What is the Uyghur Forced Labor Prevention Act (UFLPA)?

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In December of 2021, the US government introduced The Uyghur Forced Labor Prevention Act (UFLPA) as the next piece of legislation to encourage resilience, transparency, and equity in post-COVID era supply chains. The policy dictates that goods, wares, articles, and merchandise mined, produced, and/or manufactured in the Xinjiang Uyghur Autonomous Region (XUAR) of China are not entitled to entry into the United States, and must show a preset of conditions to enter the country. Most specifically, the legislation calls out 13 key product categories of focus for the attention of customs agents:Apparel, clothing, computer parts, cotton, processed cotton and cotton products, electronics, garments, hair products, polysilicon, rail transportation equipment, silica-based products, textiles, and touch screens for handheld devices and automotives.The legislation effectively introduces a burden of proof for importers to show that their suppliers in the XUAR are using ethical workforce practices—not forced labor. While the policy may seem straightforward on the surface, it is having a rippling market effect as companies scramble to understand not only their primary supply base, but also the unknown and often opaque world of their secondary and tertiary suppliers—their suppliers’ suppliers—and so forth.For most companies, multitier supply chain visibility requires an investment in digital tools to enable a deeper understanding than the status quo. This past December, the Customs and Border Patrol estimated that more than 2,200 shipments have been stopped at US ports, worth more than $728 million in inventory, since implementation. Impacted end products were certainly worth billions of dollars.Companies seeking to understand the UFLPA and how to proactively plan and prioritize for it should follow four core steps:1. Conduct a supply chain diligence to identify immediate, sole-source risksProcurement and supply chain organizations must take steps to identify suppliers operating in Xinjiang at the primary level—seeking to understand their risk level based on labor practices, local law compliance, and direct proximity to local XUAR government. The findings of this preliminary assessment must then be mapped against which components and inventory are not currently being provided by additional suppliers. If sole-sourced components are being actively sourced from the XUAR, immediate actions must be undertaken to mitigate.2. Build the risk prioritization assessmentAfter preliminary risk assessment, companies must prioritize the identified risks. A risk matrix that plots the risk level of specific suppliers against risk to the core company operation due to factors such as sole-sourced inventory is key. By clearly identifying which suppliers introduce the most individual and company-specific risk to the core operation, companies can prioritize resources for mitigation efforts.3. Install supplier protocols to protect against further violationsWhen inventory is flagged at a customs checkpoint, companies have 30 days to show proof of ethical practice notice to customs to retrieve product and continue sourcing. The required proof for customs will often include, but is not limited to:Mapping supply chain and transport along the entirety of the value chainEvidence to demonstrate how and to whom wages are paidEvidence of worker nationality and residency statusEvidence to demonstrate output consistent with documented, ethical number of workersEvidence of ethical, transparent workforce practicesTo proactively plan against having to show the burden of proof, companies can deploy several best practices to increase transparency, open communication, and ease of data access if there are ever conflict points.These practices may include:Installing processes to vet potential suppliers for unethical labor practices as part of sourcing, award, and onboarding stepsEnforcing contract stipulations that require immediate action if violations are foundDefining contract break violations and guidelines in line with unethical labor practicesRequiring a supplier code of conduct to promote compliance which explicitly bans the use of unethical labor practices4. Install supply chain transparency by enabling digital toolsIn the face of legislative challenges, supply chain risks, and compliance complexity, companies often scramble to answer the call to do everything at once. Fortunately, numerous third-party vendors, digital dashboards, and AI-enabled supply chain visibility tools have entered the market.More often than not, using third-party supply chain risk management (SCRM) tools will be the fastest way to build a deeper visualization of supply chains and associated risks. However, no software tool on the market is a silver bullet. Humans who understand a company’s specific supply chain will need to interpret SCRM tools’ outputs just like a doctor needs to interpret an MRI image. Moreover, the sensing and illumination of these buried risks needs to occur on an ongoing and real-time basis, supported by fit-for-purpose processes to be truly effective.Another key challenge faced by companies is the acquisition of data to support the supply chain illumination. This requires a multi-pronged approach of tapping in to commercially available data sources, acquiring data directly from suppliers, partnering with NGOs and industry bodies, and engaging boots-on-the-ground intelligence firms. The Uyghur Forced Labor Prevention Act presents a significant challenge to companies operating in and around Xinjiang. To comply with the law, companies must assess the risks in their supply chain, prioritize mitigation efforts, and implement measures to ensure that their suppliers are not using forced labor. By taking these steps, companies can demonstrate their commitment to responsible sourcing practices, comply with the law, and protect their reputation and bottom line.The authors wish to thank Ben Reifel for his valuable contributions to this paper.