The U.S. Uyghur Forced Labor Prevention Act &
Silicon-based Solar Panels' Raw Material Supply Chain Traceability Audits
The U.S. Uyghur Forced Labor Prevention Act &
Silicon-based Solar Panels' Raw Material Supply Chain Traceability Audits
Berlin - August 30, 2021
Scope of the U.S. Uyghur Law
The Uyghur Forced Labor Prevention Act (UFLPA) was passed by the U.S. Senate unanimously on July 14th, 2021. So far, the Bill is expected to pass the House of Representatives and be signed by the President unproblematically. The UFLPA joins the policy of the U.S. and the international community in the fight against human rights violations by the Government of the People’s Republic of China against Uyghurs, ethnic Kazakhs, Kyrgyz, and members of other Muslim minority groups in Xinjiang Uyghur Autonomous Region. In the U.S. the Uyghur Human Rights Policy Act of 2020  set the framework for U.S. policy in this regard. In addition, government bodies, such as the U.S. Office of Foreign Assets Control, among others, impose sanctions and penalties on parties who engage with or are directly found to participate in human rights abuses in the Xinjiang region. The two houses of congress recently introduced Bills the Uyghur Forced Labor Prevention Act and the Uyghur Forced Labor Disclosure Act  are expressions of this legislative approach. The proposed legislation, if passed, will require companies to vet their supply chains more thoroughly in relation to the production of goods in Xinjiang. The U.S. Departments of State, Treasury, Commerce, Homeland Security, the Office of the U.S. Trade Representative, and the U.S. Department of Labor published the Xinjiang Supply Chain Business Advisory  in July 2020 to detail the potential for human rights abuses when conducting business in the Xinjiang region. While the advisory does not impose new laws, it cautions that human rights violations may occur that could lead to U.S. government sanctions, and identified certain at-risk sectors.
Rebuttable Assumption in Section 5 of Uyghur Forced Labor Prevention Act
The U.S. Uyghur Forced Labor Prevention Act establishes a rebuttable assumption that all goods manufactured in the Xinjiang region were manufactured through forced labor. The ban on importing goods that are suspected (through a reasonable - AND NOT A CONCLUSIVE - indication) to have been manufactured using forced labor already exists under section 307 of the Tariff Act of 1930 (19 United States Code (U.S.C.) § 1307). Pursuant to this provision the import of merchandise mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured labor – including forced child labor is prohibited. Such merchandise is subject to exclusion and/or seizure, and may lead to criminal investigation of the importer(s).
Following numerous publicly known incidents of forced labor in the Uyghur region, the U.S. Congress has deemed it appropriate to assume that goods from this region were almost certainly produced by forced labor and therefore, their import should be stopped. That is why, Sec. 5(a) UFLPA  goes further by establishing a rebuttable assumption with regard to any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China or by certain listed entities.
The entities to which Sec. 5 UFLPA refers to, will be listed in a strategy for preventing the import of such goods into the United States, as provided under Sec. 4(c) UFLPA. The elements of this strategy are relevant for the design of a traceability audit.
The burden of proof that a certain merchandise was not manufactured in the Xinjiang region or through forced labor lies with the importer of record (Sec. 5 (b)(1) UFLPA). The term of the “importer of record” is not defined under the UFLPA. However, this is a commonly used term in the U.S. Customs law.
Section 5(b) UFLPA introduces exceptions from the assumption by determining how to rebut the assumption. The Commissioner shall not apply the assumption if he determines that the importer of record has:
- fully complied with the guidance described under Section 4(d)(5) UFLPA and any regulations issued to implement that guidance; and
- completely and substantively responded to all inquiries for information submitted by the Commissioner to ascertain whether the goods were mined, produced, or manufactured wholly or in part with forced labor; and
- the good was not mined, produced, or manufactured wholly or in part by forced labor.
In accordance with Section 4(2)(vii), (3) et seq. UFLPA, the responsible U.S. authorities will specify further requirements for such importers of record including:
- specific enforcement plan(s) [with instructions for efforts, initiatives, tools and technologies to be adopted by importer to ensure that U.S. Customs and Border Protection can accurately identify, and trace goods made in the Xinjiang Uyghur Autonomous Region] if the particular imported merchandise/goods pertain to high-priority sectors (e.g. polysilicon  which is the foundational building block of silicon-based solar panels),
- due diligence, effective supply chain tracing, and supply chain management measures to ensure that such importers do not import any goods mined, produced, or manufactured wholly or in part with forced labor from the People’s Republic of China, especially from the Xinjiang Uyghur Autonomous Region,
- type, nature, and extent of evidence that demonstrates that goods originating in the People’s Republic of China were not mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region, AND
- type, nature, and extent of evidence that demonstrates that goods originating in the People’s Republic of China [including goods detained or seized pursuant to section 307 of the Tariff Act of 1930 (19 U.S.C. 1307)] were not mined, produced, or manufactured wholly or in part with forced labor.
