UFLPA Entity Listing: A Closer Look
Entity Listing is still relatively inconsequential. No better time to study it.
On June 12, 2023, the Forced Labor Enforcement Task Force added two new entities to the so-called UFLPA Entity List: a Xinjiang-based company called Xinjiang Zhongtai Chemical Co., Ltd., and another Chinese company called Ninestar Corporation (not located in Xinjiang), along with eight of its subsidiaries located in Zuhai City (also not located in Xinjiang).
These were the first UFLPA Entity listings since the UFLPA took effect almost a year before. Consistent with my commitment in these pages not only to report on significant UFLPA developments, but to help contextualize them, I’ve spent a significant amount of time over the last 25 days trying to figure out (like the late Bear Vasquez of “double rainbow” fame"): What does it mean?!?!
I’ve consulted the smartest minds on the UFLPA and forced labor trade enforcement beat. I’ve spoken to experts both in and outside of the government, both on and off the record. My team has scoured previously published research, and conducted fresh open records research to try and reverse-engineer these listings, so we can better understand what the Forced Labor Enforcement Task Force (FLETF) considers actionable.
And yet, the more I examined the evidence, the more I realized I really am like Bear Vasquez in that video, God bless him. Staring at a pair of ephemeral objects (the new Entity Listings). Things that others might look at and remark about casually in passing. Yet I find myself searching, probably in vain, for some deeper cosmic insight that I’m sure must be present.
The UFLPA Entity List should matter quite a lot. After all, it ostensibly accounts for half of the law’s coverage. The UFLPA rebuttable presumption of forced labor applies to goods with a supply chain link to Xinjiang OR to a UFLPA Listed Entity. There are definitely hundreds, and probably thousands of Chinese companies that have participated in the social programs of concern that the U.S. deems forced labor and likely satisfy the conditions for listing. The Entity Listing process is not a political one. It involves an extensive vetting process, including legal review by attorneys from multiple federal agencies. So, the UFLPA Entity List should matter and we have learned 4 interesting things from this round of Entity Listings that I think you should know about, which is why I’ve taken to write this post.
And yet.
Here’s the TL;DR. The UFLPA Entity List doesn’t really matter. At least not in current form. As the kids say: no shade, just facts. So before I get into the four things I think you should know about the initial round of Entity Listings, here first are four reasons why the UFLPA Entity List remains relatively inconsequential.
Why The UFLPA Entity List Doesn’t Really Matter . . .
First, the List is growing at a glacial pace. At the current rate of two listings per year, the listing speed could increase tenfold without much risk of impact. If you blink . . . it’s safe to say you won’t miss anything.
Second, much of the List is redundant to the other coverage of the law. Many of the current listings (including one of the two recently listed entities) are located in Xinjiang, meaning the entities are already subject to the UFLPA rebuttable presumption. There is literally no legal consequence from listing a Xinjiang based entity. To be clear, this is not a mistake on the part of the FLETF; this redundancy is baked into the text of the UFLPA itself, which (inexplicably) requires FLETF to include some Xinjiang-based entities on the UFLPA Entity List.
Third, the List is all but irrelevant for purposes of CBP’s UFLPA enforcement. CBP can—and does—target all sorts of goods for UFLPA enforcement that have no actual or purported link to the UFLPA Entity List. I would conjecture that more than 95% of all UFLPA enforcement by CBP is targeting imports with possible supply chain links to the Xinjiang region, rather than UFLPA Listed Entities. So, knowing that you don’t do business with any UFLPA Listed Entities offers essentially no benefit either to avoid enforcement, or obtain a successful resolution of enforcement. CBP’s “Shadow List”—that is, the foreign producers actually being targeted for detention activity—remains the more important list, and remains entirely unknown.
The last reason why the UFLPA Entity List isn’t all that significant is because, in most instances and for most companies, there isn’t much to be done following an Entity Listing. The listing will be metabolized by all the denied party screening software providers, and that’s it. You know the name of a company you can’t do business with. Game over.
