UFLPA Detention in First Week; Supply Chain Scrutiny Goes Deeper

Solar panel exports were already facing heightened CBP scrutiny under a withhold release order affecting a major supplier of polysilicon, a material used to make ingots that are then made into cells, which are then made into panels. But the early results of the Uyghur Forced Labor Prevention Act enforcement suggest that the Biden administration is willing to strictly enforce UFLPA "despite impacts on [solar panel] supply and pricing," said Tim Brightbill, a trade lawyer at Wiley.

Brightbill said in a recent webinar that even solar panels that were cleared by CBP were affected by the WRO. "There were some solar panel manufacturers who were voluntarily quarantining their modules for a month after being cleared by Customs and Border Protection as a precaution," he said.

But Brightbill said the lessons the solar industry has learned in just over a week of UFLPA enforcement are a warning for other importers.

According to Roth Capital, there has been a UFLPA detention of solar panels from a large supplier, and CBP asked for documentation showing where the quartzite came from. While solar panel manufacturers had learned they needed to trace back to polysilicon, they were not necessarily tracing back even deeper, to metallurgical grade silicon and the quartzite rock it is made from. This supplier was thought to purchase U.S. polysilicon and to be less reliant on Chinese components than many others, he said.

"Module vendors reportedly do not have such documentation," Brightbill said. "These companies are going to have to show even more than they thought they were going to need."

He said the polysilicon-specific guidance in the UFLPA strategy "points toward the administration taking a strategy of comprehensive enforcement. Mixed sourcing from both inside and outside of the [Xinjiang] region is going to be problematic."

"This is a high priority for the Biden administration," said Nazak Nikakhtar, also with Wiley. Both sides of the aisle are really interested in it. It is not going away."

"The scope of due diligence for companies just got increased exponentially," she said during the webinar.

She said that even if companies are able to trace their supply chains to the fifth tier, and find no link to Xinjiang or source on the entity list, "those things can change in China, these things can be very fluid."

She said importers bringing goods in from countries outside China other than cotton-containing goods or polysilicon-containing goods are still at risk.

"No matter how remote, no matter how upstream, even if it’s further manufactured in a third country, the supply chain tracing dilemma still remains," she said.

So she advised that companies make revisions to their supplier and customer contracts to shield themselves from liability as much as possible.

Nikakhtar predicted that enforcement of the UFLPA will become more rigorous over time. The webinar speakers said that goods that are not listed as priorities but have either been in the news because of allegations of Uyghur forced labor or identified in a non-governmental report on Xinjiang forced labor can be expected to be in the crosshairs in the future. Those goods are electric vehicle car batteries and luxury vinyl tile.

She predicted that in addition to reacting to reports like these, Customs would decide what goods to target by analyzing how much of the global supply of any product is derived from sources in Xinjiang province. She said Wiley has the capability to run that analysis for clients.

Brightbill said importers of goods that have inputs that are targeted should have purchase orders and invoices to document that the materials were not purchased from Xinjiang sources. "After-the-fact affidavits are not the sort of documentation Customs is going to see as sufficient," he said.

He predicted that, "Over time, companies are going to have to think about making supply chains more domestic, or at least more regional, in nature."