DHS Leader: Companies That Aren't Proactive on UFLPA May Face Sudden Enforcement
The head of the Forced Labor Enforcement Task Force told an audience convened by the Consumer Technology Association that Volkswagen "did the right thing" when it self-reported it had a tiny component made by a company recently added to the Uyghur Forced Labor Prevention Act Entity List. The task force is responsible for adding companies to the list.
"Companies that don't take that approach, a proactive approach, may find that they are very suddenly subject to enforcement," said Robert Silvers, DHS undersecretary-policy, plans and strategy. He said the supply chains they were relying on will become suddenly unavailable. "And there can be business and reputation consequences that ensue," he added.
In VW's case, the part that was banned for entry came from a third-tier supplier; the company that subcontracted with the Chinese manufacturer let its customer, Lear Corp., know, and Lear notified VW, BMW and Jaguar Land Rover that they had bought parts that weren't allowed to enter the U.S. However, BMW and Jaguar Land Rover didn't stop importing the parts for months.
The CTA released a white paper this month based on a survey of 50 supply chain executives and lawyers at companies that import consumer technology products from either China, Malaysia or Vietnam. According to CBP's UFLPA enforcement dashboard, close to 8,500 shipments in the "electronics" category from one of those three countries have been stopped under suspicion of links to Uyghur forced labor. The number of those shipments that were solar panels isn't known. Polysilicon, an input for solar cells, is processed in Xinjiang and is one of the priority sectors in the law.
The white paper showed that 75% of the surveyed companies know all their Tier 1, or direct, suppliers, but only 23% have mapped Tier 2, and only 2% tracked to Tier 3.
If goods are detained, the only way to clear them is to show CBP a complete map of the supply chain from raw material to finished goods.
The white paper said none of those surveyed said they had had a detention. "While this percentage may be an accurate snapshot of seizures and detentions in the consumer technology industry, it could reflect heightened sensitivity to the potential repercussions of self-reporting or discussing seizures," the paper said.
Silvers told the audience that the priority sectors don't limit what's detained. Naming PVC, an input for flooring, seafood and shoes, he said, "We've done a lot of enforcement of categories outside of those three sectors." Enforcement "is going to widen significantly in the coming months," he added.
Silvers had said earlier in the week that more priority sectors would be announced "in coming months," but on June 13, he said: "We're going to be adding new prioritized sectors soon."
VW learned that it had an input from a company on the Entity List about a month after it was announced, as the news traveled from the second tier to the first tier to the carmakers. The CTA survey showed that 34% of the firms it surveyed check the entity list twice a year, 30% check it quarterly, 17% check it annually, 17% check it monthly, and 6% have never checked it. The trade group suggested that companies set up alerts for changes to the Entity List. Ninety-four percent of companies said they check the Entity List as they vet new suppliers, and 75% said they had adjusted their supply chains because of the Entity List.
Silvers said federal agencies "are super avid consumers of technologies that help us in this work, which is, in some respects, a needle in a haystack type of business." He said AI-powered tools are helping.
The survey found that 22% of the firms are using software, such as Assent or Source Intelligence, in their due diligence.
Silvers said he talked recently with a company that sells compliance solutions, and an executive told him that forced labor is the No. 1 growth area. "That's fantastic," he said.