The Biden Administration has taken three actions targeting solar product manufacturers in China's Xinjiang Uyghur Autonomous Region, marking the latest in a series of steps aimed at removing goods that are allegedly made using forced labor from global supply chains. First, on June 23, 2021, the US Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) on silica-based products manufactured by Hoshine Silicon Industry Co. Ltd. (Hoshine), a company located in Xinjiang, and its subsidiaries. Then, on June 24, 2021, the US Department of Commerce, Bureau of Industry and Security (BIS) added five entities, including Hoshine, to the Entity List, and the US Department of Labor announced that it had added polysilicon from China to its "List of Goods Produced by Child Labor or Forced Labor."
CBP Issues WRO on silica-based products
The WRO was issued under 19 U.S.C. § 1307, which prohibits the importation of merchandise that is produced, wholly or in part, by convict labor, forced labor and/or indentured labor under penal sanctions, including forced or indentured child labor. The WRO "instructs personnel at all US ports of entry to immediately begin to detain shipments containing silica-based products made by Hoshine and its subsidiaries." Silica is a raw material that is predominantly used to make components for solar panels, as well as electronics and other goods. The WRO applies to both silica-based products made by Hoshine and its subsidiaries and also to materials and goods (such as polysilicon) that are derived from or produced using those silica-based products.
This action is the most recent in a string of WROs issued by CBP targeting various industries in Xinjiang. Between September 2019 and November 2020, CBP issued a series of 10 WROs on certain goods produced by specific companies in Xinjiang, including garments, hair products and computer parts. Then, in January 2021, only days before the change in administrations, CBP issued a comprehensive, far-reaching WRO on all cotton and tomato products originating from the region, which included downstream products such as apparel, textiles and tomato sauce. Altogether, three of the six WROs issued by CBP in its 2021 fiscal year so far, as well as eight of the 13 issued in its 2020 fiscal year, have been on goods allegedly made by forced labor in China.
These orders prevent such merchandise from entering the United States when information "reasonably but not conclusively" indicates that the goods were produced using forced labor. Importers that wish to import these goods must provide a certificate of origin and a supply chain audit report, which can be quite burdensome.
BIS Adds Five Chinese Entities to Entity List
Additionally, BIS has added the following Chinese entities to its Entity List:
- Hoshine Silicon Industry (Shanshan) Co., Ltd.
- Xinjiang Daqo New Energy Co., Ltd.
- Xinjiang East Hope Nonferrous Metals Co., Ltd.
- Xinjiang GCL New Energy Material Technology Co., Ltd.
- Xinjiang Production and Construction Corps (XPCC).
These entities have now joined over 300 Chinese entities on the Entity List, as we have detailed in our legal update, "New US law targets Chinese companies listed on US stock exchanges; US also adds dozens of Chinese entities to the Entity List" and in other updates. According to the Commerce Department, 53 of these entities have been "implicated in human rights abuses of ethnic minorities from Xinjiang" and 15 have been implicated in abuses related to forced labor, specifically.
The Entity List comprises individuals, organizations and companies that are reasonably believed to be involved, or that pose a significant risk of becoming involved, in "activities contrary to US national security and/or foreign policy interests." While this action does not constitute an outright ban on all dealings with these entities, it prohibits, absent a license, the export, reexport, or transfer (in-country) of any items subject to the Export Administration Regulations (EAR) (e.g., US-origin items, items incorporating more than a de minimis amount of controlled US content, or items that are the direct products of US-origin software or technology) to these entities. These requirements are supplemental to those found elsewhere in the EAR. The prohibition applies only to entities specifically named on the list, but BIS also urges caution in dealing with entities affiliated with those entities identified on the list as there is a risk that items subject to the EAR can be diverted to those entities. Therefore, companies need to ensure that they have appropriate procedures in place, including, at a minimum, conducting screening and due diligence, to minimize the risk of unauthorized exports, re-exports or transfer (in-country) to these listed Chinese entities.
Department of Labor Adds Polysilicon to List of Products with Links to Forced Labor
Finally, the Labor Department updated its "List of Goods Produced by Child Labor or Forced Labor" to include polysilicon produced with forced labor in China. The Labor Department's Bureau of International Labor Affairs publishes a new list every two years, and this most recent action was particularly significant, because it is the first time that a good has been added to the list outside of that cycle. The most recent edition of the list, which was updated in September 2020, contained other products from China that have links to forced labor in Xinjiang or by Uyghur workers transferred to other parts of China, including cotton, garments, footwear, electronics, gloves, hair products, textiles, thread/yarn and tomato products. The US Department of Labor list is here.
We will continue to monitor these developments and provide updates as warranted.