. . . and Why You Should Care Anyway
The counterpoint to these reasons why the UFLPA Entity List doesn’t really matter is that it could matter, very much, and without warning. Certainly, if you’re a company that sells to the U.S. market and you get listed, it will matter to you. Or, if you’re an importer, and one of your critical suppliers is listed, the Entity Listing process will matter enormously.
And so, in the spirit of embracing the wisdom of Martin Niemöller—and at the risk of coming off like Bear Vasquez and his double rainbow—here are four things you should know about the UFLPA Entity Listing Process following the recent round of listings, the good, the bad and the strange.
1. The UFLPA Entity Lists Are Reeeeally Amorphous
In theory, there is a certain logic to having a UFLPA Entity List. Forced Uyghur labor does not occur exclusively in the Xinjiang Uyghur Autonomous Region. So, the UFLPA could not capture all forced Uyghur labor occurring in China simply by imposing a regional presumption of forced labor on goods produced in Xinjiang.
In addition to the estimated million or so Uyghurs and other ethnic minorities who have been placed in detention camps in Xinjiang, many of which may be co-located with production facilities, many millions more Uyghurs and other ethnic minorities have been forcibly transferred from Xinjiang to other provinces in China. This may be done for “graduates” of re-education through labor programs, or under the auspices of a “poverty alleviation” program targeting rural “surplus laborers”.
While not every Chinese poverty alleviation program involves forced labor, for Uyghurs and ethnic minorities targeted by the programs of social control and ethnic elimination in Xinjiang, such labor transfers are quite literally an offer you can’t refuse.
Because it can be tricky to identify companies outside of Xinjiang that may have taken a transfer of Uyghur workers under one of these programs, there is a plausible rationale for having a UFLPA Entity List, consisting of Chinese entities known to the U.S. government as being participants in such programs. But if that’s the platonic form of the UFLPA Entity List, with apologies, I now must ask you look gaze upon the lists the law created instead:
(i) a list of entities in the Xinjiang Uyghur Autonomous Region that mine, produce, or manufacture wholly or in part any goods, wares, articles and merchandise with forced labor;
(ii) a list of entities working with the government of the Xinjiang Uyghur Autonomous Region to recruit, transport, transfer, harbor or receive forced labor or Uyghurs, Kazakhs, Kyrgyz, or members of other persecuted groups out of the Xinjiang Uyghur Autonomous Region;
(iii) a list of products mined, produced, or manufactured wholly or in part by entities on the list required by clause (i) or (ii);
(iv) a list of entities that exported products described in clause (iii) from the People’s Republic of China into the United States;
(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;
Pub. L. 117-78 Sec. 2(d)(2)(B)
If you think these lists seem like a box of misfit Legos, I would not disagree with you. Why create a dedicated list (i) of companies using forced labor in Xinjiang, when the UFLPA already applies to every business entity within the region? What does it mean (ii) to recruit, transfer, harbor or receive “forced labor”? Why are exporters included on the list, when only companies involved in a “mining” “production” or “manufacture” role are in scope of the U.S. forced labor import ban to begin with? What does list (v) even intend to cover, and was it translated from ancient Greek?
The Forced Labor Enforcement Task Force has my sincere sympathy. These are the lists they were given to work with, and the lists’ amorphous nature helps no one. It certainly doesn’t make the listing process very easy for FLETF. In turn, that makes it difficult for companies trying to conduct due diligence on suppliers prophylactically. Exactly what conduct is actionable?
If the UFLPA ever undergoes a statutory evolution, clarifying and refining the Entity Lists would be high on my wish list.
2. FLETF Took a Conservative Approach in Listing Xinjiang Zhongtai Chemical Co., Ltd.
One of the two companies listed on June 12, 2023 is Xinjiang Zhongtai Chemical Co., Ltd. In order to understand why this company was listed, we first canvassed published English-language reporting on the Company. We did not have to look far.
In a June 2022 report called “Built on Repression” published by Sheffield Hallam University (SHU), a number of significant allegations were made about Xinjiang Zhongtai Chemical Co., Ltd., which is supposedly the largest individual PVC manufacturer in all of China.
