Where Was This T-Shirt Made? The uncomfortable question that could befall the retail industry

Miguel A Bacigalupe

 

Legislative History of the Uyghur Forced Labor Prevention Act

On March 11, 2020 a group of lawmakers unveiled legislation to restrict imports to the U.S. from the Xinjiang Uyghur Autonomous Region (XUAR) in Western China as a response to reports of coercive labor practices and the mass detention of Uyghurs and other Muslim minorities by the Chinese government.[1] A day before, the American Apparel & Footwear Association (AAFA), representing more than one thousand brands in the apparel industry, the National Retail Federation, the Retail Industry Leaders Association, the United States Fashion Industry Association, and the Footwear Distributors and Retailers of America, issued a joint statement expressing their deep concern over reports of forced labor and treatment of Uyghurs and other minority workers in the XUAR.[2] In their statement, the organizations urged the U.S. government to engage a multi-stakeholder working group to develop a collective approach to assess the problem and generate solutions to target bad actors, protect workers’ rights, and uphold the integrity of global supply chains.[3]

Given the COVID-19 pandemic, the proposed Uyghur legislation stalled in Congress for a few months.[4] Unfortunately, for many retailers, scrutiny over the Uyghur human rights crisis accelerated in late summer and early fall as evinced by the various congressional hearings held.[5] For example, the House Committee on Oversight and Reform’s Subcommittee on National Security and the House Foreign Affairs’ Subcommittee on Asia, the Pacific, and Nonproliferation held a joint briefing on “China’s Oppression of Muslim Uyghurs in Xinjiang” on August 17, 2020.[6] The Trade Subcommittee of the House Ways and Means Committee held a hearing on “Enforcing the Ban on Imports Produced by Forced Labor in Xinjiang” mid-September[7]—only a few days before the House of Representatives voted and passed H.R. 6210—Uyghur Forced Labor Prevention Act, by a vote margin of 406-3.[8] How quickly it will reach a vote on the Senate floor is unknown, but given its bipartisan support from the outset, it is unlikely that a change of party composition in Congress would affect its chances of eventually being enacted. 

 

Implication for Major Retailers

For major American retailers, one of the main sources of concern is Section 4 of H.R. 6210.[9] The section creates a rebuttable presumption that all goods manufactured wholly or in part in the XUAR for purposes of the “poverty alleviation” or the “pairing-assistance” programs are products of forced labor and will be denied entry into the United States.[10] The retail industry believes that such rebuttable presumption language would permit U.S. Customs and Border Protection (CBP) to find an importing company guilty until proven innocent.[11] As it is, the section would require a corporation that wants to import goods from the XUAR to demonstrate through clear and convincing evidence that there was no forced labor involved in their supply chains.[12]

Critics of H.R. 6210—such as Rick Helfenbein, the former president and CEO of the AAFA—point out that this bill changes the burden of proof required under Section 307 of the Tariff Act of 1930.[13] Such change is not unprecedented.[14] While the burden of proving that forced labor was involved in the production of imported merchandise used to be on CBP, the enactment of The Countering America’s Adversaries Through Sanctions Act in 2017 shifted that burden to importers, specifically for imported goods believed to have been produced by North Korean nationals.[15]

For corporations that need to continue importing from the XUAR, the brunt of this burden may be not only financially challenging, but also impossible to accomplish.  Even if corporations conducted thorough due diligence checks to avoid tainted supply chains, the intrusive surveillance by local authorities and the inability to obtain reliable information from workers would render the diligence results highly questionable.[16] Lastly, given that there is evidence that the aforementioned poverty alleviation programs in the XUAR have evolved into large-scale factory and labor programs, the likelihood that a company is complicit in the forced labor regime is high.[17]

According to the National Bureau of Statistics of China, in 2019, Xinjiang was the source of approximately 85% of China’s cotton—producing approximately 5 million tons out of the reported total for the entire country of approximately 5.88 million tons.[18] Furthermore, it is estimated that Xinjiang produces roughly 20% of all cotton consumed in the world, and cotton bales are often co-mingled with cotton grown elsewhere.[19] Since there is no technology available to accurately trace the origin of cotton, it will be difficult for companies that import cotton products or assembled garments tied to China to be certain that the product is “clean”: that is, forced labor did not contribute to its production.[20] 

