By Kenneth Rapoza, CPA Industry Analyst
Homeland Security Chief Ken Cuccinelli says a regional ban on goods sourced from Xinjiang, China is "on the table." How about a national ban? Multinational corporations like Nike and Apple are already saying a regional one would be too complicated for them to manage.
Companies may be banned from buying goods from China’s Xinjiang province – the whole province, and not just individuals companies, as is the norm, Department of Homeland Security secretary Ken Cuccinelli said on Wednesday.
He said a regional ban was “on the table.” Customs and Border Protection (CBP) is run by Homeland. CBP has never issued bans on products from a particular region of a country, but has issued bans on products from an entire country. We have a so-called Withhold Release Order on tobacco coming from Malawi.
“The idea of a regional WRO is certainly not out of play. It’s legally doable,” Cucinelli said. “It takes a different form of evidence -- a quantum of evidence -- to accomplish. It is something we are investigating and I’m sure Congress is also looking at a region-wide approach to the Xinjiang region.” Any mechanism put in place has to be “operable,” he added. “The point isn’t just to make announcements. The point is to actually block goods that are made with slave labor.”
Xinjiang is home to more than the set of Disney’s Mulan. It is also home to thousands of Uyghur Muslim men who are being held in detention facilities. Beijing has never denied the existence of these prison centers, but calls them re-education centers instead. Beijing says it is going after the Muslim population in the region to stop them from acts of terrorism.
As a result of these actions, many Uyghurs are being subject to work without pay.
On Wednesday, CBP banned imports of any goods made from cotton produced by the Xinjiang Production and Construction Corps (XPCC). The move is based on information that reasonably indicates the use of forced labor, including prison labor.
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.
In the late summer, when CBP started issuing these WROs against Xinjiang cotton producers, large apparel retailers like H&M came out to immediately state its clothing was not made from cotton from Xinjiang. But after a deeper look, they cut ties with what they called an "indirect" relationship to supply chains in Xinjiang.
Major US retailers and clothing brands now have to pay careful attention as to where they are sourcing their cotton for their clothing lines made in China. Industry associations have said that getting to the nitty-gritty of their supply chains would not be an easy task. But with the CBP issuing yet another WRO this week, they will have to figure it out sooner rather than later, or risk having their merchandise held up at American ports.
The WRO on XPCC cotton products is the sixth enforcement action that CBP announced in the past three months against Xinjiang based companies, including a company that made laptops for Lenovo and Google.
In July 2020, the US Government issued an advisory to caution all businesses about the risks of forced labor in Xinjiang.
Senate and House Democrats as well as London-based human-rights groups first called for a region-wide ban on products from Xinjiang in the summer.
Senate Finance Committee members Ron Wyden (D-OR) and Sherrod Brown (D-OH) said in October that they supported a ban on all goods coming from Xinjiang, meaning anything made from goods sourced in Xinjiang would be subject to a WRO.
Congress also is considering the “Uyghur Forced Labor Prevention Act,” which would ban a number of certain goods believed to be using Uyghur prison labor. The bill passed the House in September but multinational corporations led by the likes of Nike, Coca-Cola and Apple are lobbying against its passage in the Senate, according to the New York Times, saying it would be unreasonable for them to know where their China contractors are sourcing materials used to make consumer goods sold to Americans.
This is why we back a national ban on certain items. Companies will have a harder time saying they cannot tell where their China suppliers are getting their materials. If the material is Made in China and it is banned nationwide then, quite simply, they will have to buy it from someplace else if they want to keep making it there.
On November 9, CPA CEO Michael Stumo sent a letter to Senators Wyden and Brown calling for a national ban, not a corporate-wide ban, or a regional ban against Xinjiang manufacturers.
Excerpt from our letter:
"...Company specific WRO’s would not work. CBP told the Government Accountability Office recently that it 'does not have enough resources and staff' to reassess the effectiveness of existing WROs to determine if revocation or modification is warranted. As a result, the division staff reviews active WROs only in response to importers’ requests to modify or revoke WROs. Again – a meritless approach to stopping multinational corporations from profiting off of forced labor. That is why a country wide WRO is the only approach to stopping forced labor."
In a press release yesterday by the AFL-CIO, they group noted that the XPCC is a state-owned paramilitary organization that is an integral part of agricultural and industrial production in Xinjiang. It uses forced labor of Uyghur and other ethic minorities there to work on farms and in their production facilities.
The XPCC and its subsidiaries have been previously sanctioned by the Treasury Department's Office of Foreign Assets Control and is linked to numerous companies that have relationships with global supply chains.