Close Enough for Government Work
FLETF rumpled the UFLPA Entity List. Does it matter?
When Obamacare was enacted in 2010, it took approximately 381,517 words to get the job done, and those words were not all created equal. As is true with most statutes, there were a few individual provisions, and within those, a few key individual terms of outsize importance to the overall manifesto. In fact, there was just one word that mattered more than every other. Do you remember it?
It was the word “penalty”, as used in Section 1501 of the law, the so-called “individual mandate”. In 2012, the question of the meaning of the word “penalty” reached the Supreme Court. And ultimately, by the deciding vote of just a single Justice, the Court ruled that “penalty” meant “tax”, and the law was deemed constitutional as a result.
That’s a pretty heavy lift for a seven letter word, but it’s also just another day in paradise for a nation of laws. A gnarly democratic process gurgles forth bills that splutter into codified statutes, and we’re governed by the result—the word choices, the punctuation. It’s what makes the law the law. It’s a remarkable (if occasionally terrifying) process, but unquestionably better than the alternative.
Now, if by this point in the post you’re beginning to feel uncomfortable about the tack this is taking, let me just rip that Band-Aid off. Oh yes I will drag you into a no man’s land of etymology and the balance of power in the Federal Government on a Friday afternoon. I wrote this while you were sleeping (and I wanted to be), so grab an iced coffee and buckle up, buttercup. This is important!
There’s a problem—an inconsistency—in some of the key operative language within the UFLPA. I’m not going to say something unsavory slipped into the meat-grinder during the sausage-making that was UFLPA drafting, but you could say that if you wanted to.
Until very recently, this problem was entirely latent. I could have described it to you—if I tied you to your chair first—but the question was wonky, esoteric and purely academic. I trust we both had better things to do. Last month, however, that latent inconsistency became manifest. And ultimately, I settled on two reasons why this merited a dedicated post.
First, it cuts to the heart of the question of whether we can have nice things, like forced labor trade laws that are consistent with the rule of law. And second, the whole episode provides a good excuse for the folks toiling away at FLETF to take a step back and reflect on the highest and best use of their time.
Last month, and in response to considerable external pressure to expand rapidly the scope of the Entity List, FLETF made a policy decision to make the largest expansion of the Entity List since it was created, adding 26 new companies at once. While the Entity List to date has been populated with companies found by FLETF to have engaged in forced labor—both inside and outside Xinjiang—that is actually not the case for these companies.
If you skimmed the DHS press release (which mentions the term “forced labor” sixteen times) you’d be forgiven for thinking these entities were engaged in forced labor. But that’s not what FLETF found. These 26 entities include “cotton traders and warehouse facilities within China”, which “source” (and sometimes sell) cotton from the XUAR.
And with that, I can cut to the chase:
FLETF added these 26 entities to the Entity List on the grounds that they source cotton from the Xinjiang Uyghur Autonomous Region. DHS Press Release.
Sourcing material from Xinjiang does meet a statutory criterion for UFLPA Entity Listing. Pub. L. 117-78 Sec. 2(d)(2)(B)(v).1
But companies on the UFLPA Entity List are only subject to the UFLPA’s presumption when they “produce[]” goods for the U.S. market. Pub. L. 117-78 Sec. 3(a).2
Sourcing—on its own—is not production.3
Therefore, to the extent these companies engage strictly in a buy-sell capacity, they are not subject to the UFLPA presumption of forced labor. They’re just . . . on the UFLPA Entity List.
I can anticipate three reactions to this syllogism, which are all variations on so what?
So what, you might say. Is this discrepancy actually going to be recognized by CBP (or FLETF) such that this distinction might make a difference for any company in the context of enforcement?
Honestly, that is hard to imagine. If CBP stops a shipment, and finds one of these 26 companies in the traceability file for a supply chain in question, you can bet they’ll treat the merchandise as subject to the UFLPA presumption on that basis. After all, these are Entity Listed companies, are they not? And the presumption applies to merchandise from Listed Entities, does it not? The reality is, this distinction is so subtle, and the currents driving UFLPA enforcement are otherwise so strong, that this probably is indeed close enough for government work.
After this Entity List expansion, I was talking with a friend—another devotee of the rule of law, and probably one of six people in Washington who, along with your humble correspondent, recognized and understood this latency both before and after the recent Entity Listings. Do they not understand this? he asked me. Or do they not care what the law says? I’m not sure which is worse.
I’m more sanguine about it, I told him. There are probably a small number of folks in FLETF’s orbit, or within the chief counsel’s office at CBP, who are really good at statutory construction and can see this discrepancy plain as day. But what are they supposed to do? Lay down on the tracks to stop the train? Get raked over the coals for supporting Chinese forced labor because they’re stolidly committed to dictionary definitions? Nah, bro. Because like it or not, this is precisely why we have a judiciary.4
Some countries govern by fiat. Better ones govern by democratic mandate. But the finest of all govern by rule of law. And if “production” becomes to forced labor trade laws what “penalty” was to Obamacare, it’s going to be up to the judiciary to help keep us pointing in the right direction.5
Well, so what, you say. Maybe buying and selling cotton is production. Shouldn’t we want the term to have an expansive definition ? To quote a certain former President, doesn’t it depend on what the meaning of ‘is’ is?
