Report Outlines 'Shocking' Downstream Exposure to Forced Labor in Critical Mineral Supply Chains

Global Rights Compliance, a self-described "not-for-profit" that specializes in international humanitarian, criminal and human rights law, published the report June 10. It focuses on four critical minerals -- titanium, lithium, beryllium and magnesium -- and unravels the complex web of ownership that hides the impact on global supply chains of companies operating in the Xinjiang Uyghur Autonomous Region (XUAR).

The report identified 77 "critical minerals sector companies and downstream manufacturers of minerals-based products" operating in the XUAR, which are therefore "at risk of participating in labour transfer programs," in the studied critical mineral industries. GRC's research found 15 companies with "documented sourcing directly from those XUAR-based companies in the last two years" and identified 18 XUAR entity parent companies that "may source inputs from their XUAR subsidiaries." Finally, the report demonstrated that 68 "downstream customers" of those Chinese suppliers sourced from the XUAR, indicating "a risk that inputs may have been sourced from the region."

In an interview, Caroline Dale, one of the report's researchers and authors, said she hopes the findings will help companies to examine "some of these intermediary manufacturers, the chemical providers, the metals processors that are in other Southeast Asian" countries and for companies "to be able to start examining their supply chain with that piece in mind."

Dale, a licensed customs broker and attorney, said she was able to use "public vessel manifest information to trace shipments that were moving downstream" from XUAR-based companies to Western brands or to companies "within Southeast Asia that then subsequently have a larger Western market share."

While the report acknowledged that "involvement in the labor transfer program does not necessarily give rise to criminal or civil liability," it said such involvement "gives rise to a real risk of contribution to the forced labor implied by the scheme that may be the basis of such liability." Additionally, the report said supply chain exposure to the XUAR could result in "legal risk" if the products are exported to countries like the U.S. where the Uyghur Forced Labor Prevention Act bans importing goods made with forced labor or goods made in whole or in part in the Uyghur region.

The report named Hunan Wujo Light Chemical Group as a major supplier of titanium to Western firms and showed it relies on XUAR-based subsidiaries for much of its supply. It said the Wujo Group controls "the only titanium metal smelting and titanium alloy processing enterprise in the Uyghur Region" through its subsidiaries Xinjiang Wujiang Xinghua Industrial Co., Ltd. and Xinjiang Xiangsheng New Material Technology Co., Ltd.

According to its marketing materials, the Wujo Group exports "60 million USD in goods to over 100 countries annually across North and South America, Europe, and Asia," and the company's Alibaba profile lists Avon, Gibson, Carrefour, Metro, Auchan, Walmart, Disney, Quaker, Coca-Cola, Nescafe, Starbucks, Kaufland and Costa Coffee as "cooperative partners," the report noted. The company doesn't exclusively sell titanium-based products, but the report said there is "a risk of exposure to the XUAR across Wujo’s range of consumer goods produced with titanium inputs."

Wujo Group subsidiary Xinjiang XRUN is a "key supplier" of titanium sponge to downstream domestic producers outside the Uyghur region, as well as a "direct exporter" of titanium materials to foreign markets, the report said. GRC found through shipping records that XRUN shipped "approximately $1.76 million in titanium products," to Indian companies Tinita Engineering Private Ltd., Ratnamani Metals & Tubes Ltd., Titanium Equipment & Anode Manufacturing Company Ltd., Ramani Steel House, Pes Engineers Private Ltd., Kelvion India Private Ltd. and GMM Pfaudler Ltd. The report said XRUN made shipments "including titanium" to Neotiss Inc. in the U.S. Neotiss produces tubes for the aerospace industry.

GRC said XRUN supplied roughly half of titanium imports to Baoji Jucheng Titanium Industry Inc., which then exported to suppliers in India and Vietnam, including Dtp Technology Engineering Jsc, Horizon Titanium Inc., Nickel Alloy India, Manhar Metal Supply Corporation, Rajguru Steel & Alloys and Divyanidhi Nickel Alloys.

