Business is booming.

Companies braced for chaos as Xinjiang import ban starts in US

Manufacturers and retailers are bracing for chaos as US Customs begins to enforce a ban on imports from China’s Xinjiang region from June 21 in response to reports of forced labour.

Companies are scrambling to gauge how the new rules could affect their business and supply chains, with Asian clothing suppliers, international retail chains, US solar-panel makers and Chinese floor tile material makers among scores of groups that could see US-bound shipments seized.

The ban intensifies pressure on Beijing over allegations of widespread human rights violations — including torture, arbitrary detention and forced labour — against Muslim Uyghur and other minorities in the country’s far-western Xinjiang region. China denies the claims and has warned of retaliatory measures.

Signed into law by president Joe Biden at the end of last year, the Uyghur Forced Labor Prevention Act presumes that all US-bound imports traced to Xinjiang, from cotton and tomatoes to floor tile and solar panel materials, were made using forced labour and brands them as “high priority” for seizure.

More than 900 shipments from the region were seized in the last quarter of 2021 by US authorities under earlier trade restrictions.

But trade and business groups said the new legislation’s vague wording threatened to put the bulk of China’s $500bn in annual shipments bound for the US at risk.

“The way the law is written could be interpreted as applying to other kinds of goods from other parts of China that allegedly involved forced labour at some point along the supply chain,” Doug Barry, a senior director at the US-China Business Council, told Nikkei Asia in an email.

This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.

Subscribe | Group subscriptions

There are reports of detainees being moved out of Xinjiang to work in other parts of the country, while components produced in the region have been traced to US-bound exports shipped from elsewhere in China.

Barry warned that the law could heap more pressure on pandemic-hit supply chains and stoke US inflation, already running at 40-year highs.

Companies are still awaiting clear instructions from US Customs and Border Protection, Barry said.

“They have released little information beforehand, and companies won’t know many of the details of what they must comply with until the date they must comply,” he said. “We are expecting implementation to be messy.”

US-based Mission Solar pledged to follow the new rules, but the equipment provider said it was “difficult to know what effect it will have at this point”.

Hong Kong apparel supply chain manager Lever Style, whose clients include Fila, Hugo Boss and Theory, said it was pivoting to fabric made with Indian cotton for American customers ahead of the ban.

“We still buy most of our cotton fabric in mainland China, but we can quickly switch to buying fabrics in other places,” said Stanley Szeto, the company’s executive chair.

Xinjiang has a booming industrial, mining and agricultural sector. Everything from peppers and walnuts to electrical equipment and polysilicon, a key material for making solar panels, ship to the US from the region. It also accounts for 20 per cent of the world’s cotton and 80 per cent of China’s domestic production.

In the week before the ban, US customs issued an operations guide for companies looking to prove their products were not made using forced labour, including supply chain maps and purchase orders.

A new list published on June 17 bars goods that are produced by or contain material parts made by over 20 companies including Baoding LYSZD Trade and Business, Changji Esquel Textile and Hotan Haolin Hair Accessories.

US customs said it would strictly enforce the rules, which threaten to aggravate already tense relations between Washington and Beijing.

China’s state-owned Global Times reported that American shoe company Skechers organised an independent investigation of its supply chain after goods manufactured in China were seized by US customs. Companies including Nike and H&M previously faced questions about Xinjiang cotton used in their products.

“If the act is implemented, it will severely disrupt normal co-operation between China and the US, and global industrial and production chains,” said Zhao Lijian, Chinese Ministry of Foreign Affairs spokesperson, the week before the ban. “If the US insists on doing this, China will take robust measures to uphold its own rights and interests as well as its dignity.”

Concerns also exist that US agencies lack the resources to properly vet imports and enforce the new law. But authorities say they will use a multi-layered approach tapping information from vast systems.

“We don’t stop shipments just on hearsay or on one piece of information,” JoAnne Colonnello, centre director at Customs and Border Protection, told a business briefing. “We look in total at the situation, and all of the evidence involved, to ensure that we have efficient and effective targeting.”

Britain’s Sheffield Hallam University released a report in mid-June documenting the use of forced labour in Xinjiang to manufacture polyvinyl chloride, a core component in floor tiling. Academics and media organisations have published reports detailing systematic use of forced labour among Uyghurs held in what critics describe as internment camps.

China, which initially denied the existence of such facilities, later said they were vocational training centres designed to combat the rise of religious and separatist extremism in the region.

A sweeping crackdown in Xinjiang over the past few years has repressed cultural and religious practices and prompted allegations of forced sterilisation and arbitrary imprisonment — conditions that some western governments say amount to genocide.

Rights groups have urged for years that companies and brands linked to shirts, trousers and other Xinjiang-made goods be held accountable for labour conditions in the region.

“If governments make it mandatory for corporations and companies to conduct meaningful due diligence — which is not easy to do in China — before they engage in their activities, I think that is something we would welcome,” said Alkan Akad, China researcher at Amnesty International.

But some major corporations including Apple and Coca-Cola lobbied against the Biden administration’s import ban, saying they found no evidence of forced labour in Xinjiang’s manufacturing or supply chains.

Japanese retailers Muji and Uniqlo say they expect little impact on their operations.

“We do not export any products made in Xinjiang Uyghur Autonomous Region to the United States,” said a spokesperson for Muji owner Ryohin Keikaku, referring to the region’s official name. “In our business activities, we comply with the laws and regulations of each country and region, and strive to respect human rights and manage labour standards.”

Additional reporting by Rurika Imahashi, Peggy Ye and Jack Stone Truitt

A version of this article was first published by Nikkei Asia on June 20 2022. ©2022 Nikkei Inc. All rights reserved.

Source link

Comments are closed, but trackbacks and pingbacks are open.