 

Recommendations

 Before the Senate decides to pass H.R. 6210, it should consult independent experts and base its modifications to the bill on empirical data.  Congress should engage a multi-stakeholder working group as the fashion industry recommended, since their industry is likely to be the most affected.  The point of H.R. 6210 is not to disrupt legitimate supply chains, but to disincentivize forced labor. Passing a blanket import ban on all cotton from Xinjiang, given its share of cotton production worldwide, however, would also not be realistic overnight.

As of 2018, the international organization Human Rights First estimated that more than $140 billion worth of goods suspected of being made by forced labor enters the American market annually.[21] Notwithstanding the immediate financial repercussions, industry leaders must be innovative in finding meaningful solutions to the reported atrocities taking place in Xinjiang.  How did the industry manage when CBP imposed a ban on cotton from Turkmenistan in 2018?[22] What about when more than 300 companies, including the AAFA, voluntarily imposed a ban on Uzbek cotton?[23] The solutions tested in these contexts should serve as a starting point to the pressing crisis in Xinjiang.  The writing is on the wall for the retail industry to act swiftly before its public image is tarnished and its imports banned.

 

-----------------------------------------------------------------------------------------

[1] Austin Ramzy, U.S. Lawmakers Propose Tough Limits on Imports from Xinjiang, N.Y. Times (Mar. 11, 2020), https://www.nytimes.com/2020/03/11/world/asia/xinjiang-china-labor-bill.html.

[2] Joint Statement from AAFA, NRF, RILA, USFIA, and FDRA on Reports of Forced Labor in Xinjiang, American Apparel & Footwear Association (March 10, 2020), https://www.aafaglobal.org/AAFA/AAFA_News/2020_Press_Releases/Joint_Statement_Xinjiang.aspx.

[3] Id.

[4] See Sarah Frazer, The Uyghur Forced Labor Prevention Act in Congress, Borgen magazine (July 25, 2020), https://www.borgenmagazine.com/the-uyghur-forced-labor-prevention-act/.

[5] See Alan Bersin et al., U.S. Blocks Imports from China Due to Suspected Forced Labor, Continuing its Aggressive Enforcement Actions and Leading to Potential Supply Chain Disruptions, Covington Alert, (Sep. 17, 2020), https://www.cov.com/en/news-and-insights/insights/2020/09/us-blocks-imports-from-china-due-to-suspected-forced-labor-continuing-its-aggressive-enforcement-actions-and-leading-to-potential-supply-chain-disruptions.

[6] Subcommittees Hold Joint Briefing on China’s Oppression of Uyghur Population, House Committee on Oversight and Reform, (Aug. 18, 2020), https://oversight.house.gov/news/press-releases/subcommittees-hold-joint-briefing-on-china-s-oppression-of-uyghur-population.

[7] Enforcing the Ban on Imports Produced by Forced Labor in Xinjiang: Hearing Before the Ways & Means Committee, 116th Congress (2020), https://waysandmeans.house.gov/legislation/hearings/enforcing-ban-imports-produced-forced-labor-xinjiang

[8] United States House of Representatives, Roll Call 196, Bill Number: H.R. 6210 (Sept. 22, 2020), https://clerk.house.gov/Votes/2020196; Juliegrace Brufke, House Passes Legislation to Crack Down on Business with Companies that Utilize China’s Forced Labor, the hill (Sept. 22, 2020), https://thehill.com/homenews/house/517656-house-passes-legislation-to-crack-down-on-business-with-companies-that-utilize.

[9] H.R. 6210 § 4 (a), 116th Cong. (2020).

