Biden Administration Targets Xinjiang-based Solar Companies over Labor Allegations

On June 24, 2021, US Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) pursuant to 19 USC 1307 against Xinjiang, China-based Hoshine Silicon Industry Co. Ltd. and its subsidiaries (Hoshine). The WRO instructs CPB personnel to detain shipments of silica-based products produced by Hoshine and its subsidiaries, including “materials and goods (such as polysilicon) derived from or produced using those silica-based products.” On the same day, the US Commerce Department’s Bureau of Industry and Security (BIS) added Hoshine Silicon Industry (Shanshan) Co., Ltd  and four other Xinjiang-based companies to the Entity List based on allegations of their participation “in the practice of, accepting, or utilizing forced labor” in their production processes. On June 23, 2021, the Department of Labor (DOL) published a Federal Register notice updating its List of Goods Produced by Child Labor or Forced Labor  (TVPRA List) to include polysilicon from China. Meanwhile, the US Senate Foreign Relations Committee (SFRC) advanced a bill that, if passed, would impose additional restrictions on the importation of goods from China’s Xinjiang Province. CBP WRO According to the CBP announcement, the WRO is “based on information reasonably indicating that Hoshine uses forced labor to manufacture silica-based products.” Hoshine is a major supplier of materials used in solar panel production globally. Pursuant to a WRO, importers must either export detained shipments or submit, within three months, a certificate of origin and detailed statement demonstrating the merchandise does not fulfill the criteria of 19 USC 1307. If CBP determines the proof submitted is insufficient, it will exclude the shipment. Where CBP finds “probable cause” that goods or materials fulfill the criteria of 19 USC 1307, it will publish a formal “Finding” in the Federal Register. (Steptoe has discussed the WRO process in greater detail here.) The latest WRO follows a series of CBP actions targeting alleged instances of forced labor, several of which concerned China. In January 2021, CBP issued a WRO against cotton and tomato products produced in the Xinjiang Province. In December 2020, CBP issued a WRO against cotton products made by Xinjiang Production and Construction Corps, which was previously named as a Specially Designated National (SDN) by the US Treasury Department’s Office of Foreign Assets Control (OFAC) in July 2020. Entity List Meanwhile, the US Commerce Department’s Bureau of Industry and Security (BIS) added a Hoshine subsidiary and four other Xinjiang-based companies to the Entity List based on allegations of their participation “in the practice of, accepting, or utilizing forced labor” in their production processes. The companies are:

• Hoshine Silicon Industry (Shanshan) Co., Ltd.;
• Xinjiang Daqo New Energy Co., Ltd.;
• Xinjiang East Hope Nonferrous Metals Co., Ltd.;
• Xinjiang GCL New Energy Material Technology Co., Ltd.; and
• Xinjiang Production and Construction Corps.

  A BIS license requirement now applies to all items subject to the Export Administration Regulations (EAR) exported, re-exported, or transferred (in-country) to the five companies. BIS will apply a license policy of a case-by-case review for certain items identified under Export Control Classification Number (ECCNs) listed in the Federal Register notice. This includes items designated as EAR 99 that are described in the Note to ECCN 1A995 (items for protection against chemical or biological agents that are consumer goods, packaged for retail sale or personal use, or medical products) as well as items that are necessary to detect, identify and treat infectious disease. Other license applications will be reviewed under a policy of presumption of denial. The Entity List also makes the five companies ineligible for license exceptions in the EAR that would otherwise apply to exports to China. According to the Commerce Department announcement, BIS has added 53 persons to the Entity List since October 2019 in connection with China’s Xinjiang Province. Department of Labor and Congress Under the US Trafficking Victims Protection Reauthorization Act of 2005 (TVPRA), DOL must develop a list of goods that it has reason to believe are produced by child labor or forced labor as described in relevant international standards.  This list is normally issued every two years; the June 23 update falls outside of its regular publication schedule. The TVPRA List provides the US government with a mechanism for calling attention to allegations of labor practices worldwide and to assist companies in performing supply chain due diligence. The last TVPRA List, published in September 2020, included gloves, hair products, textiles, thread/yarn, and tomato products produced in China’s Xinjiang Province. Other products such as cotton and footwear were previously added to the TVPRA List. Separately, the SFRC advanced by voice vote the Uyghur Forced Labor Prevention Act (S. 65). The bill would impose, among other things, a rebuttable import ban on all products from the Xinjiang Province and calls for economic sanctions on individuals in connection with forced labor. As a result of these and other recent US government actions, companies in the relevant industries may wish to take a fresh look at their existing compliance programs and supply chain due diligence processes, including sanctions and export control risks. Companies inside or outside of China that could be impacted by these measures may consider what steps could be taken to address the risk of supply chain disruption as a result of the most recent US government actions and likely additional similar action in the future. For more information on these developments, contact a member of Steptoe’s Economic Sanctions, Export Controls, or Trade Policy & Negotiations practices.  

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