By Morgan Brown and Robert Kim
July 7, 2022
The Uyghur Forced Labor Prevention Act (UFLPA) declares that any item made wholly or in part in Xinjiang with forced labor, or by an organization on the UFLPA Entity List, will be banned from importation into the United States. Effective June 21, 2022, U.S. Customs and Border Protection will seize all such items, as well as items imported from other jurisdictions though containing inputs from Xinjiang.
Part 3 of a series investigating risks to importers under the UFLPA.
The alleged use of prison labor in Xinjiang was a driving factor cited in the U.S. government’s passing of the Uyghur Forced Labor Prevention Act (UFLPA). Complex transnational supply chains create challenges in identifying and tracking the origin of source materials that may be tied to prison labor in Xinjiang.
Anhui Huamao Textile Co. Ltd., which is located over 2,000 kilometers (over 1,200 miles) east of Xinjiang, purchased cotton valued at RMB 45 million (approximately $6.75 million USD) from a Xinjiang-based cotton processing company named Xinjiang Lihua (Group) Co., Ltd. in 2019 and 2020, according to documents reviewed by Kharon.
Xinjiang Lihua’s wholly owned subsidiary, Shaya County Lihua Innovation Cotton Industry Co., Ltd., has a cotton processing plant located in the Xinjiang Shaya Prison, according to corporate records as of December 31, 2021. Although it is not clear if any of the cotton Xinjiang Lihua sold to Anhui Huamao came from the prison processing plant, its location in a Xinjiang prison raises concerns about the possible presence of forced labor in their cotton supply chain.
Records reviewed by Kharon show that Anhui Huamao’s cotton products are sent to factories throughout China and exported to numerous countries in Southeast Asia, including Vietnam. According to trade data, between 2017 and 2021, Anhui Huamao sold cotton yarn worth more than $6 million USD to Vietnam-based textile factory Gain Lucky (Viet Nam) Limited. Gain Lucky is a supplier to apparel companies in the U.S., Europe, and Japan.
Anhui Huamao Textile Co. is publicly traded on the Shenzhen Stock Exchange.