In a highly anticipated move (particularly following recent calls for action by House Ways and Means Democrats),1 on June 24, the White House announced new measures to eliminate goods made with forced labor in the Xinjiang Uyghur Autonomous Region ("Xinjiang") from U.S. clean energy supply chains.2
Section 307
Of particular note, U.S. Customs and Border Protection ("CBP") has issued a Withhold Release Order ("WRO") pursuant to Section 307 of the Tariff Act of 1930 on silica-based products made by Hoshine Silicon Industry Co., Ltd., ("Hoshine") a company located in Xinjiang, as well as its subsidiaries. According to a White House press release, the WRO is based on information reasonably indicating that Hoshine has used forced labor to manufacture silica-based products. As a result, CBP personnel at all U.S. ports of entry have been instructed to immediately begin detaining shipments that contain silica-based products made by Hoshine or materials and goods derived from or produced using those silica-based products.
As noted in prior alerts,3 importers of products subject to the Hoshine WRO may contend, within 3 months after the date of import, that the merchandise is not produced by a prohibited form of labor by submitting (i) a certificate of origin ("Certificate") signed by the foreign seller; and (ii) a detailed statement ("Statement") demonstrating the goods were not manufactured with forced labor. Alternatively, the importer may export the merchandise to a location outside the U.S. within the 3-month detention period.
If the importer fails to either re-export the detained shipment or timely furnish the required Certificate and Statement, or CBP determines that the evidence submitted by the importer does not establish admissibility of the merchandise, the detained shipment will be excluded from entry.
Moreover, if the CBP Commissioner ultimately makes a formal finding that products subject to the Hoshine WRO are being produced with forced labor, CBP port directors may seize the covered merchandise and commence forfeiture proceedings.
Next Steps
The issuance of the Hoshine WRO appears only to be the start of the White House's moves to eliminate forced labor imports from U.S. clean energy supply chains.
In announcing the measure, the White House stated that China's forced labor practices not only "run counter to our values as a nation and expose American consumers to unethical practices," but also "leave American businesses and workers to compete on an uneven playing field by allowing firms to gain advantage over their competitors by exploiting workers and artificially suppressing wages." As such, the White House said that it will continue "maintaining support for the development of transparent and diverse clean energy supply chains at home free of forced labor — and supporting President Biden's commitment to bold climate action, the domestic solar industry, and the jobs this vital industry creates."
As the U.S. Government is aware of allegations detailing the widespread use of forced labor in polysilicon production in Xinjiang, it would not be surprising if the White House ultimately expands the Hoshine WRO to include all silica-based products produced in the region. (In fact, CBP took this same course of action with respect to cotton products from Xinjiang, where it broadened a company-specific WRO to cover subject products from the entire region in less than two months).
Addressing Risks
Given this potential likelihood, U.S. clean energy companies should consider taking steps now to ensure that their supply chains do not include components made with forced labor in Xinjiang.
As we have addressed in a recent alert,4 the U.S. Government offers a number of resources to assist companies in detecting, mitigating, and preventing forced labor in supply chains, such as the U.S. Department of Labor's Comply Chain principles and U.S. State Department's Responsible Sourcing Tool.
Adoption of processes like these to identify risks of forced labor in supply chains, address identified issues, implement lasting solutions, and monitor supplier performance over time will help U.S. clean energy companies ensure that key products will not be subject to a WRO due to forced labor concerns, thereby protecting critical supply chains.
This development is also likely to hasten other policies to offset any negative impact on energy transitions. For example, on June 8, 2021, the U.S. Department of Energy (DOE) announced new policy actions to encourage the manufacturing of battery materials and technologies in the United States, including advanced, lithium-based batteries. The actions followed a 100-day review of advanced batteries directed by President Biden's Executive Order on America's Supply Chains. DOE's actions include: (1) requiring awardees of DOE Science and Energy Programs grants, cooperative agreements, and research and development contracts to substantially manufacture their products in the United States; (2) the release of the National Blueprint for Lithium Batteries 2021-2030, which outlines goals and actions to strengthen the American battery supply chain; (3) the issuance of guidance on using the Advanced Technology Vehicles Manufacturing Loan Program to make loans to establish or expand the manufacturing of advanced technology vehicle batteries in the United States; and (4) the launch of a federal-government wide effort through the Federal Energy Management Program to identify opportunities for deploying battery storage at federal sites and provide technical assistance to federal agencies for battery storage projects. In announcing these actions, Secretary of Energy Jennifer Granholm emphasized the critical role of domestic battery manufacturing: "We're going to need a significant increase in battery production to supercharge America's clean energy future, which means we urgently need to build up our capacity to research, develop, manufacture, and market batteries right here at home." In a similar vein, on June 21, 2021, U.S. Senator Jon Ossoff (D-GA) introduced the Solar Energy Manufacturing for America Act to boost U.S. solar manufacturing by providing tax credits at every stage of the solar manufacturing supply chain, from production of polysilicon to solar cells to fully assembled solar modules.
Footnotes
1 Letter to Acting Commissioner Miller
3 https://www.bakerbotts.com/thought-leadership/publications/2021/april/us-customs-expands-enforcement
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