[Joint House and Senate Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
IMPLEMENTATION OF THE UYGHUR FORCED LABOR PREVENTION ACT AND THE IMPACT
ON GLOBAL SUPPLY CHAINS
=======================================================================
HEARING
before the
CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
APRIL 18, 2023
__________
Printed for the use of the Congressional-Executive Commission on China
Available at www.cecc.gov or www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
51-889 WASHINGTON : 2023
CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA
LEGISLATIVE BRANCH COMMISSIONERS
House
Senate
CHRISTOPHER SMITH, New Jersey, JEFF MERKLEY, Oregon, Co-chair
Chair ANGUS KING, Maine
JAMES P. McGOVERN, Massachusetts TAMMY DUCKWORTH, Illinois
BRIAN MAST, Florida
JENNIFER WEXTON, Virginia
MICHELLE STEEL, California
SUSAN WILD, Pennsylvania
ANDREA SALINAS, Oregon
ZACHARY NUNN, Iowa
RYAN ZINKE, Montana
EXECUTIVE BRANCH COMMISSIONERS
DANIEL K. KRITENBRINK, Department of State
MARISA LAGO, Department of Commerce
THEA MEI LEE, Department of Labor
UZRA ZEYA, Department of State
LISA JO PETERSON, Department of State
Piero Tozzi, Staff Director
Matt Squeri, Deputy Staff Director
(ii)
C O N T E N T S
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Statements
Opening Statement of Hon. Chris Smith, a U.S. Representative from
New Jersey; Chair, Congressional-Executive Commission on China. 1
Statement of Hon. James P. McGovern, a U.S. Representative from
Massachusetts.................................................. 3
Statement of Hon. Jeff Merkley, a U.S. Senator from Oregon; Co-
chair, Congressional-Executive Commission on China............. 5
Statement of Hon. Ryan Zinke, a U.S. Representative from Montana. 6
Statement of Hon. Jennifer Wexton, a U.S. Representative from
Virginia....................................................... 7
Statement of Hon. Zachary Nunn, a U.S. Representative from Iowa.. 8
Statement of Hon. Michelle Steel, a U.S. Representative from
California..................................................... 9
Statement of Anasuya Syam, Human Rights and Trade Policy
Director, Human Trafficking Legal Center....................... 11
Statement of Laura Murphy, Professor of Human Rights and
Contemporary Slavery, Helena Kennedy Centre for International
Justice, Sheffield Hallam University........................... 13
Statement of Kit Conklin, Nonresident Senior Fellow, GeoTech
Center, Atlantic Council....................................... 14
Statement of Elfidar Iltebir, President, Uyghur American
Association.................................................... 17
APPENDIX
Prepared Statements
Syam, Anasuya.................................................... 32
Murphy, Laura.................................................... 38
Conklin, Kit..................................................... 41
Iltebir, Elfidar................................................. 42
Smith, Hon. Chris................................................ 44
Merkley, Hon. Jeff............................................... 45
McGovern, Hon. James P........................................... 46
Submissions for the Record
Statement of Robby Stephany Saunders and Charles Benoit,
Coalition for a Prosperous America............................. 48
CECC Truth in Testimony Disclosure Form.......................... 54
Witness Biographies.............................................. 55
(iii)
IMPLEMENTATION OF THE UYGHUR FORCED LABOR PREVENTION ACT AND THE IMPACT
ON GLOBAL SUPPLY CHAINS
----------
TUESDAY, APRIL 18, 2023
Congressional-Executive
Commission on China,
Washington, DC.
The hearing was held from 10:04 a.m. to 11:41 a.m., in room
2360, Rayburn House Office Building, Washington, DC,
Representative Christopher Smith, Chair, Congressional-
Executive Commission on China, presiding.
Also present: Senator Jeff Merkley, Co-chair,
Congressional-Executive Commission on China, and
Representatives McGovern, Steel, Wexton, Nunn, and Zinke.
OPENING STATEMENT OF HON. CHRISTOPHER SMITH, A U.S.
REPRESENTATIVE FROM NEW JERSEY; CHAIR, CONGRESSIONAL-EXECUTIVE
COMMISSION ON CHINA
The hearing will come to order. I want to welcome everyone
to this very first hearing of this Congress on the
implementation of the Uyghur Forced Labor Prevention Act, a
truly landmark piece of legislation--bipartisan legislation--
that has the potential to alter the dynamic of our ongoing
struggle with the People's Republic of China. But only if it's
implemented faithfully and properly.
And make no mistake about what the stakes are in the
struggle against the Chinese Communist Party. Not something
anodyne like a simple ``strategic competition.'' Rather, we are
in a survival struggle with a dictatorship and an authoritarian
state that seeks global hegemony and the fundamental
displacement of the United States and the liberal economic
order throughout the world. To that end, the PRC will take
advantage of the Western world's liberal trade regimen, while
utilizing forced labor to give itself an unfair trade
advantage, all with the ultimate objective of imposing its
governance model upon the rest of the world.
We have known for years that the PRC has used forced and
prison labor. Indeed, I knew this as far back as 1991, when
former Congressman Frank Wolf, a Member from Northern Virginia,
and I, went to Beijing Prison No. 2 and found that at least 40
Tiananmen Square activists were being forced to make jelly
shoes and socks for export to the United States. We asked for,
and got, from the warden there--his name was Warden Zhou--
samples that we brought back and got to the customs
authorities, and said, this was being made by Tiananmen Square
activists, human rights activists, and therefore, it is
violative of the Smoot-Hawley Act. He put an import ban on it
and the place closed. Of course, they just moved their
operations elsewhere, but it showed that when you have
information that is actionable, we can have an impact on the
Chinese Communist Party.
There was some personal satisfaction that we had from that,
but again, not that much practical effect, and as to impacting
the PRC's policy of utilizing forced labor, it was next to
zero. In this case, we had evidence and a unique set of
circumstances. I would point out that both George Herbert
Walker Bush, then followed by Clinton and others, used to brag
about how we had a memorandum of understanding, an MOU, with
the Chinese Communist Party that if we thought something was
being made through slave labor, we would bring it to them, they
would investigate and tell us what the results of their
investigation were.
I remember meeting with some of the people in customs at
our embassy in Beijing. And some of you may remember years ago,
there was an ad with the Maytag repairman--they made their
washing machines so well that they never had any work. They
were always idle because there was no work. Well, these two
customs officers reminded me of the Maytag repairman. They had
nothing to do because nobody had actionable information that
they could bring forward. So the MOU, while it sounded great as
a talking point and at hearings, and the Clinton people trumped
it up every time, I said, Not worth the paper it's printed on!
We have to be able to investigate, not them. And of course,
there was no implementation.
And that's the genius of the Uyghur Forced Labor Prevention
Act. The burden is no longer upon the good men and women of the
CBP to prove that goods have been made by forced labor, but
upon importers to prove that goods made in Xinjiang and
elsewhere are free from the taint of forced labor. We know now
that the CCP, under Xi Jinping, has declared war on the Uyghur
people, labeling them as terrorists who must be destroyed root
and branch. As a matter of fact, during the debate on the
floor, I quoted where Xi Jinping himself said, ``show no
mercy'' to the people in that region. And they have shown
absolutely no mercy.
This has led to massive detentions of more than a million
people, maybe many more, of Uyghurs, many of whom are forced to
work and are subjected to horrific human rights abuse including
forced sterilization, forced abortion and, indeed, forced organ
harvesting. You recall a bill that I had introduced--passed the
House just a few weeks ago--putting a heavy focus on trying to
combat that heinous crime of organ harvesting. And along with
the Falun Gong, we now know that the Uyghurs are being targeted
to have their organs stolen, to literally put them on an
operating table and take out one to three of their organs in a
terrible, terrible procedure. These human rights abuses are
what the legislation is designed to combat.
We know from reports released yesterday in advance of this
hearing that CBP has seized over $961 million worth of goods
since last June. This is an important start, as is CBP's
holding of a Tech Expo for industry last month and its launch
of a dashboard to track trade statistics. As Co-chair Merkley
and I, joined by Ranking Member McGovern--who just joined us,
and I will yield to him momentarily--and Senator Rubio stated
in a letter addressed to the Department of Homeland Security
last week, we do remain concerned over the lack of full
transparency that would enable Congress to evaluate the
efficacy of implementation.
We're also concerned as to whether the rebuttable
presumption standard is being fully implemented, and whether
goods that are initially detained are subsequently being
released without congressional or public reporting. We have
questions as to why the robust entity list of bad actors that
the legislation requires remains so spartan. We also question
whether CBP is utilizing technology, such as isotopic and DNA
testing, to its fullest to identify goods produced in the
Xinjiang Uyghur Autonomous Region.
Finally, we also question whether goods produced by forced
labor outside of the autonomous region are being captured. We
have been working with Homeland Security to follow up on well-
founded reports that work gloves sold under the Milwaukee Tool
label in venues such as Home Depot are indeed produced by
prison labor, at a prison in Hunan province, to be precise.
Going forward, we will be taking a closer look at companies
such as Milwaukee Tool and their alleged profiteering from
forced labor, just as we have highlighted the role of Thermo
Fisher Scientific in genetic data collection that enables
repressive practices in both Xinjiang and in Tibet, and more
nefariously, has been implicated in finding DNA matches from
organ harvesting victims.
It is our hope as a Commission that the legislation will
prick the consciences of corporate actors. Some of our
testimony clearly suggests that they're getting that message--
that we mean business, the administration and Congress, and
that is a good message for them to get. We encourage them to
scour their supply chains and make sure they are free from the
taint of forced labor, and not to engage in transshipment to
other countries either, where it is the same good just with a
different statement of origin.
Finally, it is my hope that the corporate actors will
respond very favorably and will embrace this wholeheartedly,
raising the cost of doing business in the PRC. It is also our
hope that bottom-line concerns will motivate companies to do
the right thing. Finally, for those who are incorrigible and
seek to skirt the law, we will seek enforcement action and
bring public scrutiny to bear.
I'd like to now yield to my good friend and colleague, Mr.
McGovern, for any opening comments he might have.
STATEMENT OF HON. JAMES P. McGOVERN,
A U.S. REPRESENTATIVE FROM MASSACHUSETTS
Well, thank you, Mr. Chairman. Thank you for scheduling
this hearing. I look forward to hearing the testimony of our
witnesses on the implementation of the Uyghur Forced Labor
Prevention Act, its impact on global supply chains, and how we
might improve its implementation.
On a personal note, as the author of the House legislation
on the Uyghur Forced Labor Prevention Act, I want to thank my
partner in this legislation, Senator Rubio, and fellow ranking
member and my good friend and colleague Senator Merkley, for
his leadership. And, of course, to Chairman Smith, not only for
his leadership on this, but for, again, organizing this
important hearing.
This group of bipartisan Members of the House and Senate I
think demonstrates the strong bipartisan support that this
issue has received in both the House and the Senate. Since the
UFLPA was signed into law, we have seen significant efforts by
Customs and Border Protection (CBP) and the multiagency Forced
Labor Enforcement Task Force, the FLETF, to implement the bill.
As the lead enforcement agency, CBP has been a strong ally in
its implementation. The law itself recognizes that
implementation is multisectoral. It requires engagement,
cooperation, and action by CBP, but also by the private sector,
including importers, and by NGOs, which have research and
monitoring capabilities.
Last week, the CECC chair, co-chair, and ranking members--
namely, Congressman Smith, Senator Merkley, Senator Rubio, and
I--wrote to DHS Under Secretary Robert Silvers, who chairs the
Forced Labor Enforcement Task Force, to request more
information on certain key aspects of the law's implementation
to date. Due to the timing of today's hearing, neither CBP nor
DHS was able to appear and provide their views and insights on
implementing the legislation. I look forward to a future
hearing where we can hear about their experience and
suggestions for how to pursue comprehensive enforcement.
The Uyghur Forced Labor Prevention Act was a targeted
response to a specific, very serious human rights problem--the
widely documented intentional use of forced labor in the
Xinjiang Uyghur Autonomous Region of China. The use of forced
labor is one of a set of interrelated policies implemented by
the People's Republic of China against Uyghurs and other
largely Muslim Turkic peoples in the region that, taken
together, likely meet the legal definition of crimes against
humanity and genocide. In the law, ``forced labor'' means all
work or service which is exacted from any person under the
menace of any penalty for its non-performance, and for which
the worker does not offer himself or herself voluntarily--a
definition first applied in tariff law in the 1930s.
But section 3 of the bill, which establishes a presumption
that the input prohibition applies to all goods mined,
produced, or manufactured in the Xinjiang Uyghur Autonomous
Region represents a new, even revolutionary approach to
protecting human rights. Basically, instead of presuming that
the norm is that human rights violations are not committed, the
Uyghur Forced Labor Prevention Act presumes the opposite, that
the standard practice is that rights violations are committed.
This presumption is grounded in research that found that,
one, the use of forced labor is pervasive in the Xinjiang
region and two, because there's a lack of transparency and
independent investigations and audits, it is impossible to
distinguish between industry and manufacturing that involves
forced labor and that which does not. So the law establishes an
appeals process that allows a company to make the case that its
goods are not produced with forced labor. But to do so, the
company must provide clear and convincing evidence that they
are not.
There are several issues that merit attention as we review
the implementation of the bill, which my colleagues have noted
in their opening remarks, so I'm not going to repeat it. But as
the implementation of the Uyghur Forced Labor Prevention Act
advances, there will be lessons learned that may lead Congress
to tweak the bill or related law. But it's worth repeating that
the prohibition on importing goods made with forced labor is
longstanding. And what this bill provides is a new approach and
new tools for enforcement.
So the interest in improving enforcement is here to stay.
It's also important to remember that while the operational
aspects of the bill are clearly focused on the Xinjiang Uyghur
Autonomous Region, the statement of policy in the law is
broader, namely, to lead the international community in ending
forced labor practices wherever such practices occur, through
all means available to the United States Government. American
consumers should not have to wear clothing, or footwear, or eat
food, or use devices made by forced labor--wherever it occurs.
American companies should not profit off of forced labor.
In brief, Mr. Chairman, I believe the vigorous, successful
implementation of the Uyghur Forced Labor Prevention Act can
establish not just a model but a roadmap on how to address
forced labor everywhere. And I think I speak for everybody here
who is involved in drafting this bill and fighting for it, that
this is not a check-the-box initiative. I mean, this is
serious. And all of us up here, Democrats and Republicans, are
interested in making sure that it is enforced and is
implemented faithfully. And we will continue to monitor that.
So with that, I thank you, Mr. Chairman. I yield back my
time.
Chair Smith. Thank you very much, Jim.
I'd like to now yield to the co-chairman of this important
Commission, Chairman Merkley.
STATEMENT OF HON. JEFF MERKLEY, A U.S. SENATOR FROM OREGON; CO-
CHAIR, CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA
Chairman, thank you very much. The Uyghur Forced Labor
Prevention Act is a testament to why the Congressional-
Executive Commission on China exists. Horrified by the evidence
documented by the Commission's tireless researchers that the
products of slave labor reach American shelves in vast
quantities, the four most recent chairs of this Commission
acted. And coming from the Senate side, a special recognition
to Senator Rubio, who partnered in the bipartisan effort on the
Senate side.
On a bipartisan and bicameral basis, we introduced,
advocated for, and passed landmark legislation that sent a
resounding and unequivocal message that the United States would
not stand idly by as the world witnesses the evils of genocide
and the evils of slave labor. This law, the Uyghur Forced Labor
Prevention Act, aims to target China's ability to profit from
genocide, hold corporations that trade in products of forced
labor accountable, and protect American consumers from being
unwitting accomplices in these horrors.
In the 16 months since it became law and 10 months since
its key provisions went into effect, the UFLPA has made a
difference. As we'll hear today, it's put businesses on notice
that they can no longer claim that it's too difficult to trace
their supply chains. Armed with substantial new resources
provided by Congress, U.S. Customs and Border Protection now
devotes unprecedented attention to investigating those supply
chains and stopping problematic imports. As a result, direct
exports from Xinjiang have plummeted and businesses are
changing their practices to speed up production capacity
elsewhere in the world, increasing the diversification and
sustainability of their supply chains.
But as much as we've accomplished, it's only the tip of the
iceberg. Compliance with this law requires a paradigm shift. It
requires companies to be vigilant in the same way we expect
them to guard against bribery and corruption and money
laundering. Companies that resist compliance or look to exploit
loopholes need to be held accountable. The U.S. Government's
Forced Labor Enforcement Task Force needs to implement the law
even more aggressively, with particular attention to
transshipment of Xinjiang-origin goods via third countries.
Congress needs to make sure these efforts are fully funded and
that any gaps we identify are plugged.
Countries around the world need to take their own actions
to make sure that the purveyors of forced labor can't just send
their goods elsewhere. That action by other countries is needed
to avoid bifurcated supply chains that allow companies to sell
clean products in the United States and turn around and pocket
the proceeds of tainted forced labor products elsewhere. It's a
big challenge to implement a law, and it's a big challenge to
implement this law with the complexity of international trade.
But we owe it to the millions of exploited Uyghurs and other
ethnic minorities in China.
And as my colleague mentioned, this isn't just about China.
This is about taking on this issue and setting a model for how
we deal with it around the world. We owe it to American
consumers who don't want to be part of the economic machinery
of genocide, and to the businesses doing the right thing who
want to play on a level playing field. It is an honor and a
responsibility to take on this task in partnership with my
colleagues on both sides of the House and both sides of the
aisle. Thank you, Mr. Chairman.
Chair Smith.Thank you very much. Thank you very much,
Chairman Merkley.
I'd like to now yield to Ryan Zinke, former Interior
Secretary and a distinguished Member of Congress.
STATEMENT OF HON. RYAN ZINKE,
A U.S. REPRESENTATIVE FROM MONTANA
Thank you, Mr. Chairman. It is my honor to serve in this, I
think, important committee. Let's just call China what it is.
China's the largest polluter of emissions. We know that. Ninety
percent of the world's plastics come from four rivers in China.
And there are islands in the Pacific that are larger than 800
kilometers in diameter. They're the largest offender of illegal
fishing. And I'm deeply concerned about our reliance, and their
monopoly on, critical minerals and components of the emerging
EV world. In particular, I'm concerned about our reliance on
cobalt, nickel, and critical minerals that China has either a
monopoly on, or control of, and is using forced labor to
acquire. The allegations and substantiated documentation of
organ harvesting--I can think of no crime that is worse.
So let's call China what China is. And let's work for a
bipartisan solution to address the human rights, for humanity,
and our country. And America, by the way, leads. For those that
doubt, I would suggest you look otherwise. But America leads.
And this is an important effort to expose, identify, and create
solutions that matter. So with that, Chairman, I yield back.
Chair Smith. Thank you very much, Mr. Zinke.
Ms. Wexton.
STATEMENT OF HON. JENNIFER WEXTON,
A U.S. REPRESENTATIVE FROM VIRGINIA
Thank you, Mr. Chairman. A U.S. Customs official recently
referred to America and its current de minimis policy as our
country's ``free trade agreement with China.'' Just last week,
the co-chairs and ranking members of this Commission sent that
letter to Under Secretary Silvers expressing concern over,
among other things, the ability of CBP to enforce the UFLPA
when de minimis shipping allows vendors to import goods without
having to report basic data such as country of origin and
manufacturer if the claimed value is under $800. In that
letter, this Commission's leadership points out that Chinese
companies such as Shein and Temu raise concerns about direct-
to-consumer purchases.
These two China-backed online retailers make up an enormous
share of the U.S. market. From February 26th to March 26th,
2023, Temu and Shein came in first and fourth in the top five
most downloaded apps in the U.S. across Apple's iOS Store and
the Google Play Store, with over 10 million and 6.3 million
downloads respectively. Shein was the most downloaded platform
for beauty and fashion in the U.S. in 2022, with 27 million
downloads. Shein has been accused of harvesting data on their
customers and using it to manipulate their supply networks and
to make products at lower cost than their competitors, fueled
by underpaid and forced labor and raw materials from China.
