Issue Background
New York – On Thursday, Dec. 23, 2021, US Congress passed PUBLIC LAW 117–78. Legally barring all 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” from entering the United States. This is due to the alleged use of forced labor and concentration camps in the China’s Xinjiang Uyghur Autonomous Region. While only around 0.1% of total American imports from China are directly from Xinjiang, many of the primary materials used to make other products are there. The main three being Cotton, Tomatoes, and Polysilicon. This creates potential supply chain & sourcing challenges for clothing and solar panel manufactures and food products like Ketchup. Heinz, Nike, H&M, and North face are all examples of companies affected by the law. Since the passing of the law companies have quietly been altering their supply chains to divest away from Xinjiang. By doing so in a non-public was, these companies hope to avoid nationalistic backlash from the Chinese public, a growing and sometimes majority consumer of many of these products.
Key Points
- Key Point 1: The enforcement of the import ban starts June 21, 2022. Similar laws are also being passed, or have been passed in other major markets like the EU.
- Key Point 2: Exceptions will be granted by the Commissioner of U.S. Customs (currently Chris Magnus). The specifics of exceptions will come from a report which will go through a public engagement process until March 10, 2022. This process will be a strong opportunity for businesses to adjust the specifics of the law.
- Key Point 3: Importers will be expected to show a burden of proof that forced labor was not used in the supply chain of their products. However, specifics for compliance have yet to be detailed and a review and public comment period will precede any final decision allowing companies to build in internal compliance processes.
Recommendations
It is recommended that companies conduct a thorough self-assessment of their supply chain and exposure to Xinjiang products. Companies should be aware of both US and Chinese regulator and consumer positions as they navigate this complex geopolitical and market issue.
By: Juan Hertsens Marques & Brandon Hughes
Relevant Links
- US Law 117–78: https://www.congress.gov/117/plaws/publ78/PLAW-117publ78.pdf
