Uyghur Forced Labor Prevention Act Puts Onus on Corporations. Here Are Their Xinjiang Forced Labor Suppliers.

The U.S. Senate passed the Uyghur Forced Labor Prevention Act on December 16 as a separate bill, one which initially sought to be part of the Senate’s Innovation and Competition Act, the Infrastructure Law, and the beleaguered Build Back Better Act. As a stand-alone, the Act puts the onus on corporations to prove that their goods were not made by forced labor in China, at any part along the supply chain. It’s guilty, until proven innocent.

The text of the bill was written by Senator Marco Rubio (R-Fla.) and Representative Jim McGovern (D-Mass.). The House version passed first.

Over the years, including this year, we’ve seen different attempts from Congress to pass legislation banning imports of goods from Xinjiang, the infamous home to detention facilities holding tens of thousands of Muslim minorities, most of them Uyghurs. The U.S. State Department under both Trump and Biden said the Chinese Communist Party’s treatment of people in those facilities was akin to “genocide”. Many of them are spread out throughout China as prison labor, receiving little to no pay, doing everything from harvesting cotton, to busting up quartz rocks for use in polysilicon manufacturing for semiconductors and solar panels.

President Biden said he will sign the Uyghur Forced Labor Protection Act into law. CPA believes he will do so after the holidays.

The Customs and Border Protection Agency (CBP), under Homeland Security, has issued numerous so-called Withhold Release Orders (WRO) on products sourced from Xinjiang. This includes apparel made from Xinjiang cotton, and solar cells made from polysilicon sourced from one company in Xinjiang known as Hoshine Silicon Industry.

Some companies have been specifically banned from the supply chain here, and others faced regional product line bans, non-company specific, if they were active in cotton sourcing, or tomato-based goods such as ketchup.

As an aside, it is worth noting that despite being banned from U.S. supply chains due to forced labor issues, BlackRock has been a buyer of Hoshine’s shares in China as recently as November 30. And Vanguard has been an owner of Hoshine shares in two mutual funds sold to retail investors as recently as October 31.

Xinjiang Production and Construction Corps, best known by its acronym XPCC, was one of the first companies to be subject to a WRO due to forced labor. XPCC is known to have seized farmland of small-scale farmers to allocate it for industrial farm use in Xinjiang. The CCP says it pays them rental fees, but human rights groups, scholars, and international labor rights organizations have suggested that the land was taken by XPCC – or better yet, stolen.

Here is a look at some of the famous U.S. retail brands that are consumers of Xinjiang cotton.

The above infographic is a smaller version of one published in November by Sheffield Hallam University’s Helena Kennedy Center for International Justice in the U.K. The 81-page report, titled “Laundering Cotton: How Xinjiang Cotton is Obscured in International Supply Chains” recommended that businesses who contract with suppliers, sub-suppliers, or business partners that get their source material from forced labor players must be held liable even if they had no knowledge of it. Unless they can provide proof that they took tangible measures to identify and prevent such exploitation, a major apparel brand should be accountable for their forced labor supply chains.

The report cited a person named Erzhan Qurban, one of the estimated 2.6 million Uyghur, Kazakh, Kirghiz and other Muslim minorities in Xinjiang, who said they were forced into participating in state-sponsored forced labor programs in Xinjiang.

Human rights groups have been feeding Congress with the testimonies of people like Qurban for at least the past two years, providing details of forced labor practices in the supply chain – especially apparel, a market China dominates worldwide. This includes the confiscation of identification documents, 24-hour surveillance, threats of imprisonment, militarized discipline, and threats of retaliation for speaking about abuses.

This December 18 article in the New York Post quotes a Uyghur refugee’s experience in the detention centers and forced labor programs. It should be considered a primer for anyone on Capitol Hill still wrapping their head around forced labor products lining the wracks of Kohl’s and Macy’s, and the catalogs of L.L. Bean and Land’s End.

Since at least 2017, China has inflicted an unprecedented system of mass internment, surveillance, and involuntary labor in Xinjiang, also known as the location where Disney had the gall to film scenes from its live-action Disney Princess film Mulan. Estimates are that as many as 1.8 million people have been moved in and out of those internment camps, which Beijing calls re-education centers where Muslims are given CCP 101 level courses on “Xi  Jinping Thought”.

