Attorney: UFLPA Expanding in Scope, More Aggressive Enforcement Expected

Perkins Coie partner Michael House told an audience of automotive supply chain professionals that this fiscal year has seen not only a sharp increase in the number of detentions, "but even more important, in our view, is the scope of products being detained has diversified, and there's been a steady increase in detentions of merchandise that were outside those original so-called priority sectors."

House was speaking last week on a webinar hosted by the Automotive Industry Action Group.

House said that the administration has said explicitly that non-governmental organizations' reports on Uyghur forced labor are given weight, and he noted that lead acid and lithium-ion batteries, copper downstream products, tires and other automobile components were identified in a report on Xinjiang and the auto industry. He said "auto-adjacent" sectors such as metals and electronics are being detained by CBP.

In the last round of companies added to the UFLPA Entity List, House said, China's largest producer of lead acid batteries was added. "It's very telling, the priority that the task force is giving to expanding the scope beyond the initial priority products," he said.

House said the overwhelming bipartisan support that the UFLPA passed with wasn't the end of the story. He noted that Congress has appropriated millions of dollars to implement UFLPA, which he said shows how serious they really are. "We saw the Biden administration very quickly asking for significant amount of budget dollars and budget personnel, dedicated personnel, for enforcement, really dwarfing what we see in a lot of other enforcement areas," he said.

He noted that the authors of UFLPA, Sen. Marco Rubio, R-Fla., and Rep. Jim McGovern, D-Mass., expressed their disappointment that so many goods that were detained under suspicion of links to Uyghur forced labor were released after importers satisfied CBP that their goods were not connected to Xinjiang (see 2304110034).

"As far as the political climate in D.C. right now, I think it's fair to say that we have a bipartisan and growing consensus for more enforcement, more aggressive enforcement, for broader enforcement, that really has broad support," he said, part of the overall strained U.S.-China trade relationship.

House told the audience that mapping the supply chain for the product they bring in, back to the raw materials, is critical in preparing for a potential detention. "You have to in some way, in some effective way, anticipate the kind of evidence, the kinds of documents that they are going to find most persuasive," he said, and he said what is most persuasive to CBP are documents that were not created in response to the enforcement, but those that exist in the normal course of business, production records that include information about where inputs were purchased from, for instance.

Still, there are many hurdles in documenting the supply chain, he noted, such as translating documents from Chinese to English. "The frequent issue that arises is the Chinese name of the company name, or the person's name into English is not always uniform. It's not always accurate. It's not always self-evident," he said.

A CBP assistant director for enforcement at a Center of Excellence and Expertise told the audience that CBP will question if you really know your supply chain if you give them documents in Chinese (see 2403280056) and that if CBP has to translate what it's given, the review will take longer.

House told the audience that there haven't been many legal challenges to UFLPA yet, but that he thinks a recent appellate decision on the Enforce and Protect Act due process (see 2307270038) could have relevance if importers challenge the lack of information CBP discloses on why a particular shipment was detained under the presumption of Uyghur or other Chinese minority forced labor. He's not the first lawyer to make the connection (see 2307310034).

House said the appellate court said CBP has to share the evidence that CBP relied on in the evasion case "to give the importer an opportunity to argue to show that that was incorrect information, that that evidence was not true or that there's some other aspect to the evidence that led to that evidence being distorted or not material."

He also noted Ninestar Corporation's challenge to its inclusion on the Entity List last year. "The case has not yet concluded, it's in an interim phase right now, but there was a decision issued by the U.S. Court of International Trade ... preliminarily siding with the Forced Labor Enforcement Task Force." He said CIT said the task force had adequately explained why it had listed Ninestar, and that it had applied the correct burden of proof (see 2403010043).

One of the listeners questioned whether Ninestar could win its challenge at a future stage.

"You're right in that, if the same arguments finally get up to the Federal Circuit under the UFLPA, we might see some argument back and forth about whether that rebuttable presumption standard gives more leeway to CBP or allows CBP to be more aggressive or less forthcoming, let's say, in what it discloses to the importer," House responded. However, he said he thinks the focus on what evidence CBP relied on when it added Ninestar makes it analogous to the EAPA Royal Brush case.