As US customs prepares to enforce a new ban on imports from a region where it is alleged Muslim Uighurs are being exploited for cheap labor, Manufacturers and retailers are scrambling to try and figure out what the ban means for them.
Asian clothing suppliers, international retail chains, U.S. solar-panel makers and Chinese floor-tile material makers are all among the companies which may see their shipments of products seized.
The ban was enacted over allegations of widespread human rights violations against Muslim Uyghur and other minorities in the country’s Xinjiang region in the west of the nation.
China has warned it would take retaliatory measures as it denies all of the charges of abuse.
The law was signed by President Biden last year, and presumes that all shipments with materials which can be traced to the Xinjiang region were manufactured using forced labor for ethnic and religious minorities. This will include shipments from cotton and tomatoes to floor tile and solar panel materials.
Already, under earlier trade rules, over 900 shipments were traced to that region and seized by US customs. However trade and business groups are complaining that the law is written to vaguely that the bulk of China’s $500 billion in annual shipments will all qualify for seizure, and the rules will, by definition, be applied arbitrarily.
Doug Barry, a senior director at the U.S.-China Business Council said, “The way the law is written could be interpreted as applying to other kinds of goods from other parts of China that allegedly involved forced labor at some point along the supply chain.”
In addition, there are reports China is merely moving prisoners involved in forced labor out of the region to other regions where they are establishing forced labor camps, as well as moving goods made in the region to other regions, before exporting them to the US.
On top of everything, it is likely the law will further disrupt already disrupted US supply chains, constricting supply and worsening inflation, which is already running at 40-year highs.
U.S. Customs and Border Protection has still not given importers clear guidance on how the law will be applied.
Doug Barry continued, “They have released little information beforehand, and companies won’t know many of the details of what they must comply with until the date they must comply. We are expecting implementation to be messy.”
U.S.-based Mission Solar says it will comply with the new law, but it is “difficult to know what effect it will have at this point.”
Hong Kong apparel supply chain manager Lever Style, whose clients include Fila, Hugo Boss and Theory, says due to the vagaries of the law, it is shifting to fabric made in India. Stanley Szeto, the company’s executive chairman said, “We still buy most of our cotton fabric in mainland China, but we can quickly switch to buying fabrics in other places.”
Xinjiang is a region heavily involved in the production of goods for export. It exports everything from agricultural products like walnuts and peppers to electrical goods. It produces 20% of the world’s cotton, making fabric from the region common to a range of clothing manufacturers.
US Customs has produced a guide to try and help importers and brands identify banned products, including supply chain maps and purchase orders. It has also produced a list of banned suppliers it is constantly adding to. Customs has promised to strictly enforce the ban.
Already US shoe company Skechers has organized in independent investigation of its own supply chain after a shipment of its shoes was seized for violating the ban. It denies its products came from the region, and asserts they were seized wrongly.
Meanwhile the ban is aggravating tensions between the US and China.
Chinese Ministry of Foreign Affairs spokesperson Zhao Lijian said, “If the act is implemented, it will severely disrupt normal cooperation between China and the U.S., and global industrial and production chains. If the U.S. insists on doing this, China will take robust measures to uphold its own rights and interests as well as its dignity.”
One worry is customs will not have the ability to know where goods ultimately originated from. US Customs maintains they are up for the challenge.
JoAnne Colonnello, center director at Customs and Border Protection said, “We don’t stop shipments just on hearsay or on one piece of information. We look in total at the situation, and all of the evidence involved, to ensure that we have efficient and effective targeting.”
Rights groups have lobbied for such a law for years to prevent China from exploiting minority groups for profit.
Alkan Akad, China researcher at Amnesty International said, “If governments make it mandatory for corporations and companies to conduct meaningful due diligence — which is not easy to do in China — before they engage in their activities, I think that is something we would welcome.”