In February, a bipartisan group of U.S. senators called on
Shein's CEO to answer questions regarding findings by Bloomberg
that garments shipped to the U.S. included cotton from the
Xinjiang region in China. On Friday, the U.S.-China Economic
Security Review Commission published an issue that further
outlined Shein's concerning patterns and practices. All the
while, Shein continues to exploit our current de minimis policy
to sell billions of dollars' worth of goods to American
consumers, evading customs requirements ranging from tariffs to
forced labor protections along the way. In fact, the business
strategy has been so successful that it now holds the largest
share of the U.S. fast fashion market, beating out giants like
Zara and H&M. What's more, Shein, recently valued at over $100
billion, is aggressively raising capital and plans to execute
an IPO before the end of this calendar year.
To conclude, it is imperative that we take action to
mitigate Shein's exploitation of the current U.S. de minimis
customs policy to ensure a fair and competitive marketplace.
Additionally, we must ensure that companies and importers are
absolutely committed to prioritizing human rights over profits.
Thank you. I yield back.
Chair Smith. Thank you very much, Ms. Wexton.
I'd like to now yield to my distinguished colleague, Mr.
Nunn.
STATEMENT OF HON. ZACHARY NUNN,
A U.S. REPRESENTATIVE FROM IOWA
Thank you very much, Mr. Chair, and thank you to this
bipartisan commssion for coming together to speak on this very
timely and important issue.
To the people of China, let us be clear. Here in the United
States, we extend a hand in friendship. There is an on-ramp for
us to work together and to have a successful future. But to the
Communist Party of China, let us also be very clear. The
exploitation, the bald-faced lies, everything from surveillance
balloons to what they're doing within their own borders, will
not be tolerated by the United States, and they must be held
accountable to the same international norms the rest of the
world is facing. I want to thank our panelists for being here
today and providing the testimony so implicit in understanding
what is happening inside Communist China today.
As we've witnessed through countless acts, China is a
repeat offender of humanitarian rights violations. As a former
senior intelligence officer, and after nearly two decades
working as a counterintelligence officer inside China myself,
I've experienced firsthand what the Chinese intend to do both
in their global threat as well as domestically to their own
population. The Chinese government's treatment of ethnic
minorities and forced detention of over a million Uyghurs in
reeducation camps is yet another blatant violation by the
Chinese government. And it's abundantly clear that China will
do whatever it takes to achieve not only global domination but
an infliction on its own people at any cost.
The Uyghur Forced Labor Prevention Act, as was well
highlighted today by our Chairman, is an important step forward
and provides a powerful tool to address the human rights abuses
and to promote fair labor practices in the global supply chain
and prevent goods produced within the Uyghur forced labor camps
from entering our markets here domestically in the United
States. Since enforcement began in June of 2022, Customs and
Border Protection estimates it's detained alone nearly a
billion dollars worth of products that were meant to be sold in
the United States coming from these forced labor camps inside
China. These were meant to be purchased by unknowing consumers
and presented by the state-sponsored Communist Chinese
government as a way to offload its billing.
Likewise, we've seen businesses shift their supply chain
practices in order to retain access to the U.S. market, from
corporations developing compliance and due diligence programs
to ensuring that supply chains are free from forced labor
around the world. But despite these efforts, industries
attempting to enforce actions today still exist. One of the
biggest challenges our companies confronted when trying to
comply with the UFLPA is the lack of visibility into their
supply chain and where it's coming from. We have become
increasingly globalized in a complex network of supply chains,
and the Chinese have used this to exploit and hide in plain
sight where these sources are coming from. In China, companies
are also responding to our actions here in the United States by
shipping products to third countries and then finding a way to
infiltrate U.S. markets, not unlike their production of core
elements of fentanyl that are poisoning our streets.
The United States must be persistent in its efforts. And in
this committee today, we are addressing exactly that. The long-
term benefits of improving human rights and ethical practices
in global trade are vital for a sustainable future for both the
United States and our friends within China fighting against
this. So let me be clear, my position on companies here in the
West and around the rest of the world that are using forced
labor camps in their supply chains, these companies also are
complicit in China's blatant human rights abuses and should
immediately develop compliance and due diligence programs to
ensure that their supply chains are free of forced labor.
So with that, Mr. Chairman, I look forward to hearing from
our witnesses and discussing the impact and the challenges of
the UFLPA, as well as our steps in Congress to ensure that the
Xinjiang Uyghur Autonomous Region is no longer the global
epicenter of modern-day slavery. Thank you. And thank you for
allowing us to participate in this.
Chair Smith. Thank you very much, Mr. Nunn. I do want to
thank you especially for the expertise you bring to bear,
having lived there. We'll look forward to tapping that wisdom
that you will bring to bear on this Commission. So thank you so
much for that.
Michelle Steel, I believe, is online. I'm not sure if
Michelle wanted to make any opening comments.
Ms. Steel.
STATEMENT OF HON. MICHELLE STEEL,
A U.S. REPRESENTATIVE FROM CALIFORNIA
Thank you, Mr. Chairman. Thank you for hosting this
important hearing. The human rights abuses happening at the
hands of the CCP should horrify every one of us. In 2021,
Congress worked together and passed the Uyghur Forced Labor
Prevention Act. I'm glad this Commission is reviewing the
implementation, and we are working to ensure that we put an end
to forced labor in the Xinjiang Uyghur Autonomous Region. Thank
you to the witnesses for sharing with us your expertise on
further congressional oversight and other changes needed to
improve on this key issue. I just spoke this morning on the
floor regarding the Vietnamese and the CCP's human rights
violations. There are innocent people in prison because they
are asking for freedom and democracy.
I want to ask Elfidar Iltebir--if I mispronounced it, I'm
sorry. I also sit on the China subcommittee. I recently spoke
with a survivor of the Xinjiang region who is now using her
platform to raise awareness to the world. She shared emotional
stories about women being raped and experiencing other types of
sexual assault. Can you share about the living conditions and
quality of life for Uyghurs?
Chair Smith. Thank you. We're going to have the opening
statements first and then go to questions, but I know that
Elfidar will take that and respond to it, so thank you so much
for your opening comments.
I'd like to now welcome our very distinguished panel,
beginning first with Anasuya Syam. Ms. Syam is the human rights
and trade policy director at the Human Trafficking Legal
Center. She leads the Human Trafficking Legal Center's
initiative on the U.S. Tariff Act and forced labor, with a
focus on conducting investigations and submissions under the
Tariff Act. She is the coauthor of the practice guide
``Importing Freedom: Using the U.S. Tariff Act to Combat Forced
Labor in Supply Chains,'' which provides advocates with the
nuts and bolts of using the Tariff Act to halt goods made using
forced labor from entering the United States. Ms. Syam received
her bachelor's degree in law with honors from the National
University of Advanced Legal Studies in India and graduated
with a master's degree in international law from NYU School of
Law. This is her first time testifying before Congress, and it
won't be the last. So thank you, and we welcome you
wholeheartedly.
We'll then hear from Laura T. Murphy. We'll do it by way of
Zoom. She's a professor of human rights and contemporary
slavery at the Helena Kennedy Centre at Sheffield Hallam
University. She is the author of numerous books and academic
studies on the subject of forced labor and human trafficking
globally. Her current work focuses on forced labor in Xinjiang,
including the automotive, solar, apparel, and building material
industries. Her work is extremely useful to the CECC and she is
joining us today from Greece, so great is her dedication. Thank
you for joining us today.
We'll then hear from Kit Conklin, who is a nonresident
senior fellow at the Atlantic Council's GeoTech Center and a
global executive specializing in issues at the intersection of
technology, commerce, and international security. In addition
to his work with the Atlantic Council, Mr. Conklin is vice
president at the research and data analytics firm Kharon. Mr.
Conklin previously served in various national security
positions within the U.S. Government. He holds an M.S. in
emerging and disrupting technologies from the National
Intelligence University and an M.A. from Middlebury Institute
of International Studies. I'd also note that he delivered two
keynote addresses at Customs and Border Patrol's tech expo just
last month, which did a tremendous service in enlightening
businesses that participated as to the dangers of sourcing
goods made with forced labor in the PRC.
Finally, we'll hear from Elfidar Iltebir, who is the
president of the Uyghur American Association, or the UAA. Ms.
Iltebir was born in Xinjiang, also known as East Turkestan. She
emigrated to the United States in 2000. She has a B.A. in
marketing from George Mason University and over 20 years of
marketing and project management experience. She has taught the
Uyghur language to U.S. Government employees. The daughter of a
prominent Uyghur writer and journalist, she is an active member
of the Uyghur community and an outspoken human rights activist,
and has provided important and valuable insight to this
Commission and to other committees of Congress that deal with
human rights--House and Senate. In the previous three years,
she served as the secretary general of the UAA. She was elected
president in May 2022. She is currently well known to those of
us in DC. I would note parenthetically that her sister works
for Senator Rubio, and we're glad of that, and she is here with
us today.
Finally, I'd note that we've received a written submission
for the record from Robby Saunders of the Coalition for a
Prosperous America. And I ask, with unanimous consent, that it
be included as part of the record.
I'd like to now yield to our first witness, Ms. Syam.
STATEMENT OF ANASUYA SYAM, HUMAN RIGHTS AND TRADE POLICY
DIRECTOR, HUMAN TRAFFICKING LEGAL CENTER
Chairman Smith, Co-chair Merkley, and distinguished members
of this Commission, thank you for the opportunity to testify
before you today on the implementation of the Uyghur Forced
Labor Prevention Act, one of the strongest pieces of
legislation ever enacted to tackle forced labor in global
supply chains. We are here because we know that letting goods
made using forced labor circulate freely in global markets is
not only morally reprehensible, it also undermines fair trade
and hurts local businesses and workers.
As one of the world's largest economies, the United States
has significant leverage to make access to its markets
contingent on the eradication of forced labor. We welcome this
administration's proactive efforts to enforce the UFLPA. A good
indicator of success is the way that enforcement, both under
prior Xinjiang WROs and now the UFLPA, has catapulted forced
labor into a serious compliance issue for companies and
investors. Senior officials in the U.S. Government, including
DHS Under Secretary Robert Silvers, underscored this change
recently in the way forced labor is being perceived by the C-
suite. According to Under Secretary Silvers, forced labor is
now a top tier compliance issue. We agree.
Forced labor is no longer the provenance of weak codes of
conduct or CSR measures. What changed? The advent of
substantial legal and enforcement risk. Nevertheless, a few
challenges do remain when it comes to UFLPA implementation.
CBP's recently published UFLPA dashboard reveals gaps. Between
June 2022 and April 2023, CBP targeted 3,588 shipments worth $1
billion U.S., but only 490, or less than 0.13 percent, were
actually denied entry into the U.S. market. The rest were
either released into the U.S. or are currently pending review.
Apparel and textile products valued at just $3 million make
up 291 of the 490 shipments denied entry by CBP. These low
detention numbers and low dollar value are concerning,
especially when this sector is prioritized by the U.S.
Government's implementation strategy. We also worry that CBP
may be missing shipments containing inputs from the Uyghur
region that enter the United States via third countries. CBP
should have a specific strategy to address this issue, a
critical element of which must be a robust program of onsite
third-country verifications.
Another big gap is in the data around re-exportation. Of
the 490 shipments denied entry, we don't know how many
shipments were sent to Canada, Mexico, or another country. We
need to ensure that these countries are not dumping grounds for
goods denied by CBP. Re-exportation data is critical for civil
society as we support international partners in advocating for
similar import bans in other countries. The dashboard also
shows thousands of shipments pending review. Many are currently
mired in applicability reviews, a process by which importers
can show that the UFLPA does not apply to their shipments. The
burden of proof applied by CBP in such reviews is much lower
than the clear and convincing standard required to rebut the
forced labor presumption. We need more visibility into the
applicability review process to ensure that companies are not
sidestepping UFLPA enforcement.
Another issue that has garnered a lot of attention
recently, including among members of this Commission, is the de
minimis loophole. Shipments under $800 are exempt from duties
and may enter the United States without formal entry
documentation--a major impediment to collection of data
necessary to enforce import bans. Last fall, Bloomberg News
reported that Xinjiang cotton was found in apparel shipped by a
major Chinese fast-fashion company to U.S. consumers. This
confirmed what many had long suspected--companies, especially
e-commerce platforms that rely on direct-to-consumer models,
may be circumventing the UFLPA. We need to revise our de
minimis provisions, including mandating the collection of
supply chain data from shippers, to ensure that this is not
exploited as a backchannel entry for goods made using forced
Uyghur labor.
Many of these goods actually enter the United States via
air or land transportation. Currently, only maritime shipping
data is shared with the public. Public disclosure of all trade
data is critical to our efforts to trace forced labor risks and
facilitate enforcement. We call on Congress to mandate public
disclosure of trade data involving all modes of transportation.
The United States cannot act alone. There should be no safe
harbor for goods made with forced labor anywhere in the world.
A patchwork of import ban laws with different standards
will only frustrate enforcement. In the absence of
international coordination, we run the very real risk of
companies simply dumping these goods in other countries,
especially our neighbors, Canada and Mexico. The USMCA requires
each of the signatories to have import bans, but so far the
U.S. is the only country implementing one. The U.S. should push
Mexico and Canada to enact similarly robust bans on goods from
the Uyghur region. We should also work with our G-7 and G-20
allies to ensure global adoption of import bans that are
consistent with each other.
I will close by noting that we are at a pivotal moment in
global trade, one where trade sanctions have become the norm in
efforts to address forced labor across the supply chain. We
acknowledge the enormity of the task before CBP and other
agencies in the Forced Labor Enforcement Task Force. By
addressing the gaps outlined in the testimonies today, along
with a more robust forced labor enforcement strategy, we are
confident that the U.S. Government can create the economic
pressure needed to disrupt forced labor in China and around the
world. Thank you.
Chair Smith. Thank you so very much, Ms. Syam, for your
testimony and your expertise.
I'd like to now yield to Laura Murphy, if she wouldn't mind
signing on.
STATEMENT OF LAURA MURPHY, PROFESSOR OF HUMAN RIGHTS AND
CONTEMPORARY SLAVERY, HELENA KENNEDY CENTRE FOR INTERNATIONAL
JUSTICE, SHEFFIELD HALLAM UNIVERSITY
Thank you, Chairman Smith and Co-chairman Merkley, for
convening this meeting, and thank you to the congresspeople who
have supported the rights and freedom of Uyghur people. My name
is Laura Murphy and I'm Professor of Human Rights at Sheffield
Hallam University in the United Kingdom. I've studied forced
labor globally for 20 years, and my work for the last three
years has focused exclusively on the Uyghur region of China.
The Uyghur Forced Labor Prevention Act is indeed landmark
legislation, as we've heard several times today. Those of us
who study forced labor have long known that legislation of this
kind is critical to ensuring the rights of workers in our
global supply chains. It is disturbing to realize that it took
a genocide for us to understand just how dire the consequences
of our ignorance and inaction could be. It is commendable that
the U.S. is the first to create legislation that levels real
economic costs on the PRC government's state-sponsored forced
labor program.
While we still have a long way to go before we intercept
all products made in the Uyghur region, the UFLPA is indeed
working as it was intended. In the short nine months that the
UFLPA has been in effect, we have seen swift and decisive
enforcement response and targeted funding allocations. This law
has protected American consumers from unwittingly buying
products that we know to be made in the midst of a genocide--in
the shadows of a massive internment camp system--by people who
are forced to leave their children, and parents, and land, and
culture, and religion, and communities behind to work in the
factories that make the things we buy.
Since the UFLPA went into effect, however, companies have
not all responded enthusiastically. Many U.S. corporations
lobbied to prevent the law from being passed and then fought to
limit how it would be enforced and now are complaining that
investigations are not convenient for them. Many companies
still have their heads in the sand, hoping that their products
will not be scrutinized. Some are shifting the burden of due
diligence onto their suppliers, rejecting the responsibility
and the costs of knowing the conditions of workers in their
supply chains. They throw their hands up as if helpless as
auditors in China are jailed, their offices ransacked, and they
refuse to admit what is becoming increasingly clear, that there
is no feasible way to verify labor standards compliance in the
Uyghur region or of Uyghurs working outside the region. They
care about the safety of their directly employed China-based
personnel but do not worry about the Uyghurs who are at the end
of their supply chains.
This all shows that companies across sectors must be
compelled through rigorous enforcement to comply with the
UFLPA. In China, we're seeing companies pretend to sell their
Uyghur region factories, only to transfer them to executives
within their own leadership team or family. They change the
names of their subsidiaries to obscure their identities. They
ship their products through other countries to mask their
origin. They bifurcate their supply chains so they can continue
to sell goods in the U.S. market while selling Uyghur forced
labor-tainted goods elsewhere in the world. Some of those
companies are benefiting from Inflation Reduction Act
incentives while continuing to operate or source in the Uyghur
region.
The U.S. should prohibit companies from using U.S.
Government incentives to expand their manufacturing in the
United States while they continue to profit from Uyghur forced
labor in China.
Our research team at Sheffield Hallam University has
identified 55,000 companies operating in the Uyghur region. We
have published in-depth investigations that have documented at
least 150 specific companies for which there is significant
evidence of participation in state-sponsored transfer of Uyghur
labor. And yet, confoundingly, the UFLPA-mandated Entity Lists
include only four of the companies we identified as offenders,
and exactly zero new companies have been added to the list
since the UFLPA was passed.
Under Secretary of Homeland Security Robert Silvers
recently committed to expanding the Entity List. The U.S.
Government needs to make the Entity List a priority, and make
those lists as comprehensive as possible, per the mandate of
the UFLPA. Congress should declare to the Forced Labor
Enforcement Task Force (FLETF) that it must presume that all
state-sponsored labor transfers in the Uyghur region constitute
forced labor and that FLETF should add any company engaged in
those coerced transfers of labor onto the lists. These lists
will assist importers in ensuring that they know which
suppliers to exclude from their sourcing.
Lastly, some international companies and governments are
claiming the UFLPA is merely the product of a trade war between
the U.S and China, in an attempt to justify their indifference.
But the UFLPA is not a national security measure, like certain
technology export restrictions. Nor is it a measure intended to
offset economic injury to U.S. companies and workers, like
anti-dumping and safeguard duties. The UFLPA fundamentally
expresses U.S. support for internationally recognized human
rights. It is crucial that the U.S. Government encourage our
allies to align their laws to prohibit the import of forced
labor-made goods. But this must not be conflated with policies
intended to advance geopolitical or economic interests.
I'm pleased that we're having this hearing to review all
that the UFLPA has accomplished and to consider what more we
can do to lead the world in addressing this crisis. Even though
Uyghurs continue to be forced to work in China, we in the
United States should not be financing their suffering. Thank
you.
Chair Smith. Ms. Murphy, thank you very much for your
testimony and your expertise being brought to bear on this
important piece of legislation and next steps. Thank you for
that.
I'd like to now yield such time as he may consume to Kit
Conklin.
STATEMENT OF KIT CONKLIN, NONRESIDENT SENIOR FELLOW, GEOTECH
CENTER, ATLANTIC COUNCIL
Thank you and good morning. Chairman Smith, Chairman
Merkley, distinguished members of the Commission, thank you for
the opportunity to speak with you this morning. I would like to
start by saying that all views are my own.
As discussed by others, the UFLPA bans the import of goods
or commodities from China produced with forced labor.
Specifically, the UFLPA mandates a rebuttable presumption that
assumes any products made wholly or in part in the Xinjiang
Uyghur Autonomous Region, by any Chinese company on a U.S. list
of entities involved in the use of forced labor, are made with
forced labor and therefore banned from importation into the
United States.
As Dr. Murphy discussed, reflecting the increased
international consensus on the need to address forced labor,
U.S. trading partners around the world have also enacted or are
introducing legislation to ban products made with forced labor.
These include the European Commission, Germany, France, Canada,
Mexico, among other jurisdictions. Each of these bans similarly
requires importing companies subject to the laws of these
jurisdictions to engage in supply chain due diligence to
identify and mitigate exposure. I think it's important to note
that U.S. companies are not alone. Expectations are increasing
around the world to address and identify forced labor exposure
in global supply chains.
With respect to enforcement, CBP has stated that UFLPA
detentions constitute less than 0.1 percent of goods imported
into the United States. And since enforcement of the UFLPA
began in June of last year, CBP has detained approximately $1
billion worth of goods suspected of containing inputs made with
forced labor in China. It's important to note, however, that
CBP has prioritized enforcement relating to four goods--cotton,
polysilicon, tomatoes, and aluminum.