But Xinjiang Zhongtai Chemical does not operate as a standalone enterprise. According to SHU, It is one of at least 43 different subsidiaries of Xinjiang Zhongtai Group, a “wholly state-owned company” that also counts 37 joint stock companies among its assets, and is “directly supervised by the State-owned Assets Supervision and Administration Commission” of the XUAR.
Interestingly, nearly all of the forced labor allegations contained within the Built on Repression report pertain to the Zhongtai Group, rather than just Zhongtai Chemical.
The SHU report contains four full pages of footnoted allegations of participation in forced labor by the Zhongtai Group, including participation by subsidiaries other than Zhongtai Chemical. I’m not going to recap all these allegations here because they are so extensive, but they include transfers of more than 5,000 workers within Xinjiang over a multi-year span (per SHU: “more than practically any other company described in academic or journalistic accounts of labor transfers in the XUAR”), the establishment and administration of multiple vocational colleges where students were subjected to ideological training on religious and ethnic conformity, and even an active role in helping to provide surveillance on Uyghurs in their own homes.
The immediate question is why would FLETF list only one subsidiary of Xinjiang Zhongtai Group, (Xinjiang Zhongtai Chemical), if a large body of evidence points, in this instance, to participation in forced labor by the Zhongtai Group?
In one respect, this is an academic question, because both Xinjiang Zhongtai Group and Xinjiang Zhongtai Chemical are based in . . . Xinjiang, so they’re already covered by the geographic rebuttable presumption. But if you want to understand what FLETF considers actionable—for example, if you’re trying to conduct due diligence on your supply chain and want to understand what conduct is actionable under the UFLPA—it’s still a question worth considering.
I think the lesson here is that FLETF appears to have taken a conservative approach to listing, in order not leave the United States vulnerable to a legal challenge. The conservative decision—listing only one company for which there is evidence of direct participation in a forced labor program, rather than an entire group—is both prudent and commendable from a policy standpoint.
If you don’t have evidence that every company within a group of companies participated in forced labor, the whole group should not be listed. It’s a small detail, but a noteworthy one, and I think the second important takeaway from this round of Entity Listing.
3. FLTEF May Have Added Xinjiang Zhongtai Chemical Co. Ltd. to the Wrong UFLPA Entity List
One of the puzzling features of the June 12 pair of UFLPA Entity Listings is the decision to add Xinjiang Zhongtai Chomical to List (ii).
As a reminder, the scope of List (ii) includes “entities working with the government of the Xinjiang Uyghur Autonomous Region to recruit, transport, transfer, harbor or receive forced labor or Uyghurs, Kazakhs, Kyrgyz, or members of other persecuted groups out of the Xinjiang Uyghur Autonomous Region[.]” Pub. L. 117-78 Sec. 2(d)(2)(B)(ii). (Emphasis added.)
Interestingly, among all the allegations against Zhongtai Chemical (and Zhongtai Group), one allegation is glaringly absent. We have not been able to identify any published allegation that Zhongtai Chemical (or Zhongtai Group) has ever participated in or facilitated a transfer of Uyghur workers out of Xinjiang to another location in China. In fact, it is not even clear that Zhongtai Chemical has any operations outside of Xinjiang.
Here again, this is substantially an academic question. There is no legal distinction of consequence between lists. (So much so that, in common parlance we refer only to a single UFLPA Entity List, despite there technically being four.) Nevertheless, it’s weird! I see a few potential explanations, which I’ll present from somewhat less likely to somewhat more likely.
It’s possible that FLETF had actual evidence that Xinjiang Zhongtai Chemical participated in a transfer of Uyghur workers out of Xinjiang, but that information is not publicly accessible. This strikes me as relatively unlikely given the volume of publicly information available about Zhongtai generally, and given number of actors in the UFLPA ecosystem who are deeply invested in identifying and exposing links of this nature. If there is evidence of Zhongtai participating a transfer of Uyghur workers out of Xinjiang, such evidence would have been turned up by now.
Alternatively, it’s possible that FLETF simply mis-read or misunderstood the published allegations against Xinjiang Zhongtai. We all make mistakes! The Sheffield Hallam Report does describe several labor transfers involving Xinjiang Zhongtai . . . but these are all transfers within Xinjiang, and not out of Xinjiang. That said, it doesn’t seem super likely that FLETF made a simple mistake of fact given that the Listing Process is an extensively considered multi-agency, multi-stakeholder decision with multiple levels of legal review.
