DHS and FLETF Release Updated UFLPA Strategy | Kelley Drye & Warren LLP

This summary was prepared with the help of Matthew Chang and Brianna Robinson, participants in Kelley Drye’s Summer Associate Program 2024

On July 9, the Department of Homeland Security (“DHS”), on behalf of the Forced Labor Law Enforcement Task Force (“FLETF”), released the 2024 Updates to the Strategy to Prevent the Import of Goods Mined, Produced, or Manufactured Using Forced Labor into the People’s Republic of China (hereinafter: ​“Update”), as required by the Uyghur Forced Labor Prevention Act (“UFLPA”). Notably, FLETF added three new high-priority sectors for enforcement: polyvinyl chloride (“PVC”), aluminum, and seafood. The update noted that FLETF will prioritize reviewing potential entities in these sectors for inclusion on the UFLPA Entity List—currently including 68 entities—and federal agencies will also refer entities in these sectors for appropriate enforcement actions.

The update also shed light on the process of identifying high-priority sectors for enforcement. It stated that each“A 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 reports by civil society, media or academia, that many entities in the sector pose a high risk of using or facilitating forced labor; (2) the sector has been designated by the People’s Republic of China (“PRC”), Xinjiang Uyghur Autonomous Region (“XUAR”), 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) production of goods in the sector in the XUAR constitutes 15 percent or more of total production in the PRC or 10 percent more of global production.

FLETF encourages importers of high-priority goods to thoroughly examine their supply chains to ensure that such goods are not produced using forced labor. FLETF agencies will closely monitor developments in high-priority sectors and, in addition to prioritizing the addition of entities from these sectors to the UFLPA Entity List, will“review information and developments in these sectors in order to implement appropriate tools and powers, including economic sanctions, visa restrictions and export control measures, as appropriate.”

Two of the priority sector additions were heralded by the FLETF announcement on June 11, 2024, which added three new entities—one each from the seafood, aluminum, and footwear industries—to the UFLPA Entity List. The seafood and aluminum companies, Shandong Meijia Group Co., Ltd. and Xinjiang Shenhuo Coal and Electricity Co., Ltd., respectively, have been 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, vegetables, quick-frozen convenience foods, and other aquatic products. In May 2023, Outlaw Ocean Project reported an email alleging that Meijia Group, which has operations in the U.S., had received labor transfers from the XUAR. Following reports of Uyghur and other forced labor in seafood markets, the Committee on Natural Resources wrote a letter in October 2023 calling on U.S. Customs and Border Protection (“CBP”) to investigate these reports and enforce any violations of the UFLPA. That same month, the Congressional-Executive Commission on China (“CECC”) held a hearing on how forced labor in China affects the U.S. seafood supply chain. In November 2023, a SkyNews article on the Outlaw Ocean investigation into Uyghur forced labor found that nine seafood companies were linked to British seafood suppliers, including Mejia Group. In January 2024, the Outlaw Ocean Project formally submitted a recommendation to implement global Magnitsky sanctions against the related Chinese entities. Additionally, in January 2024, the Southern Shrimp Alliance sent a letter to the FLETF requesting that Meijia Group and other companies be added to the UFLPA entity list and“identify seafood as a high priority sector” for enforcement. In February 2024, the Committee on Ways and Means sent a letter to the United States Trade Representative (“USTR”), the Department of State (“DOS”), and CBP urging them to investigate allegations of forced labor in seafood supply chains linked to China, including the Meijia Group. In March 2024, the CECC requested the Biden Administration to act swiftly to 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 the XUAR that produces electrolytic aluminum, carbon graphite, and pre-baked anodes. In April 2022, Horizon Advisory wrote a report that listed Xinjiang Shenhuo as one of eight major aluminum companies linked to government forced labor transfer programs. The report indicated that Xinjiang Shenhuo is involved in labor transfers and organizes the labor transfer program in cooperation with the local government and other companies. For example, Xinjiang Shenhuo partnered with other companies in March 2017 to organize ​““special job fair” that targeted migrant workers. Xinjiang Shenhuo uses“real-time monitoring,” which is considered an indicator of forced labor. In December 2022, a report by Sheffield Hallam University on automotive supply chains and forced labor in the XUAR found that Xinjiang Shenhuo’s involvement in the labor transfer program is“alive and well… and may have even accelerated,” despite the Horizon Advisory report. The company produced about half of its aluminum — 800 tons of its 1.7 million tons of production capacity — in the XUAR in 2021.

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

Key conclusions

The announcement of these three new high-priority sectors for law enforcement increases the likelihood of arrests in these sectors.: Every import that“in whole or in part” contain inputs linked to forced labor in the PRC in the PVC, aluminum, and seafood sectors are currently at increased risk of UFLPA enforcement. FLETF emphasizes in the Update that it will prioritize adding entities from these three sectors to the UFLPA Entity List. Such additions to the Entity List increase the likelihood of identified supply chain linkage, and therefore detention, of companies operating in these sectors.

Effective due diligence is key: It is always better to detect a potential problem before you are arrested or investigated. The Update emphasizes the importance of thoroughly examining supply chains, especially in high-priority sectors. Indeed, companies with PRC links operating in the PVC, aluminum, and seafood sectors are now aware of the need for effective supply chain due diligence. As we have noted previously—and as FLETF emphasizes in the Update—effective due diligence and supply chain mapping are the most effective tools for identifying forced labor risks in the PRC. Companies that rely on PRC social compliance audits—including, but not limited to, XUAR—should not assume the accuracy of such audits as a matter of fact, much less that they accurately identify enforcement risks for forced labor trade under the UFLPA and related laws.

Paying close attention to public reporting and FLETF activities can help highlight risks: There are millions of business entities in China. While funding for UFLPA enforcement has been significant, only a small fraction of these 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 science reporting. As the recent addition of the seafood and aluminum industries as high-priority sectors has shown, it is important to stay up-to-date with forced labor reporting and additions to the UFLPA Entity List. Both industries recently added entities to the UFLPA Entity List. Both industries, especially the seafood industry, have been the subject of 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.

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