The scope of the UFLPA, however, is much larger than these
four prioritized commodities. For instance, billions of
dollars' worth of raw materials, rare earth and critical
minerals, and products are exported from Xinjiang each year,
including a significant percentage of global lithium-ion
batteries, 20 percent of the global production of calcium
carbide, 10 percent of the global production of rayon, 9
percent of beryllium deposits--which, I should note, are a key
rare earth mineral used for the production of satellite and
aviation components--and 8 percent of global pepper production.
This matters because in addition to all of these raw
materials and goods sourced from Xinjiang, the UFLPA also bans
products made with forced labor in other provinces in China.
Sometimes that's forgotten. Clearly, the scope of the UFLPA is
broad, but CBP has been very explicit about the type of
guidance that companies should consider with respect to
compliance. The challenge of course though, is that the volume
and scope of goods targeted under the UFLPA poses significant
challenges for industry. Supply chains have become increasingly
globalized, complex, and opaque. And the critical challenge for
industry--to discover supply chain visibility and detect risk--
is compounded by the Act's rebuttable presumption and a lack of
a de minimis exception, that was discussed earlier.
This means that even an insignificant input of product
produced in whole or in part with forced labor could result in
an enforcement action. The global nature of supply chains
further complicates compliance because CBP maintains the
authority to detain goods imported into the United States from
third countries. And this gets to a core issue that's been
discussed already this morning. Since the UFLPA enforcement
began in June of last year, CBP has detained $490 million worth
of goods from Malaysia and over $369 million worth of goods
from Vietnam. To provide a bit of perspective here, CBP has
only detained $89 million worth of goods imported directly from
China. These figures illustrate UFLPA transshipment risk and
why the lack of a de minimis exception necessitates the need
for due diligence in all suppliers, not just those located in
China.
It should also be noted that beyond the four products
categorized for high priority for enforcement, CBP has publicly
stated that it is considering other product categories that
will be subject to enforcement. Regardless of any possible
further announced priorities, as some in industry have
requested, CBP guidance issued in 2021 and then amended last
year sets forth red flags for forced labor exposure for all
categories of products that pose UFLPA risk.
These include things like labor transfers, supply chains
connected to prisons, and any affiliates of the Xinjiang
Production and Construction Corps. The amended guidance is very
clear and states that UFLPA compliance requires supply chain
mapping, the intelligence needed to identify and assess forced
labor risk, training, and monitoring of suppliers, and that
compliance is not static with UFLPA. It requires consistent and
regular updates.
So what's the ``so what''? Similar to industry responses
when countering money laundering, sanctions, or anti-bribery
compliance became priorities, CBP's enforcement posture is a
major driver for the material investments industry is making to
address UFLPA due diligence and compliance. And as CBP's budget
and resources expand to counter the forced labor mission, many
in industry are certain to adapt with increased senior
management attention, and with support and budget for the
technology and people needed to address risk.
In line with guidance, companies that make reasonable risk-
based investments to identify risk should be positioned to
identify UFLPA exposure and take measures to mitigate that
risk. And as industry implements UFLPA compliance programs,
global supply chains will evolve, as companies mitigate that
risk and build resilience. Observers have already pointed to
the UFLPA's impact on supply chains relating to green energy
products, rare earth minerals, food items, and pharmaceutical
precursors. Companies that have those goods prioritized for
detention by CBP have already started to see their supply
chains evolve.
In summary, compliance with UFLPA is complex. This is
similar to compliance with anti-money laundering, sanctions,
anti-bribery, and other regulations. Nonetheless, with senior
management support and in line with guidance, effective risk-
management programs can be established to identify UFLPA
exposure and mitigate the risk of forced labor in global supply
chains. As DHS Under Secretary Silvers recently stated, ``over
the years, things like anti-
corruption and sanctions compliance have come to become
standard pillars of corporate compliance programs. Forced labor
needs to be one of those pillars as well.''
Thank you for your time this morning.
Chair Smith. Mr. Conklin, thank you very much for your
testimony, your insights, and your leadership.
Ms. Iltebir.
STATEMENT OF ELFIDAR ILTEBIR,
PRESIDENT, UYGHUR AMERICAN ASSOCIATION
Thank you, Chairman Smith and Co-chair Merkley, and other
honorable members of the Commission. Thank you for giving me
the opportunity to speak at this hearing. My name is Elfidar
Iltebir and I was born in East Turkestan, the Uyghurs' homeland
where Uyghurs have been living for thousands of years and what
China now calls the Xinjiang Uyghur Autonomous Region.
Like many Uyghurs, my family also faced persecution at the
hands of the Chinese Communist Party. After waging more than
six decades of repressive assimilationist policies to weaken
and eliminate the Uyghur identity, the CCP under General
Secretary Xi decided to implement the final solution and
resorted to genocide in the 21st century. The CCP's ultimate
goal is to completely annihilate the Uyghur identity and
homogenize China's population by forcibly transforming Uyghurs
into majority Han Chinese. To achieve this goal, the CCP has
transformed the Uyghurs' homeland into a totalitarian
surveillance state, detained millions of people in detention
camps, forced labor camps, and formal prisons, and subjected
Uyghur people to inhumane conditions including torture, sexual
abuse, forced sterilization, forced labor, and forced
separation of families.
The main point I would like to stress today is that the
Chinese government's campaign of forced labor is a critical
part of China's systematic oppression of the Uyghur people and
ongoing genocide in the Uyghur homeland. The Chinese
government's forced labor practices are tearing apart the
fabric of Uyghur society, separating families and displacing
them from their communities, stripping away their ethnic and
religious identity, and leading to a reduction in the Uyghur
population.
I want to share a quick story of my friend Kalbinur Gheni,
who now lives around DC. In 2018, her sister Renagul was taken
to a concentration camp for praying at her father's funeral and
possessing Muslims' holy book. She was later sentenced to 17
years in prison and forced to work at the garment factory
inside the prison. Her children were separated from her family.
The Chinese government not only detained 12 other members of
Kalbinur's family and sent them to a camp and later to the
prisons, it has also been harassing her on U.S. soil for
speaking out about her detained family members. She received
threatening messages directly from Chinese police almost every
week last year.
Many more members of the community have similar stories of
loved ones being detained and exploited. This is one reason our
community fought so hard for the passage of the Uyghur Forced
Labor Prevention Act and why we continue to fight for its full
enforcement. On behalf of Uyghur Americans, I'd like to take
this opportunity to thank Senator Rubio, Senator Merkley,
Representative Smith, and Representative McGovern for their
leadership and to many others who were instrumental in passing
the UFLPA. Thank you for refusing to make Americans complicit
in China's genocide against Uyghurs and for putting universal
values of human rights and dignity above economic interest.
We were overjoyed with the passage of the UFLPA. We
believed this new law would be a turning point to stopping
China's genocide. We believed it would be a catalyst for
greater awareness among businesses of the CCP's atrocities in
the Uyghur homeland, that it would compel them to investigate
and cut links to supply chains connected to Uyghur forced labor
in the Uyghur homeland and across China. However, when I
recently saw in my neighborhood grocery stores the red dates
produced by the Bingtuan, which facilitates Uyghur forced
labor, it felt like a slap in my face.
As a Uyghur American, every time I shop for clothing items,
grocery items, or electronics, or when I look at cars or solar
panels, I think about how many ``Made in China'' products may
have been made by a loved one in my hometown. The human cost of
this forced labor is why it is so important to ensure that the
UFLPA is fully and rigorously implemented the way it is
intended. As Uyghur Americans, we are prepared to contribute to
the successful implementation and enforcement of the UFLPA. We
may not be able to close the camps overnight, reunite our
families this Ramadan, stop the Chinese government's mass
sterilization of Uyghur women by the next U.N. session, and
much more that we need to do to end this genocide, but as I sit
here today, I can say with confidence that together we can stop
products made with Uyghur forced labor from entering onto U.S.
soil and make this genocide costly for China. We can be an
example for our allies to implement similar laws so ``Made in
China'' products tainted with Uyghur forced labor cannot enter
any markets that value human beings and fair trade. If there is
one thing I can ask of the U.S. Government, it would be to hold
this Chinese government and affiliated entities accountable by
imposing economic cost on Chinese officials and companies
implementing, facilitating, and supporting this genocide.
The United States passed two pieces of historical
legislation--the Uyghur Human Rights Policy Act, signed by the
Trump administration, and the Uyghur Forced Labor Prevention
Act, signed by the Biden administration. Yet as far as we know,
no Chinese officials or entity has been sanctioned under these
legislative authorities. Both administrations recognized
China's atrocities as genocide. Yet U.S. businesses are still
operating in the genocide zone, U.S. companies are still
selling technology to Chinese companies implementing this
genocide, and U.S. companies are still investing in Chinese
companies supporting the Chinese government's genocidal
policies.
We need to ensure that no American technology or investment
is flowing to Chinese companies that are linked to China's
genocide against Uyghurs, and no Chinese products tainted with
Uyghur forced labor are entering our territory. Thank you.
Chair Smith. Thank you so very much for your testimony and
leadership as well.
We'll begin with a question to Ms. Syam, and Ms. Murphy may
want to answer this as well. A group of executives from 20
companies, including Walmart, General Motors, and Intel have
asked the U.S. Government to hide key import data. One of the
changes the group requests is to make data collected from
vessel manifests confidential. Experts have argued that this
would make it impossible to trace about half of the goods
entering the United States. The group has also asked CBP to
provide importers with advance notice whenever it suspects
forced labor is being used, which activists have said endangers
overseas whistleblowers. How do you view these proposed
changes? What impact would they have on CBP's enforcement
capability and on the ability of researchers, reporters, and
the public to investigate forced labor in supply chains and to
hold corporations accountable?
Ms. Syam. Thank you for the question, Chairman Smith. In a
nutshell, these proposals should be summarily rejected. Last
year, the Associated Press reported on items from these
corporate members of the Commercial Customs Operations Advisory
Committee, or the CCOAC, where it revealed efforts to
eviscerate existing customs transparency. And this customs
transparency, what we have of it is very little. As noted in my
testimony earlier, we only have access to maritime shipping
data. And we know thousands and millions of shipments are
entering the United States subject to both the U.S. Tariff Act
and the Uyghur Forced Labor Prevention Act through air, land,
rail, or road cargo.
We call on Congress to mandate the disclosure of all modes
of trade data, including all modes of transportation. In fact,
the Human Trafficking Legal Center led a broad-based coalition
of civil society organizations and sent a letter to then-CBP
Commissioner Chris Magnus requesting that the agency reject
this highly problematic proposal. The letter was signed by 38
organizations, including the AFL-CIO. The letter noted that the
trajectory should be for more transparency, not less. This
information, this trade data from all modes of transportation,
is critical to our efforts to trace forced labor risks across
the supply chain.
Chair Smith. Thank you. Ms. Murphy, did you want to respond
to that?
Ms. Murphy. I agree entirely with Ms. Syam.
Chair Smith. Thank you. Let me ask you, on the de minimis
issue, Ms. Syam, you pointed out that on average the U.S.
receives 3 million uninspected de minimis packages per day. And
in fiscal year 2022, the U.S. imported an estimated $685
million in de minimis shipments. Is that a gaping loophole that
needs to be closed?
Ms. Syam. Thank you, Chairman, again for raising an
important issue, and a loophole in UFLPA enforcement. This de
minimis shipping environment is being used to circumvent the
UFLPA. The Bloomberg report that showed that companies like
Shein were using Xinjiang cotton in their low-value shipments
being sent to the United States is a glaring example of this
loophole.
We were encouraged by the letter from Senator Warren,
Senator Cassidy, and Senator Whitehouse addressed to Shein's
CEO on the de minimis issue and asking the company to reveal
its supply chain and use of Xinjiang cotton. This is an
important step, and we look forward to receiving the responses
on this letter. The de minimis standard cannot be carte blanche
for companies and for shippers to send whatever goods they want
to U.S. markets, especially goods made using forced labor.
Chair Smith. How confident are all of you that the
applicability review is being done robustly? Are these
companies able to prove ``not made in Xinjiang'' and ``not made
with forced labor'' ? Because there's very little exposure of
it by our own government, and they don't report on it. And I'm
wondering if that's an area that we need to get much more
information on.
Ms. Syam. Definitely. We need more visibility into how
CBP's currently reviewing applicability reviews. Importers have
the ability to contest UFLPA's application on their shipments,
and this is not subject to the disclosure requirements that are
currently incumbent on those making requests to rebut the
forced labor presumption.
So a lot of reviews that are currently happening under the
UFLPA, thousands of these as the data dashboard will show--are
showing that the imports have no connection to Xinjiang, and
they're not really rebutting the forced labor presumption. In
fact, we need more visibility into these reviews, including how
many were rejected, what the basis was for conducting these
reviews, and the standards applied by CBP to conduct these
reviews.
Chair Smith. Let me ask you on the issue of transshipment--
and, Mr. Conklin, you might want to speak to this, as you
pointed out the $490 million from Malaysia, the $369 million
from Vietnam--are these goods suspected to be made with slave
labor, with gulag labor? And secondly, you did point out in
your testimony a number of things--and, again, I thank all of
you for your testimony--the polysilicon, which is obviously
being used to make solar panels, which are growing, not
diminishing, in demand. Are they being made in Vietnam, but
really much of it's coming from Xinjiang?
Mr. Conklin. Thank you for your question. Regarding
transshipment risks, the UFLPA bans that raw material; any
product that's mined or manufactured in whole or in part in
Xinjiang or with forced labor. So therefore even if a commodity
is manufactured in a third country, if it contains that raw
material, that's representative of risk itself; therefore, it's
captured under the law as written.
Chair Smith. I had some additional questions, but I'd like
to yield to the co-chair, Senator Merkley.
Co-chair Merkley. Thank you very much, Mr. Chairman. This
process of trying to strengthen enforcement of this law is
really critical. You've all illuminated many aspects of it. I
wanted to start, though, Ms. Iltebir, just with something that
you mentioned in terms of your friend, Kalbinur Gheni, and her
sister having been arrested and so forth, and that she is
receiving threatening messages directly from Chinese police
almost every week. Now, she's living here in the U.S.?
Ms. Iltebir. Yes.
Co-chair Merkley. This issue of transnational repression is
one that this body's been trying to highlight, and we're trying
to greatly motivate the FBI to collect a lot more information
about this Chinese effort, because it's really suppressing free
speech, free assembly, and just the freedom of living without
threats. And it's just so unacceptable. I'd like to follow up
with you later in regard to that or other cases as to how we
can strengthen the collection of data and protect American
citizens regarding transnational repression. And I just want to
thank you for illuminating that issue.
Mr. Conklin, you mentioned the four priorities of cotton,
polysilicon, tomatoes, and aluminum, but all these other
products that come out are relevant as well. Does the U.S.
Government have the ability to expand the list now, or do they
kind of have to come up to speed and build the systems and then
expand the list? And what are the next two or three things that
should be added to that priority list?
Mr. Conklin. Thank you for your question, Senator.
The UFLPA gives CBP the authority to ban any raw material
or any product. By prioritizing certain commodities for
enforcement, it may send a signal that all of the other
commodities are therefore not relevant or do not pose risk. I
think the challenge that CBP and industry both now are facing
is how to treat commodities that haven't been publicly
identified for prioritized enforcement. So if CBP is concerned
or interested in expanding those authorities, they already have
the law on the books to detain any commodity, so there may not
necessarily be a need to publicly prioritize extra commodity
categories.
Co-chair Merkley. All right. Thank you. I've had the
impression that they undertook those priorities in order to
develop expertise in the type of investigations necessary to
try to understand how those things flow, and with the huge
breadth of commodities, I feel like they'd do nothing
effectively if they were split over every product. So it kind
of made sense to me originally, but with experience, I think
the point has to be made that far more products need to be
carefully examined. Thank you.
Ms. Syam, you mentioned in your testimony that 1,723
shipments that were suspected are still pending CBP review.
Does that mean there's some set of warehouses around the
country where there are 1,723 shipments sitting awaiting
evaluation?
Ms. Syam. It is my understanding that these shipments are
either pending review from CBP, or that CBP is waiting for
documentation from companies that have actually sent these
shipments to see whether they are subject to the Uyghur Forced
Labor Prevention Act. I'm not clear about the ultimate
disposition of these goods.
Co-chair Merkley. But they've been seized. They aren't
allowed to go through, those 1,723 shipments?
Ms. Syam. Correct. The shipments that are pending have not
yet been released into U.S. commerce.
Co-chair Merkley. Okay. And you mentioned that we should
make sure that Mexico and Canada are not dumping grounds. And,
Dr. Murphy, I think you also addressed the question of, you
know, how we ensure that this isn't simply a bifurcated
situation where we get the products made outside Xinjiang that
can be documented, while other countries therefore get the
products of slave labor. And it sounded like, from--Dr. Murphy,
I think it was your testimony--that a number of other countries
are working to establish similar laws. I'd like to get a little
more clarity on how Mexico, Canada, and Europe are doing. Are
they just considering the question or are some of them close to
passing laws?
Ms. Murphy. There are a number of different laws, each of
which has very different clauses in them. And Ms. Syam is more
on top of these things, as she's a lawyer, but I will say that
the bills that are pending in the EU, for instance, are
designed to stop import of forced labor-made goods in general
once they enter the market, not at the border. And so that's a
difference in their laws that are pending.
But I also think that one important difference is that it
addresses forced labor globally, and not simply in the Uyghur
region. It doesn't include a region-wide ban, which I think is
something that needs to be a part of that bill, but there's
also something aspirational about it, in that the law is meant
to stop the import of any forced labor-made good, which is
something that the U.S. is uniquely equipped with. And I think
it's a surprise to people in the EU, for instance, that they
don't have a law similar to the Tariff Act.
And so these laws are still being reviewed and discussed,
and we're hopeful that they'll pass. But it's worrisome. I
think that the U.S. Government needs to have its diplomatic
strategy of the UFLPA. Real encouragement, real alignment and
engagement with our likeminded partners about how to not just
create the law but how to enforce it, because that's also a
major concern of other governments.
Co-chair Merkley. Should the U.S. be holding a meeting of
the trade ministers and experts from--at least from--at this
moment, from Canada, Mexico, and Europe, to really push for a
common alignment in terms of strategy?
Ms. Murphy. Absolutely. And, you know, the laws are
aligned, technically, on paper, but the enforcement strategy is
not. And I think there needs to be significantly more
communication of both strategy and data and information,
because it is a monumental task the CBP is undertaking, and
they could be doing it for the benefit of global partners, not
simply for the United States.
Co-chair Merkley. Ms. Syam, do you want to add to that?
Ms. Syam. Sure, thank you, Senator Merkley. Just to speak
to the efforts currently underway within the USMCA context,
Canada amended its customs tariff back in 2020 to include an
import prohibition, but it's seriously lagging behind on
enforcement. Media reports suggest that Canada has detained one
shipment, which was subsequently released after a successful
appeal by the importer. So we are concerned by the slow
implementation from our neighbor.
Mexico, on the other hand, did announce its import ban in
February 2023 and will begin implementing in May. So the time
is right for the three countries to convene--the trade
ministers--to ensure that we are aligned on the ways these
import bans are going to be enforced, and specifically make
sure that we take a region-wide approach to the issue of forced
Uyghur labor. And, under Article 23.6 of the U.S.-Mexico-Canada
Agreement, all three countries are obligated to identify and
track the cross-border movement of goods made using forced
labor.
Co-chair Merkley. Thank you very much. I just got informed
the clock is malfunctioning, so my time is actually up, but I
just want to close by saying that there are many ideas and
thoughts you all have presented for us to follow up on in terms
of pushing forward. This Act is a really significant act, but
it will be meaningless without really effective follow-up, and
I want to make sure that our government doesn't simply kind of
pretend to enforce it. And I know they'll face lots of pressure
from different companies to not take too close a look or be too
strong.
But when we are really blocking a significant number of
shipments--and I was disturbed at how few have been blocked--I
was disturbed that it sounds like many of them may have simply
been then re-exported from the United States to other countries
directly, meaning that we're having no impact, if that's the
case. So there's a lot of work to be done. And thank you all.
Chair Smith. Thank you, Co-chair Merkley.
I'd like to now yield to Michelle Steel. I believe she's
still online.
Representative Steel. Thank you, Mr. Chairman. I'm going to
ask the same question of Ms. Iltebir. I also sit on the China
subcommittee. I recently spoke with a survivor of the Xinjiang
region who is now using her platform to raise awareness to the
world. She shared emotional stories about women being raped and
experiencing other types of sexual assault. Can you share about
the living conditions and quality of life for Uyghurs?