But if there isn’t any unpublished evidence of labor transfers out of Xinjiang, and if this isn’t a mistake, then the only other possible explanation is that FLETF thinks the text of list (ii) includes intra-Xinjiang transfers. Which, ok fine, who cares, right? My answer is: if so, then that is a a very loose and/or super-expansive reading of the amorphous text of list (ii). Maybe it doesn’t matter now, but it very well could down the road. We’ll continue to monitor.
4. The Ninestar Listing Is a Mystery
If the Xinjiang Zhongtai Chemical listing evinces a few small puzzles (why not list Zhongtai Group?, and why add to list (ii)?), then the addition of Ninestar Corporation to the UFLPA Entity List under list (ii) is a larger puzzle.
In this instance, FLETF made the affirmative decision to list not just a large company (a top 500 publicly traded Chinese company), but also included 8 of Ninestar’s subsidiaries in a Zhuhai City, which is located in Guangdong province in Eastern China. In a press release announcing the listing decision, the Department of Homeland Security shared a small piece of information that contains a clue as to its thinking. The subsidiaries were listed, “as a result of the companies’ participation in business practices that target members of persecuted groups, including Uyghur minorities in the PRC”.
With that clue in hand, I challenged the best minds working on the UFLPA to track down the evidence of participation in a labor transfers of Uyghurs. We know what to look for, where to look, and how to look for it. Could anyone find the smoking gun? Reader, if evidence justifying the Entity Listing of Ninestar exists, so far as I can tell, no one outside of the FLETF has claimed ownership of it, or been able to produce it.
Interestingly, there is abundant evidence of Ninestar’s participation in poverty alleviation programs, and there is also significant evidence of the role that Zhuhai City plays in poverty alleviation programs involving ethnic minorities, but importantly not involving Uyghurs, and not involving labor transfers out of Xinjiang.
Ninestar’s prospectus describes that the company supported labor transfers or poverty alleviation for Derung and Neu ethnic minorities out of Nujiang, in Yunnan province, and for Miao, Bouyei, Dong, Tujia and Yi minority groups out of Guizhou province. But nothing involving Uyghurs or other persecuted minorities listed in the UFLPA, and nothing involving Xinjiang.
We found articles published in China Daily describing Zhuhai City’s poverty alleviation programs which indicate re-location and re-education of ethnic minorities specifically from Nujiang. In 2020, Zhuhai City established a train to facilitate these poverty alleviation projects—it is almost exclusively for minority migrant workers to take them to and from Zhuhai and Nujiang.
Additionally, a Zhuhai City government webpage appears to indicate that the city transferred over 2,000 people from rural areas to the city for labor purposes, 9,000 people were organized to train them labor force skills, and another 9,000 people were newly recruited from the province’s labor force. But again, as far as anyone has been able to turn up, no evidence of the kinds of labor transfers that would be actionable under the UFLPA Entity Listing process have turned up.
Because I’m not an expert on the ethics of Chinese social programs, I reached out to experts in the field to collect some insight. In short, the view is that labor transfers and poverty alleviation can be legitimate and necessary economic practices. These programs become problematic when enforced against individual choices, and the coercive nature is documented. In short, there is not yet any scholarship demonstrating that poverty alleviation programs supporting individuals in Nujiang, Yunnan or Guizhou involve forced labor.
Bottom line, it’s not clear why FLETF added Ninestar and its subsidiaries to List (ii), but there are a small number of mutually exclusive potential explanations. One is that FLTEF had other actionable information that does not today exist in the public realm (for any number of reasons). Or maybe, FLETF has misinterpreted the available facts, or has adopted an aggressive legal interpretation not yet clearly supported by the scholarship on forced labor in China.
Whatever the explanation, we’re continuing to keep our eyes open. If someone reading this post has more information about Ninestar and wants to share, I’m all ears.
UFLPA enforcement is only poised to grow. Better to learn while we still have the chance.