The solar industry and other business groups are jockeying with labor and human rights advocates to limit an expected U.S. ban on imports allegedly made with forced labor in China.

Companies that rely on Chinese supply chains are pushing Washington to create a targeted strategy for carrying out the Uyghur Forced Labor Prevention Act, which in June will ban shipments linked to China's Xinjiang region unless importers can prove goods were not made with forced labor. The U.S. government has made allegations that China persecutes Uyghurs and other Muslim minorities in Xinjiang, but Beijing denies the claims.

To avoid "unnecessary and unintended" economic harm, the government should streamline enforcement for importers that establish "a verifiable commitment to forced labor prevention," the Solar Energy Industries Association, or SEIA, said in a March 10 filing to the U.S. Department of Homeland Security, which is gathering public input on how the law should be implemented.

Groups representing some of America's biggest companies have made similar pitches, saying importers that adopt social auditing and supply chain tracing programs should face only minimal scrutiny at U.S. ports.

The proposals have frustrated labor and human rights advocates, who argue that corporate due diligence programs have for years failed to rid U.S. supply chains of abuse.

"[There] can be no safe harbor, no 'trusted traders' in the context of Uyghur forced labor," Martina Vandenburg, president of the Human Trafficking Legal Center, said in a statement. "Press releases and public commitments do not end forced labor. Enforcement does."

While the new anti-forced labor law applies to imports of all kinds that are tied to manufacturers and raw material suppliers in Xinjiang, the solar industry's potential exposure to the region is particularly challenging for the Biden administration, which is trying to limit climate change. China is a dominant player in green energy markets and supply chains.

In 2021, a trade restriction that the Biden administration imposed on a top raw material supplier to the solar industry disrupted equipment deliveries to the American market, contributing to project delays and cancellations, according to the American Clean Power Association, or ACP.

"Further unnecessary detentions will translate into billions of dollars in lost economic opportunity and put tens of thousands of Americans out of work," the ACP told the U.S. government in a March 11 filing to the DHS. Solar has been the top source of new power generating capacity added in the U.S. over the past three years.

A spokesperson for U.S. Customs and Border Protection, or CBP, said the government is still gathering public input on how to enforce the Uyghur Forced Labor Prevention Act and that it is too early to say how the strategy may differ from its handling of other trade restrictions. A public hearing is scheduled for April 8.

The Chinese Embassy in Washington referred to a March 1 press conference at which a spokesperson for China's regional government in Xinjiang said residents of the region are "completely free in labor and employment."

Solar sector 'uniquely positioned' to comment

SEIA began urging its members to move supply chains away from Xinjiang in October 2020 in response to questions from S&P Global Market Intelligence about the solar industry's heavy reliance on polysilicon producers in the region. Over the following months, SEIA and ACP released pledges expressing their members' opposition to the use of forced labor. SEIA also issued guidance last year to help companies trace their international supply chains and to try to prevent products made with forced labor from entering the country.

Despite those measures, the U.S. said more had to be done. In mid-2021, the government said it would detain imports containing material from a Chinese company called Hoshine Silicon Industry Co. Ltd. Hoshine is a major producer of silicon metal, a feedstock used to make polysilicon, and CBP said it had evidence that workers at the company's facilities in Xinjiang had been subjected to threats and intimidation and were denied freedom of movement. Hoshine did not respond to a message seeking comment.

CBP's enforcement of the trade restriction was sweeping. In response, solar lobbyists pressed the government to tweak its strategy to limit the fallout, while at least one Chinese solar manufacturer said it would invest in new supply chains outside of China.

The U.S. recently started releasing some detained shipments, a development the industry says demonstrates its ability to comply with the new law.

China-headquartered Trina Solar Co. Ltd. said March 4, nine months after CBP issued the detention order, that it was the first module maker to have detained cargo released by the agency. "Trina Solar expedited the products' release due to a strong risk management team and robust internal-auditing infrastructure," the company said in a news release. A company spokesperson did not respond to a message seeking comment.

Analysts at ROTH Capital Partners said CBP appears to have released other shipments belonging to Chinese manufacturers JinkoSolar Holding Co. Ltd. and LONGi Green Energy Technology Co. Ltd. JinkoSolar and LONGi did not respond to messages seeking comment.

"As proven by recent releases of significant amounts of cargo detained under the [withhold release order] process, the industry has addressed the forced labor compliance issues raised by outside parties," the ACP told the U.S. government in the March 11 filing. Given the industry's broader efforts to move supply chains away from Xinjiang, polysilicon should be delisted from a group of sectors needing high-priority enforcement under the Uyghur Forced Labor Prevention Act, the group added.

The solar industry "is uniquely positioned to comment on how the U.S. government's forced labor prevention measures could be improved while facilitating legitimate trade," SEIA said in a separate government filing.

Others view the industry's experience differently, however. The Alliance for American Manufacturing, which represents the United Steelworkers, was critical of the reported release of equipment belonging to LONGi, which has allegedly bought polysilicon from at least three producers that source raw material from Hoshine. The release shows why U.S. lawmakers felt the need to pass the Uyghur Forced Labor Prevention Act, the alliance said.

Importers must meet new standard under law

Under the new law, importers whose shipments are made wholly or in part in Xinjiang will have to prove with "clear and convincing evidence" that their products were not made with forced labor. That is a tougher standard than importers face under withhold release orders, which only require a preponderance of evidence, Eric Gottwald, a trade specialist at the AFL-CIO, said in an interview.

The statements that ACP and SEIA made to the government "are undermined by what I think is a misrepresentation or misunderstanding of the new standard under the Uyghur Forced Labor Prevention Act," Gottwald said. "The problem for the industry here is that their argument [is] that we met that old standard, so everything's good under the [Uyghur Forced Labor Prevention Act]. Well, that doesn't make any sense."

John Smirnow, SEIA's general counsel and vice president of market strategy, said in a statement that CBP "is effectively applying a clear and convincing standard now, and solar importers have shown that they can meet this high standard as evidenced by their goods being released from detention."

ACP did not respond to direct requests for comment.

Other industries do not appear to share SEIA's confidence, however. The National Foreign Trade Council, which represents some of America's biggest companies, told the government that it is not clear what would constitute clear and convincing evidence.

While efforts are underway to create non-China supply chains after tariffs pushed companies in the U.S. to source modules primarily from factories in Southeast Asia, Beijing's position in the global solar industry is still dominant. China produced more than 80% of the world's solar-grade polysilicon in 2021, according to Johannes Bernreuter of Bernreuter Research. The country also makes 99% of the solar industry's silicon wafers, the building blocks of solar modules, Auxin Solar Inc., a California module maker, said in a February filing to the U.S. Commerce Department.

"There's an extraordinary problem linked to the Uyghur region. There's a problem with traceability, and everybody knows this," said Gottwald of the AFL-CIO. "It's a bit alarming that [the solar] industry is calling for CBP just to take them off the priority enforcement list. We just passed this piece of legislation. Congress put them on there for a reason."

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.