long benefited from cheap, foreign labor, such as the fast fashion, electronics, and EV vehicle industries (the Uyghur region is a huge cotton and polysilicon exporter) and large corporations that have made sweeping sustainability claims without robust, data-driven proof.

  1. Strict Stance & Enforcement: The UFLPA takes an unprecendented, strict stance on forced-labor/unsustainable sourcing. While importers typically have 90 days to prove compliance with any relevant regulations in the past, under the UFLPA, importers will only have 30 days to prove compliance before goods are thrown out and fines are imposed. Additionally, the UFLPA has a “no de minimus” requirement. Meaning, evening if the smaller portion of your batch of goods is suspected of originating or touching the Xinjiang region, you are affected.
  1. Far-Reaching Affects on Commodities & Industries: While the main commodities affected are tomatoes, cotton, polysilicon, and their derivatives (sauce, clothing, EV batteries, etc.), the affected downstream products from these three raw materials are much more far-reaching. Multiple industries are affected under the UFLPA, including but not limited to the automotive industries, footwear & apparel industries, and many food & beverage industries.
  1. Rising Revenue Loss & Product Seizures: As with any new import/export or sustainability regulation, the actual impact of the regulation can be difficult to quantify or anticipate. However, since the UFLPA has been in effect since June 22nd, 2022, we’re able to see its effects on companies. Every year, more and more product and revenue loss has been recorded.

UFLPA Shipment Value by Month in USD
Source/Credit: Shipment Value Affected by UFLPA

Which suppliers are banned under the UFLPA?

In addition to commodity-specific bans and industry-specific ripple effects, the Department of Homeland Security published a list of suppliers whose ingredients and products are now completely banned from entering the United States. Suppliers not currently on the list but later found in violation of the act may be added in the future. To avoid supply chain disruptions, knowing who your suppliers are and who they’re sourcing from — all the way down to the first contributor will be key to avoiding border seizures. Most recently, 26 more entities were added to the list, so be sure to bookmark the site and check by often to stay up-to-date.

What are the requirements to comply with the UFLPA?

Under the Uyghur Forced Labor Prevention Act (UFLPA), goods produced wholly or in part in the Xinjiang Uyghur Autonomous Region (XUAR) of China, or by entities on the UFLPA Entity List, are presumed to be made with forced labor and are prohibited from entering the U.S. A simple, standard certification of origin is not enough to comply. Nor is re-routing shipments through Vietnam or Indonesia to hide XUAR sourcing. Here’s what in-scope importers need to know to maintain and prove compliance, particularly important in the case of product seizure:

General Provisions

General rules importers must know to prove compliance:

  • Presumption of Forced Labor: All goods from the XUAR or associated entities are presumed to be made with forced labor.
  • Challenging Detentions: Importers have 30 days to challenge a detention by U.S. Customs and Border Protection (CBP).
  • Clear and Convincing Evidence: Importers must provide clear and convincing evidence that their goods are not made with forced labor
  • Due Diligence and Traceability: Importers must demonstrate effective due diligence processes, supply chain tracing, and management measures.

Supply Chain Tracing Information

Importers must also provide detailed information about their supply chains, including:

  • Overall Supply Chain Evidence:
    • Description of the entire supply chain.
    • Roles of entities involved.
    • List of suppliers with contact information.
    • Affidavits from entities involved in production.
  • Merchandise-Specific Evidence:
    • Purchase orders, invoices, packing lists, and bills of materials.
    • Certificates of origin and payment records.
    • Shipping records and import/export documents.
    • End-to-end info to match & cover the specific product journey (i.e. for tomato products: info from tomato seed to finished products, affidavits, purchase orders, invoices, supplier lists, production process records and details)
  • Producer/Manufacturer Evidence:
    • Records tracing raw materials to the final product.
    • Production orders and factory capacity reports.
    • Site visit reports and evidence matching input volumes to output volumes.

To request release of any detained shipments, importers must submit their evidence to the port of entry, proving that goods are not produced with forced labor, and comply with the detailed requirements outlined in 19 CFR 12.43. By adhering to these requirements, importers can demonstrate compliance with the UFLPA and ensure their goods are admissible in the United States.

What are the consequences for UFLPA non-compliance?

As we’ve seen, non-compliance with the Uyghur Forced Labor Prevention Act (UFLPA) can lead to significant repercussions for importers and their customers, including legal, financial, and reputational damage. Here are the key consequences:

Legal and Financial Consequences

  • Detention of Goods: U.S. Customs and Border Protection (CBP) will detain goods suspected of being produced with forced labor. For example, Volkswagen found UFLPA-non compliance in one of their small car batteries, resulting in a significant chunk of their parts being impounded.
  • Seizure and Forfeiture: If importers fail to provide clear and convincing evidence within the 30-day challenge period, detained goods can be seized and forfeited.
  • Fines and Penalties: Importers may face substantial fines and penalties for violating the UFLPA, impacting their financial stability.

