The US Departments of State, Treasury, Commerce and Homeland Security issued a joint advisory outlining human rights and forced labour risks in the Xinjiang Uyghur Autonomous Region (Xinjiang). According to the advisory, the PRC continues to target minority groups in Xinjiang, particularly Uyghurs, ethnic Kazakhs, ethnic Kyrgyz, and other minority Muslim groups. In addition to human rights abuses and forced detention in the region, there have been "credible reports" that there have been mass transfers of people to factories across China under conditions of forced or involuntary labour.
The three ways international companies are exposed in their supply chain to these risks outlined in the advisory are:
(1) assisting in developing surveillance tools for the PRC government in Xinjiang;
(2) relying on labour or goods sourced in Xinjiang, or from factories elsewhere in China implicated in the forced labour of individuals from Xinjiang in their supply chains; and
(3) aiding in the construction of internment facilities used to detain Uyghurs and members of other Muslim minority groups, and/or in the construction of manufacturing facilities that are in close proximity to camps operated by businesses accepting subsidies from the PRC government to subject minority groups to forced labour.
Previous US Government Actions
The US Department of Commerce has added several Chinese companies to the Entity List which prohibit and/or impose additional licensing conditions on exports to/from these companies. US Customs and Border Protection have seized products believed to be manufactured with forced labour from Xinjiang, and the Department of States has issued visa bans for government officials believed to be involved in detention and abuse of minority groups in Xinjiang. OFAC also has the ability to designate persons engaged in serious human rights abuse under the Global Magnitsky Act.
Guidance for Businesses
Although the advisory is not legally binding, the US government suggests that businesses "may face reputational risks and/or trigger US law enforcement or other actions, depending on the specific facts and circumstances of their involvement".
Some of the legal risks include Department of Commerce licensing restrictions, federal prohibitions on importing or benefitting from goods produced with forced labour, the Federal Acquisition Regulation, Combating Trafficking in Persons, and the Trafficking Victims Protection Act (TVPA) which criminalises the act of benefiting financially, or by receiving anything of value, from forced labour where the defendant knew or recklessly disregarded such forced labour and knowingly participated in the relevant venture. Additionally, on June 17, 2020, the US implemented the “Uyghur Human Rights Policy Act of 2020," which permits sanctions to be imposed on foreign persons determined to be responsible for certain actions with respect to specified ethnic Muslim minority groups in Xinjiang.
Areas to be cautious of include:
- selling items which can be used for tracking or surveillance;
- involvement in JVs or partnerships with Chinese companies engaged in surveillance;
- providing services to such companies, or involvement with entities on the Commerce Entity list
Indicators of Forced Labour or Labour Abuses include:
- lack of transparency/use of shell companies or opaque contract terms to disguise where goods were produced, or by whom;
- companies with high revenue but few employees paying into government social security insurance;
- mention of "internment terminology" (e.g., Education Training Centers (职业教育培训中心) or Legal Education Centers);
- companies receiving government development assistance in Xinjiang as part of the government's "poverty alleviation efforts or vocational training programs";
- companies using government recruiters;
- factories located in Xinjiang near interment camps or industrial parks involved in "poverty alleviation efforts".
Guidance on Human Rights Due Diligence:
- End Use: To the extent practical, businesses and individuals should examine the end users of their products, technology, research, and services
- Industry Collaboration: businesses should consider collaborating with industry groups and multi-stakeholder groups to exercise leverage to address and prevent human rights abuses in their supply chains.
- Risk-based due diligence: Businesses and individuals providing goods and services to Chinese entities that may be operating in Xinjiang or using labourers from Xinjiang are also encouraged to conduct appropriate due diligence measures regarding the employment of forced labour
- Red flags: Annex 3 to the advisory provides an illustrative list of industry which may involve labour abuses, this includes in particular cotton
Additional Resources for Risk-Based Human Rights DD
- UN Guiding Principles on Business and Human Rights, the Organisation for Economic Co-operation and Development (OECD) Guidelines on Multinational Enterprises,
- International Labor Organization (ILO) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy
- The US Department of Labor’s Comply Chain provides information on due diligence measures specific to forced labor and child labor in supply chains.
- The US Department of State’s Responsible Sourcing Tool includes an in-depth examination of 11 key sectors and 43 commodities at risk for human trafficking or trafficking-related practices, as well as 10 comprehensive risk-management tools.
- The Human Trafficking Prosecution Unit of the Department of Justice’s Civil Rights Division works with federal law enforcement agencies to prosecute forced labor cases. Complaints involving potential criminal violations of forced labor statutes may be referred to HTPU@usdoj.gov.
Businesses with potential exposure in their supply chain to Xinjiang or to facilities outside Xinjiang that use labor or goods from Xinjiang should be aware of the reputational, economic, and legal risks of involvement with entities that engage in human rights abuses, including but not limited to forced labor in the manufacture of goods intended for domestic and international distribution.