Accused of not doing enough about the Communist Chinese government’s exploitation of slave labor earlier this year, the Biden Administration has recently taken surprisingly strong measures matched with equally strong language arrayed against the practice,
These actions include threatening American companies with serious legal consequences of doing business with the Chinese industries charged with involvement in the practice.
Both the Biden and Trump Administrations had previously targeted companies operating in the Xinjiang Uyghur Autonomous Region, where the Chinese Communist government is accused of confining members of the Moslem Uyghur minority in forced labor camps and subjecting them to other serious abuses.
As a result, textiles and other imports from the Xinjiang region were banned from import into this country by the Trump Administration last year.
The human rights violations also ignited a war of words between the two countries early in Biden’s presidency that are now being backed up by actions.
The most recent of these is The Xinjiang Supply Chain Business Advisory was issued on July 13 by the Departments of State, Treasury, Commerce, Homeland Security, Labor, and the Office of the U.S. Trade Representative.
The directive minces no words: “The People’s Republic of China (PRC) government continues to carry out genocide and crimes against humanity
against Uyghurs and members of other ethnic and religious minority groups in the Xinjiang Uyghur Autonomous Region.”
It says the Chinese government’s crimes against humanity “include imprisonment, torture, rape, forced sterilization, and persecution, including through forced labor and the imposition of draconian restrictions on freedom of religion or belief, freedom of expression, and freedom of movement.”
Since 2017, the PRC government in Xinjiang has been accused of unjustly imprisoning more than one million Uyghurs, ethnic Kazakhs, ethnic Kyrgyz, and members of other ethnic and Muslim minority groups for indefinite periods in internment camps.
Among the abuses cited are a laundry list of horrors said to include extreme overcrowding, sleep and food deprivation, medical neglect, physical and psychological abuse, torture, forced labor, forced ingestion of unidentified drugs, forced sterilizations and abortions and sexual abuse.
Others aimed at inducing ideological conformity include such things as forced renunciation of religion, denial of prayer and other religious practices (including pressure to consume pork or alcohol), denial of the use of their native languages, and being forced to study and recite Chinese Communist Party propaganda
Although the authors of the July 13 advisory characterize it is being only explanatory without the force of law, it contains strongly worded warnings
to American firms doing business in the region.
It warns businesses, individuals and other persons, including investors, consultants, labor brokers, academic institutions, and research service providers who have potential exposure to or connection with operations, supply chains or laborers from the Xinjiang-region that they could find themselves in trouble in the future.
The advisory stresses that people involved in these activities should be aware of the significant reputational, economic and legal risks of being involved with “entities or individuals in or linked to Xinjiang that engage in human rights abuses, including but not limited to forced labor and intrusive surveillance.”
To put a finer point on their advice, they state that given the severity and extent of these abuses in Xinjiang, “businesses and individuals that do not exit supply chains, ventures, and/or investments connected to Xinjiang could run a high risk of violating U.S. law.”
The advisory discusses in detail four primary types of potential supply chain exposure for Americans to entities engaged in human rights abuses:
1) Assisting or investing in the development of surveillance tools for the PRC government in
Xinjiang, including tools related to genetic collection and analysis.
2) Sourcing labor or goods from Xinjiang, or from entities elsewhere in China connected to the
use of forced labor of individuals from Xinjiang, or from entities outside of China that source
inputs from Xinjiang.
3) Supplying U.S.-origin commodities, software, and technology to entities engaged in such
surveillance and forced labor practices; and
4) Aiding in the construction and operation of internment facilities used to detain Uyghurs and
other Muslim minority groups, and/or in the construction and operation of manufacturing facilities in close proximity to camps and reportedly operated by businesses accepting subsidies from the PRC government to use minorities as forced labor.
Among the potential legal risks facing American businesses are violation of statutes criminalizing forced labor, including knowingly benefitting from participation in a venture, while knowing or in reckless disregard of the fact that it has engaged in forced labor. Other sanctions can arise from violations if dealing with designated persons; export control violations; and violation of the prohibition of importations of goods that are produced with forced or prison labor.
The new advisory was issued shortly after the U.S. government announced that it had taken action restricting the import of silica-based products from Xinjiang called polysilicon that are used in this country to manufacture half of all solar energy panels produced. The government said it imposed the ban because it has evidence that forced labor was involved in creating the exported products.
As of 2020, China controlled an estimated 70% of the global supply for solar-grade polysilicon and China also dominated manufacturing in other downstream solar photovoltaic components, including ingots, wafers and cells that are assembled into solar modules. An estimated 95% of solar PV modules rely on solar-grade polysilicon.
Also, in 2020, five of the top six solar-grade polysilicon companies, by capacity, were headquartered in China, with 45% of the world’s supply of solar-grade polysilicon coming from four producers with operations in Xinjiang.
Criminal penalties for violation of this ban can include up to 20 years in prison and up to $1 million in fines, or both. Administrative monetary penalties also can amount to $308,901 per violation or twice the value of the transaction. Unlicensed transactions can result in a company’s debarment from U.S. government contract opportunities and result in potential bans on exports.
At some point in the future, the actions targeting Xinjiang businesses could be expanded to elsewhere in China, the July 13 advisory suggests. There are credible reports of labor transfers from Xinjiang to other regions deemed “state-sponsored coercive relocation and forced labor program aiming to force assimilation and reduce their population density.”