Lye Identified as Xinjiang Product Appearing in US Products' Supply Chains
Kharon, a company that provides intelligence to help companies with global compliance issues, says that caustic soda, commonly known as lye, is being produced by a state-owned company in Xinjiang, and is being sold to Vietnamese fabric manufacturers and electronics manufacturers, and is even being sold to U.S. cleaning products manufacturers.
Kharon wrote that Xinjiang Zhongtai Chemical Co. sells its chemicals to Excel Leader Development Co. and Meiyang Industry Co. in Hong Kong, who then ship to Vietnam and the U.S., including as recently as February 2023.
Any goods made by a manufacturer in Xinjiang are presumed to be made with forced labor; however, Kharon analysts said "Xinjiang Zhongtai has conducted ideological, political, cultural, and linguistic training for employees transferred to the company through a government-sponsored poverty alleviation program, according to a 2018 Chinese government press release." Transfers through poverty alleviation are considered forced labor by the U.S. government.
The brief described the use of lye as, at times, a processing step where no trace of the lye remains, as in the case of scouring or mercerizing textiles, but also as an ingredient in dyes or cleaning products.
John Foote, an attorney with Kelley Drye who focuses on forced labor in supply chains, said in an e-mailed reply to questions: "The question raised by the Kharon brief on caustic soda (lye) is a closer call [than a manufacturer of inputs]. Whether a product (like caustic soda) that is consumed during the course of production, or as a result of production, but is not present in the finished good is within the scope of the forced labor import ban is the type of question that would be well-suited for judicial review, or even agency rulemaking. I expect CBP would treat such a product as in scope of enforcement."
The brief did not name the U.S. companies it says source several layers back from Xinjiang Zhongtai; however, it did say a Vietnamese company, Anbinhgiang, buys caustic soda originally made by Xinjiang Zhongtai, and "supplies caustic soda to customers in Vietnam, including a fabric manufacturer that uses the chemical as a dye additive. Trade data shows that this manufacturer in turn sells fabrics to the Vietnamese subsidiary of a U.S.-based multinational clothing company, whose brands include numerous American household brands."
CBP has not mentioned lye as a good it is tracing through supply chains -- it has said it is tracing polysilicon, cotton, tomatoes, aluminum and PVC plastic. However, a spokesperson from the U.S. Fashion Industry Association, responding to a question from International Trade Today, said: "We definitely know that CBP and DHS follow the Kharon updates, so I expect there may be some questions from CBP."
Kharon said China is the largest exporter of caustic soda, exporting 387,806 metric tons in 2021, with Vietnam, Indonesia and Nigeria as the top buyers. However, Xinjiang is not the top producer of caustic soda in the country-- it is fourth.