It’s been a little more than a year since the U.S. government enacted its Uyghur Forced Labor Prevention Act (UFLPA), a mechanism to prevent goods made with forced labor in Xinjiang, China, from entering the country.
In that time, apparel, footwear and textiles have accounted for over $31 million in shipments detained by U.S. Customs and Border Control (CBP) under the UFLPA. That’s according to Ben Kelbaugh, director of sales for the software company SourceMap, who said the stakes will only get higher.
Speaking Thursday during an industry call hosted by the Footwear Distributors and Retailers of America, Kelbaugh said, “Enforcement of the law is increasingly ramping up in new industries. Additionally, other U.S. government entities such as the House Select Committee on China and the Senate Finance Committee have started specifically calling out organizations for their links to forced labor and the ex-Uyghur region. CBP is increasing staffing; they’re increasing funding. And so all signs point to UFLPA compliance becoming a more serious concern for all industries moving forward.”
FDRA’s vice president of government affairs, Thomas Crockett, noted on the call that the UFLPA considers any good connected — in any way — to the Xinjiang Uyghur Autonomous Region in China to be produced with forced labor. “And the burden is on companies to show that it’s not forced labor. That requires intense knowledge of supply chains, traceability and investing in companies that can help map supply chains,” he said. “This is a big issue for companies.”
And the U.S. isn’t the only country cracking down on the issue. On July 11, FN sister publication Sourcing Journal reported that the Canadian Ombudsperson for Responsible Enterprise opened a fact-finding investigation into Nike Canada’s alleged ties with businesses that have profited from forced Uyghur labor in China.
Kelbaugh — whose company offers a software to help brands gain visibility into their upstream supply chains — offered a few important tips for companies to ensure they remain in compliance with the UFLPA and avoid costly repercussions.
Tip 1: Start Mapping
“The first requirement for compliance is mapping your supply chain — mapping being defined as the discovery of your upstream sub-suppliers at every step, from finished goods, to the manufacturers, to raw material origin source, to the farms and the mines,” Kelbaugh said.
He explained that some companies may have the resources and bandwidth to conduct the mapping internally. For those who opt to use a third-party partner, he said there are two methodologies to consider: AI-based modeling and supplier-disclosed data.
“[AI-based software] is aggregating open-source trade data to infer what the supply chain of a particular brand may be or likely is,” Kelbaugh said. “These solutions can be very helpful to give you a cursory look at potential risk in the supply chain, but they inherently don’t present a comprehensive view of your actual supply chain.”
He added that SourceMap uses the latter methodology, gathering data on a firsthand basis directly from the suppliers. “Supplier-disclosed data collection is obviously a more intensive process, but it inherently provides more accurate data,” said Kelbaugh.
Tip 2: Monitor Continuously
Once mapping is complete, Kelbaugh recommends companies study the highest-risk areas of their supply chains first, looking at the product raw materials that CBP is targeting and tier-one suppliers in high-risk areas. “Part of that risk analysis should also include screening discovered suppliers against global entities lists, government lists and academic research to identify if you have a supplier flagged for forced labor exposure,” he said.
And the information is constantly changing, according to Kelbaugh, who noted that research recently added 50,000 new names to the list of entities engaged in or benefiting from forced labor in Xinjiang. So companies should be continuously monitoring for risk.
Tip 3: Get Organized
If a shipment of merchandise or materials is seized by the CBP, companies have only 30 days to rebut the assumption of guilt, said Kelbaugh. That process requires specific forms of documentation, such as detailed transaction and supply chain records, including invoices, contracts, purchase orders, etc.
“Companies need to be collecting this information proactively at scale, because once a shipment is detained, that window to collect the information from suppliers reactively is unrealistically short,” he said.
Kelbaugh also noted that the information needs to be organized internally in a way that’s searchable and exportable, making it easier to present the strongest case to CBP officials.
“They have an expectation that you’re not just presenting the raw data,” he said. “You should have a concise report that outlines very easily and efficiently how to make sense of what you’re submitting — but not a doctoral dissertation that’s going to take them a very long time to review.”