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This New Import Law Will Hurt US Consumers

Today the the U.S., suffering from high inflation caused by a lack of supplies, is launching the dumbest sanction regime ever:

A new law, the Uyghur Forced Labor Prevention Act produce documentation

The 12 million Uighurs live predominantly in the south of China’s Xinjiang province. The area is arid and there is not enough water for the growing population. Over the years this had led to poverty, social unrest and, with the help of some Saudi educated Wahhabi preachers, to terrorism against non-Wahhabis.

The Chinese government had launched a large scale program to solve the problem once and for all. It subsidized companies to move production facilities to Xinjiang. For geographic reasons these are now mostly in the northern part of Xinjiang. The government also organized large camps for vocational and language training. After people went through those they were offered jobs in the new factories where they work in exchange for normal wages.

The U.S. anti-China propaganda campaign claims that these Uighur people were forced to take up their new jobs and calls that ‘forced labor’. It is not.

Working in some industry far from home is normal in China. It is the reason why each year during the Spring Festival season 300 million  people in China travel to reunite with their families.

Real forced labor is what one sees in the U.S. prison industry where prisoner have no choice but to work for a few pennies which the prison will in the end regain due to absurd prices for small necessities prisoners have to pay for.

It is doubtful that the Biden administration will not apply the new law to many more products.

Domestic producers competing with Chinese products can complain to the commerce department which would then have to detain imports at the border, launch an investigation and could eventually seize the products.

Auxin, a small U.S. producer of solar panels, did exactly that in a tariff case causing chaos in the industry:

The investigation will cut expected solar installations by 46 percent for 2022 and 2023 and could cost more than 100,000 solar jobs should the department impose the tariffs, according to an analysis released yesterday by the Solar Energy Industries Association (SEIA), which organized the congressional meetings.

The probe is “already having a pretty devastating impact,” SEIA President and CEO Abigail Ross Hopper told The Climate 202.

The new law will replace a Withhold Release Order (WRO) which the U.S. Custom and Border Protection (CBP) issued under the Trump administration in January 2021. The WRO applied to cotton products sourced from Xinjiang and has led to some chaos in the apparels industry.

The new UFLPA law is much wider and will hit many more products. Many commodities like lithium and nickel are produced in Xinjiang and flow into many downstream products:

Xinjiang Nonferrous and its subsidiaries have partnered with the Chinese authorities to take in hundreds of such [Uyghur] workers in recent years, according to articles displayed proudly in Chinese on the company’s social media account. These workers were eventually sent to work in the conglomerate’s mines, a smelter and factories that produce some of the most highly sought minerals on earth, including lithium, nickel, manganese, beryllium, copper and gold.

It is difficult to trace precisely where the metals produced by Xinjiang Nonferrous go. But some have been exported to the United States, Germany, the United Kingdom, Japan, South Korea and India, according to company statements and customs records. And some have gone to large Chinese battery makers, who in turn, directly or indirectly, supply major American entities, including automakers, energy companies and the U.S. military, according to Chinese news reports.

The bureaucratic effort importers in the solar and other industry will have to make to avoid getting punished under the new law is extensive:

CBP released UFLPA guidelines last week that includes a section on polysilicon imports. In order to comply with the UFLPA, CBP said solar companies must:

  • Provide complete supply chain documentation that lists all entities involved in the exported good.
  • Provide a flow chart mapping each step in production and identify the region where each material originated.
  • Provide a list of all entities associated with each step of production, even if the exporting company did not directly work with them.

The CBP guidelines also state that solar companies that source polysilicon both from within Xinjiang and outside the region risk being subject to detention, as it may be more difficult to verify the products did not co-mingle with Xinjiang polysilicon at any point in the manufacturing process.

For small importers it will be impossible to do the above. Only big companies can afford to research and provide all that data and to take the risk of importing products that may get confiscated at the border. They will of course ask their customers to pay for all that.

For the U.S. consumer this does not only mean higher prices but likely less access to products they need or want. The U.S. industry is not in state where it can provide on the scale that China can.

To avoid the scrutiny Chinese producers may eventually move their factories. But they will move to countries in South Asia and not to the United States.

Why the ‘green agenda’ Biden administration thought that this is a smart move is beyond me.

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