U.S. Government Moves to Block Imports from Xinjiang, Triggering Due Diligence Challenges for Companies

Pillsbury Global Trade Blog

On September 14, 2020, U.S. Customs and Border Protection (CBP) issued five Withhold Release Orders (WROs) for a range of goods produced in the Xinjiang region of China.  Under 19 U.S.C. § 1307, CBP can initiate enforcement actions for products made wholly or “in part” by forced or indentured labor – defined as “work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily,” as well as forced or indentured child labor.  CBP issues WROs following an investigation if it finds that information “reasonably but not conclusively” indicates that the goods have been made in whole or in part by such forced labor.  A WRO prevents the products from being released by CBP into the United States.

According to CBP, the products subject to the five new WROs are “produced with state-sponsored forced labor in the Xinjiang Uyghur Autonomous Region, where the Chinese government is engaged in systemic human rights abuses against the Uyghur people and other ethnic and religious minorities.”  Although the orders are limited to the listed companies, it has been reported that the Trump administration is considering the possibility of a wider ban that would apply to all products produced in the region.  Such an action would be similar to the country-wide ban on cotton from Turkmenistan that was imposed in 2018.

The WROs at issue direct CBP to withhold release of the following products into U.S. commerce:

• All products made with labor from the Lop County No. 4 Vocational Skills Education and Training Center in Xinjiang Uyghur Autonomous Region, China.
• Hair products made in the Lop County Hair Product Industrial Park in Xinjiang Uyghur Autonomous Region, China.
• Apparel produced by Yili Zhuowan Garment Manufacturing Co., Ltd. and Baoding LYSZD Trade and Business Co., Ltd in Xinjiang Uyghur Autonomous Region, China.
• Cotton produced and processed by Xinjiang Junggar Cotton and Linen Co., Ltd. in Xinjiang Uyghur Autonomous Region, China.
• Computer parts made by Hefei Bitland Information Technology Co., Ltd. in Anhui, China.

The above orders come on the heels of other Xinjiang-related WROs.  For example, in August 2020, CBP issued a WRO against garments produced by the Hero Vast Group (including Shanghai Hero Vast International Trading Co., Ltd.; Henan Hero Vast Garment Co., Ltd.; Yuexi Hero Vast Garment Co., Ltd.; Ying Han International Co., Ltd.; and Hero Vast Canada Inc.).  Similarly, in June of 2020, CBP issued a WRO against merchandise containing hair products produced by Lop County Meixin Hair Product Co. Ltd.  Although CBP has emphasized its recent enforcement efforts on imports from the Xinjiang region, it has also issued several WROs against Chinese manufacturers located elsewhere.

Where an importer is affected by a WRO, it may re-export the merchandise out of the United States or seek to demonstrate that the goods were not produced using forced labor.  If an importer pursues the latter option, it must submit a certificate of origin and a detailed statement demonstrating that the subject merchandise was not produced with forced labor (e.g., supply chain audit) within three months of importation.  CBP will then determine whether to release the goods on a case-by-case basis.  Thus, robust due diligence on the origin of goods and supply chains may help avoid import delays.

There is a possibility that this type of regulation of imports could be significantly expanded.  On September 22, 2020, the House of Representatives overwhelmingly (406-3) passed a bill that would bar from entry into the United States products made “wholly or in part” in the Xinjiang region or by certain persons working in the Xinjiang region.  Under the proposed legislation, such products may be admitted if CBP determines by “clear and convincing evidence” that the products were not made by a prohibited form of labor.  (This is similar to the treatment of products made by North Korean labor (discussed here)).  The bill will now move to the Senate and likely will be taken up after the election on November 3, 2020.  If this bill is enacted, the requirements of WROs would be imposed on all products from the Xinjiang region without the need for CBP to issue specific WROs.