I appreciate your Bill Clinton reference, but to answer your question, we’d have to consider how the term production is used within the statute. As it turns out, this concept of production is rooted in the statute as deeply as every other term you know and love— “wholly or in part”, “rebuttable presumption”, “prohibited merchandise”.
The term originally appears in the text of Section 307—the forced labor import ban—which underlies the UFLPA. That law makes it illegal to import any goods “mined, produced or manufactured” by forced labor. That exact phrase is parroted in Section 3 of the UFLPA, because that’s what the UFLPA’s rebuttable presumption links into.
This is important to keep front of mind, because after a few drinks, we’re liable to start slurring our concepts. We start to think in terms of products that have become “tainted” by forced labor. We start fumbling around for “links” to it, or where “risks” of it might be found. Before you know it, we’re not focused on production at all, but on companies that are just intermediaries, or traders, or shippers, or brokers, or storage units for heaven’s sake and the making of the thing dissipates into a fog of traceability.
But at the end of the day, under this particular law, it’s the production of the thing that counts. That includes the growing of a thing, or the excavating of a thing, or the harvesting of a thing. Also the refining of a thing, and the assembly of a thing, and the processing of a thing. Also its de-scaling, and its weaving, and its hot-dipping. You know, production.
Why is this law so deeply rooted in the concept of actual, hands-on, value-added productive activity?
BECAUSE THAT’S WHERE THE FORCED LABOR IS
Well so what, you might say. Who cares about a bunch of Chinese warehouses and cotton traders anyway? And besides, this is a whole of the supply chain law. These additions to the Entity List should help companies conduct better due diligence.
Maybe you’re right. I’m not rightly sure who’s going to pour one out for Linxi County Fangpei Cotton Buying and Selling Co., Ltd. And maybe companies really will do a better job with due diligence because 26 cotton traders were listed by the U.S. government in May 2024. Maybe?
Here, I’d just like to make one gentle point. I’m going to try and do my moral clarity thing again.
Congress crafted the Entity List because China ships Uyghurs and other ethnic minorities from Xinjiang across the country under forced relocation and labor transfer programs. En masse. These workers have no conceivable means to refuse such transfers, or the work that ensues. They are frequently guarded, constrained in movement, and subject to constant surveillance under threat of harm to themselves or family members at home. Their individual identity, their religion, and their ethnic identity are forcibly reformulated under the cruel weight of totalitarian lies and power. The companies they work for need to be added to the Entity List because they’re engaging in forced labor, and so that the goods they produce will no longer be sold and exported into the U.S. market. That’s the model. FLETF’s role is indispensable, and has a moral dimension to it. Or it can, if FLETF approaches the challenge correctly.
Only FLETF can populate the Entity List with Chinese firms it finds to be engaged in forced labor.6 Such evidence can be hard to come by, but the U.S. government better equipped than anyone for the task. If FLETF wants to list purchasers of Xinjiang content, it has the authority and discretion to do so. But the truth is, we kind of already have that part of the equation buttoned down?
Of course cotton traders in China source cotton from Xinjiang. And so do thousands of other entities in China that FLETF hasn’t gotten around to researching yet, and thousands more outside China that can’t be entity listed. Knowledge of this fact is why CBP and members of the trade have invested such significant resources into isotopic testing capability. Of all the challenges in UFLPA enforcement, knowing where the Xinjiang cotton is located happens to be just about the only problem we can regard as—basically, for the most part—solved. Thank you Oritain.
As I’ve complained noted before, the UFLPA Entity Lists are a hodgepodge of adjacent, overlapping, arcane and non-mutually exclusive categories. That just means that it’s incumbent on FLETF to do the hard work of asking itself what is the highest and best use of its time. As we approach the 2-year anniversary of the UFLPA later this month, it’s worth remembering that the law has now reached 25% of its lifespan (it will sunset in 8 years, absent extension). At some point, more care and attention should be given to redrafting and delineating the UFLPA Entity Lists, and ensuring that an intentionally tailored set of consequences attaches to each one.
That might seem like a lot of work for the sake of a few words, but it’s just another day in paradise under the rule of law.
UFLPA Sec. 2(d)(2)(B)(v): a list of facilities and entities, including the Xinjiang Production and Construction Corps, that source material from the Xinjiang Uyghur Autonomous Region or from persons working with the government of the Xinjiang Uyghur Autonomous Region or the Xinjiang Production and Construction Corps for purposes of the ‘‘poverty alleviation’’ program or the ‘‘pairing-assistance’’ program or any other government labor scheme that uses forced labor[.]” (Emphasis added)
(a) IN GENERAL.—The Commissioner of U.S. Customs and Border Protection shall, except as provided by subsection (b), apply a presumption that, with respect to any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China or produced by an entity on a list required by clause (i), (ii), (iv) or (v) of section 2(d)(2)(B)[.]” (Emphasis added.)
Marbury v. Madison haters, don’t @ me.
Google: production definition
pro·duc·tion /prəˈdəkSH(ə)n/
noun
the action of making or manufacturing from components or raw materials, or the process of being so manufactured.
"the production of chemical weapons"
Similar: manufacture, manufacturing, making, producing, construction
Fortunately, the constitutionality of the law isn’t at stake.
Equally important is rigorously evaluating claims by listed firms that they’ve terminated participation in such programs or that the actioned intel was wrong in the first place.