February 20, 2022
December 14, 2022
1
Min Read

What does the new WRO for forced labor in Xinjiang mean for global brands?

What does the new WRO for forced labor in Xinjiang mean for global brands?
Blog

Here are a few things you should consider:

Right now, you probably know who your Tier 1 suppliers are and that they have warehouses in Shanghai or Bangladesh. But you’re not sure who their suppliers are, and you have no idea where the original cotton bales came from. Maybe the bales were picked in the XUAR; maybe they weren’t. Maybe your cotton is blended from two or more origins—half comes from cotton in Xinjiang; the other half comes from growers in the Yangtze River Basin or the Huang-Huai Region.

You could attempt to map your supply chain by asking your suppliers for their suppliers, but that could take a while. They might tell you about some suppliers, but not others. Or they may not respond at all. All that to say, you still won’t be sure whether you’re sourcing from Xinjiang. And you certainly won’t be able to prove you’re not. Remember, too, that it’s not only articles produced in the XUAR; the WRO also includes entities outside the XUAR that are using workers from the XUAR who have been forcibly transferred there.

How do you prove that no part or portion of your product was produced by forced labor or in Xinjiang?

The answer is simple: Prove that it all came from somewhere else and that everyone received payment. A blockchain-enabled traceability solution like BanQu can geo-locate each transaction along your supply chain, from the cotton picker or farmer, through every transport and transformation, to the shelf. For proof of admissibility, customs officials will likely require you to show the entire supply chain from the bale level, identify all parties involved in the production process, and provide maps of where each production process occurred. That information is recorded in real-time with blockchain solutions capable of reaching that far into your value chain. (See below for more on what may be required and how BanQu can help.)

The execution might be more complex for brands who find that their cotton is coming from Xinjiang (or produced by forced Uyghur labor) and need to redirect their supply chains. We’re not under any illusions that redirecting will be easy. Current supply chain disruptions aside, it takes months if not years to vet, train, and certify new suppliers. For that reason, some brands may decide to risk it and see if they can get their products through without making any changes. Given the recent detention of tomatoes from Mexico under a similar WRO, it’s not a risk we suggest taking.

How do you provide “clear and convincing” evidence for customs?

There are no specific requirements yet. More details will be forthcoming after a period of public comment, but Customs and Border Protection has required the following as proof of admissibility under similar WROs. BanQu can provide corresponding evidence to back you up.

  1. An affidavit from the provider of the product. Brands can use real-time blockchain records that are tamper proof to draft their statements.
  2. Purchase orders, invoices, and proof of payment. Brands and their suppliers can place orders, track invoices, and provide proof of payment through the platform…including proof of payment to the cotton picker.
  3. A list of production steps and records for the imported merchandise. Every transaction is captured in real-time and geo-located, even with SMS at the cotton picker level. You can share a full mapping of your production process and corresponding records with customs officials.
  4. Transportation documents. Capture the truck manifest, bill of materials, and tie it all back to the original purchase order.
  5. Daily manufacturing process reports. Each step of the manufacturing process can be captured, including every asset transformation, ensuring a complete view of the chain of custody.
  6. A list of entities that supplied inputs for the products being imported. BanQu’s platform proves not just the materials in motion, but each supplier and all the people across the value chain, including the cotton picker.
  7. Any other relevant information that the importer believes may show that the shipments are not subject to the import ban. Let’s just say full traceability means you can provide any proof customs will need.

So, what should your company do?

Forward-thinking leaders will give themselves as much lead time as possible for supply chain redirects. Best-case scenario, your suppliers are blending cotton from Xinjiang with that of another region in China. With lead time, you could work with your existing suppliers to include only non-Xinjiang cotton in your products and trace that supply, proving fair pay and decent labor conditions, through a blockchain traceability solution from the bale to the final product. Worst-case scenario, you need to find new suppliers in China, Egypt, or Uganda. As that value chain becomes established, you’ll still need a traceability solution for customs evidence. In any case, the sooner you know, the more options you’ll have to reduce disruptions in production.

