BMW Imported Cars Containing Uyghur Forced Labor After Tier 1 Supplier Notified It

The automotive industry's inadequate due diligence controls for Uyghur forced labor make it complicit in the abuse, the Senate Finance Committee charged in a report that criticizes three customers of a firm on the Uyghur Forced Labor Prevention Act entity list -- Volkswagen, BMW and Jaguar Land Rover.

"The failure of two major automakers to discover that a company identified as using forced labor by multiple NGO reports and that had been added to the UFLPA Entity List was one of their tier 3 suppliers, even after being informed of this fact in writing by a tier 1 supplier, demonstrates that existing due diligence regimes are not sufficient to detect exposure to forced labor in automotive supply chains," the report said.

Investigators from the committee first started questioning automotive executives in December 2022, and received non-specific assurances that the companies conduct due diligence to make sure their supply chains are free of forced labor. A second round of questions to tier 1 suppliers also did not reveal much.

But after VW self-reported to CBP that it had LAN transformers in cars that were heading to the U.S., and that was reported by the Financial Times, the investigation had new momentum. Committee staff asked BMW and Jaguar in April if they sourced the same part from Sichuan Jingweida Technology Group (JWD), the company that was added to the list in January.

"In April 2024, after the Committee explicitly asked both companies whether they ever 'directly or indirectly sourced parts from JWD,' Jaguar Land Rover claimed to be unaware of its links to the manufacturer listed on the UFLPA Entity List, and BMW informed the Committee that JWD was not on their 'supplier list,'" the report said.

But Lear Corporation, the tier 1 supplier for all three firms, had told the companies that they sourced from JWD via their supplier, Bourns, and that JWD was on the Entity List. JWD is a contractor to Bourns, which cooperated fully with the committee, detailing its relationship with JWD going back to 2012, and providing evidence that Lear knew of the relationship.

A Lear spokesperson emailed a statement after the report was released: "When our supplier informed us in January 2024 that JWD had been added to this list, we promptly notified our customers of products containing these components and worked with our supplier to expeditiously re-source the manufacture of these components to another sub-supplier."

Lear added: "We take these matters seriously and share the Committee’s desire to combat forced labor."

The report said that BMW eventually acknowledged that it received that Jan. 11 letter from Lear, and acknowledged that it imported 8,000 MINIs containing that part, along with spare parts from JWD, after JWD was put on the entity list Dec. 11. It told the committee that it "began the process of stopping imports of affected products on April 5, 2024." It also said it had disclosed to CBP that it imported the cars and parts that were banned from entry.

The report said BMW appeared to have decided to stop importing the part only after the committee staff "repeatedly asked detailed questions to Lear and Lear’s OEM customers, including BMW, about their relationship with JWD."

The report said the committee will continue to investigate why BMW continued importing the cars with the JWD parts after the January notification, and whether any other BMW vehicles with the part were imported after the entity list addition.

Jaguar Land Rover also told the committee this month that it received notice in January that JWD was a tier 3 supplier, but that information didn't make its way from the parent company to the importer of record, Jaguar Land Rover North America. That company imported spare parts, not cars containing the part.

"Once our compliance team were informed that a Tier Three subcomponent manufacturer was on the UFLPA Entity List, JLR immediately stopped all shipments of the two affected aftermarket service parts and all existing inventory containing the affected subcomponent globally were quarantined for destruction," a spokesperson emailed May 20.

Senate Finance Committee Chairman Ron Wyden, D-Ore., said in a news release announcing the report: "Automakers are sticking their heads in the sand and then swearing they can’t find any forced labor in their supply chains. Somehow, the Finance Committee’s oversight staff uncovered what multi-billion-dollar companies apparently could not: that BMW imported cars, Jaguar Land Rover imported parts, and VW AG manufactured cars that all included components made by a supplier banned for using Uyghur forced labor. Automakers’ self-policing is clearly not doing the job. I’m calling on Customs and Border Protection to take a number of specific steps to supercharge enforcement and crack down on companies that fuel the shameful use of forced labor in China."

VW AG did uncover its link to JWD -- something that Eric Choy, who leads forced labor enforcement at CBP, said was a great example of good due diligence (see 2404010059).

"Volkswagen takes allegations of human rights violations very seriously and is committed to preventing the use of forced labor in our supply chain. With regard to the supply chain issue referenced in the Committee Report, we acted as quickly and responsibly as possible to replace the part and comply with the UFLPA," the company said in an emailed statement.

Still, the investigators were critical of all three companies' ignorance that a company mentioned by Sheffield Hallam and in a 2020 report was in the third tier of their supply chains. "Questionnaires, self-reporting and audits of direct suppliers are insufficient to proactively identify forced labor exposure in supply chains, particularly in China," the report said. They attached internal business documents from Bourns showing it had told Lear many times over the years that JWD was the source of the part.

They noted that Bourns had done repeated in-person audits at JWD and never detected the presence of transferred Uyghur workers. Sayari, a company that provides due diligence research to companies, had also done a check to see if any of Lear's suppliers were connected to labor transfers.

"As fewer Chinese companies publicly announce participation in the CCP’s 'poverty alleviation' and 'pairing assistance' programs, government and private sector lists of entities that rely on forced labor are increasingly underinclusive," the report said.

Sayari did not respond to a request for comment.

The committee also asked CBP to be more forthcoming about what it is detaining, and what its policies are when companies self-disclose. It also asked that CBP reveal how it will report those cases. The committee said that the only public information is that 65 shipments in either the automotive or aerospace sectors have been detained, and 53 of those were denied entry.

That is up from 48 in September 2023 (see 2309210025).

"Without significantly more detail about the types, scope, and results of enforcement actions, it is difficult for both the automotive trade and policy makers to understand the impact and effectiveness of UFLPA," the report said.