Ms. Iltebir. Thank you. The recent condition of East
Turkestan, China is that the genocide is still going on.
Millions of Uyghurs are still in the camps. Because of the
total control of the region, we don't get much information.
China made cosmetic changes, you know, like fewer visible
checkpoints on every corner, but surveillance cameras are
everywhere, and everyone's phone has downloaded this app that
allows the government to monitor everything they do daily.
People are very scared. Most people are sent to remote prisons,
even though China said that they were released. There is
extrajudicial trial and the people are sent to prison, as I
said.
Besides that, I think you mentioned what's happening to
women, the sexual abuse and rape. China has been strategically
targeting Uyghur women for decades. Before, the Uyghurs,
especially women, were transferred to inner China to factories,
so they can't give birth. They're away from their families.
They can't marry. And even if they have children, they were far
from their families so they cannot transfer their cultural,
religious values, their identity to their children. When both
parents were sent to camps and factories for forced labor,
their children were sent to boarding schools, state-run
orphanages, and kindergartens and raised as loyal subjects of
the CCP. They were also stripped of their identity, their
language, their cultural beliefs, and traditions. So that is
the situation now.
Representative Steel. Thank you so much. I want to ask Ms.
Syam, last year actually I asked all the major sponsors of the
Beijing Olympics to use their platform to raise awareness about
the human rights abuse of the CCP, because they've been
gathering billions of dollars from advertising. They could not
use just a little bit of that money to let the whole world know
exactly what the CCP's been doing to the Uyghurs. It's not just
Uyghur minority communities but religious communities--Muslim,
Christian, you name it.
And they're going after all these innocent people. And they
are in the jails--and labor camps. Plus, all those families are
separated. I mean, you know, we cannot really ignore in this
world that they are doing awful, awful things, that the CCP has
been evil. Not a single company, interestingly, acknowledged my
letter. Now, some of these same corporations might be trying to
hide data related to Xinjiang forced labor. Can you share why
we need transparency to ensure that products coming to the
market aren't made with forced labor, because it has been
prohibited? At the same time, what do we really have to do to
expose what the CCP's been doing?
Ms. Syam. Thank you for the question. I will try to briefly
respond, and I'm sure the other witnesses maybe can add more
insight. There's definitely an urgent need for companies to
reveal--for us to have more visibility into--supply chains. And
the UFLPA law is creating that expectation around traceability.
With the UFLPA implementation strategy, and with CBP's guidance
for importers, there are clear expectations on companies that
import products, especially in the high-risk, the high-priority
sectors, to trace their supply chains down to the raw material.
Now there are strategies that companies could be using to
obfuscate their supply chains, and we need to investigate those
very seriously. For companies in the U.S. that continue to
tolerate forced labor in supply chains, we need to look at what
other authorities exist. CBP has existing authorities to impose
civil penalties on U.S. companies for continuing to import
products made using forced labor. And CBP did do that once in
2020 by imposing a $535,000 penalty on a U.S. company for
importing the artificial sweetener stevia made using prison
labor in China. We urge the agency to continue imposing these
penalties, because they send a strong message to industry that
CBP does not tolerate forced labor in supply chains.
Representative Steel. Thank you very much. Mr. Chairman, I
yield back.
Chair Smith. Thank you very much, Ms. Steel.
Ms. Wexton.
Representative Wexton. Thank you, Mr. Chairman. I want to
thank the witnesses for being here with us today. Products made
with forced labor have no place in the American marketplace,
and I'm proud to be introducing the Uyghur Forced Labor
Disclosure Act during this Congress. My bill would require
publicly traded companies and those asking to issue trade
securities on the U.S. exchanges to report any links to
Xinjiang and forced labor, both as a condition of being
registered and as a part of ongoing annual disclosures to
investors.
In line with this legislation, and given the credible
allegations made against Shein for its use of Uyghur and forced
labor, and its intention to execute an IPO in the coming
months, I also plan to lead a letter to SEC requesting that
they require Shein to certify the company does not violate the
Uyghur Forced Labor Prevention Act as a condition of its
registration. At the same time, concerns exist that the audits
of Chinese families and supply chains can be easily manipulated
or falsified.
Ms. Syam, you talked a little bit about more things that we
can do to help identify Uyghur forced labor in supply chains,
particularly CCP-backed companies. But is there more that we
can do, given that the audits that often take place in that
country are under pressure and are not really reliable?
Ms. Syam. Thank you for that question. That's a very
important point. We certainly believe that it is impossible to
conduct due diligence in the Uyghur region. And there has been
retaliation for those that attempt to do so. Thank you for your
efforts on investment and making sure that U.S. companies are
not complicit. We do need to compel divestment from these
problematic supply chains.
And as noted in my testimony, and as Ms. Iltebir noted
earlier, we do need to have a whole-of-government approach to
addressing this issue. And there are tools that are
complementary to the import restrictions under the Uyghur
Forced Labor Prevention Act and the Tariff Act, including the
economic sanctions or Magnitsky sanctions, as well as the
export controls from the Department of Commerce. So I encourage
a whole-of-government approach and the use of these
complementary tools.
Representative Wexton. Anybody else have any suggestions
about other things we can do in order to combat this use of
forced labor?
Ms. Iltebir. I think there should be a cost for China. We
need to impose cost penalties for the willful violations of
this law. And also, I believe we should reduce the de minimis
rule so China can't continue to profit from the genocide, from
the Uyghur forced labor. Bingtuan products, for example, are
still on the shelves. And UHRP's report showed, you know, all
the linked companies to Uyghur forced labor. Those companies
should be sanctioned. The companies that do business with
Bingtuan should be sanctioned.
Representative Wexton. Very good segue there, because I
wanted to ask about the loopholes in the de minimis rule and
the way that they can get around the rules, and particularly as
it relates to CCP-controlled companies, like Shein. They may be
head-
quartered in Singapore or elsewhere, but these companies
control an enormous share of the U.S. market. Should Congress
require the CBP to collect more information on the de minimis
shipment?
Ms. Iltebir. For the de minimis rules, I think Ms. Syam or
Laura Murphy is more expert on this. But we know that China is
taking advantage of this rule and separating their shipments
into smaller amounts, and still, you know, sending, and we are
receiving, those deliveries.
Representative Wexton. Dr. Murphy, do you think that
there's a way to crack down on de minimis shipments and maybe
to also aggregate them in some way for other consumers?
Ms. Murphy. I do think that more data and more accurate
data should be required for de minimis shipments. But I welcome
the disclosure legislation that you're describing here. And I
also share Congresswoman Steel's concern that companies are not
willing to be more public about their ethical commitments.
They're more concerned about the retaliation of the Chinese
government than they are about the moral outrage or even the
penalties in the United States.
And so it's clear that we need some kind of penalty regime
within the UFLPA that makes it more costly to not comply with
the UFLPA than it is to just stick your head in the sand and
hope you don't get enforced against, which is what is
essentially happening now, whether it's for de minimis
packages, companies that are operating through that mechanism,
or for other companies that are at the moment not receiving a
ton of scrutiny just yet.
I'd also say that creating more funding for the creation of
the Entities List, for the expansion of the Entities List,
would be important. This is something that Congress could do.
And I also think that adding priority sectors, as we discussed
earlier, could be a route to informing the import community of
additional high-priority sectors that the Chinese government
has incentivized moving out to the Uyghur region.
We don't have to guess what the Uyghur region is producing.
We don't have to say that it's every single thing that's coming
in that we have to inspect. In fact, the Chinese government
produces annual and every-five-year directives telling the
Uyghur region government what to produce and gives incentives
to companies to move out to the region.
And so we know that, for instance, critical minerals are
high on their list, steel and aluminum are high on their list.
And these are critical to our infrastructure and to the
creation of practically every product that we make. Cotton is
not the only textile that they're making there, but they're
making viscose and all kinds of synthetic polyester, these
kinds of things. So we can name those products as priority
sectors, the ones that we know the Chinese government is
incentivizing in the Uyghur region. So these are some of the
things that we can do to sort of make the UFLPA enforcement
more robust.
Representative Wexton. And that's why the whole burden
shifting--putting it on the producer to prove that it's not the
product of forced labor--is so important in the Uyghur Forced
Labor Prevention Act, isn't it?
Ms. Iltebir. I would like to add to that that a secondary
sanction bill should be introduced--reintroduced, because that
is, we believe, going to fix the loopholes and the gaps of the
first bill.
Representative Wexton. One of the things that's so
disturbing about this is that not only the Chinese companies
but the U.S. companies kind of view it as the cost of doing
business, right? So as long as they can make more money,
they're perfectly content to look the other way on forced
labor. That shouldn't be happening in this country at all.
Mr. Conklin, is there anything else that we can do at CBP
to improve the way that we're enforcing the law?
Mr. Conklin. I think the comments about a whole-of-
government approach to the UFLPA and to forced labor are spot
on. You have a whole variety of other government agencies that
have a history with export controls, sanctions; there's
guidance and all sorts of good policies that have come out that
could be applied for this context. But I think the ideas posed
by others on the panel are perhaps the way to start.
Representative Wexton. Thank you very much. Mr. Chairman, I
see my time is expired and I yield back.
Chair Smith. Thank you very much, Ms. Wexton.
I'd like to just ask one or two final questions, and then
if you have any additional questions, Ms. Wexton, I'd gladly
yield, or Ms. Steel.
First, the whole idea of the de minimis being $800. As you
pointed out, Ms. Syam, 3 million uninspected de minimis
packages per day. I mean, who even knows if those packages are
$800, or $2,000, or $1,500? Who knows? I mean, they're
uninspected. When did the number get raised to--I mean, who set
$800 as a de minimis number? Was it done by administrative? I
don't recall it being in the bill. Yeah, OK, my understanding
is that it used to be $200, and now it's been raised. I mean,
$800 is a lot of money. But it's uninspected, so it could be
much more. How do we rein that in?
Ms. Syam. Thank you, Chairman Smith, for your interest in
this topic. I think we do need to pay attention to what data
points we can collect from de minimis shippers and also closely
scrutinize this de minimis shipping environment. Right now, CBP
is piloting an 86-type entry commercial entry process as part
of its customs enforcement. But this is a voluntary measure.
Companies can choose not to follow and disclose details of
their supply chain. So we need to make collection of certain
specific data points, including country of origin, value, the
tariff, DHS classification, part and parcel of the de minimis
shipping environment.
Chair Smith. How big are these packages? I mean, we know
that we couldn't stop fentanyl coming in for years. It's still
coming in, obviously, in huge amounts. Who's even looking?
Ms. Syam. Yes, that is a big concern. A lot of these
packages, as I mentioned earlier in my testimony, could be
coming by mail, through express courier services. And one
strategy to circumvent this could also be to break down bigger
packages into shipments under $800, into many shipments. And
this is what we are concerned that companies are doing to
circumvent the law.
Chair Smith. Right. I would hope that CBP would at least
take an aggressive look at some of this to find out whether or
not we're all being duped, and that all kinds of goods are
coming in illegally, made with slave labor and forced labor,
and right under our nose. So this is an area we really need to
focus on, I think, big time.
Let me ask you, Ms. Murphy, you said that your research
team has identified 5,500 companies operating in the Uyghur
region. In your opinion, should they all--or most--be placed on
the Entity List? And if not, what is the best approach for
using the Entity List as a tool and a signal?
Ms. Murphy. Thank you for that. Yes, we've identified
55,000 companies operating in the Uyghur region.
Chair Smith. Sorry.
Ms. Murphy. Thirty-three hundred in the textile industry
alone. We have this data. We've shared this data with U.S.
Government agencies, various agencies. And I think that
probably ideally I would like to see all 55,000 companies that
are operating in the Uyghur region named in the Entity List
because if we presume that forced labor dominates the region
under the UFLPA, we're presuming that all companies that
operate in the region should be having their goods stopped, and
therefore they should be added to the Entity List.
It has been suggested to me that this is a lot of companies
to add to the list, but I have some ideas for how we might
start to add companies to the list in a way that is robust and
vigorous but also gives companies enough information to be able
to begin to exclude the suppliers that we know are the worst
actors. The FLETF can start by adding companies that are state-
owned operations that have been instrumental in the development
of the labor transfer programs.
Some of these companies have transferred 5,000 people to
their own facilities alone. Some of these state-owned
enterprises have run training centers that they call
universities that are closed, they're locked down. People are
not allowed to leave. And then those people are summarily
transferred to factories all over the region. These companies
are egregiously bad actors, and they are not on our Entities
List. And we have this information. It is my suspicion, based
on media reports about what's getting stopped, that CBP is in
fact stopping goods made by some of these companies, but
importers don't know necessarily who those companies are, and
they could know if they were added to the Entity List.
It's also possible to add all of the textile companies that
we know to be operating in that region, because then companies
could then link them to--or importers could link them to--their
parent companies so that they can pressure the parent companies
to move out of the Uyghur region, to stop sourcing from the
Uyghur region. Otherwise, importers don't actually know who
these companies are that are most connected to the Uyghur
region and are sourcing from there. There are companies that
are named that are engaged in the critical minerals sector, in
the automotive sector, that we know to be actively involved and
to have an import nexus to the United States. Those companies
should absolutely be added to the UFLPA Entity List as well.
It wouldn't take that long, because civil society has
produced significant research really unpacking all of the
evidence that is out there. And many groups like mine have
handed this data over to the U.S. Government, and we publish
reports about them. And so there's more than enough information
in the public sphere now to really vigorously add more
companies to the Entity List, to be a signal to the Uyghur
community and to advocacy groups that the UFLPA Entity List is
being taken seriously, but also to show the import community
where they can begin the process of eliminating forced labor-
made goods.
Chair Smith. Thank you so very much for that excellent
answer and recommendation.
Let me ask Mr. Conklin, should all fast-fashion goods from
Temu be subject to a rebuttable presumption? And should the app
be banned because of privacy concerns, like TikTok?
Mr. Conklin. Thanks for your question. I don't know the
data piece with Temu, so I'm not really in a position to
provide too much guidance on that, but with respect to what
products should be banned from importation into the United
States, I would just note that regardless of what the company
is, regardless of how much the shipment costs, there is a law
on the books that bans all products manufactured in whole or in
part with forced labor. So if a company or a supply chain is
tainted with that, then the law should, I believe, apply.
Chair Smith. Before we close, if you have any final
comments you'd like to make, any of our distinguished
witnesses, or Ms. Wexton, or Ms. Steel?
I do want to point out that yesterday I sent a letter to
Chairman Xi Jinping asking to visit the Uyghur region. I based
it on an email a diplomat in the Chinese embassy here in
Washington sent to my office after the legislation, the Stop
Forced Organ Harvesting Act, passed, which was my bill. And I
spoke very strongly on the floor about it. And I think it's an
outrage beyond words that they are murdering young Uyghur men
and women, average age 28, in order to steal their organs, one
to three per person.
And this Minister-Counselor for Congressional Affairs in
Washington, Zhou Zheng, stated--and this is his quote from the
email--``China fully protects the rights and interests of all
ethnic minorities, including Uyghurs in Xinjiang, and the
living standards and human rights protections of all ethnic
groups continue to improve.'' I wrote and said I'd like to lead
a delegation there and get a visa to go there. Hopefully we can
get a week or 10 days to really do a full-scale trip there.
And I am especially buoyed by the hope--the Chinese Foreign
Ministry spokesperson welcomed foreigners to visit Xinjiang to
``see with their own eyes.'' He was asked in a March 27th press
conference if China would be willing to provide a U.S.
congressional delegation to the region. And he said the door to
Xinjiang is always open and that people from all countries are
welcome to visit. And so in my capacity as chairman, I've
written to Xi Jinping asking him to approve that visit. So stay
tuned.
My hope is that it will be approved. It would be a very
serious, serious undertaking. I hope that we would have
unfettered access to the camps and to talk to officials there
and, above all, to talk to individual Uyghurs without any fear
of retaliation. And there is precedent for that that I've
worked on in the past, where you get prior approval with regard
to that. But to see for ourselves--they're saying they have
nothing to hide; well, let us come and we'll pick dates when
we're not in session, and my colleagues and I will travel
there. So hopefully that comes to fruition.
And so if any of you have any final comments before we
close? Well, thank you so very, very much for your insight,
your written testimony, and your oral presentations were
extraordinary. And it really does help us significantly in
providing a path forward as to what our next steps should be.
We're deeply, deeply grateful. The hearing is adjourned.
[Whereupon, at 11:41 a.m., the hearing was concluded.]
?
=======================================================================
A P P E N D I X
=======================================================================
Prepared Statements
______
Prepared Statement of Anasuya Syam
Chairman Smith, Co-Chair Merkley, and Members of the CECC: It is an
honor to testify today before the Congressional-Executive Commission on
China (CECC), and address the implementation of the Uyghur Forced Labor
Prevention Act (UFLPA), which entered into force nearly ten months ago.
My name is Anasuya Syam, and I serve as the Human Rights and Trade
Policy Director at the Human Trafficking Legal Center, a non-profit
organization that fights for systems change to end human trafficking.
Addressing forced labor in global supply chains is central to our
mission. The organization works to shine a light on the system failures
that allow forced labor to flourish. We fight for accountability from
traffickers, from governments, and from corporations.
Since 2019, the Human Trafficking Legal Center has been raising
awareness \1\ on the role trade law and policy--specifically import
prohibitions--can play in creating financial and legal consequences for
companies and governments that tolerate forced labor. Civil society
organizations have made common cause to press for robust enforcement of
import controls under Section 307 of the U.S. Tariff Act of 1930, as
well as under the Uyghur Forced Labor Prevention Act (UFLPA). Import
bans send a strong signal to industry and--in the case of state-imposed
forced labor like in Xinjiang--governments, that they simply cannot
profit from forced labor. In 2020, the Human Trafficking Legal Center,
in partnership with nine other organizations, filed a petition \2\ with
U.S. Customs and Border Protection (CBP) requesting a region-wide
import ban (a Withhold Release Order or WRO) on cotton products from
Xinjiang (``Uyghur Region''). CBP responded by issuing a WRO \3\
against Xinjiang cotton and cotton products in January 2021, one of the
broadest import prohibitions against forced labor ever issued (before
the UFLPA).
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\1\ https://htlegalcenter.org/sdm--downloads/importing-freedom-
using-the-u-s-tariff-act-to-
combat-forced-lab or-in-supply-chains/
\2\ https://investorsforhumanrights.org/news/human-rights-groups-
call-us-regional-ban-imports-china-made-uyghur-forced-labor
\3\ https://www.cbp.gov/newsroom/national-media-release/cbp-issues-
region-wide-withhold-
release-order-products-made-slave
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Multiple coalitions support aggressive enforcement of Section 307
and UFLPA. The Human Trafficking Legal Center serves as the Secretariat
for the Tariff Act Advisory Group (TAAG), a coalition of non-
governmental organizations dedicated to enforcement of import bans
against forced labor. The organization is also a member of the
Coalition to End Forced Labour in the Uyghur Region, \4\ a group of 60+
civil society organizations, investors, and trade unions united to end
state-sponsored forced labor and other egregious human rights abuses
against people from the Uyghur Region in China.
---------------------------------------------------------------------------
\4\ https://enduyghurforcedlabour.org/
---------------------------------------------------------------------------
Companies have been on notice about forced labor in the Uyghur
region from the time the first Withhold Release Orders (WROs) against
the region were issued by U.S. Customs and Border Protection (CBP) in
2019, \5\ if not before. That was four years ago. There is a mountain
of evidence, publicly available, on the PRC's forced labor policies in
the Uyghur region. Even today, many Uyghurs, Kazakhs, and members of
other ethnic groups continue to be arbitrarily detained and held in
forced labor in Xinjiang and elsewhere in China.\6\ Less than a month
ago, two courageous survivors of Chinese detention camps provided
first-hand testimony to a House panel, about the abusive prison-like
conditions and forced ``re-education'' they suffered in Xinjiang.\7\
---------------------------------------------------------------------------
\5\ https://www.cbp.gov/newsroom/national-media-release/cbp-issues-
detention-orders-against-companies-suspected-using-forced
\6\ https://www.dol.gov/agencies/ilab/against-their-will-the-
situation-in-xinjiang
\7\ https://www.washingtonpost.com/opinions/2023/04/09/uyghur-
camps-china-gulbahar-haitiwaji/
---------------------------------------------------------------------------
Many Uyghurs and other Turkic and/or Muslim-majority peoples are
coerced into producing textiles, electronics, car parts, toys, solar
panels, polyvinyl chloride (PVC), and other products for domestic and
global consumption. Recent reports from the Sheffield Hallam University
\8\ reveal hundreds of global brands that are implicated in forced
Uyghur labor. My fellow witnesses testifying on this panel today will
cover the details of the policies in Xinjiang and the supply chains
that are implicated. My remarks will focus on the implementation of the
Uyghur Forced Labor Prevention Act (UFLPA).
