Caught between a rock and a hard place: Mapping your supply chain

Mapping your supply chain from finished products through multiple tiers has become an important function within supply chain operations. The idea of mapping global suppliers took root, particularly after the pandemic, to identify and address potential vulnerabilities and risks at every link and tier in the chain. This is no easy task and often requires the use of software and services that identify supplier networks and connections.

Uyghur Forced Labor Prevention Act (UFLPA)

In 2021, the U.S. passed the Uyghur Forced Labor Prevention Act (UFLPA)—another reason, among many, to map global supply chains. Because the UFLPA law presumes that any goods or materials originating from China’s Xinjiang Uyghur Autonomous Region (XUAR) are made with forced labor, you must overcome this presumption with clear and convincing evidence to be able to enter your shipments through U.S. Customs. The only way to comply is to map and document every link in the supply chain. For apparel importers, this means from the cotton fields to processing, textile production, apparel manufacturing, and all labor involved along the way. This new U.S. regulation digs deep into China’s supply chains, and the Chinese government has recently retaliated because this meddling was thought to be extraterritorial.

Extraterritoriality

Extraterritoriality is the legal principle by which a nation asserts its authority, laws, or jurisdiction in a foreign country. In this case, it is the U.S. asserting import laws on Chinese suppliers.

The Chinese government recently passed two new laws that have U.S. trade professionals alarmed. The Chinese 834 and 835 regulations are supposed to protect Chinese supply chains from intrusion and sabotage by foreign countries—extraterritorialism.  These new laws restrict foreign countries, companies, and individuals from investigating the origin of raw materials, parts, and finished products manufactured, grown, or mined in China, creating an opaque shield for any company mapping its supply chain. The Chinese government intends to protect the sovereignty of Chinese companies from extraterritoriality—the application of U.S. laws on Chinese domestic industry.

The problem is that now U.S. import regulations for goods such as textiles, especially cotton, electronics, tomato products—anything that may originate in Xinjiang Province—must be mapped, documented, and confirmed that these goods are not made by forced labor. If this cannot be proven, the goods will not be allowed to enter the U.S. But the new Chinese laws will not allow this mapping and documentation. So U.S. importers are caught between a rock and a hard place. 

Denied entry into the U.S.

Companies caught in this scenario, where they cannot map the origins of their supply chains and are denied entry into the U.S., must arrange for the return of the goods or for destruction of the goods under supervision by U.S. Customs.

China has also imposed countermeasures against the United States by placing 10 U.S. companies on an export control list and barring Chinese government agencies from purchasing products from 46 other U.S. companies.

All of this tit-for-tat trade war action may seem like Washington policy folly, but it is causing real impact to thousands of U.S. importers. China is now playing hardball in the trade wars.

On one side is a rock, and on the other side is a hard place. Importers are stuck in the middle until our trade relationship with China improves or U.S. importers start sourcing in other countries or at home.

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