U.S. Customs and Border Protection announced yesterday that, effective immediately, it will detain shipments containing cotton and cotton products originating from the Xinjiang Production and Construction Corps., a sprawling state-owned commercial entity that has been implicated in human rights abuses in China and was sanctioned by the Treasury Department’s Office of Foreign Assets Control this past summer.
CBP’s Office of Trade issued a Withhold Release Order against cotton products made by the XPCC based on information that reasonably indicates the use of forced labour, including convict labour.
The WRO applies to all cotton and cotton products produced by the XPCC and its subordinate and affiliated entities as well as any products that are made in whole or in part with or derived from that cotton, such as apparel, garments, and textiles.
Part of an unprecedented corporate accountability campaign launched by the Trump administration earlier this year, the WRO is the sixth enforcement action taken by CBP in the past three months against goods made by forced labour from China’s Xinjiang Uyghur Autonomous Region.
Beginning last July, the U.S. Government issued an advisory cautioning businesses about the risks of forced labour in Xinjiang, “where the Chinese government continues to execute a campaign of repression targeting the Uyghur people and other ethnic and religious minority groups.”
Treasury’s OFAC sanctions initially gave companies until September 30 to sever ties with the XPCC, but the deadline was extended by two months following industry groups requesting the extension because the Chinese entity’s supply chain was too opaque for them to quickly comply.
XPCC & Other High-Risk Entities
XPCC, a quasi-military entity estimated to employ 12% of Xinjiang’s population and account for 17% of its largely cotton-based economy, has been accused of using forced labour by oppressed minority groups throughout its various supply chains.
According to experts, it is virtually impossible to do business with China’s cotton and textile industries without also engaging with XPCC in some way.
A recent financial analysis of the entity determined that it had 862,000 direct and indirect holdings in almost 150 countries. Corporate intelligence group Sayari found that “2,114 of these companies are based in the United States and/or appear in U.S. official public records,” adding that “71 of these US-linked companies are within 10 layers of ownership from the XPCC.”
Effects of the WRO
The WRO issued by CBP pursuant to the federal statute prohibiting the importation of convict-made goods (19 U.S.C. 1307), requires detention at U.S. ports of entry of all cotton products made by the XPCC and any similar goods that the XPCC produces.
CBP advises that importers of detained shipments are provided an opportunity to export their shipments or demonstrate that the merchandise was not in any way produced with forced labour.
To quote the government’s prior advisory concerning such imports: “Businesses with potential exposure in their supply chain to entities that engage in human rights abuses in Xinjiang or to facilities outside Xinjiang that use forced labour from Xinjiang in the manufacture of goods intended for domestic and international distribution should be aware of the reputational, economic, and legal risks of involvement with such entities.”
The note further suggested that “to mitigate reputational and other risks, businesses should apply appropriate industry due diligence policies and procedures.”
Need More Information?
Should you have any questions about this detention order, or if you require any assistance with mitigating risk in this regard, don’t hesitate to contact one of our knowledgeable trade experts to discuss this issue in more detail.