---------------------------------------------------------------------------
\8\ https://www.shu.ac.uk/helena-kennedy-centre-international-
justice/research-and-projects/all-projects/forced-labour-lab
---------------------------------------------------------------------------
UFLPA is a powerful tool to confront a significant problem:
preventing goods made with Uyghur forced labor from entering the U.S.
market. No one should reap profits on the backs of forced Uyghur labor.
Allowing goods made using forced labor to circulate freely in global
markets is not only morally reprehensible, it also significantly
undermines fair trade and hurts local businesses and workers.
Governments, policy makers, companies, civil society groups, and other
stakeholders have a collective responsibility to ensure that we do not
continue to be implicated in forced labor. Uyghurs and other persecuted
groups deserve better. Consumers deserve better. As one of the world's
largest economies, the United States has significant economic leverage
and influence to push companies to eliminate forced labor in their
supply chains, or risk losing access to U.S. markets.
We are very encouraged by the U.S. Government's continued
commitment to prioritize forced labor and the enforcement of import
prohibitions. The inter-agency Forced Labor Enforcement Task Force
(FLETF)'s release of the UFLPA implementation strategy \9\ on June 17,
2022, was an important first step. That strategy provided a blueprint
for the law's enforcement and created expectations around traceability.
There is no doubt that the UFLPA is already making waves in global
supply chains and changing business practices.
---------------------------------------------------------------------------
\9\ https://www.dhs.gov/uflpa-strategy
---------------------------------------------------------------------------
These changes are a direct result of CBP's enforcement actions at
U.S. ports--through shipment inspections, detentions, and seizures of
goods made with forced labor. According to official data recently
published, \10\ between June 2022 and April 2023, U.S. Customs and
Border Protection (CBP) stopped more than 3,588 shipments with
suspected links to Xinjiang at U.S. ports of entry. However, only a
small percentage (less than 13%) of these shipments were denied entry
into U.S. commerce.
---------------------------------------------------------------------------
\10\ https://www.cbp.gov/newsroom/stats/trade/uyghur-forced-labor-
prevention-act-statistics
---------------------------------------------------------------------------
In a letter addressed to Department of Homeland Security (DHS)
Under Secretary Robert Silvers a few weeks ago, members of this
Commission, including Representative Smith and Senator Merkley,
highlighted a few gaps in UFLPA implementation.\11\ We agree that more
can be done. I'd like to address the impact of the UFLPA and outline a
few specific challenges. These include gaps in UFLPA enforcement based
on insights from recently published data, the issue of low-value
shipments evading customs scrutiny, the need for more trade data
transparency, and finally, the importance of pushing our international
allies to adopt similar region-wide bans to address the forced labor
situation in Xinjiang.
---------------------------------------------------------------------------
\11\ https://www.nationalreview.com/wp-content/uploads/2023/04/
UFLPA-Implementation-Letter-to-FLETF.pdf
---------------------------------------------------------------------------
From the perspective of the Human Trafficking Legal Center, a good
indicator of progress is in the way enforcement (both under prior
Xinjiang WROs and the UFLPA) has catapulted forced labor into a serious
compliance issue for companies and investors. Never before has forced
labor achieved this level of attention from the C-suite. In September
2022, DHS Under Secretary and FLETF chair Robert Silvers, in an
interview with the Wall Street Journal, \12\ underscored this change in
the way forced labor is being perceived by corporate management.
According to Under Secretary Silvers, ``[F]orced labor belongs in the
same breath as Foreign Corrupt Practices Act (FCPA).'' We agree. The
message from the top is clear--forced labor is a ``top tier''
compliance issue. It is no longer the provenance of weak Codes of
Conduct or Corporate Social Responsibility (CSR) measures. What
changed? The advent of substantial enforcement risk.
---------------------------------------------------------------------------
\12\ https://www.wsj.com/articles/forced-labor-a-top-tier-
compliance-issue-says-u-s-official-11664271003
---------------------------------------------------------------------------
In CBP's latest ``Trade News Snapshot'' publication, CBP Executive
Assistant Commissioner (EAC) AnnMarie Highsmith noted that businesses
are shifting their supply chain practices in order to retain access to
the U.S. market.\13\ Corporations are developing compliance and due
diligence programs to ensure their supply chains are free of forced
labor.
---------------------------------------------------------------------------
\13\ https://www.cbp.gov/trade/snapshot/volume-5-issue-2
---------------------------------------------------------------------------
While we still have a long way to go to achieve FCPA anti-bribery
levels of compliance, forced labor is now getting more traction from
senior management, as well as from investors. Beyond reputational
damage, there are significant financial and legal risks for companies
that profit from forced labor. Slowly, but surely, we are raising the
stakes for offending companies. But this progress is predicated on
robust enforcement of the UFLPA. As Scott Nova, Executive Director of
the Worker Rights Consortium (WRC), noted in his testimony before the
Senate Finance Committee last month, the cost (for companies) of
failing to perform due diligence should be higher than the cost of
performing it.\14\ According to Mr. Nova, only when we enforce the law,
that is, when importers with forced labor in their supply chains are
caught, and financial consequences are imposed, will they feel the
pressure to perform adequate due diligence that prevents the use of
forced labor.
---------------------------------------------------------------------------
\14\ https://www.finance.senate.gov/hearings/ending-trade-that-
cheats-american-workers-by-
modernizing-trade-laws-and-enforcement-fighting-forced-labor-
eliminating-counterfeits-and-
leveling-the-playing-field
---------------------------------------------------------------------------
The Human Trafficking Legal Center and our partners welcome the
Biden Administration's efforts to enforce UFLPA. But challenges remain.
insights from cbp's new uflpa ``data dashboard''
CBP recently released a long-anticipated ``data dashboard'' \15\
with UFLPA enforcement statistics from June 21, 2022. The release of
the dashboard is an important step in the direction of UFLPA
enforcement transparency. We commend the agency for making this
disaggregated data available. However, insights from this dashboard
raise a few concerns around enforcement.
---------------------------------------------------------------------------
\15\ https://www.cbp.gov/newsroom/stats/trade/uyghur-forced-labor-
prevention-act-statistics
---------------------------------------------------------------------------
Over $3 trillion in imports have entered the United States since
the UFLPA went into effect.\16\ CBP has reviewed only about $1 billion
worth of imports: 0.03% of the total. Although it would appear that CBP
has targeted--that is either examined, denied entry, or released--more
than 3,588 shipments valued at $1.07 billion in the last ten months,
only 490 (13%) of these shipments were actually denied entry into the
U.S. market. In general, we are concerned by the low number of
shipments denied entry into the United States.
---------------------------------------------------------------------------
\16\ https://www.bea.gov/news/2023/us-international-trade-goods-
and-services-december-and-
annual-2022#::text=increased%20%2424.3%20billion
---------------------------------------------------------------------------
Of the total 3,588 shipments stopped at port, CBP released more
than 1,323 shipments into U.S. commerce after reviewing their
admissibility. There are 1,778 shipments valued at 541 million USD
still pending review. Apparel, footwear, and textile products valued at
just $3 million make up 291 of the 490 shipments denied entry by CBP
since June, 2022. These low shipment numbers--and low dollar value--of
apparel shipment detentions are also concerning, especially since this
sector is prioritized in the UFLPA implementation strategy.
The UFLPA implementation strategy \17\ notes that CBP will
``prioritize illegally transshipped goods with inputs from Xinjiang.''
While a few apparel shipments from Vietnam and China have been caught
in the enforcement net, CBP does not seem to be scrutinizing a
significant number of apparel, textile, or footwear shipments from
major exporting countries like Bangladesh, Indonesia, Pakistan, and
Cambodia, all of which have historically used substantial Chinese-made
cloth in their textile production. This is just one example. We are
worried that CBP may be missing shipments--illegally transshipped or
otherwise--containing inputs from Xinjiang that could be entering the
United States from other countries. Transshipment is certainly a big
challenge for CBP. The agency should have a specific strategy to
address the issue of transshipment of Xinjiang-origin goods via third
countries, a critical element of which must be a robust program of on-
site, third country verifications of the provenance of potentially
transshipped goods.
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\17\ https://www.dhs.gov/sites/default/files/2022-06/
22_0617_fletf_uflpa-strategy.pdf
---------------------------------------------------------------------------
The dashboard tells us that electronics shipments constitute a
majority of CBP's enforcement actions under the UFLPA since June 2022.
CBP defines ``electronics'' to include solar products, information
technology, integrated circuits, automated data processing equipment,
and consumer electronics. However, in the last few months, a staggering
third of these shipments were released into the U.S. markets by
CBP.\18\ Only 22 electronics shipments were denied entry since the
UFLPA law entered into force. Since solar is designated as a high-
priority sector for enforcement, we need more clarity on what
percentage of electronics shipments reviewed by CBP are solar panels or
modules versus others. This is an important data point because we know
that more than 45% of the world's supply of solar-grade polysilicon
comes from Xinjiang.\19\
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\18\ https://www.reuters.com/world/us/us-releases-third-
electronics-detained-under-china-forced-labor-law-data-shows-2023-03-
14/
\19\ https://www.shu.ac.uk/helena-kennedy-centre-international-
justice/research-and-projects/all-projects/in-broad-daylight
---------------------------------------------------------------------------
Another big gap is in the data around re-exportation. According to
CBP's data dictionary \20\ the term ``denied entry'', could mean
several different things: the term includes shipments that were either
seized, excluded, exported, or destroyed. Of the 490 shipments denied
entry since June 2022 we do not know how many shipments were simply re-
exported to Canada, Mexico, or another country. We need to ensure that
other countries--including Canada and Mexico, which are subject to the
forced labor provisions of the USMCA--are not ``dumping grounds'' for
goods refused entry by CBP for being made with forced labor. Re-
exportation data is critical for civil society groups as we support
international partners in advocating for similar import bans in other
countries.
---------------------------------------------------------------------------
\20\ https://www.cbp.gov/document/stats/uyghur-forced-labor-
prevention-act-data-dictionary
---------------------------------------------------------------------------
According to the UFLPA implementation strategy, CBP is taking a
``risk-based approach, dynamic in nature, that prioritizes the highest-
risk goods based on current data and intelligence. Currently the
highest-risk goods include those imported directly from Xinjiang into
the United States and from entities on the UFLPA Entity List.'' We know
that direct exports from Xinjiang have dropped significantly and that
the current list of companies on the Entity List \21\ is very thin. We
urge the agency to expand its enforcement efforts by increasing the
number of highest-risk goods and adding more entities to the UFLPA
Entity List.
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\21\ https://www.dhs.gov/uflpa-entity-list
---------------------------------------------------------------------------
cbp's uflpa applicability review determinations
The Uyghur Forced Labor Prevention Act created a rebuttable
presumption that goods made wholly or in part in Xinjiang or goods
involving a company on the UFLPA Entity list are made with forced
labor. This presumption may only be refuted with ``clear and convincing
evidence'', a fairly high evidentiary threshold. Naturally, only a
handful of importers have even attempted to rebut the presumption and
meet the high burden of proof. Under the UFLPA, importers can also
contest in ``applicability reviews'' whether the rebuttable presumption
even applies to their shipments, by maintaining that they have no
connections to Xinjiang. It appears that the burden of proof applied by
CBP in such reviews is much less than ``clear and convincing
evidence.'' This is precisely the route that hundreds of companies are
taking, according to CBP.
We know from the UFLPA data dashboard that at least 1,778 shipments
are currently being examined by CBP under the UFLPA, and have been
classified as ``pending''--which could either mean ``shipments pending
importer action such as providing documentation to support
applicability or exception review or pending CBP review/decision.''
Many of these shipments are ostensibly mired in UFLPA applicability
reviews. If the importer is successful in such a review, CBP will
release the importer's goods into the U.S. market. In the last 10
months, CBP has released at least 1,323 of the total 3,588 shipments it
had identified as being potentially subject to the UFLPA.
Only successful rebuttals of the forced labor presumption have to
be made public and reported to Congress under Section 3(c) of the
UFLPA. CBP's applicability review determinations are not subject to
similar disclosures. In this information vacuum, it is important that
CBP share details, at least in the aggregate, of how many applicability
reviews it has conducted. It is important to have visibility into how
many applicability reviews were successful or rejected, as well as the
types of documents importers are submitting to demonstrate that their
goods are not touched by Xinjiang or by companies on the Entity List.
CBP should also explain the standards under which these reviews are
conducted.
the issue of low value direct-to-consumer or
de minimis packages evading customs scrutiny
De minimis shipments refer to goods that are imported into the
United States and are exempt from certain taxes and duties because
their value falls below a certain threshold. Currently, the de minimis
threshold for the U.S. is $800. These are typically direct-to-consumer
shipments that receive almost no customs scrutiny or inspection. Under
current practice, de minimis shipments may enter the United States
without formal entry documentation, which impedes the collection of
information necessary to enforce U.S. law prohibiting the import of
goods made with forced labor. CBP is conducting a voluntary test of a
de minimis commercial entry process through the creation of the new
Entry Type 86, \22\ which provides additional information to CBP that
can be useful for enforcement purposes. The Type 86 process should
therefore be made mandatory to the maximum feasible extent.
---------------------------------------------------------------------------
\22\ https://www.cbp.gov/trade/trade-enforcement/tftea/section-321-
programs
---------------------------------------------------------------------------
A strategy for circumventing enforcement of the UFLPA might be to
break up a shipment that is clearly subject to all reporting
requirements into multiple de minimis packages. And companies are doing
just that. On November 20, 2022, Bloomberg reported that Xinjiang
cotton was found in apparel shipped by fast fashion giant Shein to U.S.
consumers, based on the results of a laboratory test.\23\ This
confirmed what many had long suspected. The expose prompted a letter
\24\ addressed to Shein's CEO from Sen. Warren, Sen. Cassidy, and Sen.
Whitehouse, demanding the company reveal details about its supply chain
ties to Xinjiang and use of de minimis shipments.
---------------------------------------------------------------------------
\23\ https://www.bloomberg.com/news/features/2022-11-21/shein-s-
cotton-clothes-tied-to-xinjiang-china-region-accused-of-forced-
labor#xj4y7vzkg
\24\ https://www.cassidy.senate.gov/newsroom/press-releases/
cassidy-warren-whitehouse-press-shein-on-connection-to-chinese-slave-
labor-supply-chains
---------------------------------------------------------------------------
On average, the United States receives three million uninspected de
minimis packages per day.\25\ In FY22, the United States imported an
estimated $685 million in de minimis shipments.\26\ The U.S. de minimis
threshold is one of the highest in the world.\27\ There are many other
companies with similar direct-to-consumer business models that may be
implicated in Xinjiang forced labor. We urge the agency to conduct
``spot checks'' on de minimis packages from companies like Shein at all
U.S. ports of entry and begin detaining such packages for potentially
violating the UFLPA. This will send a strong message to direct-to-
consumer platforms that the de minimis provision is not a carte blanche
for companies to send goods made using forced labor into U.S markets.
---------------------------------------------------------------------------
\25\ https://www.forbes.com/sites/kenrapoza/2023/02/19/how-a-us-
trade-loophole-called-de-
minimis-is-chinas-free-trade-deal/?sh=50fcb09d4c9b
\26\ https://www.cbp.gov/newsroom/stats/trade
\27\ https://prosperousamerica.org/the-trade-deficit-is-worse-than-
we-thought-de-minimis-hides-128-billion-of-u-s-imports/
---------------------------------------------------------------------------
There is an urgent need to monitor the de minimis shipping
environment and ensure that it is not exploited as a backchannel entry
for goods made using forced Uyghur labor.
need for more public disclosure of trade data--
including air, rail, and road cargo
Last fall, three months after the UFLPA entered into force, the
Associated Press reported on a corporate ploy to hide shipping manifest
data from the public.\28\ Public disclosure of import/export data is
critical to tracing and monitoring forced labor risks in supply chains.
This data is especially crucial for civil society organizations, which
conduct investigations to petition CBP to enforce import prohibitions.
A leaked proposal from a few corporate members of the Commercial
Customs Operations Advisory Committee (COAC) revealed efforts to
eviscerate existing customs transparency.
---------------------------------------------------------------------------
\28\ https://apnews.com/article/business-global-trade-regulation-
us-customs-and-border-
protection-c878caa703150f417342c9777504b9a1
---------------------------------------------------------------------------
Rapid mobilization by civil society groups thwarted these efforts.
A broad-based coalition of civil society organizations sent a letter
\29\ to the CBP Commissioner requesting that the agency summarily
reject this highly problematic COAC proposal. The letter was signed by
38 organizations, including the AFL-CIO. The letter noted that the
trajectory should be for more customs transparency, not less. Trade
data transparency is already far too limited. Currently, U.S. federal
law (19 U.S.C.
Sec. 1431) provides for public access only to ocean freight data.
Data on air and land cargo is still not accessible to the public.
Moreover, U.S. law already grants both importers and shippers the right
to request confidentiality of their data on a case-by-case basis (19
C.F.R. Sec. 103.31).
---------------------------------------------------------------------------
\29\ https://htlegalcenter.org/wp-content/uploads/Open-Letter-on-
Trade-Data-Transparency-FINAL.pdf
---------------------------------------------------------------------------
Civil society organizations have joined together to demand full
disclosure of air, road, and rail manifests, in addition to maritime
vessel manifests. Thousands of shipments subject to the UFLPA could be
entering U.S. borders through air or land transportation. The UFLPA
data dashboard does not provide a breakdown of shipments by mode of
transportation.
In fact, in February 2023, maritime trade accounted for only 41.08%
of the total import value processed by CBP.\30\ Almost 60% of U.S.
imports enter via air, land, or road. We therefore call on members of
Congress to mandate public disclosure of trade data involving all modes
of transportation.
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\30\ https://www.cbp.gov/newsroom/national-media-release/cbp-
releases-february-2023-monthly-operational-update
---------------------------------------------------------------------------
pushing for ``no safe harbor for forced labor''--need for information
sharing and international coordination around import bans against
forced labor
Forced labor persists because it is propped up by large
multinational corporations in some of the world's biggest importing
economies. Companies are confident that, if caught, they can simply re-
export tainted goods from U.S. ports to other markets. Under both the
U.S. Tariff Act and the UFLPA, companies have the option to re-export
goods that CBP suspects were made using forced labor (if they choose
not to contest this suspicion). In the absence of international
coordination, with more shipments being targeted by CBP under the
UFLPA, we run the very real risk of companies simply dumping these
products in other countries. We urge the U.S. Government to push for
``no safe harbor'' for goods made using forced labor, especially with
its key allies. We certainly hope that this will be a key pillar of the
State Department's Diplomatic Strategy to Address Forced Labor in
Xinjiang, \31\ which was submitted to Congress on April 12, 2022 and as
required under Section 4 of the UFLPA.
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\31\ https://www.dhs.gov/sites/default/files/2022-06/
22_0617_fletf_uflpa-strategy.pdf
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Under the U.S.-Mexico-Canada Trade Agreement (USMCA), all three
countries are required to have import bans and coordinate with each
other on the cross-border movement of goods made using forced labor.
However, we currently do not know what infrastructure has been set up
under the USMCA to identify such shipments. It is also unclear whether
the three countries have even agreed on a coordinated approach to
Xinjiang.
Canada amended its Customs Tariff \32\ to include an import ban in
2020, but is seriously lagging behind on enforcement. Media reports
\33\ suggest that in the last three years, Canadian authorities have
detained only one shipment over forced labor concerns. That lone
shipment--clothing from China--was released into the Canadian market
almost immediately, following a successful appeal by the concerned
importer. One reason for the slow pace of enforcement could be that
Canada is enforcing its forced labor import ban on a shipment-by-
shipment basis--something that the U.S. Government should push back on.
