The Trump administration barred all cotton and tomato products from China's Xinjiang region over allegations of human rights abuses against ethnic minorities, spelling potentially large supply chain consequences for U.S. companies that source from the region.
The U.S. Department of Homeland Security on Jan. 13 issued a withhold release order under the authority of Section 307 of the Tariff Act of 1930 against cotton and cotton products and tomatoes sourced from the Xinjiang region in western China. The U.S. imported $9 billion worth of cotton and cotton products from China as a whole in 2020, along with roughly $10 million in tomatoes.
"These enforcement actions send a crystal clear message to the trade community: Know your supply chains," Mark Morgan, acting U.S. Customs and Border Protection commissioner, told reporters on a call Jan. 13.
The dollar value of such products sourced from Xinjiang is not known, DHS officials said, but Xinjiang accounts for about 20% of the world's cotton supply, according to a July 2020 report by the Center for Strategic and International Studies, a nonpartisan research organization in Washington, D.C.
Morgan said an investigation by Customs and Border Protection found that forced labor is used in the region's production of apparel, textiles, tomato seeds and tomato sauce.
The measure requires apparel brands and other importing companies to provide chain-of-custody documents at U.S. ports of entry to prove they are not using forced labor in their supply chain. Experts told S&P Global Market Intelligence in 2020 that the supply chains of U.S. apparel and technology companies, including Nike Inc., Amazon.com Inc. and Apple Inc., could be at risk from enhanced regulatory and trade impositions from Washington against Beijing.
"I think this is going to put big-name brands in a very tight spot," Nina Gardner, who advises companies on corporate social responsibility for the consulting firm Strategy International and is a professor at Johns Hopkins University, said in an interview. "Since most of the cotton in China is produced in Xinjiang, it will be very difficult to have forced-labor-free products of any kind if they use cotton in their supply chain."
The U.S. has accused the Chinese government of forcing the ethnic minority Uighurs, most of whom are Muslim, into unpaid labor to produce industrial inputs or finished products, mainly in the apparel and technology industries.
Beijing has adamantly denied allegations of forced labor. Foreign Ministry spokesman Wang Wenbin said a September 2020 U.S. bill threatening sanctions "maliciously slandered the human rights situation in Xinjiang," citing progress in the region's economic development. "The so-called problem of forced labor is totally a lie fabricated by some organizations and personnel in the United States and the West,” Wang told reporters in a September 2020 briefing.
The order marks the latest in a series of sanctions by the Trump administration on China over the allegations of Uighur abuses. The most recent was a Nov. 30, 2020, withhold release order issued against cotton products made by the Xinjiang Production and Construction Corps, a state-owned economic entity in the Xinjiang region that not only produces cotton and other agricultural goods but also serves as a paramilitary organization, according to the U.S. State Department. The DHS issued nine Section 307 orders in fiscal 2020 on goods that it alleged were made using forced labor in China.
The U.S. departments of State, Treasury, Commerce and Homeland Security in July 2020 issued an advisory to U.S. companies warning of the risk of importing products that may have been made with forced labor in Xinjiang.
The Biden administration's policies on supply chain restrictions will likely be in line with what the Trump White House has pursued, Julia Friedlander, senior fellow and deputy director of the GeoEconomics Center at the Atlantic Council, said in an interview. "This will put pressure on U.S. companies operating in the region, ones with big names."