US ban
On 30th November 2020 US Customs and Border Protection (CBP) banned the import of cotton grown by Xinjiang Production and Construction Corps (XPCC). XPCC grow’s 7% of the world’s cotton[1] and the CBP’s Withhold Release Order (WRO) extends to any product containing its cotton.
The US prohibits the import of goods made by forced labour and has increasingly focused enforcement efforts on China.[2]
In August 2020, CBP collected a $575,000 fine from Pure Circle U.S.A. as part of a settlement relating to that company’s import of stevia products made by Chinese forced prison labour. That the goods were imported before a WRO was in place underscores the fact that all goods made, mined or farmed by forced labour are banned, not just those subject to WROs.
Brenda Smith, Executive Assistant Commissioner of CBP’s Office of Trade stated that “companies have a responsibility to proactively monitor their supply chains to mitigate the risk of importing goods into the United States that were produced with forced labor.” WRO officials have previously noted that they will take into consideration human rights due diligence conducted by a company when deciding on enforcement action.
XPCC is a vast and complex organisation with revenues of $36 billion and stakes in a reported 800,000 companies. XPCC and certain of its officials have been subject to US Office of Foreign Assets Control sanctions since July 2020.
Sadly, the Chinese Government appears unlikely to close the “re-education programme” anytime soon. Meanwhile companies will be subject to increased consumer, investor and regulatory pressure to ensure that their supply chains are free of Uyghur forced labour. A bill to ban all imports from Xinjiang passed the US House of Representatives in March 2020 and has passed to the Senate. A similar bill was recently introduced in the Australian Senate.
Action for companies
The United Nations Guiding Principles on Business and Human Rights confirms that all companies should engage in human rights due diligence to help tackle abuses in their supply chains.
While the WRO only applies to US importers, we recommend that all companies consider its implications. The “re-education programme” is vast, with one million alleged victims, and XPCC is a major enterprise in the region. It is highly credible that forced labourers from the programme are being exploited in XPCC’s cotton operations.
Due to the labour-intensive nature of harvesting, cotton carries a high risk of modern slavery. All cotton, and in particular Chinese cotton and goods containing cotton sourced from China, should be subjected to enhanced due diligence. Furthermore, companies should check their supply chains for other products made by forced labour from the Xinjiang “re-education programme.”
[1] The US Government estimates that China grows 23% of the world’s cotton crop and XPCC is reported to grow 30% of the national output.
[2] See our previous article for an overview of the Xinjiang “re-education programme” and US efforts to prevent the import of goods made by its victims.