---------------------------------------------------------------------------
\32\ https://www.publicsafety.gc.ca/cnt/trnsprnc/brfng-mtrls/
prlmntry-bndrs/20210625/10-en.aspx
\33\ https://www.cbc.ca/news/world/canada-u-s-forced-labour-
scorecard-1.6686977
---------------------------------------------------------------------------
Mexico announced its import ban in February 2023, and will begin
implementing the law in May.\34\ Unfortunately, there is little
consistency between the forced labor trade remedies in each of the
three USMCA countries. There is no agreement on how state-imposed
forced labor will be treated. There does not seem to be reciprocity for
CBP's enforcement actions under the UFLPA. The United States should
push its neighbors to the north and south to enact a region-wide
prohibition on goods made using forced Uyghur labor. CBP's UFLPA
enforcement will be severely hobbled without similar actions by Canada
and Mexico. Forced labor-tainted goods blocked by one country should be
denied entry in all other countries.
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\34\ https://dof.gob.mx/nota--detalle.php?codigo=5679955&fecha=17/
02/2023#gsc.tab=0
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The European Union (EU) is currently in the process of developing a
so-called ``product ban'' against goods made with forced labor; this
would apply both to imports and goods produced inside the EU. However,
leading European civil society groups have highlighted major gaps \35\
in the proposal published by the European Commission on September 17,
2022.\36\ Criticisms include ambiguities in the way the EU plans to
address cases of state-imposed forced labor (like Xinjiang). We urge
the U.S. Government, especially the USTR and State Department, to use
its leverage through the U.S.-E.U. Trade and Technology Council (TTC)
\37\ to push the EU to take a region-wide import ban approach to
Xinjiang. Last year, we read reports \38\ claiming that Xinjiang's
exports to the European Union (EU) rose by more than 34%. Without a
similar regional approach to Xinjiang, the EU will continue to be a
dumping ground for goods manufactured using Uyghur labor.
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\35\ https://www.antislavery.org/wp-content/uploads/2022/10/Joint-
Statement-on-EU-FLI-10.22-v3-1.pdf
\36\ https://ec.europa.eu/commission/presscorner/detail/en/
ip_22_5415
\37\ https://ustr.gov/useuttc
\38\ https://www.euractiv.com/section/economy-jobs/news/eu-imports-
from-xinjiang-rose-by-34-in-2022/
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The United States should also push its G7 and G20 allies to enact
import bans against forced labor. The U.S. Government has an
opportunity to make the case for ``no safe harbor'' for goods made
using forced labor at the upcoming G7 summit in Hiroshima.\39\ With
Japan's G7 presidency this year, there is great potential for the two
countries to work closely on trade. We were encouraged to see the
creation of the U.S.-Japan Task Force on the Promotion of Human Rights
and International Labor Standards in Supply Chains in January this
year.\40\ We urge the trade ministers of the two countries to
prioritize import ban enactment and coordination.
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\39\ https://www.g7hiroshima.go.jp/en/
\40\ https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2023/january/united-states-and-japan-launch-task-force-
promote-human-rights-and-international-labor-standards
---------------------------------------------------------------------------
If we hope to achieve the goals outlined in the UFLPA, the United
States cannot act alone. A patchwork of laws with different standards
will only frustrate enforcement of import bans. A more coordinated
approach between countries to identify and track goods made with forced
labor will result in profound impact. No safe harbor for goods made
with forced labor will make re-export impossible. These goods should
not find any market.
conclusion
We are at a pivotal moment in global trade. Market restrictions,
import bans, and economic sanctions have become the norm in efforts to
address forced labor across the supply chain. UFLPA is a powerful tool
to end state-sponsored forced labor. But it must be enforced.
We acknowledge the enormity of the task before CBP and other
agencies in the FLETF. By addressing the gaps outlined in the hearing
today, along with a more robust forced labor enforcement strategy, we
are confident that the U.S. Government can create pressure to disrupt
forced labor in the Uyghur region and throughout China. In addition,
enforcement will reduce our market exposure to products made using
forced labor. This will also protect U.S. workers, who cannot compete
against forced labor. Ultimately, we want UFLPA enforcement to have a
ripple effect, encouraging other countries to impose import
prohibitions against forced labor.
As Professor Laura Murphy poignantly noted in her keynote address
at CBP's recent Forced Labor Tech Expo, \41\ we need to reframe our
discourse around supply chains and forced labor in Xinjiang. What we're
really talking about here is the risk to the Uyghur people--this is not
just an issue of ``risk'' to business operations.
---------------------------------------------------------------------------
\41\ https://www.dvidshub.net/tags/video/cbp-forced-labor-
technical-expo/page/1
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Companies have a duty to prevent the use of forced labor in their
supply chains. They have been on notice for years. And now is the time
to eradicate forced labor in global supply chains, once and for all.
______
Prepared Statement of Laura T. Murphy
Thank you, Chairman Smith and Co-chairman Merkley for convening
this meeting and to all of the Congresspeople who are attending today
and to all who have supported the rights and freedom of Uyghur people.
My name is Laura Murphy, and I am Professor of Human Rights and
Contemporary Slavery at Sheffield Hallam University in the UK. I have
studied forced labor globally for nearly 20 years, and my work for the
last three years has focused exclusively on the Uyghur Region of China.
successes
The Uyghur Forced Labor Prevention Act is landmark legislation.
Researchers who study the perilous situation of people enslaved around
the world have known that the level of supply chain scrutiny and
corporate accountability required by the UFLPA is necessary if we want
to ensure that the people who work to produce our goods are not being
enslaved or trafficked. It is painful to realize that it took a
genocide for us to understand just how dire the consequences of our
ignorance could be. There is no silver lining to the oppression of the
Uyghurs and other minoritized people in the Uyghur Region, but it is
commendable that the U.S. has been the first to create the legislation
necessary to level real economic costs on the PRC government's state-
sponsored forced labor program and on the corporations that directly
benefit from those forced to work.
It is critical to note that while we still have a long way to go
before we intercept all products made in whole or in part in the Uyghur
Region, the UFLPA is indeed working as it was intended. In the short
nine months that the UFLPA has been in effect, we have seen a swift and
decisive enforcement response. Customs and Border Protection has
indicated that it has refused at least 424 shipments entry into the
United States after investigating their links to Uyghur forced labor.
Those products span a broad spectrum including electronics, solar
panels, apparel, and building materials. Congress has allocated
significant resources--though more will still be needed--to enable CBP
to conduct the in-depth supply chain investigations required to
understand where our products are made, down to the raw materials. This
work has protected consumers from unwittingly buying products that we
know to be made in the midst of a genocide, in the shadows of a massive
internment camp system, by people who are visited day after day by
government agents and prosecutors and prison bureau officials demanding
that they leave their children and parents and land and culture and
religion behind to work in the factories that make goods that end up on
our shelves. Even though Uyghurs continue to be forced to work in
China, we in the United States have some small comfort that we might
not be financing their suffering and that every day U.S. corporations
are reducing their complicity in these crimes against humanity.
challenges of enforcement: corporate compliance
Of course, enforcement of the UFLPA is not an easy task. What our
research at Sheffield Hallam University has found is that since the
UFLPA went into effect, companies have not all responded with
enthusiasm. Many U.S. (and multinational corporations selling in the
U.S. market) lobbied to prevent the law from being passed, and then
fought to limit how it would be enforced, and now are complaining that
the investigations are not convenient for them. Companies that are not
making products involving the UFLPA ``priority sectors'' still have
their heads in the sand, hoping that their products will not be
scrutinized. Many are shifting the burden of due diligence onto their
suppliers, rejecting the responsibility and the costs of knowing the
conditions of workers in their supply chains. They throw their hands up
in the air as auditors are jailed, their offices ransacked, and say
they cannot do anything to address forced labor in the Uyghur Region
because that could put the lives of their China-based staff at risk.
They care about their own directly employed personnel and yet do not
worry about the Uyghur workers at the end of their supply chains. Those
that have done the right thing by terminating their relationships with
suppliers implicated in Uyghur forced labor have refused to be
transparent about it, out of fear of retaliation in China. And many
still refuse to admit what is becoming increasingly clear--that there
is no feasible way to verify labor standards compliance in the Uyghur
Region or of Uyghurs working outside the region. This all shows that
companies across sectors must be compelled through vigorous enforcement
to comply with the UFLPA.
Some international companies and governments are claiming the UFLPA
is merely about a trade war between the U.S. and China, trying to
justify their indifference toward profiting from a genocide. It is
crucial that the U.S. Government encourage our allies to align their
laws to prohibit the import of forced labor-made goods, but we should
not link the UFLPA to trade and economic competition issues--we must
make it clear that this is a human rights issue, not a strategic one.
If we don't, the U.S. is likely to remain the only country with a ban
on Uyghur forced labor imports.
enforcement challenge: obscuring supply chains
In China, we are seeing companies pretend to sell their Uyghur
Region factories, only to transfer them to executives within their own
leadership team or family. They change the names of their subsidiaries
to obscure the names that have been revealed by the media to be
involved in Uyghur oppression. They are shipping their products first
to third countries, where they know that convoluted supply chains mask
their complicity. They are bifurcating their supply chains so that they
can continue to sell goods in the U.S. market while still selling
Uyghur forced labor-tainted goods elsewhere in the world, sometimes
even continuing to manufacture directly in the Uyghur Region and using
people ``transferred'' by the state for work. Some of those companies
are benefiting from the Inflation Reduction Act (IRA) incentives, while
continuing to operate in the Uyghur Region. The U.S. should prohibit
companies from using U.S. Government incentives to expand their
manufacturing in the United States while they continue to profit from
Uyghur forced labor in China.
enhancing priority sectors
We know that this affects a wide range of goods. The Xi Jinping
government has published explicit directives indicating the
manufacturing sectors they are investing in in the Uyghur Region. These
include items that are critical to our supply chains and to meeting our
climate goals, including renewable energy-related products, critical
minerals, steel and aluminum, PVC, agricultural products. The U.S.
urgently needs to add these products to its priority list of goods
produced in the Uyghur Region to ensure that we are stopping these
goods from coming into our markets and to alert the business community
to the enormous risk of sourcing forced labor-made goods if they do not
commit to more diligent supply chain tracing.
enhancing the entity lists
Our research team has identified 55,000 companies, large and small,
operating in the Uyghur Region.
We have published in-depth investigations that have documented at
least 150 specific companies in the Uyghur Region and elsewhere in
China for which there is significant evidence of participation in
state-sponsored labor transfer programs that are tantamount to forced
labor. These companies are hiding in plain sight. Some of them are
massive state-owned corporate conglomerates that served as the
architects of the repressive programs that oppress minoritized people
in the Uyghur Region; others produce the lion's share of commodities
essential to manufacturing worldwide. These companies sell their goods
into international markets.
The UFLPA requires FLETF to create a ``comprehensive'' description
of the situation of forced labor in the Uyghur Region and list the
companies that are engaged in those programs. And yet the entity lists
include only four of the companies we have identified as offenders--and
zero new ones have been added since the UFLPA was passed.
The first version of these lists did nothing more than reiterate
the 20 companies that had already been named in previous withhold
release orders. It is hard to comprehend why still, not even a single
addition has been made to these lists, especially in light of the
evidence provided by civil society organizations to FLETF that warrants
the addition of potentially thousands more entities.
Under Secretary of Homeland Security Robert Silvers recently
committed to expanding the entity list. The U.S. Government needs to
prioritize making the UFLPA entity lists as comprehensive as possible,
per the mandate of the UFLPA. FLETF should begin with the state-owned
companies that have openly done the bidding of the PRC government to
force sometimes thousands of people to work for their companies. FLETF
should then add to the lists those companies operating in the shadows
in the mining and processing tiers of our supply chains that are least
visible to companies. Congress should make clear to FLETF that it must
presume that all state-sponsored labor transfers in the Uyghur Region
constitute forced labor and thus add any company engaged in those
coerced transfers of laborers onto the lists. These iterative and
constantly expanding lists will assist importers in ensuring that they
know which suppliers to exclude from their sourcing.
conclusion
The UFLPA provides us with a robust set of tools for weeding out
the fruits of forced labor from the products that reach our markets.
The rebuttable presumption is one important tool, but the priorities
list and the entity lists are also critically important tools that
consumers, advocates, industry, and enforcement all benefit from. We
should put those tools to their most robust use. We cannot be hesitant
about doing every single thing we can, using every single tool at our
disposal, to address the genocide in the Uyghur Region. I'm pleased
that we're having this hearing to review all that the UFLPA has
accomplished and to consider what more we can do to lead the world in
addressing what is likely the worst human rights crisis we'll see in
our lifetimes. I believe that we should not rest until we know we've
done every single thing we possibly can to end the Uyghur genocide and
to end corporate complicity in it.
Prepared Statement of Kit Conklin
overview
Chairman Smith, Chairman Merkley, distinguished members of the
Commission, thank you for the opportunity to speak before you this
morning. I would like to start by saying that I am representing myself
this morning and all views are my own.
The Uyghur Forced Labor Prevention Act (the UFLPA or the Act) bans
the import of goods or commodities from the People's Republic of China
produced with forced labor. Specifically, the Act mandates a
``rebuttable presumption'' that any products made wholly or in part in
the Xinjiang Uyghur Autonomous Region (``Xinjiang''), or by any Chinese
company on a U.S. list of entities involved in the use of forced labor,
are made with forced labor and banned from importation into the U.S.
reflecting the increased international consensus
on the need to address forced labor
U.S. trading partners around the world have enacted or are
introducing legislation to ban products made with forced labor, to
include the European Commission, Germany, France, Canada, and Mexico,
among other jurisdictions. Each of these bans similarly requires
importing companies subject to the laws of these jurisdictions to
engage in supply chain due diligence to identify and mitigate exposure.
U.S. companies are not alone, as expectations are increasing around the
world for industry to address forced labor exposure in global supply
chains.
enforcement
CBP has stated that UFLPA detentions constitute less than 0.1% of
goods imported into the U.S., yet since enforcement of the UFLPA began
in June 2022, CBP has detained approximately $1 billion worth of
products suspected of containing inputs made with forced labor in
China.
CBP has prioritized enforcement relating to four goods: cotton,
polysilicon, tomatoes, and aluminum--although the scope of the UFLPA
includes any raw materials and goods that are mined, farmed in, or
connected to Xinjiang. For instance, billions of dollars' worth of raw
materials, rare earth minerals, and products are exported from Xinjiang
each year, including a significant percentage of global lithium-ion
batteries, 20% of global production of calcium carbide (used to make
PVC among other materials), 10% of global production of rayon (used to
manufacture apparel and home good items), 9% of global beryllium
deposits (a key rare earth mineral used for the production of satellite
and aviation components), and 8% of global pepper production. In
addition to raw materials and goods sourced from Xinjiang, the UFLPA
also bans products made with forced labor in other provinces in China.
compliance challenges
The sheer volume and scope of goods targeted under the UFLPA poses
significant compliance challenges for industry, as supply chains have
increasingly become globalized, complex and opaque. The critical
challenge for industry--to discover supply chain visibility and detect
risk--is compounded by the Act's rebuttable presumption and the lack of
a de minimis exception, meaning even an insignificant input of product
produced in-whole or in-part with forced labor could result in
enforcement action.
The global nature of modern supply chains further complicates
compliance because CBP maintains authority to detain goods imported
into the United States from third countries. Since UFLPA enforcement
began in June 2022, CBP detained $89 million worth of goods imported
directly from China, but, for instance, detained over $490 million
worth of goods from Malaysia and over $369 million worth of goods from
Vietnam. These figures illustrate UFLPA transshipment risk and why the
lack of a de minimis exception necessitates the need for due diligence
into all suppliers, not just those located in China.
guidance
Beyond the four product areas categorized as high priority for
enforcement, CBP has publicly stated that it is considering other
product categories that will be subject to priority targeting and
enforcement. Irrespective of further announced priorities, as some in
industry have requested, CBP guidance issued on July 13, 2021 and
amended on June 17, 2022 sets forth red flags for forced labor exposure
for all categories of products that pose UFLPA risk as well as
information CBP may require from importers. These red flags include
involuntary labor transfers, supply chains connected to prisons, and
any affiliates of the Xinjiang Production and Construction Corps
(XPCC). The amended guidance further states ``an importer seeking an
exception to the rebuttable presumption must demonstrate that it has
fully complied with the requirements [in the guidance].'' These
requirements include, for example, supply chain mapping, intelligence
to identify and assess forced labor risk, training, and monitoring of
suppliers. CBP guidance also states that UFLPA compliance is not static
and that industry should ``update [supplier risk information] on a
regular basis.''
towards sustainable compliance
Similar to industry responses when countering money laundering,
sanctions or anti-bribery compliance became priorities, CBP's
enforcement posture is a major driver for the material investments
industry is making to address UFLPA due diligence and compliance. As
CBP's budget and resources expand to support the counter forced labor
mission, many in industry are almost certain to adapt with increased
senior management attention, and with support and budget for the
technology and people needed to address risk.
In line with guidance, companies that make reasonable, risk-based
investments to effectively map supply chains, layer in risk
intelligence, and conduct training and monitoring--in most instances--
should be positioned to materially improve their capabilities to
identify potential UFLPA exposure. As industry implements UFLPA
compliance programs, global supply chain management practices will
continue to adapt as companies mitigate forced labor risk and build
resilience. Observers have already pointed to impacts on supply chains
relating to green energy products, rare earth minerals, food items, and
pharmaceutical precursors. Companies with supply chains prioritized by
CBP for UFLPA enforcement have also started to review and implement
obligations and best practices to mitigate UFLPA risk.
In summary, compliance with the UFLPA is complex and not binary,
similar to compliance with AML, sanctions, and anti-bribery.
Nonetheless, with senior management support and in line with guidance,
effective programs can be established to identify exposure and mitigate
risk of forced labor in the supply chain. As DHS Under Secretary
Silvers recently stated, ``over the years, things like anti corruption
and sanctions compliance have come to be standard pillars of corporate
compliance programs. Forced labor needs to be one of those pillars as
well.''
______
Prepared Statement of Elfidar Iltebir
My name is Elfidar Iltebir and I was born in East Turkistan, the
Uyghurs' homeland where Uyghurs have been living for thousands of years
and what China now calls the Xinjiang Uyghur Autonomous Region. Like
many Uyghurs, my family also faced persecution at the hands of the
Chinese Communist Party (CCP). After waging more than six decades of
repressive assimilationist policies to weaken and eliminate the Uyghur
identity, the CCP under its general secretary Xi decided to implement
the ``final solution'' and resorted to genocide in the 21st century.
The CCP's ultimate goal is to completely annihilate the Uyghur
identity, our cultural values and religious beliefs, and homogenize
China's population by forcibly transforming Uyghurs into majority Han
Chinese. To achieve this goal, the CCP has transformed our homeland
into a totalitarian surveillance state; detained millions of people in
detention camps, forced labor camps, and formal prisons; and subjected
the Uyghur people to inhumane conditions, including torture, sexual
abuse, forced sterilization, forced labor, and forced separation of
families.
When my father, a prominent Uyghur writer and intellectual, feared
for his life in our homeland, our family fled China in 1992. Thanks to
the American Government, we were able to seek refuge in the United
States, our adopted homeland. Inspired by the belief that all human
beings are endowed with certain rights and freedoms that governments
are supposed to protect, not abuse, I wanted to help my people fight
for their God-given rights and freedoms in this land of the free and
home of the brave. I am now the President of the Uyghur American
Association based here in Washington, DC. UAA is a nonpartisan
community-based organization that promotes the preservation of Uyghur
culture and advocates for the human rights, freedom, and self-
determination of the Uyghur people. We serve as the primary hub for the
Uyghur diaspora in the United States and respond to the needs of our
community members on a variety of issues. Since 2017, we have focused
major efforts on advocating for the Uyghur people being subjected to
genocide in our homeland, including family, friends and other loved
ones of UAA members.
The main point I would like to stress today is that the Chinese
government's campaign of forced labor targeting Uyghurs is not purely
economic exploitation that benefits Chinese companies. It is a critical
part of China's systematic oppression of the Uyghur people and the
ongoing genocide in the Uyghur homeland. The Chinese government's
forced labor practices are tearing apart the fabric of Uyghur society,
separating families and displacing them from their communities,
stripping away their ethnic and religious identity, and leading to a
reduction and dilution of the Uyghur population. As Uyghur
intellectuals, religious scholars, professionals, businesspeople,
cultural icons, and tradition bearers are still imprisoned in detention
camps, forced labor camps, or formal prisons, and Uyghur men and women
are enslaved in factories while their children are raised in state
orphanages, this ongoing genocide puts Uyghur people on the verge of
total annihilation. And we believe that is the ultimate goal of the
CCP.
