Uyghur Forced Labor Prevention Law: What It Means for the Solar Supply Chain | Bradley Arant Boult Cummings LLP
On December 23, 2021, President Biden enacted the law HR 6256, known as the Uyghur Law on the Prevention of Forced Labor. The law seeks to stem the importation of goods manufactured by forced labor from the Xinjiang Uyghur Autonomous Region of the People’s Republic of China (the âXinjiang Regionâ) into the United States. The law provides additional enforcement tools to complement already existing protections against the importation of goods produced by forced labor.
Implementation of the law
The law directs a federal task force to develop a strategy to combat the importation of goods mined, produced or manufactured in whole or in part using forced labor in China. This strategy is to be developed over a period of approximately four months and will include the solicitation of public comments and a public hearing. The task force will submit a report outlining its strategy within six months of enactment of the law. The report should also include the following:
- A list of entities in the Xinjiang region that extract, produce or manufacture all or part of goods, commodities, articles and commodities with forced labor;
- A list of entities working with the government of the Xinjiang region to recruit, transport, transfer, harbor or receive forced labor or Uyghurs, Kazakhs, Kyrgyz or members of other persecuted groups outside the Xinjiang region;
- A list of products extracted, produced or manufactured in whole or in part by entities appearing on the list required by clause (i) or (ii);
- A list of the entities which exported the products described in clause (iii) from the People’s Republic of China to the United States;
- A list of facilities and entities, including the Xinjiang Production and Construction Corps, which source materials from the Xinjiang region or people working with the Xinjiang region government or the Production Corps and building Xinjiang for the purposes of “poverty reduction” program or “twinning assistance” program or any government labor program that uses forced labor;
- A plan for the identification of additional facilities and entities described in clause (v);
- An enforcement plan for each of those entities whose goods, items or merchandise are exported to the United States, which may include the issuance of withholding orders to support the application of Section 4 to the ‘regard to the entity;
- A list of priority sectors for the application, which will include cotton, tomatoes and polysilicon; and
- An application plan for each of these high priority sectors. (it is we who underline)
The working group will also provide importers of potentially forced labor products with additional guidance on how to identify and trace these products in order to limit their entry into the United States and to assist importers in locating and obtaining products that avoid the use of forced labor in regions or countries of concern. The guidance will include the following:
- Due diligence, effective supply chain tracing and supply chain management measures to ensure that these importers do not import any good extracted, produced or manufactured in whole or in part with the forced labor of the People’s Republic of China, especially the Xinjiang region;
- The type, nature and extent of the evidence demonstrating that the goods originating in the People’s Republic of China were not extracted, produced or manufactured in whole or in part in the Xinjiang region; and
- The type, nature and extent of evidence demonstrating that goods originating in the People’s Republic of China, including goods detained or seized under section 307 of the Tariff Act of 1930 (19 USC 1307), no. ‘were not extracted, produced or manufactured in whole or in part for forced labor.
The provisions of the ârebuttable presumptionâ Act
With respect to all goods, merchandise, articles and merchandise mined, produced or manufactured in whole or in part in the Xinjiang region or produced by the entities listed in the report to Congress (see (i), (iii), ( (iv) and (v) above), the statute provides that the United States Commissioner of Customs will apply a presumption that such goods are produced in violation of Section 307 of the Tariff Act (covering the prohibition of import goods using forced labor) and are prohibited from entering the United States. The Commissioner will apply this “rebuttable presumption” unless it determines (1) that the importer of record has (A) fully complied with the guidelines described above and any regulations issued to implement those guidelines, and (B) responded fully and substantially to all requests for information submitted by the Commissioner to determine whether the goods were extracted, produced or manufactured in whole or in part with forced labor; and (2) by clear and convincing proof that the good, commodity, article or commodity was not extracted, produced or manufactured in whole or in part by forced labor.
Challenges for the solar industry
The focus of the law on the polysilicon sector will have a substantial impact on the solar photovoltaic (PV) module market in the coming months. Indeed, in anticipation of the adoption of the law (and following the Addition of the Commerce Department to its list of prohibited importer entities several silicon producers based in the Xinjiang region last summer), many solar PV developers and entrepreneurs have already abandoned the purchase of PV modules from manufacturers with known ties to the Xinjiang region, where a significant amount of crude polysilicon. There remains, however, great uncertainty as to which entities will be included on the list to which the ârebuttable presumptionâ of the law applies – an issue that will undoubtedly be hotly debated given the consequences. Listed entities may have to severely limit their presence in the US market, or even find it impossible to maintain a presence and exit the US altogether.
Solar PV developers and contractors should consider immediate mitigation measures to avoid potentially catastrophic impacts of their projects being involved in forced labor issues, including law violations. Cautious mitigation measures may include:
- Implement strong PV manufacturer supply chain traceability audit programs to identify potential areas of concern regarding forced labor;
- Engage with manufacturers of photovoltaic modules in an immediate due diligence of their supply of polysilicon, in particular by addressing any potential risk of application of section 307;
- Review and secure forms of performance guarantees from manufacturers of PV modules (e.g., bonds, letters of credit, etc.) to provide adequate remedy in the event of default, particularly where the manufacturers have a limited presence in the United States ;
- Identify and develop relationships with other PV module manufacturers to diversify supply options in the event that PV modules need to be replaced or substituted due to an import ban; and
- Restrict or delay purchases of photovoltaic modules to the extent possible pending greater clarity and certainty on how the implementation of the law will unfold.
Compliance programs for international trade management
As the legal challenges facing the solar industry show, there is no âone size fits allâ approach to legal compliance programs for managing international trade. The Association of Solar Energy Industries has developed its own solar supply chain traceability protocol, and encourages its members to sign the Solar industry’s commitment to environmental and social responsibility.
In addition to the purchase of photovoltaic modules in the solar industry, it is likely that other sectors of the renewable energy industry will be affected by the law early in its implementation process: for example, lithium mined in the Xinjiang region and used for battery energy storage the systems may be subject to the same increased control over imports under the law.
We can continue to expect understandable concerns and related policy changes regarding human rights issues across the global trade industry in the years to come. In order to ensure the integrity of the supply chain and mitigate the risks of violating trade regulations and sanction laws, PV developers and contractors should consider implementing strong internal compliance programs in line with risk-based guidelines from Foreign Assets Control Office (OFAC) (the Treasury Department’s Sanctions Program Administrator).