The Uyghur Forced Labor Prevent Act (UFLPA), which has been in effect since June of 2022, should be top of mind for any organization that has suppliers in China. The UFLPA puts a burden on companies to ensure materials and parts used in their products are not associated with forced labor in the Xinjiang region of China. Currently, The Department of Homeland Security (DHS) has chosen to target four high-risk sections of goods: apparel, cotton, tomatoes, polysilicon, and most recently aluminum.
How will UFLPA be enforced? Customs and Border Projection (CBP) will seize any shipments they suspect are in violation of UFLPA. Those shipments will then be considered guilty until proven innocent. To avoid violations, companies must expand their visibility into multi-tier suppliers—immediately. This is where a combination of multi-tier mapping and supplier risk assessments can help give companies the visibility they need.
In this Q&A, Resilinc’s Senior Director of Product and Data Shahzaib Khan explains why UFLPA should be taken seriously, and what solutions Resilinc has developed specifically to help our clients prevent and navigate risk related to UFLPA violations.
Resilinc: When did UFLPA come onto your radar?
Shahzaib: This act was signed into a law in December 2021 and went into effect in June 2022. Keep in mind that in mid 2022 supply chain issues were also contributing to inflation, so the government wasn’t totally focused on the implementation of UFLPA. Plus, there was the midterm election coming up. But some of our customers knew that once we were done with the elections, the government (especially CBP), would start doing more on the implementation and enforcement side. Many came to us and asked what we were doing, or what we could do, to help.
Resilinc: And where did you start, in terms of offering solutions to help navigate the UFLPA?
Shahzaib: We were already working on Autonomous AI Mapping when we learned that our customers were worried about UFLPA, so I started looking into how this type of mapping could help address the issue—quickly. Autonomous mapping basically takes a supplier and then breaks that supplier into multiple supplier layers, down to the nth-Tier. For example, you’ll get a quick snapshot of all the tiers of the supplier network, including where all raw materials are sourced from. If you want to be compliant with UFLPA, you have to know where your suppliers are and where their suppliers are.
Resilinc: How does Autonomous AI Mapping provide visibility for organizations that are concerned about UFLPA violations?
Shahzaib: Let’s say you have a supplier named ACME and it provides you with electronic parts. You know where all of ACME’s manufacturing locations are but nothing beyond that. Is that enough for UFLPA? No.
You have to know who ACME’s suppliers are and where they are located. And, if those suppliers have suppliers, you have to know who and where they are as well. And so on. Essentially, you have to know the multi-tier, deep network of a supplier and from there you can identify if any of these suppliers have locations in the Xinjiang region. For example, it’s possible that your part is coming from Malaysia, but some raw materials (used to make that part) were sourced from Xinjiang, China. That kind of violation you can identify through autonomous mapping.
Customers came to us with a list of suppliers that provide electronics parts with polysilicon—a potential raw material. Then, we used autonomous AI mapping for quick visibility into those suppliers’ networks, multi-tier deep. With autonomous AI mapping, we can identify tier-locations and sub-tier supplier’s locations — which is critical for UFLPA compliance.
The law says that any item associated with the Xinjiang region in China will not be permitted entry into the US and could be seized at the border. This includes even the smallest parts or raw materials like polysilicon or cotton. Imagine the impact on your supply chain!
Resilinc: Many companies – including our competitors – are touting autonomous AI mapping as the only mapping solution needed for visibility. But really we need to have a way to validate what the AI puts forth, right?
Shahzaib: Correct. Resilinc’s AI Mapping solution allows you to rapidly gain visibility into your “most likely” supply chain network by leveraging over a decade of supplier intelligence harnessed from public domain sources. We also clean and normalize the data. That said, it still hasn’t been validated by the supplier.
To have true visibility into your supplier network we recommend a hybrid approach: leveraging AI mapping and then validating those results directly from your suppliers using Supplier Validated Multi-Tier Mapping. Resilinc has over 12 years of supplier-validated mapping data, spanning 1 million sites and 4 million parts. We are currently the only solution provider out there that has this type of data.
For example, let’s say you have a supplier with 200 facilities around the world. Autonomous mapping will assume that all your parts come from those 200 facilities. That’s a lot of noise for you to deal with. However, through validated multi-tier mapping, you would be able to confirm which of those 200 sites is actually producing the parts you source. It’s actionable and reliable data
Resilinc: In addition to autonomous and multi-tier mapping, what else should organizations be doing to mitigate risk for UFLPA compliance?
Shahzaib: Mapping is the foundation, but the next pillar is continuous monitoring for news and updates related to the UFLPA. You cannot just map your network and walk away. You have to continuously refresh the mapping data and monitor for any news or events that could signal potential risk. For example, a new company or industry could be added to the sanction list or perhaps you onboard a new supplier and need visibility into its supplier network.
Beyond this, companies should conduct ongoing supplier risk assessments as well as work to validate data and information directly from the supplier. This is how our customers progress towards being more proactive in their supply chain risk management program. I’m pleased to report that Resilinc has created a custom UFLPA Assessment that can be sent directly to your suppliers.
In the assessment, suppliers will answer questions such as, “Do your sub-suppliers manufacture goods in the Xinjiang region?” and “Do you maintain certificates of origin from your suppliers?” The answers to these questions can then be used to give you proof of due diligence since the answers come directly from the suppliers themselves.
Moving forward we’re looking to develop an entire dashboard dedicated to UFLPA, where customers can monitor any news, check supplier status, and download playbooks or paperwork related to violations or lack thereof.
Resilinc: You mentioned polysilicon earlier. Solar panels in particular have been affected due to the polysilicon used in their production. What other specific products or industries are being impacted due to this flag on polysilicon?
Shahzaib: Solar panels are a very obvious polysilicon-based product and we’ll for sure see a lot of articles about the impact on the solar industry. Our customers, which include some of the largest hi-tech organizations out there, are mainly worried about electronic parts because 10% of the polysilicon supply is used in electronic parts and more commodities might get added to the UFLPA list. Beyond that we’ll see impacts to the automotive, aerospace, and healthcare industries. All of these industries use parts that contain polysilicon.
Resilinc: Do you think similar legislation will show up in different countries in the future?
Shahzaib: Yes, and it’s one of the top priorities on our customer’s to-do lists to get solutions that will help them with compliance and regulatory related issues going forward. A lot of countries are moving forward with legislation to ensure ethical and environmentally friendly supply chains.
As an example, in January of this year (2023) the German Supply Chain Due Diligence Act went into effect. The act aims to make supply chains more transparent, boost human rights, and environmental protection. The solutions we are offering for UFLPA can be applied to the German Supply Chain Due Diligence Act and the National Defense Authorization Act as well. And we are continuing to build out more solutions to help mitigate supply chain risk for these existing and new compliance laws.
Shahzaib Khan is Resilinc’s Senior Director of Product and Data, and can be reached at [email protected]