The next parent company the report identified is CNNC Hua Yuan Titanium Dioxide Co., Ltd. or CHTi, which has referred to the Uyghur region as "an important supply area for the company’s raw material titanium concentrate." The report said "roughly 28% of CHTi’s titanium dioxide is produced with titanium concentrate mined in the Uyghur Region." CHTi lists paint companies Sherwin Williams, Valspar, Axalta, KCC Corp., Taiho Group, Carpoly Paint, AkzoNobel, Alesco, BASF, and industrial chemical and manufacturing companies Haier, Huawang Group and Shide Group as "brands we work with," according the report.

Through its subsidiary Anhui Gold Star Titanium Dioxide Trading Company Ltd., CHTi supplies "major international paint companies" DuPont Performance Coatings Mexico, AkzoNobel, Asian Paints, Sherwin Williams, BASF India, Nippon Paint, Caldic Italia, Caldic UK, Caldic France and Caldic Iberia.

The lithium industry in the XUAR is still in its infancy, but the report said it's "reasonable to believe" that lithium battery companies operating in the region source "or anticipate sourcing from" the expansion of lithium mining and processing in the Uyghur Region. Dale said she hopes in six months to "take another evaluation of how much production is now happening" and thinks "we'll find a pretty different number" of lithium products exposed to forced labor.

The report noted that because of the geographic concentration of beryllium reserves, the government's monopoly over processing capacity, and the "inherently opaque" nature of supply chains, "all products containing beryllium inputs from the PRC are at high risk of exposure to the Uyghur Region."

Through its subsidiary, Fuyun Hengsheng Beryllium Industry Co., Ltd., Xinjiang Nonferrous Metals Industry Group Co., Ltd. supplies Hebei Botou Safety Tools Co., Ltd. with beryllium. According to the report, shipping records "indicate Hebei Botou Safety Tools has exported tools made with beryllium" to Phuong Dong Sea Oil & Gas Construction Design Jsc, Viet Thuong Industrial Co., Ltd., Titan Technical Jsc, Cromwell Industrial Supplies Private, Ltd., and Viet Dan Construction Trading Co. over the past two years.

Many of the magnesium producers named in the report are already on the UFLPA Entity List, but Dale said their products are likely entering the U.S. market regardless. She said that Xinjiang-based companies produce almost "10% of the world's share of magnesium." From that figure, she estimates that magnesium potentially produced with forced labor "is entering into maybe a third of the automotive supply chain coming out of Xinjiang. That puts all Western automotive companies" at risk of exposure.

The report laid out policy recommendations to governments and private companies. It recommended that governments pass legislation similar to UFLPA to outlaw the import of goods made with forced labor and noted the importance of "a rebuttable presumption mechanism that can be applied to entire regions or industries where it can be presumed that goods are made with state-imposed forced labor." It also suggested governments require companies to publish a list of "their critical raw materials suppliers and processors/refiners" and "document the GPS coordinates where entities at those stages of the supply chain operate."

Specifically, the report recommended that the U.S. government add the four minerals it studied "as high-priority sectors under" UFLPA and add them to the Department of Labor’s List of Products Made with Child and Forced Labor. It also recommended the EU, Canada and Mexico "identify these sectors as affected by forced labour for purposes of enforcement of existing forced labour regulations."

The report requested private companies extricate their supply chains from the XUAR "until China demonstrates that it is not engaged in forced labor in the Region." It also recommends that all companies conduct robust supply chain mapping and make human rights a priority "at the board level."

Companies often want "a quick solution and to mitigate costs," but that oftentimes the "resource dedication that's required" is very substantial, Dale said. It can include training, advanced tools and technology and a department "that is dedicated to doing nothing but figuring out exactly the degree of exposure."

She acknowledged the difficulty of the task for private companies, but said the report reiterates the moral imperative for companies to abide by its findings: "While there are issues of competition and geopolitics that are at play, there's also this broader question, not just of economic competitiveness, but of this piece of ethic and moral commercial engagement that companies are having to reconcile with, and what is the cost of the Chinese market and of affordable inputs for your consumers, versus the ethical cost of continuing to participate in a program that empowers the PRC to continue controlling critical mineral supply chains, but also it continues to perpetuate what's been recognized by every Western government as crimes against humanity."