It’s been eight months since the United States enacted one of the country’s most sweeping supply chain laws, but some businesses still have more questions than answers. The Uyghur Forced Labor Prevention Act (UFLPA) bans the importation of goods from China’s Xinjiang region on the presumption that they were produced with forced labor. The law grants U.S. Customs and Border Protection broad power to seize any merchandise suspected of being manufactured wholly or in part from the region, as well as any other shipments with potential ties to modern slavery.
Customs has made clear its intentions to aggressively enforce the law. The agency received funding this year for an additional 300 positions related to enforcing the UFLPA. During the law’s first eight months, Customs stopped approximately 2,700 shipments suspected of violating the act, more than $814 million worth of merchandise. That includes 282 shipments in January 2023 alone.
Yet Customs has remained tight lipped about which specific companies and sectors have been targeted by the law, frustrating businesses looking for a more acute understanding of their risks. For brands and retailers, the stakes are high. Detainments can delay shipments by about two months, long enough for seasonal products to completely miss their retail window.
Customs initially singled out cotton, tomatoes and polysilicon as commodities of particular concern, and many of the first detainments under the law were solar panels containing polysilicon with apparent links to Xinjiang. Already, however, there are signs that Customs has expanded enforcement of the law to include additional high-risk commodities, including aluminum. Meanwhile, Congress has expressed concern about the auto industry’s ties to forced labor following a sobering new report that found every major car manufacturer likely uses components from Xingjian, including metals, batteries and wiring. That’s sparked speculation that Customs will increasingly scrutinize those imports as well.
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A Customs spokesperson says the agency is barred from releasing more detailed information about UFLPA detainments because of its obligation to protect “law enforcement sensitive and business confidential information.” Still, the agency does seem to be hearing criticisms that it hasn’t been transparent enough. Last month, shortly after the Wall Street Journal published an article about Customs’ opaque enforcement of the law, the agency released its most detailed set of guidance for importers yet, including concrete steps for rebutting the UFLPA’s forced labor presumption.
The agency may be playing its UFLPA enforcement plans close to its chest, but it has been clear about how businesses can comply if they have the right systems and processes in place.
Documentation and Prevention
According to Customs’ newly expanded guidance, to rebut the law’s presumption of forced labor, importers need to provide documentation detailing “the order, purchase, manufacture, and transportation of inputs throughout their supply chain.”
Examples of that include records substantiating the parties involved in the sourcing and manufacturing of goods; documentation of the payments for and 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-to-case basis, but in short, businesses must now have full records of all their suppliers, from raw materials to finished goods, and they need to be able to document the full chain of custody of materials. That poses a challenge for brands and retailers, since most lack the proper systems to centralize supplier information and document the full provenance of their products.
Customs’ renewed guidance underscores the need for these businesses 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. Especially for brands and retailers with complicated supply chains and large supplier networks, comprehensive supplier mapping is almost impossible without an advanced multi-enterprise platform.
A multi-enterprise platform can help businesses collect and organize the chain of custody documentation they need to adhere to UFLPA guidelines. In response to demand from our customers, TradeBeyond recently introduced a new enhancement that will allow merchandisers to easily compile and review this documentation and even approve or reject orders based on their chain of custody paper trail. We expect this technology will increasingly become standard as businesses continue to adjust to the UFLPA’s new normal.
In its expanded new guidance, Customs has stressed that the most effective way to ensure shipments aren’t subject to detention is for businesses to clean up their supply chains to mitigate risks. 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.
A multi-enterprise platform grants businesses a full understanding of their social and environmental footprint, and in addition to facilitating visibility, it exposes vulnerabilities that businesses can quickly act to correct. Proper documentation can help brands and retailers in the event their shipments are subject to withhold release orders, but as is usually the case in matters of supply chain management, there’s no substitute for prevention.
Eric Linxwiler is SVP 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 [email protected] to discuss how the TradeBeyond platform can address the supply chain challenges created by new ESG regulations.