Reputational Damage

  • Bad Press and Public Scrutiny: Companies found non-compliant face negative publicity and public backlash. Volkswagen’s detention case highlighted how harmful such reports can be, tarnishing the brand’s reputation and consumer trust .
  • Loss of Consumer Confidence: Ongoing association with forced labor can lead to a loss of consumer confidence and loyalty, affecting sales and market position.

Even if goods are held & eventually released, importers can face the following:

  • Termination of contracts
  • Products no longer timely and may lose value
  • High demurrage fees
  • Disrupted manufacturing schedules

Last, but certainly not least, failure to terminate a relationship with a supplier that uses forced labor or takes appropriate remedial action may result in criminal liability.

Best Practices for Companies to Achieve UFLPA Compliance

Achieving compliance with the Uyghur Forced Labor Prevention Act (UFLPA) is crucial for importers to avoid severe legal, financial, and reputational consequences. Here are some best practices to help companies ensure compliance:

1. Proactive Supply Chain Mapping

  • Thoroughly Map Your Supply Chain: Begin by mapping your entire supply chain, with a focus on gaining visibility into lower-tier suppliers. This includes tracing the origins of raw materials and identifying all entities involved in the production process. Bonus points if you can digitize your supply chain map.
  • Focus on High-Risk Areas: Pay special attention to any parts of your supply chain that may have connections to the XUAR. Even minimal involvement with XUAR can trigger enforcement under the UFLPA. So it’s important to map your supply chains end-to-end.

2. Implement Robust Due Diligence Processes

  • Engage and Diversify Suppliers: Regularly engage with your suppliers to assess and address the risks of forced labor. This includes conducting thorough audits and assessments of their operations. Diversifying your supplier portfolio as well is a great risk-mitigation strategy as well.
  • Require Supplier Code of Conduct: Develop and enforce a comprehensive supplier code of conduct that explicitly forbids the use of forced labor and addresses the risk of involvement in Chinese government labor schemes. Including a firm stipulation with supplier contracts will ensure that should anything go awry, you can quickly address the issue and pivot to another supplier.
  • Implement Continuous Training & Monitoring: Implement ongoing monitoring of supplier compliance with the established code of conduct. Use independent verification to ensure the effectiveness of your due diligence processes.

3. Digitize Supply Chain Traceability

  • Adopt Digital Tools: Invest in digital, data-driven systems to track and verify the origins of your goods in real time. This will help you uncover inefficiencies, ensure compliance, and take immediate action when risks are identified. Many digital tools can support your compliance efforts with automatic alerts and flagging to spot areas of concert swiftly.
  • Consider Supply Chain Traceability Partners & Solutions: Consider adopting an end-to-end supply chain traceability system to capture & report the data you need to prove UFLPA compliance while optimizing your supply chain.
  • Chain-of-Custody Tracking: In addition to proof of raw material origins, chain of custody tracking is a crucial ingredient to ensuring final products weren’t mixed with non-compliant commodities at any point in the supply chain journey. Remember: no de minimus!

4. Outline Internal Risk Mitigation Processes

  • Prompt Escalation: Be sure to put chain of command processes in place to escalate any potential compliance issues within your organization. In the chance of product seizure for UFLPA compliance, ensure that executives and senior management are aware ASAP and take necessary actions.
  • Practice Makes Perfect: Once you have a risk mitigation strategy and process in place, practice a mock, real-life situation. Have your teams act as if non-compliant commodities were discovered and seized. Evaluate your plan and smooth out any weak areas.

BanQu: Get the data you need to prove UFLPA compliance, while driving more resilient business.

Non-compliance with the UFLPA can lead to severe legal, financial, and reputational consequences, including product seizures and hefty fines. Companies - especially in the fashion, electronics, and automotive industries - must proactively map and digitize their supply chains to ensure no touchpoints occur in Xinjiang. BanQu's supply chain traceability solutions help capture audit-ready compliance data, ensuring adherence to UFLPA while enhancing supply chain efficiency and resilience. To see if BanQu could be right for your business, schedule a free UFLPA consultation with us today.

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Download The Guide To UFLPA Regulation, Requirements, & Compliance

The UFLPA came into effect in June of 2022. Learn how brands can comply with customs requirements to avoid costly fees and seizures.

Download the Guide

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