In summary, the UFLPA enables importers to prove in individual cases that their goods either do not come from Xinjiang or were not produced with forced labor.
Best Practices & Third-Party Supply Chain Traceability Audits
The U.S. Customs and Border Protection (CBP) has previously offered some guidance on the kind of evidence importers (seeking release of detained shipments) must be prepared to provide. In addition to the Certificate of Origin and importer’s statement set forth in 19 CFR § 12.43  that must be “sufficiently detailed and include proof that the goods were not produced… with forced labor,” the CBP has highlighted the best practices (derived from previous experience) that should be implemented by any such importer (as part of a ‘raw material supply chain traceability auditing process’) in order to be immediately compliant with the future U.S. Uyghur Forced Labor Prevention Act (when it comes into force) include the provision of:
- An affidavit from the provider of the product and identification of its source;
- Purchase Orders, Invoices, and Proofs of Payment;
- A List of production steps and production records from the imported merchandise back through the supply chain;
- Transportation documents at all stages of the supply chain; and
- Daily process reports.
Where the above documentation cannot be provided by importer, in-country supplier investigations may be the only solution. How detailed these investigations need to be, the CBP has not made entirely certain, although full supply chain mapping and unannounced audits are likely to be the bare minimum of what is required. Companies wishing to do such investigations should be sure to include the right to do so in their supplier contracts – and should make sure to pass down the obligation to sub-suppliers as well. Due to the special situation in Xinjiang, however, the requirements for the on-site audits also have to be adjusted.
“In and for themselves, third-party audits are not a sufficient due diligence program, and may not be a credible source of information for indicators of labor abuses in the region, for the following reasons:
- Auditors have reportedly been detained, harassed, threatened, or stopped at the airport.
- Auditors may be required to use a government translator who conveys misinformation or does not speak in workers’ first language.
- Auditor interviews with workers cannot be relied upon given pervasive surveillance, the threat of detainment, and evidence of workers’ fear of sharing accurate information.”
In order to rebut the assumption established under Sec. 5(a) UFLPA the third-party audit provider will have to establish evidence that makes the entire supply chain transparent to the Commissioner of the CBP which evidence exactly will be admissible depends on the strategy and guidelines that will be published. However, evidence such as Videos, interviews, other possibly digital means of security that document the supply chain in a comprehensive way can be used in order to prove the legal origin of a product and its components. Regarding polysilicon, however, further guidance from the CBP should be awaited.
Fair & Balanced Contractual Relationship Between Importer (Client) & Third Party Audit Provider
The importer’s third party audit provider of raw material supply chain traceability audit should establish an agreement with importer which include:
- The exact scope of work for the provider i.e. the kind of investigations / audits / assessments which must be carried out and for which audit provider is hired by importer;
- A disclaimer (exclusion of liability) in the event that components of the traceability audit are not accepted as sufficient evidence by the CBP anymore. The disclaimer must state that the third party audit provider is only responsible for fulfilling the specifications of the importer with respect to any audit, and that the importer itself is fully and solely responsible for compliance with all US laws and CBP regulations. This disclaimer should therefore shift the responsibility for dictating the exact scope of work with respect to any compliance with U.S. laws to the importer, so that the provider is only responsible for the exact express instructions provided by the importer (i.e. the actual audit itself, and not for any U.S. regulatory compliance, as regulations may change from time to time). This places the responsibility on the importer itself to supply the correct instructions for any audit (unless agreed otherwise with the provider). Any adverse consequences or use of the audit by US authorities or the importer should not be the responsibility of the third party audit provider. This will give the provider of a traceability audit a narrow, clear and contractually defined scope of responsibility, thereby insulating the provider from liability (in theory), in case the CBP or a US government authority refuses or disputes the provider’s audit. However, this disclaimer will not protect the provider where they have incorrectly verified the production process, and when the audit is conducted with negligence or with an unreasonable lack of accuracy. Indeed, the third party provider of a traceability audit has to bear the risk of goods being refused for import only if the audit was not carried out properly. Therefore, it should be clearly agreed in the contract with the importer, which investigations / audits / assessments are to be carried out by the provider of the traceability audit (with the provision that the agreed investigations /audits/ assessments may be limited given the current security situation in China / Xinjiang region). The third party provider should clearly agree on the scope of responsibilities for the audit, and clearly explain that they are not responsible for further activities in the audit, unless requested by the importer (the client); AND
- That if the importer requests the audit provider to take over importer’s U.S. law compliance program, the provider should charge a higher rate to cover the additional responsibilities involved, and obtain the certification of a U.S. licensed lawyer to shield themselves from liability. Indeed, if the third party audit provider wishes to take on the responsibility for researching and verifying compliance with US laws for any of their customers, this should be done at a higher price, to justify the additional risk. It is also advisable to have a U.S.-licensed lawyer review and attest the opinion issued by the Provider, to certify the accuracy of the audit in accordance with US law. This would be the best way to insulate the provider from liability in case the importer asks the third party audit provider to take full responsibility for their compliance program. However, it is advisable not to take this approach when possible (taking responsibility for the full compliance program as described herein) and instead it is recommended to be provided with the specific/limited scope of the compliance audit by the importer directly, so that a disclaimer can be used.
