How the Uyghur Forced Labor Prevention Act Will Reshape Supply Chains

In late 2021, the United States Congress passed nearly unanimously the Uyghur Forced Labor Prevention Act (UFLPA). The bill indicates that the administration must take drastic steps to prevent goods from the Uyghur region in China from entering the United States, because the region is well known for being a hot spot for state-sponsored forced labor. While this is a step in the right direction in terms of economically punishing human rights violations, many American businesses are beginning to worry about the fallout from enforcing the UFLPA.

While only 0.01 percent of total goods imported by the United States come directly from the region, the challenges facing US supply chains are more nuanced. One of the most important clarifications within the UFLPA is that no product may be imported directly from the Uyghur region, nor can any product be imported into the United States whose raw materials may have been sourced from the region. This means a product made in Australia, for example, that contains raw materials from the Uyghur region, is barred from entry into the United States.

Enforcement of the UFLPA by US Customs and Border Protection (CBP) will require intense research into multiple different sectors to discover exactly how deep the roots of Uyghur products run in American supply chains. One area of particular interest are the supply chains associated with solar panels. One of the main products produced in the Uyghur region is polysilicon, one of the most important components to solar panel production. China exports 90% of the world’s polysilicon, half of which is produced in the Uyghur region. While it is currently unknown exactly how much of the US solar panel market will be affected by this policy change, early research indicates that four of the largest solar panel suppliers in the US were sourcing materials from the Uyghur region in 2020.

In a time of preexisting supply chain disruptions and inflated prices there is a high likelihood that the UFLPA could further exaggerate existing shortages. The Department of Homeland Security indicated that the high priority sectors of enforcement include:

• Polysilicon;

• Cotton;

• Tomatoes; and

• Apparel.

Roughly 20% of the world’s cotton supply and 30% of the world’s tomato paste comes from the Uyghur region.

While this is not a good omen economically, the UFLPA does in theory help fight against the rampant human rights violations occurring in China. The Department of Labor believes that nearly 100,000 people who have been detained in China’s notorious “reeducation camps” may being forced to work against their will. If the United States, as the world's largest importer, can play a part in reducing such rights violations, then perhaps the UFPLA is worth its cost.

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