Electronics Importers Must Adapt Processes in Response to UFLPA

By Eric Linxwiler

No industry has been hit harder by the United States’ Uyghur Forced Labor Prevention Act (UFLPA) than electronics. Of the more than 4,200 shipments detained during the first year of America’s supply chain law, which bans the importation of goods made in whole or in part from China’s Xinjiang region under the presumption they were produced with forced labor, nearly half have been electronics. According to the latest data from U.S. Customs and Border Protection’s UFLPA enforcement dashboard, the agency has detained more than $1,193 million in electronics shipments. Of the 1,999 electronics shipments detained so far, only 840 have been released, with 1,333 still pending. The exact product breakdown of those electronics detainments is unknown because Customs doesn’t share granular data about the shipments it detains, but it’s clear one product makes up a disproportionate share. Customs cracked down on solar PV module imports swiftly under the UFLPA last year, detaining 1,423 shipments, according to recent reports.

Eric Linxwiler

Past enforcement numbers may only provide a limited hint into how the agency will enforce the law going forward, however. Customs officials have maintained that their enforcement priorities will evolve in response to changing data and intelligence about which products are most at risk. One unmistakable takeaway from the first year of the UFLPA is its enforcement scope isn’t limited to shipments from China. In fact, of the electronics shipments Customs has seized so far, the vast majority came from Malaysia (1,280) and Vietnam (676), not China. Since the law applies to shipments from any country of origin, it’s not adequate for brands and retailers to merely demonstrate to Customs that their shipments came from outside China. To comply with the UFLPA and prove that no forced labor was involved in the creation of imports, Customs’ guidelines stipulate that companies must be able to provide documentation detailing “the order, purchase, manufacture, and transportation of inputs throughout their supply chain.” That could include records of the payments for transportation of raw materials (including invoices, contracts, purchase orders and other proofs of payment); and transaction and supply chain records (including packing lists, bills of lading, and manifests). The exact documentation required will vary on a case-by-case basis, but in short, electronics retailers must now have full records of all their suppliers, from raw materials to finished goods, and they need to document and provide to authorities the full chain of custody of materials. That poses a challenge, both because of the high quantity of components involved in finished electronics goods and because most businesses lack the proper systems to document the full provenance of their products and centralize supplier information, especially beyond the first and second tier. Optimizing Chain of Custody Management

Electronics manufacturers need to adopt a supply chain management platform that can provide the transparency they need to make the most responsible sourcing decisions and to map their supplier networks to the Nth tier to obtain the proper chain of custody documentation. Especially for retailers with increasingly complex supply chains supporting vast supplier networks, that traceability is almost impossible without an advanced multi-enterprise platform. A multi-enterprise platform helps businesses collect and organize the chain of custody documentation they need to adhere to UFLPA guidelines. In response to demand from our customers, my company TradeBeyond recently introduced a comprehensive chain of custody management suite. The platform introduces a simple process for compiling this documentation during order creation and for determining whether an order has fulfilled the chain of custody obligations of the UFLPA and other new global due diligence laws. To mitigate risk, the system also creates alerts flagging orders that have unmet chain of custody requirements. This technology will increasingly become standard as businesses continue to adjust to the UFLPA’s new normal, especially as reports mount about long and extremely costly product detainment delays at ports under the law. While managing orders properly can help avoid lengthy detainments, another key preventative measure electronics retailers can take is selecting carefully vetted supply chain partners in the first place. Here, too, multi-enterprise platforms prove to be invaluable. Supplier Relationship Management tools allow supply chain managers to vet and monitor vendor compliance, enforce their company’s ESG expectations, and easily and quickly onboard responsible suppliers based on their location and accreditation. This allows companies to strategically cut high-risk vendors and regions out of their supply chain, which is precisely what lawmakers set out to accomplish with the UFLPA. A multi-enterprise platform grants electronics retailers more efficient operations and a full understanding of their social and environmental footprint. In addition to facilitating visibility, it exposes vulnerabilities that businesses can quickly act to correct. This due diligence is no longer just a best practice; it’s key to staying ahead of tightening ESG regulations like the UFLPA.

Eric Linxwiler is Senior Vice President of TradeBeyond. He has over 30 years of experience in enterprise software and cloud-based platform companies with a specialty in supply chain optimization and workflow management. Contact him at eric.linxwiler@tradebeyond.com.