Over the long weekend, famed venture capitalist and Golden State Warriors team co-owner Chamath Palihapitiya said the crisis facing the Uyghur Muslims in Xinjiang, China is not high on his, or anybody’s, list of things to worry about.
Chamath made the comment on the “All-in Podcast” on Saturday, after co-host Jason Calacanis brought up President Joe Biden’s “very strong” stance on the alleged human rights abuses faced by the Uyghur minority in China.
“Nobody cares about what’s happening to the Uyghurs, okay? You bring it up because you really care, and I think it’s nice that you care, the rest of us don’t care,” Palihapitiya said. “Of all the things I care about, yes, it is below my line.”
While Chamath was likely making the point that the NBA and individuals have other things to worry about, his callousness to the plight of the Uyghurs at the hands of the Chinese Communist Party sparked an instant outrage by show hosts and listeners. His own team separated themselves from the comment, but never mentioned China or the plight of the Uyghurs.
Many individuals and companies doing business in China are going to have to start seeing things very differently. They might be more worried about their child’s school, or their health and job status, but if they are doing business in China, and that business includes a supply chain linked to China, they care very much about the Uyghurs.
Thanks to a new law, they legally have to care.
President Biden signed the Uyghur Forced Labor Prevent Act into law on December 23. Compliance officers now have their hands full. Their businesses may be guilty until proven innocent if making a product that has ties to Xinjiang supply chains.
Corporate trade lawyers from Wiley held a webinar with clients on January 13 to warn them what’s coming. In short, the law signed by Biden presumes goods from Xinjiang are produced by forced labor and will be barred from entry to the United States by Customs and Border Protection (CBP). This includes goods mined, manufactured, or produced, wholly or in part, in Xinjiang – such as cotton and polysilicon used in making solar cells and semiconductors – already banned by CBP in a Withhold Release Order in January and June against one polysilicon producer.
The law now includes manufactured goods made by entities that work with the government of Xinjiang “to recruit, transport, transfer, harbor, or receive forced labor” out of the far western province and into other parts of the country.
It won’t be easy to do the due diligence on these global supply chains, but now companies are faced with the threat of being at odds with the law.
Comments from the Wiley attorneys last week suggest many companies do not have insight into where their raw materials come from. This would include the two main ones sourced from Xinjiang – cotton for retail apparel, and polysilicon.
Chinese companies are unlikely to cooperate with traceability requests from U.S. companies, particularly given the Chinese laws that prohibit them from doing so. Chinese law forbids Chinese companies from complying with requests for supply chain sourcing.
Wiley partner Tim Brightbill said, “I think companies have to assume their suppliers in China may not cooperate with these enforcement efforts and may have to plan accordingly.”
A White House task force will put together a list of Uyghur forced labor factories, and Customs will refer mostly to that list to keep them out of U.S. supply chains.
It won’t be easy.
The real solution is to get away from Withhold Release Orders, which usually target a company, or Entity Lists by the Commerce Department, and move towards a country-wide ban of a specific product already known to be a hotbed of Muslim prison labor.
Multinationals can hire law firms to put together convincing paperwork showing a supply chain doesn’t involve a factory on the task force’s list, and they’ll get a pass.
We should know more about the efficacy of the law this year.
At a minimum, importers from China should have all their shipping documents made public. Shipping documents for ocean vessels are already largely public, and readily accessible thanks to websites like Import Yeti. But importers are going the extra yard now and getting confidentiality treatment for their shipments. Moreover, air and land shipments aren’t public. This needs to change. To truly police supply chains involving forced labor, extending transparency on shipping documents is a bare minimum.
Polls have shown that American consumers do not support forced labor goods in the supply chain. CPA did a recent poll, conducted by Morning Consult, that asked this very question in regard to the solar industry’s supply chain in China.
We would like to think that NBA owner and billionaire Chamath is probably not supportive of Uyghur genocide, but his comments represent a pattern of big business influencers who treat China like it’s a Western Democracy, rather than a country the State Department said, under both the Trump and Biden administrations, is committing genocide.
Until A-list names like Chamath and companies attracted to the China market speak out, even if only once, nothing changes. As a result, businesses get stuck with new compliance issues that make their business more complicated.
Wiley, and other corporate lawyers, know that businesses are moving away from Xinjiang and China. It’s happening slowly. One reason is that there is no corporate influencer saying anything about China’s human rights abuses until Biden made this a law. Now companies will have no choice but to care about the Uyghurs, even if they remain quiet about it.