I want to share a quick story of my friend Kalbinur Gheni, who now
lives in DC. In 2018, her sister Renagul was taken to a concentration
camp for praying at her father's funeral and possessing religious
literature. She was later transferred to a prison and forced to work at
a garment factory inside of the prison. Her children were separated
from her family. The Chinese government not only detained twelve other
members of Kalbinur's family and sent them to camps and later to
prisons, but it has also been harassing her on U.S. soil for speaking
out about her detained family members. She received threatening
messages directly from the Chinese police almost every week last year.
Many more members of our community have similar stories of loved
ones being detained and exploited. This is one reason our community
fought so hard for the passage of the Uyghur Forced Labor Prevention
Act (UFLPA) and why we continue to fight for its full enforcement. We
stayed up many nights writing thousands of letters, made even more
phone calls, and roamed the halls at Capitol Hill, knocking on every
door to deliver our message. Our message was simple: Stop sourcing
goods from supply chains tainted with Uyghur forced labor. No business
with genocide. No profit from genocide. On behalf of Uyghur Americans,
I'd like to take this opportunity to thank Senator Rubio, Senator
Merkley, Representative Smith, and Representative McGovern for their
leadership and to many others who were instrumental in passing the
UFLPA. Thank you for refusing to make Americans complicit in China's
genocide against the Uyghurs and for putting universal values of human
rights and dignity above economic interests.
We were overjoyed with the passage of the UFLPA. We believed the
UFLPA would be a turning point in stopping China's genocide. We
believed it would be a catalyst for greater awareness among businesses
of the CCP's atrocities in the Uyghur homeland and that it would compel
them to investigate and cut links to supply chains connected to Uyghur
forced labor in the Uyghur homeland and across China. We believed we
would see the shift we had been waiting for since the beginning of this
genocide and that the Chinese government would get the message loud and
clear from the United States: We stand against the ongoing genocide
against Uyghurs and we're not spending one American dollar on any goods
that are tainted by the forced labor of the Uyghur people. Americans
will not consume or profit from the proceeds of genocide.
However, when I recently saw in my neighborhood grocery store the
red date products that were produced by the Bingtuan, or the Xinjiang
Production and Construction Corps (XPCC), which is a paramilitary
organization that implements the Chinese government's genocidal
policies in the region and facilitates Uyghur forced labor, it felt
like a slap in the face. How are the U.S.-sanctioned XPCC's products
being displayed on shelves in the U.S. in packaging with images of
dancing Uyghurs and outlines of Uyghur scenery? As an Uyghur American,
every time I shop for clothing items, grocery items, or electronics, or
look at automobiles or solar panels, I think about how these ``Made in
China'' products might have been made by a loved one in my hometown
subject to forced labor, and if not my loved one, that of another
fellow Uyghur here in the United States. Why, I ask myself, are Chinese
companies still able to circumvent the UFLPA and continue to profit
from Uyghur forced labor? The human cost of this forced labor is why it
is so important to ensure that the UFLPA is fully and rigorously
implemented the way it is intended. I know there are hundreds of hard-
working people at the Customs and Border Protection Agency, the Forced
Labor Enforcement Task Force, and other government agencies, as well as
human rights and workers rights groups that are committed to enforcing
the Uyghur Forced Labor Prevention Act. I also know there are many
challenges, gaps, and loopholes that require us to keep working
together to fully implement and enforce the UFLPA so that American
businesses and consumers don't become complicit in the genocide against
Uyghurs. We must face these challenges and many more head on and
strengthen enforcement mechanisms to ensure that American and Chinese
businesses and the Chinese government get the message: No business with
Uyghur genocide.
As Uyghur Americans, we are prepared to contribute to the
successful implementation and enforcement of the UFLPA so that we can
help deliver that message. We may not be able to close the camps
overnight, to reunite our families this Ramadan, to stop the Chinese
government's mass sterilization of Uyghur women by the next session of
the U.N. Committee on the Elimination of Discrimination against Women
and much more that we need to end this genocide. But as I sit here
today, I can say with confidence that together we can stop products
made with Uyghur forced labor from entering onto U.S. soil and make
this genocide costly for China. We can be an example for our allies to
implement similar laws so ``Made in China'' products tainted with
Uyghur forced labor cannot enter any markets that value human beings
and fair trade.
If there is one thing we ask the U.S. Government on behalf of the
Uyghur American Association, that would be to hold the Chinese
government and affiliated entities accountable for the genocide and
crimes against humanity by imposing economic cost on Chinese officials
and companies implementing, facilitating, and supporting this genocide.
The United States passed two pieces of historic legislation, the Uyghur
Human Rights Policy Act, signed by the Trump Administration, and the
Uyghur Forced Labor Prevention Act, signed by the Biden Administration.
Yet, as far as we know, no Chinese official or entity has been
sanctioned under these legislative authorities. Both administrations
recognized China's atrocities as genocide. Yet, U.S. businesses are
still operating in the genocide zone, U.S. companies are still selling
technology to Chinese companies implementing this genocide, and U.S.
companies are still investing in Chinese companies supporting the
Chinese government's genocidal policies. We need to ensure no American
technology or investment is flowing to Chinese companies that are
linked to China's genocide against Uyghurs and no Chinese products
tainted with Uyghur forced labor are entering our territory. First we,
as Americans, need to eliminate our inadvertent complicity in this
ongoing genocide and then we can ask our allies and partners to do the
same so that the Chinese government is held accountable for the
genocide and crimes against humanity it is committing against the
Uyghurs in the 21st century.
______
Prepared Statement of Hon. Chris Smith
Good morning, and welcome to the first hearing held this Congress
on implementation of the Uyghur Forced Labor Prevention Act, a truly
landmark piece of legislation that has the potential to alter the
dynamic of our ongoing struggle with the People's Republic of China--
but only if it is implemented properly.
And make no mistake about what the stakes are: we are in a struggle
with Communist China--not something anodyne, like simple ``strategic
competition.'' Rather, the United States is in a survival struggle with
an authoritarian state that seeks global hegemony and the fundamental
displacement of the United States and the liberal economic order. To
that end, the PRC will take advantage of the Western world's liberal
trade regime, while utilizing forced labor in order to give itself an
unfair trade advantage--all with the ultimate objective of imposing its
governance model upon the rest of the world.
We have known for years that the PRC has used forced and indeed,
prison slave labor . . . I knew this as far back as 1991, when former
Congressman Frank Wolf and I went to Beijing Prison No. 2 and found at
least 40 Tiananmen Square activists being forced to make jelly shoes
and socks for export to the United States. We asked for, and were
given, samples which we then promptly brought back to the United States
and had an import ban imposed, pursuant to the Smoot-Hawley Tariff Act
of 1930.
There was some personal satisfaction to be had from that, but in
terms of net practical effect in impacting the PRC's policy of
utilizing forced prison labor, it was next to zero. In this case we had
direct evidence, but that was a unique set of circumstances. How else
could Customs and Border Protection prove that goods were being made by
prison labor, absent a couple of Congressmen bringing back jelly shoes
from a visit to a prison factory?
This is where the genius of the Uyghur Forced Labor Prevention Act
comes in--the burden is no longer upon the good men and women of CBP to
prove that goods have been made by forced labor, but upon importers to
prove that goods made in the Xinjiang Uyghur Autonomous Region and
elsewhere are free from the taint of forced labor.
For we now know that the CCP under Xi Jinping has declared war on
the Uyghur people, labeling them terrorists who must be destroyed
``root and branch.'' This has led to the massive detention of more than
a million Uyghurs, many of whom are forced to work and who are
subjected to horrific human rights abuses, including forced
sterilization, forced abortion, and indeed, forced organ harvesting.
These egregious human rights abuses are what the UFLPA is designed
to combat. We know from reports released yesterday in advance of this
hearing, the CBP has seized over $961 million worth of goods since last
June. This is an important start, as is CBP's holding of a tech expo
for industry last month and its launch of a dashboard to track trade
statistics.
As Co-chair Merkley and I, joined by Ranking Member McGovern and
Senator Rubio, stated in a letter addressed to the Department of
Homeland Security last week, however, we do remain concerned over the
lack of full transparency that would enable Congress to evaluate the
efficacy of implementation.
We are also concerned as to whether the ``rebuttable presumption''
standard is being fully implemented, and whether goods that are
initially detained are subsequently being released without
congressional or public reporting.
We have questions as to why the robust Entity List of bad actors
that UFLPA requires remains so spartan. We also question whether CBP is
utilizing technology, such as isotopic and DNA testing, to its fullest
to identify goods produced in the Xinjiang Uyghur Autonomous Region.
Finally, we also question whether goods produced by forced labor
outside the XUAR are being captured. We have been working with Homeland
Security to follow up on well-founded reports that work gloves sold
under the Milwaukee Tool label in venues such as Home Depot are indeed
produced by prison labor--at Chishan Prison in Hunan province, to be
precise.
Going forward, we will be taking a closer look at companies such as
Milwaukee Tool and their alleged profiteering from forced labor, just
as we have highlighted the role of Thermo Fisher Scientific in genetic
data collection that enables repressive practices in both the Xinjiang
Uyghur and Tibet Autonomous Regions--and, more nefariously, has been
implicated in finding DNA matches from organ harvesting victims.
It is my hope that the UFLPA will prick the consciences of
corporate actors and encourage them to scour their supply chains to
make sure they are free from the taint of forced labor. If not
motivated by altruism, then by raising the cost of doing business in
the PRC, it is my further hope that companies will determine that
bottom-line concerns will motivate them to do the right thing. Finally,
for those that are incorrigible and seek to skirt the law, we will seek
enforcement action and bring public scrutiny to bear.
______
Prepared Statement of Hon. Jeff Merkley
Mr. Chairman, thank you very much. The Uyghur Forced Labor
Prevention Act is a testament to why the Congressional-Executive
Commission on China exists. Horrified by the evidence documented by the
Commission's tireless researchers that the products of slave labor
reach American shelves in vast quantities, the four most recent chairs
of this Commission acted, and coming from the Senate side, a special
recognition to Senator Rubio who partnered in the bipartisan effort on
the Senate side. On a bipartisan and bicameral basis, we introduced,
advocated for, and passed landmark legislation that sent a resounding
and unequivocal message that the United States would not stand idly by
as the world witnesses the evils of genocide and the evils of slave
labor.
This law, the Uyghur Forced Labor Prevention Act (UFLPA), aims to
target China's ability to profit from genocide, hold corporations that
trade in products of forced labor accountable, and protect American
consumers from being unwitting accomplices in these horrors. In the 16
months since it became law and 10 months since its key provisions went
into effect, the UFLPA has made a difference. As we'll hear today, it's
put businesses on notice that they can no longer claim it's too
difficult to trace their supply chains. Armed with substantial new
resources provided by Congress, U.S. Customs and Border Protection now
devotes unprecedented attention to investigating those supply chains
and stopping problematic imports. As a result, direct exports from
Xinjiang have plummeted and businesses are changing their practices to
speed up production capacity elsewhere in the world, increasing the
diversification and sustainability of their supply chains.
But as much as we've accomplished, it's only the tip of the
iceberg. Compliance with this law requires a paradigm shift. It
requires companies to be vigilant in the same way we expect them to
guard against bribery and corruption and money laundering. Companies
that resist compliance or look to exploit loopholes need to be held
accountable. The U.S. Government's Forced Labor Enforcement Task Force
needs to implement the law even more aggressively, with particular
attention to transshipment of Xinjiang-origin goods via third
countries.
Congress needs to make sure these efforts are fully funded and that
any gaps we identify are plugged. And countries around the world need
to take their own actions to make sure that the purveyors of forced
labor can't just send their goods elsewhere. That action by other
countries is needed to avoid bifurcated supply chains that allow
companies to sell clean products in the United States and turn around
and pocket the proceeds of tainted forced labor products elsewhere.
It's a big challenge to implement a law, and it's a big challenge
to implement this law given the complexity of international trade. But
we owe it to the millions of exploited Uyghurs and other ethnic
minorities in China, and as my colleague mentioned, this isn't just
about China, this is about taking on this issue and setting a model for
how we deal with it around the world. We owe it to American consumers,
who don't want to be part of economic machinery of genocide, and to the
businesses doing the right thing who want to play on a level playing
field. It is an honor and a responsibility to take on this task in
partnership with my colleagues in both Houses and both sides of the
aisle. Thank you, Mr. Chairman.
______
Prepared Statement of Hon. James P. McGovern
Thank you, Mr. Chairman, for scheduling this hearing. I look
forward to the testimony of our witnesses on the implementation of the
Uyghur Forced Labor Prevention Act, its impact on global supply chains,
and how we might improve its implementation.
On a personal note, as the author of the House UFLPA legislation, I
want to thank my partner on this legislation, Senator and fellow
Ranking Member Rubio, my good friend and colleague Senator Merkley for
his leadership on the UFLPA, and Chairman Smith for organizing this
hearing. This group demonstrates the strong bipartisan support this
issue has received in both the House and the Senate.
Since the UFLPA was signed into law, we've seen significant efforts
by Customs and Border Protection--CBP--and the multi-agency Forced
Labor Enforcement Task Force--the FLETF--to implement the UFLPA. As the
lead enforcement agency, CBP has been a strong ally in its
implementation.
The law itself recognizes that implementation is multisectoral. It
requires engagement, cooperation, and action by CBP, but also by the
private sector, including importers, and by NGOs, which have research
and monitoring capabilities.
Last week the CECC chair, co-chair, and ranking members--namely
Congressman Smith, Senator Merkley, Senator Rubio, and I--wrote to DHS
Under Secretary Robert Silvers, who chairs the Forced Labor Enforcement
Task Force, to request more information on certain key aspects of the
law's implementation to date.
Due to the timing of today's hearing, neither CBP nor DHS was able
to appear and provide their views and insights on implementing the
UFLPA. I look forward to a future hearing where we can hear about their
experience and get suggestions for how to pursue comprehensive
enforcement.
The UFLPA was a targeted response to a specific, very serious human
rights problem: the widely documented, intentional use of forced labor
in the Xinjiang Uyghur Autonomous Region of China. The use of forced
labor is one of a set of interrelated policies implemented by the
People's Republic of China against Uyghurs and other largely Muslim
Turkic peoples in the region that, taken together, likely meet the
legal definition of crimes against humanity and genocide.
In the law, by forced labor we mean ``[a]ll work or service which
is exacted from any person under the menace of any penalty for its
nonperformance and for which the worker does not offer himself (or
herself) voluntarily,'' a definition first applied in tariff law in the
1930s.
But section 3 of the UFLPA, which establishes a presumption that
the import prohibition applies to all goods mined, produced, or
manufactured in the Xinjiang Uyghur Autonomous Region, represents a
new, even revolutionary, approach to protecting human rights.
Basically, instead of presuming that the norm is that human rights
violations are not committed, the UFLPA presumes the opposite, that the
standard practice is that rights violations are committed.
This presumption is grounded in research that found that--
(1) the use of forced labor is pervasive in the Xinjiang region,
and
(2) because there is a lack of transparency and independent
investigations and audits, it is impossible to distinguish between
industry and manufacturing that involves forced labor and that which
does not.
The law establishes an appeals process that allows a company to
make the case that its goods are not produced with forced labor. To do
so, the company must provide ``clear and convincing evidence'' that
they are not.
There are several issues that merit attention as we review the
implementation of the UFLPA, which my colleagues have noted in their
opening remarks, so I won't repeat them here. As implementation of the
UFLPA advances, there will be lessons learned that may lead Congress to
tweak the UFLPA or related law.
But it is worth repeating that the prohibition on importing goods
made with forced labor is longstanding--what the UFLPA provides is a
new approach and new tools for enforcement. So, the interest in
improving enforcement is here to stay.
It's also important to remember that while the operational aspects
of the UFLPA are clearly focused on the Xinjiang Uyghur Autonomous
Region, the statement of policy in the law is broader--namely, ``to
lead the international community in ending forced labor practices
wherever such practices occur through all means available to the United
States government.''
American consumers should not have to wear clothing, or eat food,
or use devices made by forced labor, wherever it occurs. American
companies should not profit off forced labor.
In brief, Mr. Chairman, I believe the vigorous, successful
implementation of the UFLPA can establish not just a model, but a
roadmap, for how to address forced labor everywhere.
Submissions for the Record
------
Submission of Robby Stephany Saunders and Charles Benoit,
Coalition for a Prosperous America
Implementation of the Uyghur Forced Labor Prevention Act and the
Impact on Global Supply Chains
introduction
The Coalition for a Prosperous America (CPA) thanks the Commission
for holding this hearing on the Uyghur Forced Labor Prevention Act
(UFLPA) and its impact on global supply chains. We believe it is
important oversight to examine the law's impact and continue exploring
how to eliminate forced labor in multinational supply chains. CPA is a
nonprofit, bipartisan organization representing the interests of
domestic producers in manufacturing and agriculture across the country
of 4.1 million households engaged in domestic production through our
agricultural, manufacturing and labor members.
Our written testimony will focus on two key areas: trade and
investment. Regarding trade, we elaborate on the law enforcement gaps
and the need to close the de minimis loophole in U.S. customs policy.
For investment, we outline the importance of stopping the financing
behind the companies that make the products. Products do not make
themselves; companies make the products. These products are made by
forced labor because of the companies involved that benefit from the
government regime in the People's Republic of China (PRC) and the
ability of these Chinese Communist Party (CCP) linked companies to
raise hundreds of billions of dollars for their companies. It is
morally wrong and illegal for these companies to benefit from forced
labor and it is also morally wrong for financiers to back these
companies. It is also then nearly impossible to compete in the global
marketplace with companies that profit off of slave labor and receive
minimal to no actual punishment for their actions--while continuing to
receive international financial backing from the world's most lucrative
capital markets--those of the United States and the Western world.
trade
China will not allow the policing of its supply chains, rendering a
law enforcement approach futile. The Chinese Communist Party (CCP) has
made it abundantly clear, through both legal and extra-legal means,
that they will not tolerate investigations into forced labor in China.
Therefore, the legal requirements of Section 307 of the Tariff Act of
1930, not to mention our moral duty to fight forced labor, will be
nullified by attempting to narrowly target particular consignments of
merchandise from specific entities.
This is not conjecture. The U.S. Department of State, in a
statement to the Wall Street Journal, reported that ``We are deeply
concerned by reports that supply chain auditors have been detained,
threatened, harassed, and subjected to constant surveillance while
conducting their vital work in China''. China \1\ has called
allegations of forced labor in state-run labor programs involving
Uyghurs ``the lie of the century.'' \2\
---------------------------------------------------------------------------
\1\ Lingling Wei, Eva Xiao, and Trefor Moss, ``China Closes U.S.
Auditor as Tensions Mount Over Forced Labor Allegations,'' Wall St.
Journal Aug. 19, 2021, available at https://www.wsj.com/articles/china-
closes-u-s-auditor-as-tensions-mount-over-forced-labor-allegations-
11629390253
\2\ Id.
---------------------------------------------------------------------------
If a class of merchandise originating in China is made in part with
forced labor, then Withhold Release Orders should apply against the
entire relevant class(es) of merchandise originating in China. This is
already authorized by law, and done for smaller countries.
Fortunately, existing law and practice offers an easy remedy to the
CCP's adversarial stance on policing supply chains. Per existing
regulations in 19 C.F.R.
12.42-12.45, when U.S. Customs & Border Protection (CBP) is presented
with information that indicates that merchandise was produced using
forced labor, CBP is permitted to issue a Withhold Release Order
against all shipments of that class of merchandise for the offending
country of origin.
CBP has already done this in other countries. On May 18, 2018,
following a petition filed by members of the U.S. Cotton Campaign,
Alternative Turkmenistan News, and International Labor Rights Forum,
CBP issued a Withhold Release Order against ``All Turkmenistan cotton
or products produced in whole or in part with Turkmenistan cotton.''
The order \3\ does not contemplate any futile attempt to parse
particular shipments of Turkmenistan cotton depending on supply chain
records. It is enough to know that the Turkmenistan government is
tolerating forced labor in cotton, and until that situation is
resolved, no shipments of Turkmenistan cotton may be entered into the
United States.