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Resources
Blog
What does the new WRO for forced labor in Xinjiang mean for global brands?

Here are a few things you should consider:

Right now, you probably know who your Tier 1 suppliers are and that they have warehouses in Shanghai or Bangladesh. But you’re not sure who their suppliers are, and you have no idea where the original cotton bales came from. Maybe the bales were picked in the XUAR; maybe they weren’t. Maybe your cotton is blended from two or more origins—half comes from cotton in Xinjiang; the other half comes from growers in the Yangtze River Basin or the Huang-Huai Region.

You could attempt to map your supply chain by asking your suppliers for their suppliers, but that could take a while. They might tell you about some suppliers, but not others. Or they may not respond at all. All that to say, you still won’t be sure whether you’re sourcing from Xinjiang. And you certainly won’t be able to prove you’re not. Remember, too, that it’s not only articles produced in the XUAR; the WRO also includes entities outside the XUAR that are using workers from the XUAR who have been forcibly transferred there.

How do you prove that no part or portion of your product was produced by forced labor or in Xinjiang?

The answer is simple: Prove that it all came from somewhere else and that everyone received payment. A blockchain-enabled traceability solution like BanQu can geo-locate each transaction along your supply chain, from the cotton picker or farmer, through every transport and transformation, to the shelf. For proof of admissibility, customs officials will likely require you to show the entire supply chain from the bale level, identify all parties involved in the production process, and provide maps of where each production process occurred. That information is recorded in real-time with blockchain solutions capable of reaching that far into your value chain. (See below for more on what may be required and how BanQu can help.)

The execution might be more complex for brands who find that their cotton is coming from Xinjiang (or produced by forced Uyghur labor) and need to redirect their supply chains. We’re not under any illusions that redirecting will be easy. Current supply chain disruptions aside, it takes months if not years to vet, train, and certify new suppliers. For that reason, some brands may decide to risk it and see if they can get their products through without making any changes. Given the recent detention of tomatoes from Mexico under a similar WRO, it’s not a risk we suggest taking.

How do you provide “clear and convincing” evidence for customs?

There are no specific requirements yet. More details will be forthcoming after a period of public comment, but Customs and Border Protection has required the following as proof of admissibility under similar WROs. BanQu can provide corresponding evidence to back you up.

  1. An affidavit from the provider of the product. Brands can use real-time blockchain records that are tamper proof to draft their statements.
  2. Purchase orders, invoices, and proof of payment. Brands and their suppliers can place orders, track invoices, and provide proof of payment through the platform…including proof of payment to the cotton picker.
  3. A list of production steps and records for the imported merchandise. Every transaction is captured in real-time and geo-located, even with SMS at the cotton picker level. You can share a full mapping of your production process and corresponding records with customs officials.
  4. Transportation documents. Capture the truck manifest, bill of materials, and tie it all back to the original purchase order.
  5. Daily manufacturing process reports. Each step of the manufacturing process can be captured, including every asset transformation, ensuring a complete view of the chain of custody.
  6. A list of entities that supplied inputs for the products being imported. BanQu’s platform proves not just the materials in motion, but each supplier and all the people across the value chain, including the cotton picker.
  7. Any other relevant information that the importer believes may show that the shipments are not subject to the import ban. Let’s just say full traceability means you can provide any proof customs will need.

So, what should your company do?

Forward-thinking leaders will give themselves as much lead time as possible for supply chain redirects. Best-case scenario, your suppliers are blending cotton from Xinjiang with that of another region in China. With lead time, you could work with your existing suppliers to include only non-Xinjiang cotton in your products and trace that supply, proving fair pay and decent labor conditions, through a blockchain traceability solution from the bale to the final product. Worst-case scenario, you need to find new suppliers in China, Egypt, or Uganda. As that value chain becomes established, you’ll still need a traceability solution for customs evidence. In any case, the sooner you know, the more options you’ll have to reduce disruptions in production.

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