In early January 2022, the United States Customs and Border Protection (hereinafter referred to as "the United States Customs") detained a batch of Chinese dates at the port of Oakland, California, under the Xinjiang Related Act, on the grounds that these dates were produced in Xinjiang and the packaging was printed with the "Xinjiang Construction Corps" icon [1]. This event indicates that the implementation of the Xinjiang Related Program is not limited to specific products such as photovoltaic, cotton, and tomatoes. Therefore, if exporters lack knowledge of the risks involved in Xinjiang, they may result in the export goods being detained or even destroyed by the United States Customs. The following will briefly introduce the key points of the Xinjiang Related Act and the coping strategies of Chinese enterprises in this new context. 

Main provisions of the Xinjiang Related Act

The full name of the Xinjiang Related Act is the Uighur Forced Labor Prevention Act (UFLPA), which was signed by US President Biden on December 23, 2021, and aims to strengthen the import control of goods produced in Xinjiang or related entities by the US government. According to Part 3 (SEC. 3) of the Xinjiang Related Act, US customs must presume that they are producing in Xinjiang, China, "Or goods mined, produced, or manufactured by entities on the list of entities involved in Xinjiang use forced labor and are prohibited from entering the United States.". This provision entered into force on June 21, 2022, marking the full implementation of the Xinjiang Related Act.

Scope of application of the Xinjiang Related Act

Although the key law enforcement products emphasized in the Xinjiang Related Act are photovoltaic, cotton, and tomatoes (see Annex A to the Act), other products and industries may also be affected, as the Act applies to products produced in any of the following situations:

● Products mined, produced, or manufactured in Xinjiang;

● Products mined, produced, or manufactured by enterprises on the list of entities involved in Xinjiang; [2]

● Products that are produced in other regions, but whose raw materials and components come from Xinjiang, or are mined, produced, or manufactured by enterprises on the list of entities involved in Xinjiang.

Inversion and transfer of the burden of proof

The Xinjiang Related Act requires the United States Customs to identify, detain, inspect, or confiscate goods exported to the United States by Xinjiang or related entities through various sources of information, including reporting, unless the importer can provide clear and convincing evidence to rebut the presumption of the United States Customs that the relevant goods were not produced in Xinjiang or, even if produced in Xinjiang, were not manufactured using forced labor.
In practice, because the evidence required by the United States government covers all supplier information and related records throughout the entire supply chain from raw materials to finished products, importers are often unable to provide such information. Therefore, the burden of proof and legal risk are transferred from US importers to Chinese exporters.

Evidence requirements of the United States government

According to the Xinjiang Related Act and the accompanying Operational Guidelines for Importers [3], after the relevant goods are detained by U.S. customs, U.S. importers/Chinese exporters must submit evidence of due diligence and supply chain management, supply chain traceability, and no forced labor before the goods can be released. On the contrary, if the importer fails to provide clear and convincing evidence to overturn the presumption of US customs, the relevant goods will be refused entry. At that time, the importer must arrange for the re export of the relevant goods within the prescribed time limit, otherwise the goods will be destroyed by the United States Customs.

Specifically, the evidence that US importers/Chinese exporters need to submit includes the following:

Evidence of Due Diligence and Compliance Management: Evidence that the importer has conducted supply chain due diligence and compliance management for Xinjiang related elements, such as:

● The enterprise has jointly verified or evaluated the risks of forced labor with suppliers and relevant trading parties;

● The enterprise has evaluated whether there is a risk of forced labor in the supply chain from raw materials to commodity production;

● Enterprises require suppliers to sign a supplier code of conduct and prohibit the use of forced labor;

● Provide necessary training to employees who select or coordinate with suppliers within the enterprise to prevent the risk of forced labor;

● The enterprise takes effective measures to monitor suppliers' compliance with the code of conduct;

● If any situation of forced labor is discovered, the enterprise shall immediately remedy it or terminate its cooperative relationship with the supplier if it is unable to remedy it;

● The company has evaluated the implementation and effectiveness of the due diligence system;

● The company has irregularly summarized the performance and participation of the due diligence system.

Supply chain evidence: evidence that the goods were not produced by a company on the list of Xinjiang or Xinjiang related entities, such as:

Evidence related to the entire supply chain, including:

● The production process and supply chain map of relevant goods and components must cover all entities in the supply chain;

● Name, contact information, role, and factory address of each entity in the supply chain;

● Affidavit of no forced labor issued by various entities in the supply chain.

Evidence related to the product or component, including:

● Procurement documents, such as orders, contracts, invoices, certificates of origin, and payment vouchers;

● Transportation documents, such as bills of lading, freight invoices;

● Enterprise inbound and outbound documents;

● Import and export customs clearance documents;

Evidence related to production, including:

Production records, raw material procurement vouchers, documents that can prove the equipment capacity, factory inspection reports, and evidence that the input amount of raw materials matches the output amount.

