Experts: Cotton Traders' and Warehouses' Addition to Entity List May Lead to Lawsuits

In a podcast called "The Trade Guys," from the Center for Strategic and International Studies, Kelley Drye customs attorney John Foote pointed out the incongruity of applying an import ban on goods produced with forced labor and putting firms on an entity list used to apply that law that don't employ Uyghurs but are cotton traders or warehouses that received cotton from Xinjiang.

"These companies are not involved in any kind of production, mining or agriculture," he said.

Podcast host Bill Reinsch, a senior fellow at CSIS, replied, "I smell litigation."

In a follow-up blog post, Foote wrote about the addition to the UFLPA entity list of 26 companies that source Xinjiang cotton, which is a reason listed in the statute to earn a listing, but noted that the presumption only applies to production.

Still, he acknowledged this is a distinction without a difference, given that a factory that makes fabric could buy from one of these firms, and that factory does produce a good. "If CBP stops a shipment, and finds one of these 26 companies in the traceability file for a supply chain in question, you can bet they’ll treat the merchandise as subject to the UFLPA presumption on that basis. After all, these are Entity Listed companies, are they not? And the presumption applies to merchandise from Listed Entities, does it not? The reality is, this distinction is so subtle, and the currents driving UFLPA enforcement are otherwise so strong, that this probably is indeed close enough for government work," he wrote.

He suggested a reader of his blog might say that knowing these companies are barred could help companies conduct better due diligence.

But he said the bigger point is that UFLPA itself already bans the import of fabric or clothing that contains Xinjiang cotton, and the Forced Labor Enforcement Task Force didn't need to add cotton traders to the list to stop those goods.

"Of course, cotton traders in China source cotton from Xinjiang. And so do thousands of other entities in China that FLETF hasn’t gotten around to researching yet, and thousands more outside China that can’t be entity-listed. Knowledge of this fact is why CBP and members of the trade have invested such significant resources into isotopic testing capability. Of all the challenges in UFLPA enforcement, knowing where the Xinjiang cotton is located happens to be just about the only problem we can regard as -- basically, for the most part -- solved. Thank you Oritain," he wrote, referring to the origin testing company.

Instead, he suggested, FLETF should be spending its time trying to find proof that certain companies outside of the region employ Uyghurs and other ethnic minorities from Xinjiang, sent there under the excuse of poverty alleviation. "Such evidence can be hard to come by, but the U.S. government [is] better equipped than anyone for the task," he wrote.

In the podcast, Reinsch and co-host Scott Miller asked what observers can expect on future UFLPA enforcement.

Foote said he would be quite surprised if the government failed to identify additional "high priority categories" past cotton, tomatoes and polysilicon this month. He said car parts, aluminum or seafood could be selected, after reporting about Uyghur involvement in all three sectors.

He said ideally, the companies identified by the Outlaw Ocean Project in eastern China that process seafood, and employ minorities from Xinijang, should be added to the entity list. "In theory, that's what the UFLPA entity list is best designed to capture," he said, adding, "the evidence is actually quite compelling."