DHS Undersecretary Warns More Sectors to Fall Under Increased UFLPA Scrutiny

Importers and the broader trade industry should expect DHS in the coming months to expand the business sectors under scrutiny for companies’ adherence to forced labor guidelines within the Uyghur Forced Labor Prevention Act, DHS Undersecretary for Policy Robert Silvers said during a June 12 webinar sponsored by Kharon, a risk analytics platform.

“We will indeed be announcing in due course new prioritized sectors” beyond the three initial high-priority sectors of cotton, tomatoes and polysilicon, said Silvers, who also chairs the Forced Labor Enforcement Task Force (FLETF).

DHS has been coordinating enforcement efforts with other federal agencies -- including the State, Commerce, Treasury and Labor departments and the Office of the U.S. Trade Representative -- to ensure companies are adhering to UFLPA, which calls for U.S. importers to ensure that their supply chains don't touch Xinjiang or include a company on the UFLPA Entity List. The list is supposed to identify companies that use transferred Uyghurs, Kazakhs, Kyrgyz or other religious minority workers from Xinjiang.

About 68 companies are on the list now, with DHS announcing June 11 the inclusion of three more companies from China (see 2406110041): a seafood processor, a footwear manufacturer and a manufacturer of electrolytic aluminum and related products. The seafood processor, Shandong Meijia Group, has supplied frozen seafood to U.S. and Canadian grocery stores such as H-Mart and Loblaws, while footwear manufacturer Dongguan Oasis allegedly has supplied materials to the brands Skechers, K-Swiss and Brooks Running.

“We have enforced [the UFLPA] in over a dozen sectors, and that list of sectors is growing,” Silvers said. “I think that sends a crystal-clear message to the trade community that they need to be expansive in looking for risks in their supply chain, and it's not just sectors that are prioritized for enforcement where enforcement actually does occur.”

The number of companies on the Entity List has grown in part because the coordination on the FLETF between DHS and the other federal agencies has become more efficient and streamlined since UFLPA was rolled out two years ago, according to Silvers. Any agency can nominate a company for inclusion on the list, and each agency has the opportunity to ask questions, look at evidence and hold discussions, Silvers said.

Each agency is then asked to vote on each nominated entity, and entities that receive a majority vote will be prepared for designation.

“The relationship between the agencies is excellent. This has been a learning experience for every agency involved because it’s an entirely new way of doing business. So, there’s been a learning curve,” Silvers said. “But I think where we are on that learning curve is at the point where, now two years in, we’ve really made tremendous progress. We’ve streamlined procedures, gotten a comfort level as a multi-agency body on how we’re proceeding, and that has led to a sharp acceleration in the pace of our designations to the list.”

As DHS and other agencies streamline the nomination process further, they will be on the lookout for suppliers that seek to create bifurcated supply chains, where they might have a “clean” supply chain for the U.S. market and an “unclean” supply chain for other countries, according to Silvers.

“Where we see bifurcated supply chains, we ask a lot of questions. And we ask for really solid proof that there’s no co-mingling between the supply chains,” Silvers said. “When you’re dealing with a supplier that is doing dirty work but assuring you that [U.S. companies are] not part of that dirty work, that’s a red flag.”

While DHS and others “have adopted a posture of sharing the absolute maximum amount [of information] that we can” to companies seeking clarification about the guidelines that govern an entity’s placement on the list, according to Silvers, the agencies are hindered by two factors: the law enforcement process and the Trade Secrets Act.

“We operate based on leads. The bad guys are trying to cover their tracks, obscure what they’re doing ... . Just like you wouldn’t have an investigative agency tip its hand in any context to criminals about what it knows, we have the same consideration of what we call law enforcement sensitivities in this process so that the bad guys can’t game the system,” Silvers said.

“The second set of limitations is around the fact that the trade data and information that is provided to us by importers is frequently protected under the Trade Secrets Act as proprietary business information, and we’re not at liberty under the law to share specific information about specific shipments very often,” Silvers continued. What the agencies have done to provide companies with more direction has been to create a UFLPA enforcement dashboard online that is constantly updated, he said.

One way to determine the next steps of DHS and partnering agencies in terms of which sectors will be up for closer scrutiny is to look at the types of suppliers that have been put on the list, according to Silvers.

“It’s certainly a signifier that that entity has problems and should be avoided,” Silvers said, referring to the three most recent additions to the entity list. “And it also may well be a signifier that there are broader issues at play in that industry. Seafood is a good example. We designated yesterday a single company that is engaged in seafood processing outside of Xinjiang Province but in China, but we are attuned more broadly to conditions in the seafood sector when it comes to forced labor, and that includes potential forced labor and fishing fleets. ... And also, more broadly, the seafood processing sector that happens on dry land. So yes, they very well can be a signal that there’s a broader set of concerns in the industry, and industry should take note.”