Evidence of no forced labor: evidence that the goods were not produced by forced labor, such as:

● The production of related goods does not use forced labor. Such evidence must cover the labor usage of various entities involved in different stages of the supply chain, including: a complete list of workers; Wage payments for workers on the list; The native place and residence status of the workers; Evidence that workers match production;

● Workers involved in product production are not recruited, transported, transferred, harboured, or received with the participation of local governments, Xinjiang Production and Construction Corps, or enterprises on the list of entities involved in Xinjiang.

● Measures taken by entities in the supply chain to ensure that all workers are recruited voluntarily. Evidence in this regard includes employee recruitment documents; Enterprise internal control working documents; Documents indicating that the company supports religious beliefs and language freedom; Independent third-party audit work reports, etc.

The above list of evidence is not exhaustive, and the United States Customs may also specifically raise other questions and requirements based on the specific product and business of the importer. It can be seen that the presumption of guilt principle under the Xinjiang Related Act gives the United States Customs a great deal of discretion, while imposing an excessive burden of proof on importers and Chinese enterprises, making it extremely difficult to prove. If an enterprise does not establish a complete Xinjiang related compliance system in its daily operations, it will be difficult to meet the evidentiary requirements of the United States government within the prescribed time limit.

Risks and losses of goods being detained

Since the full implementation of the Frontier Related Act on June 21, 2022, the United States Customs has detained thousands of batches of solar cells and components, valued at hundreds of millions of dollars. The reason for the US government is that they reasonably suspect that these goods use raw materials mined or produced in Xinjiang, China. After four months of negotiation, a large number of goods have still not been released by the customs.

Once the goods are detained by the United States Customs under the Frontier Related Act, in addition to incurring high port detention costs, it will also lead to a series of contract disputes. For example, after the goods of a photovoltaic enterprise in China were detained by the United States customs, they were subject to a sky-high price claim from a United States customer. The reason for the US customer is that when the Chinese side is unable to deliver the components, the US customer can only purchase the components from a third party, resulting in increased procurement costs and delays in delivering the components, resulting in a total project loss of hundreds of millions of dollars for the plaintiff.

Strategies for Chinese Enterprises

As mentioned earlier, the presumption of guilt principle under the Xinjiang Related Act gives the United States Customs a great deal of discretion, while imposing an excessive burden of proof on importers and Chinese enterprises. In this case, Xinjiang related products should be avoided from exporting to the United States. On the other hand, if the United States is an important export market for enterprises and cannot stop exporting in the short term, it is recommended to consider the following countermeasures:
Firstly, from a commercial perspective, enterprises can take the following measures:
For products exported to the United States in the future, enterprises can consider using imported raw materials for production. This makes it easier to prove that exported products do not use forced labor, reducing the time for goods to be detained at United States customs. For example, in December 2022, the United States Customs released some solar cells exported from China, mainly because the relevant companies were able to prove that the raw materials (polysilicon) needed for their production were from American and European suppliers.

2. Enterprises should strengthen cooperation with end customers in the United States (such as the American Import Industry Association and the Consumer Alliance), so that when goods are detained by the United States Customs, the end customer can negotiate with the United States Customs in a timely manner and request early release.

Enterprises should strive to cooperate with American customers, establish joint venture factories in the United States, and enhance the voice of Chinese enterprises in the domestic industry in the United States. This can reduce the possibility of the United States Customs intercepting your goods, as the subject of applications to the United States Customs for intercepting goods under the Xinjiang Related Act is often the domestic industry of the United States.

Secondly, from a legal perspective, enterprises can take the following measures:

Improve due diligence and traceability management of suppliers as soon as possible, and collect evidence of non forced labor. The relevant due diligence and traceability management are extremely professional, and enterprises should hire professional lawyers to assist in relevant work.

"In the contract for the sale of goods between an enterprise and a U.S. customer, a corresponding clause should be added, stipulating that the buyer and seller jointly bear the risk of goods being detained under the Xinjiang Related Act.". Firstly, if the goods are detained by the US customs, the US customer has the obligation to communicate with the US customs; Secondly, the expenses incurred in responding to the United States temporary detention order shall be borne by the United States or both parties; Thirdly, the US temporary detention order is listed as one of the situations of force majeure, and China does not have to bear the relevant liability for breach of contract for the delay and return of goods caused thereby. Considering that in international trade, there are often only orders and no contracts, if necessary, professional lawyers can be hired to specially draft relevant contracts or terms.

Statement: This article only represents the author's personal views and does not constitute a legal opinion. If your company needs professional advice on the US export control and border related legislation, please contact the author.
References and Notes:

[1]Evan Conceicao and Melissa Whalen, “Implementing the Uyghur Forced Labor Prevention Act: A Challenge Worth the Effort”, U.S. Customs and Border Protection official website, available from:  https://www.cbp.gov/frontline/implementing-uyghur-forced-labor-prevention-act

[2]UFLPA Entity List, available from:  https://www.dhs.gov/uflpa-entity-list

[3]U.S. Customs and Border Protection Operational Guidance for Importers, June 13, 2022, available from:  https://www.cbp.gov/sites/default/files/assets/documents/2022-Jun/CBP_Guidance_for_Importers_for_UFLPA_13_June_2022.pdf