US Chip Supply Chain at ‘Low Risk’ of Sourcing From Forced Labor: SIA

Though the Uyghur Forced Labor Prevention Act (UFLPA) designates polysilicon as a “high-priority enforcement sector,” the polysilicon produced in Xinjiang, and elsewhere in China, “currently does not meet the extremely high levels of purity required for semiconductor-grade polysilicon,” commented the Semiconductor Industry Association in docket DHS-2022-0001. The comments posted there Friday were in response to a Department of Homeland Security notice in January on how best to comply with UFLPA measures for preventing goods produced with forced labor in China from being imported into the U.S. (see 2203110054).

President Joe Biden signed the UFLPA Dec. 23, using his Tariff Act Section 307 authority to ban imports originating in Xinjiang unless the importer of record shows Customs and Border Protection “clear and convincing evidence” that the goods weren't produced with forced labor. CBP, under the direction of the Forced Labor Enforcement Task Force (FLETF), is to begin enforcing the statute’s “rebuttable presumption” measures June 21.

As far as SIA is aware, polysilicon produced in Xinjiang or elsewhere in China “currently is not used by the semiconductor industry,” said the association. Global production of “semiconductor-grade” polysilicon, it said, is concentrated among five major manufacturers operating in eight countries -- Australia, Brazil, France, Germany, Malaysia, Norway, South Korea and the U.S. “We are confident the U.S. semiconductor supply chain is at low risk of sourcing silicon from China, including Xinjiang.”

SIA urges the FLETF to work with the semiconductor industry to “promulgate clear and actionable guidance that takes into consideration the low risk that semiconductor supply chains involve forced labor in violation of the UFLPA, said the association. It also wants the FLETF to help chipmakers and their suppliers develop agreed-upon “protocols and documentation,” enabling the industry to demonstrate to CBP at U.S. ports of entry that its supply chains “remain free of forced labor,” it said.

Effective UFLPA compliance should “minimize the risk of unnecessary disruptions that could impact key U.S. manufacturing sectors,” said SIA. Disruptions would harm the hundreds of thousands of U.S. jobs “that depend on timely access to semiconductor inputs, particularly in a time of widespread global shortages and supply chain disruptions,” it said.

If any developed protocols recommend or require that companies receive third-party certifications attesting that their supply chains are free of forced labor, SIA encourages the FLETF “to identify a limited pool of certifying entities that would be accepted by the U.S. government,” said the association. “This would help ensure greater consistency and oversight.” The semiconductor industry “already aligns its due diligence standards” and guidelines with those of international bodies like the Organisation for Economic Co-operation and Development, it said. “SIA therefore encourages CBP to recognize this alignment of standards as sufficient as opposed to creating a separate certification process, which can lack consistency and oversight.”

The UFLPA’s rebuttable presumption applies only to goods, wares, articles and merchandise that are mined, produced or manufactured wholly or in part in Xinjiang, said SIA. The FLETF should therefore differentiate between two classes of evidence, it said: (1) That required to overcome the rebuttable presumption by demonstrating the absence of forced labor in a good’s supply chain; and (2) Evidence required to show that the goods were not manufactured wholly or in part in Xinjiang, “such that the rebuttable presumption does not apply in the first place.”

Clearly identifying and distinguishing between the two types of evidence “will promote greater administrability of UFLPA,” said SIA. “Importers will more readily understand what is expected and how due diligence measures can be further improved to address forced labor. As a result, importers will be more prepared to provide the necessary documentation to CBP such that CBP can focus more of its efforts on reviewing the evidence as opposed to coordinating with importers about what is needed.”