The UFLPA essentially prohibits the import of goods manufactured in the Xinjiang region, due to the rebuttable presumption imposed under its provisions. In addition, heavy US sanctions, and existing laws and regulations create risks that goods imported from this region could subject a company to the seizure of goods, fines and penalties. The US Office of Foreign Asset Control could also impose sanctions on a company which has dealings with sanctioned entities, or which is found to directly or indirectly promote human rights abuses. Therefore, the substance of any traceability audit should first address the source of goods, to ensure that production in the Xinjiang region is not a part of the supply chain.
When it comes to conducting audits and verifying compliance, strong documentary evidence should be produced to authenticate the location of the supply chain and the processes it involves. This includes the review of not only delivery reports, purchase orders, invoices or shipping receipts, but also video and image documentation, which is time stamped and authenticated by the auditor personally (for cases where there is a strong suspicion that goods are produced in the Xinjiang region). In addition, affidavits from producers in the supply chain, such as delivery service providers and subcontractors, will also be of use.
There could be other creative ways to authenticate production practices as well, such as asking for the business registration documents, lease or property title deed of a supplier, to authenticate the location of activities. Employment contract samples could also be sought, and interviews with the employees working at facilities could be undertaken for more extensive audits.
Vera Grebe LL.M. (Author), Zakir Mir, Esq. & Dr. Ariel Humphrey (Reviewers/Editors)
 UYGHUR FORCED LABOR PREVENTION ACT; S. 65 — 117th Congress (2021-2022), available under: https://www.congress.gov/bill/117th-congress/senate-bill/65/titles?q=%7B%22search%22%3A%5B%22Uyghur+Human+Rights+Policy+Act+of+2020%22%5D%7D&r=4&s=1 (last visited 19.9.2021).
 Dan Lonergan, Sarah K. Rathke, Congress Takes Aim at Uyghur Forced Labor, The National Law Review, August 3rd 2021, available at: https://www.natlawreview.com/article/congress-takes-aim-uyghur-forced-labor
 Uyghur Human Rights Policy Act of 2020, available under: https://www.congress.gov/116/plaws/publ145/PLAW-116publ145.pdf (last visited 19.8.2021).
 H.R.2072 - Uyghur Forced Labor Disclosure Act requiring publicly traded companies with activities in the Xinjiang region to periodically report their activities to the U.S. Securities and Exchange Commission, available under: https://www.congress.gov/bill/117th-congress/house-bill/2072/text?r=2 (last visited 19.8.2021).
 Xinjiang Supply Chain Business Advisory, available under: https://www.dhs.gov/sites/default/files/publications/xinjiang-business-advisory-13july2021-1.pdf (last visited 19.8.2021).
 19 U.S.C. § 1307 states, that all goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor or/and indentured labor under penal sanctions shall not be entitled to entry at any of the ports of the United States, and the import thereof is hereby prohibited, and the Secretary of the Treasury is authorized and directed to prescribe such regulations as may be necessary for the enforcement of this provision.
“Forced labor”, as herein used, shall mean all 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. For purposes of this section, the term “forced labor or/and indentured labor” includes forced or indentured child labor (first enacted in June 17, 1930 as “Hawley-Smoot Tariff Act”) https://www.law.cornell.edu/uscode/text/19/1307.
 See the findings of the Congress in Sec. 2 UFLPA.
 Sec. 5 (a) UFLPA: IN GENERAL.—The Commissioner of U.S. Customs and Border Protection shall, except as provided by subsection (b), apply a presumption THAT, with respect to any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China or produced by an entity on a list required by clause (i), (iii), or (iv) of section 4(d)(2)(B):
(1) the import of such goods, wares, articles, and merchandise is prohibited under section 307 of the Tariff Act of 1930 (19 U.S.C. 1307); and
(2) such goods, wares, articles, and merchandise are not entitled to entry at any of the ports of the United States.
 Sec. 4(c) UFLPA: DEVELOPMENT OF STRATEGY.—After receiving public comments under subsection (a) and holding the hearing required by subsection (b), the Secretary of the Treasury and the Secretary of Homeland Security shall jointly, and in consultation with the Secretary of Labor, the United States Trade Representative, the Secretary of State, and the Director of National Intelligence, develop a strategy for preventing the import into the United States of goods mined, produced, or manufactured wholly or in part with forced labor in the People’s Republic of China.
