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Companies Brace for Impact of New Forced Labor Law - The New York Times
Jun 22, 2022 2 mins, 33 secs

WASHINGTON — A sweeping new law aimed at cracking down on Chinese forced labor could have significant — and unanticipated — ramifications for American companies and consumers.

The law, which went into effect on Tuesday, bars products from entering the United States if they have any links to Xinjiang, the far-western region where the Chinese authorities have carried out an extensive crackdown on Uyghur Muslims and other ethnic minorities.

That could affect a wide range of products, including those using any raw materials from Xinjiang or with a connection to the type of Chinese labor and poverty alleviation programs the U.S.

border, until importers can produce evidence that their supply chains do not touch on Xinjiang, or involve slavery or coercive practices.

Evan Smith, the chief executive at the supply chain technology company Altana AI, said his company calculated that roughly a million companies globally would be subject to enforcement action under the full letter of the law, out of about 10 million businesses worldwide that are buying, selling or manufacturing physical things.

Such a scenario is likely to cause headaches for companies and sow further supply chain disruptions.

projects while they investigated their supply chains.

But trade experts say the connections between the region and global supply chains are far more expansive than just those industries.

Direct exports to the United States from the Xinjiang region — where the Chinese authorities have detained more than a million ethnic minorities and sent many more into government-organized labor transfer programs — have fallen off drastically in the past few years.

But a wide range of raw materials and components currently find their way into factories in China or in other countries, and then to the United States, trade experts say.

The Chinese government disputes the presence of forced labor in Xinjiang, saying that all employment is voluntary.

law remain to be seen, it could end up transforming global supply chains.

operations, continuing to use Xinjiang materials for the China market or maintain partnerships with entities that operate there.

Instead of moving their operations out of China, some multinationals are investing in alternative sources of supply, and making new investments in mapping their supply chains.

The highly intricate and interconnected global supply chain is in upheaval.

At the heart of the problem is the complexity and opacity of the supply chains that run through China, the world’s largest manufacturing hub.

The average carmaker has about 250 tier-one suppliers but exposure to 18,000 other companies across its full supply chain, according to research by McKinsey & Company, the consultancy firm.

Adding to the complexity is reluctance by the Chinese authorities and some companies to cooperate with outside investigations into their supply chains.

China tightly controls access to Xinjiang, making it impossible for outside researchers to monitor conditions on the ground, especially since the start of the coronavirus pandemic.

Any company with a supply chain running through China has to consider the risk that its products could face scrutiny or detentions, he wrote, adding, “There is almost no company in the United States currently truly prepared for this type of enforcement.”

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