Ever since US President Joe Biden signed the Uygur Forced Labour Prevention Act into law last month, the apparel industry in China’s manufacturing hub of Guangdong province has been engulfed in a haze of uncertainty and, for some, panic.
Even though they are located about 3,300km (2,000 miles) away from Xinjiang – the far-west region of China that has become embroiled in international controversies in recent years – exporters and factory owners in the southern coastal province are already bearing the brunt of the new law, which looks to have sweeping implications on global trade.
The ban is an outlier among US import restrictions, which typically limit goods based on specific product types or individual suppliers, rather than entire regions.
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Apparel exporters told the South China Morning Post they have received, or were at least expecting, requirements from their foreign customers to provide a paper trail documenting the entire supply chain of their goods – from the origin of the cotton at the bale level to the final production of the finished product.
The requirements also include showing proof that the supply chain does not involve forced labour in Xinjiang, which the US government will require the American importers to disclose after the ban on Xinjiang imports takes effect in June.
“If we ask the upstream suppliers for such proof, it would seem like that we are endorsing the law, and we would face great public pressure in China if we were to be reported or exposed, so no one wants to do it,” a cross-border e-commerce company manager based in Guangdong said, on condition of anonymity because of the sensitivity of the matter.
“But if we don’t request such certification, we will face great uncertainties on the US side too.”
Large multinational companies will not be the only ones caught up in the political maelstrom resulting from the new law, according to industry insiders. An increasing number of small exporters in China – most of them with little to no resources to cope with the political risks – are finding themselves in the crossfire, forced to take sides.
The experts say the US law will strangle exports in various Chinese industries, forcing foreign companies to move their supply chain entirely away from Xinjiang, or perhaps even China.
Cotton farming in Xinjiang is at the centre of many forced-labour accusations – allegations that Beijing has repeatedly denied – and it is an agricultural pillar in the region. Xinjiang’s annual cotton output is about 5.13 million tonnes, accounting for 89 per cent of the country’s total cotton production last year, according to the National Bureau of Statistics.
But Xinjiang does not export much raw cotton or yarn itself. Instead, most is consumed locally or sold to other provinces and then made into cloth, garments or other textile products for both domestic and overseas markets.
As a result, the region is a key source of raw material for China’s entire textile industry, and the complexity of the supply chain makes it difficult to trace goods to their exact origin.
“Apparel exporters must prove to US importers where the fabrics come from, the fabric factories need proof from greige fabric factories, the greige fabric factories need proof of the origin of the yarn, and the yarn factories need proof of the origin of the cotton,” said a manager at a cotton factory in central Xinjiang, who also asked not to be identified due to the sensitive nature of the issue.
And each step involves numerous businesses taking sides, forcing them to juggle political considerations and economic needs. These decisions can affect the livelihoods of many people.
As the most upstream player, the cotton industry in Xinjiang has been under pressure since the forced-labour allegations started to ferment in 2020, the cotton factory manager said.
A survey in July 2021 of more than 90 textile manufacturers across the country, by the China Cotton Association, showed that some factories were using more imported products and reducing their reliance on Xinjiang cotton.
But it still accounted for 86.7 per cent of cotton consumption across the country, while imported cotton accounted for just 9.8 per cent.
“It depends on the requirements of their foreign customers,” the manager explained. “If they’re not that strict, they will continue to buy Xinjiang cotton. If they’re very strict, they will have to avoid buying from us.”
For some makers of apparel products such as sportswear, it’s easier to entirely avoid using Xinjiang cotton, as the major component in those clothes is polyester, not cotton.
“But for products such as jeans, cotton is the predominant raw material, so it would be very hard to entirely cut off from Xinjiang,” the Guangdong-based e-commerce manager said.
Another textile exporter in Guangdong said a British customer has already asked that the company present signed declarations that no component of their goods is related to forced labour in Xinjiang.
“The basic principle is the company must not sign it,” an employee of the company said. “And then verbally reply to the guests that we can’t sign and try to convince them.”
But even though it is a sensitive and risky decision, signing such self-declarations and providing proof of step-by-step source tracing might be the only option for exporters looking to keep their business afloat once the law is strictly enforced.
An official certificate of origin issued by the Chinese government attests only that a certain product is made in China, and it does not specify which region.
“The origin is usually a separate customs territory, and it’s different from administrative or geographical regions within a country. So, there is no mechanism to do that [certify whether the origin of a product is a specific province],” said an official from China Council for the Promotion of International Trade, which operates under the Ministry of Commerce and issues the certificate of origin.
Enforcing the law is almost impossible, said Tao Jingzhou, an international arbitrator who has practised in Beijing, Hong Kong and London.
As opposed to the US government proving the involvement of forced labour in the production of their goods, the law requires importers to prove to the US government that there is no forced-labour component – a “rebuttable presumption”, as it is called in the legislation.
“This reverse burden of proof will result in mission impossible,” Tao said.
Meanwhile, it is questionable whether the Chinese government will allow international inspection companies to conduct independent audits in Xinjiang, where Uygurs are reportedly subject to intense surveillance.
According to human rights groups and a United Nations committee, up to 1 million Uygur Muslims – the region’s largest ethnic group – have been detained in “re-education centres” there and subjected to indoctrination, torture and forced labour. Beijing has repeatedly denied these allegations and said its measures in Xinjiang are meant to prevent terrorism.
“So, this is a dilemma: whether there will be any kind of certification firm recognised by the US government to certify the non-existence of forced labour, and on the other hand, whether the Chinese government will allow such as companies to conduct the certification process in China,” Tao said.
For textile and apparel exporters in Guangdong, many are still hoping that their foreign customers will continue to lobby their governments on the issue, while others are seeking alternative export destinations.
“All textile and garment exporters are facing the problem,” said a Chinese analyst familiar with the textile export supply chain. “The value of China’s textile exports already fell by about US$15 billion last year, and this year is expected to be even worse.”
Regardless of whether more countries follow Washington’s lead, experts say the worst outcome would be a mass exodus of foreign companies moving their operations out of Xinjiang, or out of China altogether.
“That’s easier said than done,” a Beijing-based European diplomat said on condition of anonymity. “Where else can the foreign companies move to? Not [all countries] can provide the same support infrastructure as China.”
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