 Sec. 5 (b)(1) UFLPA: (b) EXCEPTIONS.—The Commissioner shall apply the
presumption under subsection (a) unless the Commissioner determines that—
(1) the importer of record has—
(A) fully complied with the guidance de-
scribed in section 4(d)(5) and any regulations issued to implement that guidance; and
(B) completely and substantively responded to all inquiries for information submitted by the Commissioner to ascertain whether the goods were mined, produced, or manufactured wholly or in part with forced labor; and (2) the good was not mined, produced, or manufactured wholly or in part by forced labor.
- “the owner or purchaser of the goods, OR
- when designated by the owner, purchaser, or consignee . . . a licensed Customs broker,” 19 U.S.C. § 484(a)(2)(B).
Furthermore, under Customs Directive No. 3530-002A, the terms “owner” and “purchaser” include parties with financial interests in the transaction. Such parties are typically the owner of the goods, the purchased of the goods, buying or selling agents, or a person or firm importing goods for exhibitions at trade fairs or for repairs, etc.
 Polycrystalline silicon, or multicrystalline silicon, also called polysilicon or poly-Si, is a high purity, polycrystalline form of silicon, used as a raw material by the solar photovoltaic and electronics industry. Polysilicon is produced from metallurgical grade silicon by a chemical purification process, called the Siemens process. This process involves distillation of volatile silicon compounds, and their decomposition into silicon at high temperatures. An emerging, alternative process of refinement uses a fluidized bed reactor. The photovoltaic industry also produces upgraded metallurgical-grade silicon (UMG-Si), using metallurgical instead of chemical purification processes.
 The term “forced labor “, which is already defined in Sec. 307 of the Tariff Act of 1930 (19 U.S.C. § 1307) is being adjusted to the situation in the Xinjiang region in Sec. 9(2) UFLPA. According to Sec. 9(2) UFLPA forced labor:
(A) has the meaning given that term in
section 307 of the Tariff Act of 1930 (19 U.S.C. 1307)
“Forced labor”, as herein used, shall mean all 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. For purposes of this section, the term “forced labor or/and indentured labor” includes forced or indentured child labor; and
(B) includes convict labor and indentured labor under penal sanctions.”
 § 12.43 Proof of admissibility.
(a) If an importer of any article detained under § 12.42(e) or (g) desires to contend that the article was not mined, produced, or manufactured in any part with the use of a class of labor specified in section 307, Tariff Act of 1930, he shall submit to the port director or Commissioner of CBP within 3 months after the date the article was imported a certificate of origin, or its electronic equivalent, in the form set forth below, signed by the foreign seller or owner of the article. If the article was mined, produced, or manufactured wholly or in part in a country other than that from which it was exported to the United States, an additional certificate, or its electronic equivalent, in such form and signed by the last owner or seller in such other country, substituting the facts of transportation from such other country for the statements with respect to shipment from the country of exportation, shall be so submitted.
Certificate of Origin
I, ________, foreign seller or owner of the merchandise hereinafter described, certify that such merchandise, consisting of ________ (Quantity) of ________ (Description) in __________ (Number and kind of packages) bearing the following marks and numbers ______ was mined, produced, or manufactured by ________ (Name) at or near ________, and was laden on board __________ (Carrier to the United States) at ________ (Place of lading) (Place of final departure from country of exportation) which departed from on ______; (Date); and that __________ (Class of labor specified in finding) was not employed in any stage of the mining, production, or manufacture of the merchandise or of any component thereof.
(b) The importer shall also submit to the port director or Commissioner of CBP within such 3-month period a statement, or its electronic equivalent, of the ultimate consignee of the merchandise, showing in detail that he had made every reasonable effort to determine the source of the merchandise and of every component thereof and to ascertain the character of labor used in the production of the merchandise and each of its components, the full results of his investigation, and his belief with respect to the use of the class of labor specified in the finding in any stage of the production of the merchandise or of any of its components.
(c) If the certificate or certificates and statements specified in paragraphs (a) and (b) of this section, or its electronic equivalent, are submitted within the time prescribed and the Commissioner finds that the merchandise is admissible, the port director concerned will be advised to that effect, whereupon he shall release the merchandise upon compliance with the usual entry requirements.
 The following statement is made by the US Congress in Sec. 2(4) UFLPA, with respect to such audits:
“Audits and traditional due diligence efforts to vet goods and supply chains in the Xinjiang Uyghur Autonomous Region are unreliable for identifying the absence of forced labor in the production of goods because of interference by the Government of the People’s Republic of China, including through intimidation of potential witnesses and concealment of relevant information.”
 Xinjiang Supply Chain Business Advisory, available under: https://www.dhs.gov/sites/default/files/publications/xinjiang-business-advisory-13july2021-1.pdf, p. 14 (last visited 19.8.2021).