According to the Sheffield Hallam report, Xinjiang cotton has come to be “associated with human rights abuses” and should now “be considered high risk for international brands.”

China’s cotton industry has benefited from an export strategy that obscures cotton’s origin in Xinjiang.

Xinjiang produces approximately 85% of all of China’s cotton, and in the last several years, China has encouraged the rapid growth of cotton goods manufacturing there.

United States shipping records, based on data from Sheffield Hallam’s study, indicate that cotton, textile, and apparel imports originating from Xinjiang have nearly ceased altogether in the last two years. This doesn’t mean Xinjiang cotton has gone out of business.

Cotton-based yarn, textiles, and finished garments manufactured in Xinjiang are transported from the region to other locations – and other countries — before being turned into a finished good and shipped internationally. Sheffield Hallam researchers, led by Laura T. Murphy, found that while the United States remained the largest consumer of finished apparel from China, the top destinations for the cotton and base fabrics from China are Bangladesh, Vietnam, Philippines, Hong Kong, Indonesia, and Cambodia. These countries account for over 52% of exports of semi-finished cotton goods exported from China. Manufacturers in these countries serve as intermediaries in finishing cotton-based apparel, thus obscuring the provenance of the cotton which – if it came from China – came from Xinjiang.

The main cotton supply chain players are Huafu Fashion, Lianfa Textiles, Luthai Textiles, Texhong Textiles, and Weiqiao Textiles. Xinjiang cotton may be reaching international consumers, including through some of China’s top cotton textile export partner countries. A review of state media and corporate disclosures reveals that these five companies have all sourced cotton from Xinjiang as recently as last fall 2020. Most of these companies have subsidiaries there that have employed state-sponsored labor transfers of prison labor throughout China, which brings CPA to believe that certain products should be banned on a national level, or risk putting Customs through the wringer as a police force with limited resources to stop forced labor from key, consumer supply chains like clothing.

According to Sheffield Hallam, some 103 well-known international brands are supplied by Asian intermediaries who are at high risk of having Xinjiang cotton in their supply chains.

Sheffield Hallam recommends that governments:

• Enact legislation that prohibits the importation of goods made in whole or in part from forced labor (based on Section 307 of the Tariff Act of the United States);
• Enact legislation to hold liable companies that benefit from forced labor, whether the forced labor is committed by the corporation or by its subsidiaries, suppliers, sub-suppliers, or business partners, whether or not they had knowledge of it or intended for the violations to occur;
• Enact legislation that makes customs records publicly available.

And for businesses:

• Any company sourcing apparel and other cotton-made goods should trace their supply chains to identify their suppliers at every tier, down to the raw materials;
• As it is not possible to conduct standard human rights due diligence as set forth in the UN Guiding Principles on Business and Human Rights in Xinjiang, due to the interference of the government, companies should disengage from any supplier (and its parent and subsidiaries) located in or sourcing from the Uyghur Region;
• Disengage from any supplier or sub-supplier that employs laborers through state-sponsored labor programs;
• Join the Coalition to End Forced Labor in the Uyghur Region’s Call to Action or take comparable steps to ensure that cotton-made goods are not made in whole or in part from the forced labor of Uyghur and other Muslim minorities in Xinjiang.

The Uyghur Forced Labor Protection Act, once it becomes law, may force companies to try a bit harder on the due diligence side of their supply chain. They may move out of Asia altogether, though this is hard to believe.  There is very limited intel on the sources of imported goods.

When goods are imported, CBP gets very limited information on the shipping documents. Importers are not required to list their supply chain. So attempting to stop imports that consist of inputs made by certain producers in certain parts of a country puts a massive burden on CBP.

The Uyghur Forced Labor Protection Act attempts to ease this burden somewhat by shifting it to importers. But at the end of the day, CBP has to either take their word for it or do loads of China-based detective work for every importer.

Time will tell if they can put an end to this, which not only makes it hard for American textile producers to compete but also for poorer countries in Central America which are also part of the U.S. textile supply chain. Like here at home, they too will have no fighting chance against Chinese prison labor.