How Congress can compel global divestment from China’s forced labor

When Beijing hosted the 2022 Winter Olympics, the world’s attention finally focused on China’s alarming human rights abuses. Since 2017, more than 1 million Uyghurs and other ethnic minorities have disappeared into a vast network of re-education camps in the far west region of Xinjiang, China. It’s part of what the U.S. State Department has labeled “genocide.” Beijing remains undeterred by U.S. criticism, however, and continues to press many thousands of Uyghurs and other ethnic groups into slave labor. 

In December 2021, President Biden signed the Uyghur Forced Labor Prevention Act (UFLPA) to strengthen laws banning forced-labor products from entering the United States. Since then, the U.S. has enjoyed moderate success in seizing banned goods. And Congress has increased appropriations to help U.S Customs and Border Protection (CBP) fully implement the law. 

This was a helpful start. But plenty of goods manufactured through China’s slave labor are still entering the United States. In part, that’s due to an obscure section of U.S. customs law – the “de minimis” threshold for consumer imports – that allows contraband Uyghur products to be shipped directly to U.S. buyers.

The current U.S. de minimis threshold is $800. That means any product valued at less than $800 can simply enter the U.S. without tariffs or scrutiny. This loophole has greatly benefited e-commerce vendors such as Amazon, Ali Express and Shein, since it allows goods produced through Uyghur labor to completely bypass border inspections.

Equally concerning is the CBP’s lack of transparency for bills of lading. Companies can request “manifest confidentiality” from the CBP in order to hide their import data from public view. That leaves competitors and public interest groups unable to adequately monitor imports.

A further challenge is that the UFLPA is applied only to “formal entry” shipments valued at $2,500 or more. As a result, imports of lesser value can also avoid federal oversight.

For the UFLPA to be effective, Congress must plug these holes. But there’s still an overarching question: Why are so many popular global brands continuing to invest in China, particularly in Xinjiang, and prop up Beijing’s slave labor?

The Australian Strategic Policy Institute (ASPI) believes Uyghur labor is now tied to at least 82 well-known global brands, including Apple, BMW, Gap, Huawei, Nike, Samsung, Sony and Volkswagen. If U.S. lawmakers want to thoroughly tackle China’s slave labor, they need to formally identify these corporate bad actors and link them to capital markets sanctions. 

This is strong medicine. But many of the multinational firms complicit in China’s labor abuse continue to raise funds in U.S. capital markets. That gives Congress leverage, since lawmakers could block them from continuing to access America’s financial markets.

It’s helpful that the UFLPA created an “entities list” of companies sourcing goods through Uyghur forced labor. But this list must be expanded to accurately track the companies still profiting from supply chains with murky roots in Xinjiang. 

What matters is hitting these companies in the wallet. Unfortunately, consumer boycotts are hard to organize on a global scale. And customer awareness is also limited because the U.S. doesn’t require country-of-origin labeling for goods sold online. 

The answer is to identify the stocks, exchange-traded funds (ETFs) and mutual funds that include businesses tied to China’s forced labor. This is where Congress holds real leverage since robust legislation could mean pulling these equities and investment products from America’s financial markets.

Companies tied to forced labor (as well as the thousands of index funds containing Chinese companies that benefit from forced labor) should have been targets of the UFLPA. To really compel action, they should now face the threat of being excised from America’s capital markets. Such “forced labor divestment” is a necessary, realistic step to compel multinationals to decide whether to keep sourcing from China’s slave labor (and pay the price) or clean house.

U.S. investors don’t want to support China’s repression of Uyghurs in Xinjiang. It’s time for Congress to force the issue by conditioning access to America’s financial markets on ending corporate complicity in China’s egregious human rights abuses.

Robby Stephany Saunders is vice president for national security at the Coalition for a Prosperous America.