U.S. Government Issues Warning to Businesses to Abandon Supply Chains Connected to China’s Xinjiang Region

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U.S. Government Issues Warning to Businesses to Abandon Supply Chains Connected to China’s Xinjiang Region

 

As concerns over crimes against humanity in the Xinjiang region of China continue to rise, the U.S. government is intensifying its efforts to persuade businesses to abandon supply chains connected to the region.  Harsher and broader warnings about conducting business with entities in the region were announced in a business advisory, jointly release by the Office of the U.S. Trade Representative and the U.S. Departments of State, Treasury, Commerce, Labor, and Homeland Security on July 13.

The advisory warns that businesses and individuals that do not exit supply chains, joint ventures, academic or other research initiatives, and/or investments connected to operations in the Xinjiang region run the risk of violating U.S. law, suffering significant reputational or economic damage, and triggering criminal or civil enforcement actions, including:

  • Violation of statutes criminalizing forced labor
  • Sanctions violations
  • Export control violations
  • Violations of the prohibition of imports of goods produced in whole or in part with forced or convict labor

The advisory identifies the following industries as being at particular risk to the use of forced labor:

  • Agriculture (including raw cotton and tomato-based products)
  • Cell phones
  • Cleaning supplies
  • Construction
  • Cotton, cotton yarn, cotton fabric, ginning, spinning mills, and cotton products
  • Electronics assembly
  • Extractives (including coal, copper, hydrocarbons, oil, uranium, and zinc)
  • Fake hair, human hair wigs, and hair accessories
  • Food processing factories
  • Footwear
  • Gloves
  • Hospitality services
  • Metallurgical grade silicon
  • Noodles
  • Printing products
  • Renewable energy (polysilicon, ingots, wafers, crystalline silicon solar cells, and photovoltaic modules)
  • Stevia
  • Sugar
  • Textiles (including apparel, bedding, carpets, wool, and viscose)
  • Toys

It is important to note, raw and refined materials, commodities, intermediate goods, byproducts, and recycled materials may all have connections to human rights violations, regardless of the final product and region of origin or export.

Due Diligence

The advisory urges American businesses to perform heightened due diligence efforts to ensure their supply chain are free from the use of forced labor and to prevent exposure to companies linked to human rights violations in Xinjiang or China’s state-sponsored forced labor, re-education, or intrusive surveillance programs to ensure compliance with U.S. law.  Exporters should also be aware that exposure could come from supplying U.S.-origin commodities, software, and technology to Chinese entities engaged in forced labor practices or surveillance programs.

While tight government controls, a lack of government and corporate transparency, the threat of detention of auditors and workers, and a police state atmosphere in Xinjiang impose significant obstacles to conducting adequate due diligence to identify human rights abuses linked to Xinjiang, businesses should consider any warning signs and credible reports of the prevalence of human rights abuses in the region.

To assist U.S. businesses in conducting credible audits, the U.S. Department of Labor has published the Comply Chain mobile app and web-based platform.  The interactive platform helps companies assess risks and impacts of forced labor in their supply chains as well as offers lessons and good practices from over 50 real-life examples of due diligence across various sectors.

The U.S. Department of State also published a Responsible Sourcing Tool, which offers comprehensive risk-management tools and an in-depth examination of 11 key sectors and 43 commodities which are at risk for human trafficking.

Warning Signs of the Use of Forced Labor

  • Business Location: Companies operating in Xingjian, either within or near the confines of the re-education camps or prisons or adjacent to the industrial parks involved in the government’s poverty alleviation efforts
  • Lack of Transparency: Use of shell companies to hide the origin or their goods or conceal ownership of the company, contracts which are written with opaque or vague terms, or financial transactions which are conducted in such a way that it is difficult to determine where the goods were produce or who produced them
  • Internment Terminology: Any mention of “Educations Training “Centers or “Legal Education Centers” coupled with statements regarding poverty alleviation programs (e.g., Xinjiang Aid, Mutual Assistance Programs), ethnic minority graduates, reskilling vocational training, or re-education.
  • Government Recruiting or Incentives: Companies in Xinjiang that either hire workers through government recruiters, receive government development assistance as part of China’s poverty alleviation or vocational training programs, are involved in the mutual pairing assistance program, or who receive subsidies for energy, transportation and/or labor costs.
  • Affiliates of XPCC: Xinjiang Production and Construction Corps (XPCC) is a state-owned economic and paramilitary organization in the Xinjiang region, who was sanctioned by the U.S. Government in 2020.  XPCC and XPCC-affiliated entities are part of the prison labor system which uses forced labor in the production of agricultural products.
  • Goods or Entities Flagged by the U.S. Government: Any raw material, component, finished good, company, or individual that appears on any of the following lists:

Who are the Uyghurs and What is Happening to the Them?

The Uyghurs are Turkish-speaking Muslims from the Central Asian region.  There are roughly 12 million Uyghurs living in the Xinjiang region of China, making them the largest minority ethnic group.

The Chinese government continues to carry out genocide and other crimes against humanity against the Uyghurs and other ethnic minority groups in the north-western region of Xinjiang.  Human rights groups, including Amnesty and Human Rights Watch, have accused China of detaining more than one million Uyghurs against their will in what the state calls “re-education camps” and sentencing hundreds of thousands to prison terms over the last few years.  Allegations of abuse include forced labor, torture, persecution, intrusive surveillance, food and sleep deprivation, forced ingestion of unidentified drugs, rape, and forced sterilizations and abortions.  China has also been accused of banning Muslim religious practices, targeting religious figures, and destroying mosques and tombs.  There have also been credible reports claiming that victims have been forcibly transferred to factories in other provinces in China, generally in the eastern part of China, that are part of a state-sponsored coercive relocation and forced labor program.

For more information about the Uyghurs, click here.

China has denied all allegations of human rights abuse in Xinjian, claiming the re-education camps are a system to combat separatism and Islamist militancy in the region.

 

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Sources

  • State.Gov, Xinjiang Supply Chain Business Advisory: Risks and Considerations for Businesses and Individuals with Exposure to Entities Engaged in Forced Labor and other Human Rights Abuses linked to Xinjiang, China
  • BBC News, Who are the Uyghurs and why is China being accused of genocide?
  • SaveUighur.Org