---------------------------------------------------------------------------
\3\ https://www.cbp.gov/trade/forced-labor/withhold-release-orders-
and-findings
---------------------------------------------------------------------------
Given that ongoing forced labor abuses assuredly involve complicit
support from the territory's sovereign, making Withhold Release Orders
country-wide is the appropriate response. It is also the only
functional response given the data elements CBP has to work with. Every
shipment must indicate a country of origin of the merchandise, as well
as a classification under the Harmonized Tariff System for a formal
shipment. This makes prohibiting the importation of goods made in part
with forced labor relatively straightforward, when the Withhold Release
Order is tied to a class of merchandise and a country of origin.
If there were situations where particular foreign producers of a
product were affected unfairly as they did not rely on forced labor,
then existing practice already authorizes the appropriate approach. On
November 1, 2019, CBP issued a Withhold Release Order against tobacco
produced in Malawi and products containing tobacco produced in Malawi.
This is the best way to start. Since then, three business entities have
had themselves removed from the order, presumably demonstrating to the
CBP Commissioner's satisfaction that their particular shipments did not
constitute forced labor. This is precisely the type of rebuttal
presumption required by Section 3 of the Uyghur Forced Labor Prevention
Act.
Finally, if issuing Withhold Release Orders tied to a class of
merchandise and a country of origin is deemed ``too much'' given the
size of China's economy, then we should be honest about that fact.
De Minimis
Currently, there is no attempt to enforce forced labor Withhold
Release Orders against merchandise entering through Section 321 of the
Tariff Act of 1930, known as `de minimis shipments'. Even the most
basic data, like merchandise country of origin, is typically lacking
for de minimis shipments. De minimis imports are done by `consignees',
typically mail carriers or express couriers, who cannot speak to the
package beyond what is written on the manifest. The manifest
description in turn may be as simple as one or two words. CBP is clear
when pressed by legislators: there is no policing of de minimis or
application of UFLPA to the de minimis channel, which accounts for over
two million shipments per day. Failing to repeal de minims signals an
unwillingness to tackle forced labor seriously.
De minimis was codified in 1938 to ensure that the government was
not wasting time doing customs assessments on trivial imports. The law
set thresholds of $5 for merchandise accompanying travelers and bona
fide gifts, and $1 for every other situation. Each threshold is dealt
with in a separate subsection.
In 1978, the ``everything else'' subsection rose from $1 to $5. But
in 1994, Congress increased it from $5 to $200 along with the other
sections. All of the Congressional record at that time indicated
Congress only understood the law as increasing the returning traveler
exemption.
Worse yet, via regulation, Treasury unilaterally broke with
hundreds of years of customs law, saying that any mail carrier or
express courier (``consignee'') could make entry of merchandise
entering via Section 321. This was a profound repudiation of the
expectation in customs law that the importer be able to answer
questions about the merchandise to a customs officer. This meant
individuals and entities making imports had title to their merchandise,
and were either present before a customs officer or engaged a customs
broker.
Repealing this requirement for de minimis shipments gave every
retailer in the world direct access to American homes. We receive
millions of these shipments daily, and have little information for the
majority of them.
All a foreign vendor has to do to claim de minimis treatment is
assert that the value of the shipment, in their country, is worth less
than $800. Foreign vendors are able to hand-write these declarations
completely outside our jurisdiction, and 99.9% of them will necessarily
be accepted at face value, as our customs authorities have no capacity
to inspect thousands of mailbox-sized shipments per shipping container.
Toys can't be tested for lead. Apparel can't be checked for forced
labor cotton. All of our product safety rules go out the window if the
foreign vendor merely asserts de minimis.
Sure enough, 62.5% of de minimis shipments originate from China and
Hong Kong. The second largest shipment origination country is Canada.
It is safe to assume that the majority of these shipments are not
``Made-in-Canada'' merchandise. Instead, they certainly consist of
mostly Made-in-China merchandise, sitting in bonded warehouses in
Canada along the U.S. border, waiting to be delivered within 48 hours
of a customer making a purchase online. This is civilizational suicide,
and it must end.
While de minimis is growing rapidly, it likely still accounts for
less than 3% of merchandise imports, and thus there is still time to
repeal it without systemic effects. Other nations have rejected
following us down this folly.
investment
Americans are complicit in the financing of the forced labor
atrocities this hearing is constructed to address and that the UFLPA is
supposed to mitigate. But U.S. law and the UFLPA Entity List fails to
punish corporate human rights abusers and those companies that take
advantage of forced labor schemes. While products are seized, companies
go on without being aggressively punished and without losing access to
troves of capital available in the U.S. We believe that this should be
addressed to maximize the true effectiveness of the UFLPA. In 2020,
U.S. holdings of Chinese securities neared $1.2 trillion. This is about
five times the holdings than that of any other country. The exposure of
U.S. investments in Chinese securities has never been greater, and it
will continue to grow. Due to the gaps in U.S. securities laws and
those laws intended for due diligence, investor protection, or risk
mitigation, there is no mechanism to prohibit investment in the
companies that are profiting off of forced labor and complicit in other
human rights violations or posing a risk to American national security.
Below are some of the key areas of risk and the actions Congress
can take to minimize the outflowing capital going to support the forced
labor regime and the CCP.
A-Shares and Passive Investments
Congress, the media, and independent regulators like the Securities
and Exchange Commission (SEC) have recently focused on the risks posed
to U.S. investors from Chinese companies directly listed on U.S. stock
exchanges. While CPA welcomes this focus and encourages further action,
it does not address the bulk of ``bad actor'' Chinese companies that
are still present in American passive investment products.
Their presence is in the form of over 4,200 A-share and H-share
companies found throughout a multitude of financial vehicles, such as
Exchange Traded Funds (ETFs) and index mutual funds, that have received
little or no regulatory scrutiny or fiduciary due diligence. Tens of
millions of Americans are unwittingly exposed to these A-shares in
their investment portfolios and retirement investment accounts.
U.S. investors are inadvertently subsidizing Chinese companies
involved in activities that are contrary to the national security,
economic security, and foreign policy interests of the United States.
We are also subsidizing the economic growth of the United States' top
global adversary. A-shares are securities listed on mainland Chinese
exchanges and only accessible to American and foreign investors via
inclusion in indexes and associated index funds. Similarly, H-shares
are Hong-Kong listed shares. These companies are oftentimes non-
compliant with U.S. securities laws and financial reporting norms and,
in some cases, have been sanctioned by the U.S. Government for
egregious human rights and national security abuses. Index providers
neglect to consider the full range of China-specific material risks to
investors when determining index constituents and weighting. These
include considerations of reputational risks relating to national
security, export controls and sanctions regimes, human rights
violations, political factors, or even full consideration of
traditional environmental, social, and governance (ESG) factors.
As of June 2022, a look at five of the larger index mutual funds
offered by industry leaders--Fidelity Emerging Markets Index Fund
(FPADX), State Street Emerging Markets Equity Index Fund (SSKEX),
BlackRock iShares MSCI Total International Index Fund (BDOKX), Vanguard
Emerging Markets Stock Index Fund (VEMAX), DFA Emerging Markets Core
Equity I (DFCEX), which just so happen to be included in the new Mutual
Fund Window available to TSP beneficiaries--includes at least 14
underlying companies directly linked to China's military-industrial
complex and listed on either the Department of Defense's Section 1260H
list or the Treasury Department's NS-CMIC List or both, in just these
five funds. This is in addition to several companies on BIS's Entity
List and others with documented links to the oppressive Chinese
surveillance state and connected to Uyghur forced labor.
Harmonizing Government Sanctions--How to Guide Investors Away from Bad
Actor Chinese Companies Including Forced Labor Human Rights
Violators
Capital markets sanctions are a relatively under-utilized yet
highly effective tool to be brought to bear to force divestment from
certain key sectors and bad actor companies in the best interests of
investors, human rights, market transparency and accountability, and
national security. These sanctions work when properly implemented and
are an under-utilized tool of the U.S. Government that this Committee
must work to establish and enforce legislatively. Especially for those
interested in not going to an actual kinetic/physical war with China,
cutting off China's resources--our capital flowing to them--now and
decreasing our dependence on their exports decreases China's resources
and wealth to then be able to ratchet up its pressure on Taiwan and to
play in other key geopolitical sandboxes around the world.
Polling conducted by CPA shows an overwhelming majority of
Americans are concerned with investment in risky Chinese companies and
support stricter investment requirements. A poll conducted by Morning
Consult shows 62 percent of voters are concerned Americans can invest
in Chinese and Russian companies that have been sanctioned by the U.S.
government or have not complied with U.S. laws.
To accomplish this mission of decreasing and divesting U.S. capital
from China, a series of executive orders have been promulgated by both
Republican and Democratic presidents to try to selectively enforce
capital investment bans on critical Chinese companies in critical
industries and linked to the CCP military and military-civil fusion
operations.
CPA would like to see this concept of capital markets sanctions be
expanded to include more human rights violations, including those
complicit in or profiting off of forced labor.
When expanding to cover forced labor companies, any new policy must
also include the concept of sanctions harmonization. Better than a mere
notion of sanctions reciprocity, sanctions harmonization links up
current lists run by various U.S. Government departments and agencies
in an interlocking process such that being sanctioned or listed by one
enables the other to undertake consideration for legal sanctions action
as well, and ultimately will ideally lead to increased listings by OFAC
and more rigorous review. The current U.S. Government arrangement sees
little transparency on why some Chinese companies are chosen to be on
one list but not another. Across the U.S. Government, there are dozens
of reports, lists, advisories, or sanctions tranches issued on a
recurring basis. Some of these include: the U.S. Commerce Department's
Bureau of Industry and Security (BIS) Entity List; the Military End
User List, the Unverified List, the Department of Defense's 1260H or
CMC List (formerly 1237 CCMC List), the new Uyghur Forced Labor
Prevention Act Entity List maintained by the Department of Homeland
Security, the OFAC NS-CMIC List, and more.
The financial industry will not lead. Congress--supported by the
human rights community--must do so. To ensure against further American
investment flowing to Chinese companies that pose investor protection,
national security, and human rights concerns, Congress should take the
following actions:
Pass legislation that requires index providers and asset
managers to address the risks posed by A-share and H-share companies in
investment products that have zero investor protection, due diligence,
or disclosures.
Pass a ``Uyghur Forced Labor Divestment Act'' to prohibit
investment in companies complicit in forced labor activities and punish
those intentionally supporting such heinous endeavors.
Expand the Holding Foreign Companies Accountable Act
(HFCAA) to cover Chinese companies traded in the United States via
passive investment products, despite not being directly listed on U.S.
exchanges, to ensure that ETF products traded on U.S. exchanges are
PCAOB compliant, consistent with the investor protection imperatives of
the Act.
Compel the SEC to require further disclosures and issue
new rules for index providers as it pertains to oversight of quality
control and minimizing conflicts of interest.
Compel the SEC and other U.S. Government agencies to
provide and require more information to be made known to investors and
fiduciaries in regard to the geographic location of companies, their
industries or sectors, their linkages to foreign governments or foreign
actors, the presence of companies on U.S. sanctions lists, or other
national security, human rights, or governmental and political risk
factors.
Require index providers to reevaluate their index
inclusion criteria, which currently expose U.S. investors to material
and reputational China-specific risks and further require them to
justify continued inclusion of any such risky China-specific
investments.
Harmonize U.S. sanctions policy against Chinese companies
in order to close current gaps that exist between different sanctions
lists. This will clarify for and assist index managers and investors in
compliance and due diligence.
Establish a new capital markets list from the State
Department with sanctions coordination with the Treasury to include
Chinese corporate human rights abusers.
Consider a national policy to prohibit investors from
investing--either here or abroad--in companies which have Chinese
Communist Party (CCP) cells in their management.
appendices:
appendix a: op-ed
[Reprinted from The Hill, March 16, 2023]
How Congress Can Compel Global Divestment from China's Forced Labor \4\
---------------------------------------------------------------------------
\4\ Website URL: https://thehill.com/opinion/international/3903787-
how-congress-can-compel-global-divestment-from-chinas-forced-labor/
---------------------------------------------------------------------------
By Robby Stephany Saunders, Opinion contributor
When Beijing hosted the 2022 Winter Olympics, the world's attention
finally focused on China's alarming human rights abuses. Since 2017,
more than 1 million Uyghurs and other ethnic minorities have
disappeared into a vast network of re-education camps in the far west
region of Xinjiang, China. It's part of what the U.S. State Department
has labeled ``genocide.'' Beijing remains undeterred by U.S. criticism,
however, and continues to press many thousands of Uyghurs and other
ethnic groups into slave labor.
In December 2021, President Biden signed the Uyghur Forced Labor
Prevention Act (UFLPA) to strengthen laws banning forced-labor products
from entering the United States. Since then, the U.S. has enjoyed
moderate success in seizing banned goods. And Congress has increased
appropriations to help U.S Customs and Border Protection (CBP) fully
implement the law.
This was a helpful start. But plenty of goods manufactured through
China's slave labor are still entering the United States. In part,
that's due to an obscure section of U.S. customs law--the ``de
minimis'' threshold for consumer imports--that allows contraband Uyghur
products to be shipped directly to U.S. buyers.
The current U.S. de minimis threshold is $800. That means any
product valued at less than $800 can simply enter the U.S. without
tariffs or scrutiny. This loophole has greatly benefited e-commerce
vendors such as Amazon, Ali Express and Shein, since it allows goods
produced through Uyghur labor to completely bypass border inspections.
Equally concerning is the CBP's lack of transparency for bills of
lading. Companies can request ``manifest confidentiality'' from the CBP
in order to hide their import data from public view. That leaves
competitors and public interest groups unable to adequately monitor
imports.
A further challenge is that the UFLPA is applied only to ``formal
entry'' shipments valued at $2,500 or more. As a result, imports of
lesser value can also avoid federal oversight.
For the UFLPA to be effective, Congress must plug these holes. But
there's still an overarching question: Why are so many popular global
brands continuing to invest in China, particularly in Xinjiang, and
prop up Beijing's slave labor?
The Australian Strategic Policy Institute (ASPI) believes Uyghur
labor is now tied to at least 82 well-known global brands, including
Apple, BMW, Gap, Huawei, Nike, Samsung, Sony and Volkswagen. If U.S.
lawmakers want to thoroughly tackle China's slave labor, they need to
formally identify these corporate bad actors and link them to capital
markets sanctions.
This is strong medicine. But many of the multinational firms
complicit in China's labor abuse continue to raise funds in U.S.
capital markets. That gives Congress leverage, since lawmakers could
block them from continuing to access America's financial markets.
It's helpful that the UFLPA created an ``entities list'' of
companies sourcing goods through Uyghur forced labor. But this list
must be expanded to accurately track the companies still profiting from
supply chains with murky roots in Xinjiang.
What matters is hitting these companies in the wallet.
Unfortunately, consumer boycotts are hard to organize on a global
scale. And customer awareness is also limited because the U.S. doesn't
require country-of-origin labeling for goods sold online.
The answer is to identify the stocks, exchange-traded funds (ETFs)
and mutual funds that include businesses tied to China's forced labor.
This is where Congress holds real leverage since robust legislation
could mean pulling these equities and investment products from
America's financial markets. Companies tied to forced labor (as well as
the thousands of index funds containing Chinese companies that benefit
from forced labor) should have been targets of the UFLPA. To really
compel action, they should now face the threat of being excised from
America's capital markets. Such ``forced labor divestment'' is a
necessary, realistic step to compel multinationals to decide whether to
keep sourcing from China's slave labor (and pay the price) or clean
house.
U.S. investors don't want to support China's repression of Uyghurs
in Xinjiang. It's time for Congress to force the issue by conditioning
access to America's financial markets on ending corporate complicity in
China's egregious human rights abuses.
appendix b: addendum.
new data from cpa on publicly traded, chinese-linked companies present
in household investment products linked to forced labor
Methodology: The list of 5,266 publicly traded companies initially
examined companies with publicly reported links or usage of forced
labor in China found using open-source research. The companies
ultimately selected for the list have reported links and are publicly
traded, including mainland-listed stocks issued abroad. All companies
listed are linked to oppression of ethnic minorities within Chinese
territories. We determined that a number of these Chinese corporate
forced labor offenders are included in popular American indices and
investment products benchmarked against these indices.
Disclaimer: This document reflects the CPA's own conclusions based
on inferences drawn from an analysis of public and proprietary sources
and is designed for general information to contribute to public
discourse on issues of national concern. CPA disclaims, to the fullest
extent permitted by applicable law, any and all liability for the
accuracy and completeness of the information in this document and for
any acts or omissions made based on such information. CPA is not
engaged in rendering any form of professional or other advice or
services through the publication of this report. No person or entity
should rely on the contents of this publication without first obtaining
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Witness Biographies
Anasuya Syam, Human Rights and Trade Policy Director, Human
Trafficking Legal Center
Anasuya Syam is the Human Rights and Trade Policy Director at the
Human Trafficking Legal Center. She leads the Human Trafficking Legal
Center's initiative on the U.S. Tariff Act and forced labor, with a
focus on conducting investigations and submitting petitions under the
Tariff Act. Syam works with pro bono counsel, civil society groups,
government, and other stakeholders to push for greater accountability
through enforcement of the Tariff Act import prohibition. She is the
co-
author of the practice guide ``Importing Freedom: Using the U.S. Tariff
Act to Combat Forced Labor in Supply Chains,'' which provides advocates
with the nuts and bolts of using the Tariff Act to prevent goods made
using forced labor from entering the United States. The guide has been
translated into four languages. Syam has also published multiple op-eds
and articles on the Tariff Act and forced labor. She chairs an advisory
group of NGOs working to enhance the impact of import bans in
addressing forced labor. Previously, Syam worked as a legal fellow at
the World Bank with a focus on anti-corruption and corporate
governance. She also worked as a corporate counsel in India. Syam
received her bachelor's degree in law, with honors, from the National
University of Advanced Legal Studies in India, and graduated with a
master's degree in international law from NYU School of Law.
Laura T. Murphy, Professor of Human Rights and Contemporary
Slavery, Helena Kennedy Centre for International Justice, Sheffield
Hallam
University
Laura T. Murphy is a Professor of Human Rights and Contemporary
Slavery at the Helena Kennedy Centre at Sheffield Hallam University.
She has authored numerous books and academic articles on the subject of
forced labor and human trafficking globally. Her current work focuses
on forced labor in the Uyghur region of China, including in the
automotive, solar, apparel, and building materials industries. She has
provided expert testimony and evidence on the crisis in the Uyghur
region to the U.S., U.K., E.U., and Australian governments, and has
provided private briefings to government agencies, advocacy groups, law
firms, and others interested in the issue globally. She has consulted
for the World Health Organization, the U.S. Department of Health and
Human Services, the U.S. Office of Victims of Crime, and the National
Human Trafficking Training and Technical Assistance Center.
Kit Conklin, Nonresident Senior Fellow, GeoTech Center at the
Atlantic Council
Kit Conklin is a nonresident senior fellow at the Atlantic
Council's GeoTech Center and a global executive who specializes in
issues at the intersection of technology, commerce, and international
security. He regularly speaks on China issues, data analytics,
international finance, and emerging technologies. In addition to his
work with the Atlantic Council, Conklin is a vice president at the
research and data analytics firm Kharon. Conklin previously served in
various national security positions with the U.S. Government. He also
supported data innovation programs at Lawrence Livermore and Pacific
Northwest National Laboratories. Conklin holds an M.S. in emerging and
disruptive technologies from the National Intelligence University and
an M.A. from the Middlebury Institute of International Studies.
Elfidar Iltebir, President, Uyghur American Association
Elfidar Iltebir was born in Urumchi, East Turkestan and grew up in
Istanbul, Turkiye until her family immigrated to the U.S. in 2000. As
the daughter of a prominent Uyghur writer and intellectual, Iltebir is
an active member of the Uyghur American community and an outspoken
human rights activist. From 2019 to 2022, she served as the secretary
general of the Uyghur American Association (UAA). The community
rewarded her excellent performance in raising awareness of China's
genocide against the Uyghurs by electing her president of the UAA in
May 2022, a role in which she currently serves. She has a B.A. in
Marketing from George Mason University and 20 years of experience in
marketing and project management. She is fluent in English, Uyghur, and
Turkish.