Norton Rose Fulbright US LLP
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Solar companies are anxious about whether tougher enforcement of a US prohibition against importing products that benefited from Chinese forced labor will mean more blocked solar panels and batteries.
Solar panels and batteries imported on or after June 21 are at greater risk of being blocked at the US border under a Uyghur Forced Labor Prevention Act that took effect on June 21. (For more details, see “Customs Seizures of Solar Panels” in the March 2022 NewsWire.)
Two US government reports in mid-June describe what importers will have to do in the future to prevent such equipment from being detained.
Importers will have to produce a lot of paper. This will require a change in equipment procurement contracts to put a larger burden on suppliers.
All goods manufactured wholly or partly in Xinjiang or that include inputs from Xinjiang will be presumed to have been made with forced labor and be blocked from entry into the United States. Solar panels are particularly at risk because of the large percentage of polysilicon originating in western China. Roughly 80% of the cells that power lithium-ion batteries are also made in China.
The presumption that any product using any inputs from Xinjiang benefited from forced labor is rebuttable.
US Customs must decide within five days after goods are presented for entry whether to block them.
Customs may issue one of three types of notices: a detention, exclusion or seizure notice.
Anyone receiving a detention notice generally has 30 days to try to rebut the presumption.
An exclusion or seizure notice requires a more formal process to overcome.
Importers will either have to prove their supply chains are free of any inputs from Xinjiang or other forced labor or, if there is any link to Xinjiang, prove no forced labor was involved. The latter may prove very difficult.
The two papers the US government released in mid-June are a June 13 US Customs paper called “Operational Guidance for Importers” about how to comply with the new statute, and a June 17 report to Congress by the Department of Homeland Security, where Customs is housed, that reports on the steps it is taking to enforce the new law and that includes a section called “Guidance for Importers.”
Anyone in a position of having to rebut the presumption will have to have done a lot of diligence.
The importer must produce a supply chain map. All of the suppliers along the supply chain must have written codes of conduct barring forced labor and “addressing the risk of use of Chinese government labor schemes.” The procurement staff must have had training on how to spot forced labor risks. It must monitor the suppliers for compliance with their codes of conduct. There must be an independent verification of “the implementation and effectiveness of the due diligence system.”
The importer may also have to produce a list of every worker at any Xinjiang company in the supply chain, the worker’s residency, the wages he or she is paid, proof that the factory output is consistent with the number of documented workers and proof that none The workers were recruited with help from the Chinese government, the Xinjiang Production and Construction Corps (XPCC) or any company on the UFLPA entity list.
Anyone trying to prove the presumption does not apply in the first place because there are no links to Xinjiang or other forced labor must have affidavits from each company involved in the production process.
If Customs allows any goods in with ties to Xinjiang because the importer was able to prove no forced labor, then it must alert Congress in a report identifying the goods and the evidence considered. The reports will be made public. Proprietary information may be withheld from release under the same standards that protect confidential information from disclosure under the Freedom of Information Act.
The government has a UFLPA entity list with names of Chinese companies that use forced labor. The list includes four companies involved in supplying polysilicon and silica-based products: Hoshine Silicon Industry, Xinjiang Daqo New Energy, Co. Ltd., Xinjiang East Hope Nonferrous Metals Co. Ltd. and Xinjiang GCL New Energy Material Technology, Co. Each of the companies operates under various aliases that are included on the entity list.
The New York Times suggested in a June 21 article that Xinjiang Nonferrous Metal Industry Group, which is involved in the supply chain behind batteries, uses some forced labor. The company is not on the entity list.
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