Customs Lawyer Says UFLPA Entity List Creates 'High-Stakes and Error-Prone' Environment
A lack of specifics and dire consequences for listing companies on the Uyghur Forced Labor Prevention Act Entity List creates "an enormously high-stakes and error-prone" environment, customs lawyer John Foote of Kelley Drye said April 14 in a blog post.
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It's "high-stakes because, once listed, a Chinese company is effectively foreclosed not just from exporting to the U.S. directly, but from participating in any supply chain destined for the United States," said Foote, writing in response to a letter from the Congressional-Executive Commission on China regarding the enforcement of the UFLPA (see 2304110034).
On the other hand, the Entity List is "error-prone, because the current structure suffers from lack of formal guidance regarding what will be considered actionable," Foote said. There is no helpful information "on what level of detail is needed for an allegation to be considered actionable, or how current such information need to be," he said. "What if a company had investments in Xinjiang in 2013? What if it sold those investments? What if there is just reason to think it might have transacted with entities in Xinjiang but the proof is scanty?"
One solution Foote proposes is to focus on evidence that is "reasonably current" and confirmed by at least two sources.
Foote points out that the UFLPA doesn't define what a "firm" is for listing purposes. So, he said, "How will related corporate entities be handled? Parent companies and subsidiaries? Off-shore subsidiaries?" Foote proposed that the Entity List prioritize listing firms that are "engaged in the state-sponsored labor transfer program," as described in the letter from the CECC, which "would be a good guiding principle in regulations that should be published to govern the UFLPA Entity Listing process."
He said that the Entity List should be limited to the businesses "directly involved in participating in the state-sponsored labor transfer program," leaving out parent companies and other subsidiaries and instead signaling them for "targeted detention" rather than going the aggressive route with putting them on the Entity List.
"I am confident that even the nongovernmental organizations and activists would agree, there are more than enough targets that fit these reasonable, rule-of-law style constraints," Foote said. "Firms that do not meet these criteria should not be UFLPA Entity Listed."