[10] Id. Poverty alleviation programs are presented by state media as a noble, benevolent effort by the ruling Communist Party to help predominantly poor rural workers gain access to the material benefits enjoyed by China’s urban residents [through which] they are offered free training and stable jobs to enable them to support their families and achieve a better life. See Rebecca Wright et al.,‘Black Gold’: How global demand for hair products is linked to forced labor in Xinjiang, Cable News network (Oct. 10, 2020), https://edition.cnn.com/interactive/2020/10/asia/black-gold-hair-products-forced-labor-xinjiang (noting that

[11] Rick Helfenbein, Xinjiang China – U.S. Retail’s XUAR Question Has A Truly Ugly Answer, Forbes (Sept. 29, 2020), https://www.forbes.com/sites/rickhelfenbein/2020/09/29/xinjiang-chinaus-retails-xuar-question-has-a-truly-ugly-answer/#3b9d8e1e221f.

[12] Press Release, Xinjiang: Chairs Release New Legislation & Report on Global Supply Chains and Forced Labor, Congressional-Executive Commission on China (Mar. 11, 2020), https://www.ccc.gov/media-center/press-releases/cecc-chairs-release-new-legislation-report-on-global-supply-chains-and.

[13]  Helfenbein, supra note 11.

[14] Id.

[15] H.R. 3364, 115th Cong. (2017); see also Nate Bolin, CBP Issues Guidance on Complying with New Prohibitions on the Use of North Korean Labor and Inputs in Imported Merchandise, Faegre Drinker Biddle & Reath LLP, at 1 (2017), https://pdf.faegredrinker.com/pdfrenderer.svc/v1/ABCpdf9/GetRenderedPdfByUrl/CBPIssuesGuidanceonComplyingwithNewProhibitionsontheUseofNorthKoreanLaborandInputs__.pdf/?url=https%3a%2f%2fwww.faegredrinker.com%2fen%2finsights%2fpublications%2f2017%2f11%2fcbp-issues-guidance-on-complying-with-new-prohibitions-on-the-use-of-north-korean-labor-and-inputs__%3fformat%3dpdf&attachment=false.

[16] See Luke Adams, et al., Global Supply Chains, Forced Labor, and the Xinjiang Uyghur Autonomous Region, at 7 (2020), Congressional-Executive Commission on China, https://www.cecc.gov/sites/chinacommission.house.gov/files/documents/CECC%20Staff%20Report%20March%202020%20-%20Global%20Supply%20Chains%2C%20Forced%20Labor%2C%20and%20the%20Xinjiang%20Uyghur%20Autonomous%20Region.pdf (cautioning against relying on auditing of supply chains in the XUAR “given the impossibility of obtaining accurate information from the region”).

[17] See id. at 4; Austin Ramzy & Chris Buckley, China’s Detention Camps for Muslims Turn to Forced Labor, N.Y. Times (Dec. 16, 2018), https://www.nytimes.com/2018/12/16/world/asia/xinjiang-china-forced-labor-camps-uighurs.html.

[18] National Bureau of Statistics of China, Press Release: Bulletin on the National Cotton Output in 2019. (Dec. 17, 2019), http://www.stats.gov.cn/english/PressRelease/201912/t20191218_1718288.html

[19] US ban of China’s Xinjiang cotton ‘would wreak havoc’, leading apparel group says, South China Morning Post (Sept. 18, 2020), https://www.scmp.com/economy/china-economy/article/3102008/us-ban-chinas-xinjiang-cotton-impossible-enforce-leading.

[20] Id.; Helfenbein, supra note 11.

[21] Sebastien Malo, U.S. bans imports of slave-picked cotton from Turkmenistan, Reuters (May 24, 2018), https://www.reuters.com/article/us-usa-trafficking-turkmenistan/u-s-bans-imports-of-slave-picked-cotton-from-turkmenistan-idUSKCN1IP3UB

[22] See Withhold Release Orders and Findings, https://www.cbp.gov/trade/programs-administration/forced-labor/withhold-release-orders-and-findings, (last visited Oct. 12, 2020).

[23]See Responsible Sourcing Network, Uzbek Cotton Pledge Signatories (Oct. 12, 2020, 1:30 PM), https://www.sourcingnetwork.org/cotton-pledge-signatories-complete-list.