Companies Sourcing From China Face ‘Severe UFLPA Compliance Dilemma’
Jasmin Malik Chua
7 min read
For Scott Nova, executive director of the Worker Rights Consortium, few incidents illustrate the so-called “failure” of social audits as well as the 2013 collapse of Rana Plaza, which killed 1,134 garment workers and injured or maimed thousands more just outside the Bangladeshi capital of Dhaka.
The disaster, he told the Congressional-Executive Commission on China (CECC) in Washington, D.C. on Tuesday, was the “culmination of two decades of scandalous recklessness by U.S. and European apparel brands and their local partners, resulting in dozens of mass fatality fires and structural failures in factories across that country’s sprawling garment sector.”
“After Rana Plaza, when legitimate building safety inspections finally began in Bangladesh under the auspices of the Accord on Fire and Building Safety, the inspectors did not identify a single factory in a multi-story building, out of more than 1,600 factories inspected, that had proper fire exits,” Nova said. “All these factories had been the subject of numerous social audits conducted for Western brands and retailers. The factories were death traps before these social audits, and they were death traps afterward.”
The question posed by the CECC hearing—whether social audits can be relied upon to root out forced labor in Chinese supply chains—seemed almost rhetorical. If social auditing is ineffective even in the best of circumstances, as witnesses testified, then how can they be relied on in the worst-case scenario of China?
Representative Christopher H. Smith, the New Jersey Republican who chairs the commission, set the tone at the outset by warning compliance departments to “take note.” While many corporations appear to be relying on social audits to shield themselves from potential liability, he said, they are “works of near fiction” when it comes to portraying the state of labor in China.
“In a country such as the People’s Republic of China, where independent labor unions do not exist, social controls prevent the free exchange of information, and recently passed national security laws make the disclosure of information that portrays China in a bad light a national security offense, social audits are particularly laughable,” Smith said.
Indeed, audits in the Xinjiang Uyghur Autonomous Region, the locus of what the U.S. government says is China’s genocidal crackdown on predominantly Muslim ethnic minorities, have been essentially made “illegal” by the Chinese government, said Thea Lee, deputy undersecretary for international affairs at the Labor Department.
“Any audit occurring in Xinjiang cannot be conducted without government oversight, making objective worker interviews free from reprisal an impossibility,” she said. “As the U.S. government highlighted in the Xinjiang Business Advisory published in 2021 and updated in September of 2023, auditor interviews with workers cannot be relied upon given pervasive surveillance, the threat of detainment and evidence of workers’ fear of sharing accurate information. Moreover, auditors have reportedly been detained, harassed, threatened or stopped at the airport.”
In 2020, dozens of compliance firms, including Bureau Veritas, RINA, Sumerra, TÜV SÜD and Worldwide Responsible Accredited Production withdrew their services from Xinjiang, citing the challenges of performing their jobs in a hostile police-state environment.
While social audits can be a useful tool to assess compliance at a “particular point in time,” Lee said that they must be part of a comprehensive social compliance system that promotes trade unions, freedom of association and worker voice to be rendered effective. Better yet are binding and enforceable agreements between brands and their suppliers, in which workers are also a party, such as the Dindigul Agreement to Eliminate Gender-Based Violence and Harassment, which Indian manufacturer Eastman Exports, its subsidiary Nachi Apparels and H&M Group forged in the aftermath of a worker’s rape and murder in 2022.
Because all of this is “impossible” in Xinjiang when workers are trapped in state-sponsored forced labor, the only responsible option left to companies is “not to operate in that atmosphere,” she said. “The goal is to convince the Chinese government to stop these practices.”
With forced labor bans in Canada and Mexico, forthcoming slavery-busting regulations in the European Union and burgeoning due diligence measures in Australia and elsewhere, Lee said that it should at some point become untenable for Beijing to “continue business as usual.”
But the problem of social audits extends beyond Xinjiang to other parts of China, where the forced mobilization of Uyghurs as “poverty-alleviated laborers” is a growing problem, said Adrian Zenz, a senior fellow in China studies at the Victims of Communism Memorial Foundation. By his count, these coerced labor transfers increased by nearly 38 percent from 27,600 in 2022 to 38,000 in 2023. Any company sourcing in China must be considered at risk of being tainted by Uyghur forced labor, he said, adding that divestment is the only ethical path forward.
“Many auditing companies are either unaware or pretend to not realize that the very nature of state-imposed forced labor and labor transfers means that forced labor cannot be reliably assessed at workplaces; you would have to conduct an audit of the entire social environment,” Zenz said. “While there have been efforts by companies to divest from supply chains linked to Uyghur forced labor, these efforts remain insufficient [because] supply chain transparency remains limited.”
Any proactive measures are also stymied by “obfuscation efforts” by Chinese authorities, who are criminalizing the collection of data essential to performing due diligence, he added. The Uyghur Forced Labor Prevention Act, or UFLPA, Zenz said, needs to require companies whose supply chains involve an “elevated risk of connection” to products made in whole or in part with Uyghur forced labor to disclose their supply chains to the raw material level.
Nova agreed that since labor transfers have been utilized by factories in different parts of China, it “must be assumed” that the “risk of complicity” in the mobilization scheme “exists at virtually any production facility in the country.”
This gives rise to two questions, he said. One, are companies importing goods made in whole or in part in China into the United States inspecting the relevant suppliers to ensure that no transferred labor has been involved? And two, what methods are their auditors using to conduct credible and effective inspections, given the “prevailing climate of repression of rights of speech and assembly across China and the extremely sensitive nature of any discussion of Uyghur forced labor”?
“There is a notable dearth of public information that speaks to these urgent questions,” Nova said. “Most corporations sourcing from China are publicly silent on how they are complying in this area. And we are unaware of any auditing firm that has provided any transparency as to the methods it utilizes to verify compliance.”
Lee said that she has yet to encounter an effective way of addressing the challenge of monitoring forced Uyghur migration to other Chinese provinces. Though determining whether a subcontractor is using transferred labor “ought to be possible,” it remains “very difficult,” she said.
“I know that on the Forced Labor Enforcement Task Force, we’ve faced a lot of trouble trying to get verifiable information about the labor transfer programs,” Lee said. “There’s information sometimes provided on Chinese websites and then it disappears. And a lot of information is not as fresh as we’d like because there isn’t free access inside of China to workplaces, to workers, to be able to assess effectively who the workers are and where they’ve come from.”
It’s for all these reasons that corporations sourcing from China face a “severe UFLPA compliance dilemma,” even if they have made every effort to exclude inputs from Xinjiang in their supply chains, Nova said.
“Full compliance requires viable methods to ensure there are no transferred Uyghur labor at suppliers outside the XUAR,” he said. “The U.S. government should be asking corporations importing goods from China to demonstrate that they have such methods. Any corporation that can’t do so must then explain how they know, with respect to any given import on a given day, that they are not breaking the law.”
