Forced labor act takes effect, targets solar supply chains

Solar module importers face another trade hurdle as the Uyghur Forced Labor Prevention Act (UFLPA) takes effect.

Passed by Congress and signed by President Biden on December 23, the law is intended to reinforce U.S. policy to curb the importation of goods made with forced labor. 

The UFLPA draws its authority from Section 307 of the Tariff Act of 1930, as amended (19 U.S.C. § 1307). That section, first crafted nearly a century ago, prohibits the importation of all “goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor or/and indentured labor under penal sanctions.”

Credible evidence has circulated since 2020 that ethnic Uyghars living in the Xinjiang region of China are being forced to work in extracting and refining raw materials that go into the production of polysilicon that then is used to produce solar cells and modules.

Beijing has long denied that forced labor of any kind is used in any Chinese manufacturing. It has enacted laws to punish Chinese companies that cooperate with international efforts to address the use of forced labor. Those actions have made it challenging for solar module importers to produce the detailed documentation that Customs and Border Protection (CBP) agents require.

As written, the UFLPA requires the CBP Commissioner to presume that imports mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China (PRC), or by entities identified by the U.S. government on the UFLPA Entity List, are made with forced labor and are prohibited from entry into the United States.

That presumption extends to goods made in, or shipped through, the PRC and other countries that include inputs made in Xinjiang.

To overcome the presumption, importers must, among other things, demonstrate by “clear and convincing evidence” that the item was not produced or manufactured by forced labor. 

The UFLPA also requires that importers “demonstrate due diligence, effective supply chain tracing, and supply chain management measures” to ensure that they do not import any goods made by forced labor. This requirement extends throughout the entire supply chain, to include goods that may be shipped from elsewhere in the PRC and to third countries for further processing.

Guidelines issued by CBP officials on June 13 outline four requirements aimed specifically at polysilicon.

• Importers need to provide complete records of transactions and supply chain documentation that demonstrate all entities involved in the manufacture, manipulation, or export of a particular good, and the country of origin of each material used in the production of the products going back to the suspected source of forced labor (that is, production in Xinjiang or by an entity on the UFLPA Strategy entities lists).

• Provide a flow chart mapping each step in the procurement and production of all materials and identify the region where each material in the production originated (for example, from location of the quartzite used to make polysilicon, to the location of manufacturing facilities producing polysilicon, to the location of facilities producing downstream goods used to make the imported good).

• Provide a list of all entities associated with each step of the production process, with citations denoting the business records used to identify each upstream party with whom the importer did not directly transact.

• Importers should be aware that imports of goods from factories that source polysilicon both from within Xinjiang and outside of Xinjiang risk being subject to detention, as it may be harder to verify that the supply chain is using only non-Xinjiang polysilicon and that the materials have not been replaced by or co-mingled with Xinjiang polysilicon at any point in the manufacturing process.

The UFLPA codifies into law a year-old Withhold Release Order that the Biden administration imposed on solar module imports.

In a series of actions on June 24, 2021 the administration ordered a ban on U.S. imports from Chinese-based Hoshine Silicon Industry Co. over forced labor allegations. The U.S. Department of Commerce separately restricted exports to Hoshine, three other Chinese companies, and what it said was the paramilitary Xinjiang Production and Construction Corps.

The three companies included Xinjiang Daqo New Energy Co, a unit of Daqo New Energy Corp.; Xinjiang East Hope Nonferrous Metals Co, a unit of Shanghai-based manufacturer East Hope Group; and Xinjiang GCL New Energy Material Co., part of GCL New Energy Holdings Ltd.

Hoshine is estimated to be the source of around two-thirds of the world’s metallurgical grade silicon, which is used in the solar industry. The silicon provides feedstock used in the polysilicon refining process. In August, reports began to emerge that CBP was detaining solar modules that they suspected contained material subject to the WRO.