This summary was drafted with assistance from Matthew Chang and Brianna Robinson, participants in Kelley Drye’s 2024 Summer Associate Program

On July 9th, the Department of Homeland Security (“DHS”), on behalf of the Forced Labor Enforcement Task Force (“FLETF”), released its 2024 Updates to the Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People’s Republic of China (the Update”), as required by the Uyghur Forced Labor Prevention Act (“UFLPA”). Notably, the FLETF added three new high-priority sectors for enforcement: polyvinyl chloride (“PVC”), aluminum, and seafood. The Update noted that the FLETF will prioritize review of potential entities within these sectors for inclusion in the UFLPA Entity List – now including 68 entities – and the federal agencies will also target entities within these sectors for relevant enforcement.

The Update also shed light on the process for identifying high-priority sectors for enforcement. It stated that any member agency may submit a recommendation to the FLETF to add a new high-priority sector” based on the following (non-exhaustive) criteria: (1) credible evidence, including from civil society, media, or academic reporting, of multiple entities in the sector having a high risk of utilizing or facilitating forced labor; (2) the sector was designated by the People’s Republic of China (“PRC”), the Xinjiang Uyghur Autonomous Region (“XUAR”), the Xinjiang Production and Construction Corps, and/or provincial or municipal governments as a target for investment and expansion in the XUAR based on government directives; and (3) XUAR-based production of goods in that sector represent 15 percent or more of total production in the PRC or 10 percent more of global production.

The FLETF encouraged importers of high-priority sector goods to heavily scrutinize their supply chains to ensure any such goods are not made with forced labor. FLETF agencies will closely monitor developments in the high-priority sectors and, in addition to prioritizing addition of entities from these sectors to the UFLPA Entity List, will review information and developments in these sectors in order to deploy their respective tools and authorities, including economic sanctions, visa restrictions, and export control measures, as appropriate.”

Two of the high-priority sector additions were foreshadowed by the FLETF’s announcement on June 11, 2024, in which it added three new entities – one each from the seafood, aluminum, and footwear industries – to the UFLPA Entity List. The companies in the seafood and aluminum sectors, Shandong Meijia Group Co., Ltd. and Xinjiang Shenhuo Coal and Electricity Co., Ltd., respectively, were the subject of significant forced labor allegations in recent years:

Shandong Meijia Group Co., Ltd. (“Meijia Group”) is based in Shandong Province and sells frozen seafood products, vegetables, quick frozen convenience food, and other aquatic foods. In May 2023, the Outlaw Ocean Project reported on an email that stated that Meijia Group, which does business in the U.S., received labor transfers from the XUAR. Following reports of Uyghur and other forced labor in seafood markets, the Natural Resources Committee wrote a letter in October 2023 urging U.S. Customs and Border Protection (“CBP”) to investigate these reports and enforce any UFLPA violations. That same month, the Congressional-Executive Commission on China (“CECC”) held a hearing on how forced labor in China taints America’s seafood supply chain. In November 2023, a SkyNews article on the Outlaw Ocean investigation on Uyghur forced labor found nine seafood entities connected to UK seafood suppliers, including the Mejia Group. In January 2024, the Outlaw Ocean Project formally filed a recommendation to implement Global Magnitsky sanctions against connected Chinese entities. Additionally, the Southern Shrimp Alliance sent a letter on January 2024 to the FLETF asking it to add Meijia Group, among other companies, to the UFLPA Entity List and identify seafood as a high-priority sector” for enforcement. In February 2024, the Ways and Means Committee sent a letter to the U.S. Trade Representative (“USTR”), Department of State (“DOS”), and CBP urging them to investigate the allegations of forced labor in seafood supply chains associated with China, including Meijia Group. In March 2024, the CECC asked the Biden Administration to quickly act and address issues of forced labor in the seafood industry.

Xinjiang Shenhuo Coal and Electricity Co., Ltd. (“Xinjiang Shenhuo”) is a state-owned enterprise based in XUAR that produces electrolytic aluminum, graphite carbon, and prebaked anodes. In April 2022, Horizon Advisory wrote a report that named Xinjiang Shenhuo as one of eight major aluminum companies associated with government-led forced labor transfer programs. The report indicated that Xinjiang Shenhuo is involved in labor transfers and organizes transfer of labor programming in concert with the local government and other companies. For example, Xinjiang Shenhuo partnered with other companies in March 2017 to hold a special job fair” that targeted migrant workers. Xinjiang Shenhuo utilizes real-time monitoring,” which is considered an indicator of forced labor. In December 2022, a Sheffield Hallam University report on automotive supply chains and forced labor in XUAR stated that Xinjiang Shenhuo’s participation in the labor transfer program is alive and well . . . and may have even accelerated,” despite the publication of Horizon Advisory’s report. The enterprise produced approximately half of its aluminum – 800 tons of its 1.7 million ton capacity– in XUAR in 2021.

Notably, Mejia Group and Xinjiang Shenhuo were explicitly mentioned in the Update in explaining the FLETF’s addition of seafood and aluminum as high-priority sectors.

Key Takeaways

The announcement of these three new high-priority sectors for enforcement increases the likelihood of detentions in those sectors: Any imports that wholly or in part” contain inputs linked to PRC forced labor in the PVC, aluminum, and seafood sectors are now at heightened risk of UFLPA enforcement. The FLETF underscores in the Update that it will prioritize the addition to the UFLPA Entity List of entities from these three sectors. Such Entity List additions increase the likelihood of an identified supply chain connection, and thus a detention, for businesses operating in these sectors.

Effective due diligence is key: It is always better to catch a potential problem before you are subject to a detention or investigation. The Update highlights the importance of examining your supply chains in detail, especially in high-priority sectors. Indeed, business with PRC links operating in the PVC, aluminum, and seafood sectors are now on notice of the necessity of effective supply chain due diligence. As we have noted previously – and as the FLETF emphasizes in the Update – effective due diligence and supply chain mapping is the most effective tool to identify forced labor risks in the PRC. Companies that rely on social compliance audits conducted in the PRC – including, but not limited to, the XUAR – should not presume the accuracy of such audits as a factual matter, much less that they accurately identify forced labor trade enforcement risks under the UFLPA and related laws.

Paying close attention to public reporting and FLETF actions can highlight risks: There are millions of business entities in China. Although funding for UFLPA enforcement has been significant, only a tiny fraction of those entities will ever be investigated thoroughly enough to be placed on the Entity List. The Update highlights the importance of credible evidence from civil society, media, or academic reporting. As demonstrated by the recent addition of the seafood and aluminum industries as high-priority sectors, it is important to stay up to date on forced labor reporting and UFLPA Entity List additions. Both industries recently had entities added to the UFLPA Entity List. Both industries, especially the seafood industry, have been subject to extensive reporting, and even congressional hearings, over the past few years. Sectors under intense public scrutiny are much more likely to be added as high-priority enforcement sectors.

Please reach out to a Kelley Drye attorney if you have concerns about your supply chain and how your company could be impacted.