The average T-shirt bought online or at any fast fashion store has a complicated origin story.
The direct supplier to that brand has a second-tier supplier, who in turn has its own third- and fourth-tier suppliers, all the way back to the supplier of the raw material itself — in this case cotton. Because today’s global supply networks are so multilayered, it’s difficult to see the trees through the proverbial forest, and the result can be the obfuscation of societal ills such as forced labor somewhere along that value chain.
A supply chain built around low cost and outsourcing spurred massive growth in global trade over the past 30 years. To participate and profit, companies have built connections with a constellation of hundreds, often thousands, of different suppliers around the world to produce and deliver the goods that arrive on our shores.
This has been great for price and working capital optimization. But it has eroded accountability, trust and transparency across that vast global network of suppliers. For example, it gets very hard fairly quickly for that retailer to track, let alone document, the supply chain that has placed a T-shirt on its customers’ backs.
Until recently, the inner workings and on-the-ground-conditions of ever-more-complex global supply chains have been hidden from the average consumer, and in most cases, even from the companies that rely upon them. From the cotton in that T-shirt to the spices in our kitchens and solar panels lining our roofs, forced labor — modern slavery — is often at the foundation of countless everyday products.
But the veil is being lifted. Recent broad exposure of these conditions and practices in a number of countries — and revelations concerning forced labor camps in China — are driving consumer and regulatory demands for change. New legislation is about to change the game entirely.
In December 2021, President Biden signed into law The Uyghur Forced Labor Prevention Act (UFLPA) with wide bipartisan support. The law, which went into effect last month, is focused on preventing shipments of goods into the United States produced by forced labor in China’s Xinjiang province, where it is reported that more than 1 million Uyghurs have been relocated, persecuted based on their religious and cultural identity and compelled to work in labor camps.
The UFLPA institutes a “rebuttable presumption” that all goods manufactured or sourced even partially in Xinjiang are the product of forced labor and therefore not entitled to entry at U.S. ports. In other words, any shipments from Xinjiang are presumed guilty until proven innocent by clear and convincing evidence. This shifts the burden of proof dramatically from the government regulator to the regulated private sector. That is huge and will necessitate serious discussions among C-Suites about business risk and corporate social responsibility. Companies will need to implement rigorous operational protocols, establish trusted networks of suppliers, and examine every single link and ingredient of a product on its journey from source through manufacturing to shipment, import and sale — or face a penalty.
The ripple effects from the law’s implementation will come as a shock to the public because of its potential impact on everyday consumer products. It will also embody severe challenges both for Customs and Border Protection, the nation’s border management agency, as it ramps up enforcement at an unprecedented scale, and the private sector that became liable under the law starting June 21. An extensive “mapping report” prepared by my company, Altana, shows more than 700,000 companies and 183 countries potentially impacted by UFLPA.
Some enterprises may continue to claim they can’t possibly trace the origins of goods through opaque international supply chain networks. But that is simply no longer true — nor is it an acceptable response.
We have the technology and ability today — using artificial intelligence — to build dynamic, living models of the global supply chain. We can track billions of production and shipment data points across hundreds of millions of businesses, enabling us to bring opaque global supply chain networks into the light.
UFLPA is a catalyst for positive change. By placing the burden of proof on importers and introducing material business risk, the law creates an opportunity and incentive for organizations to invest meaningfully in supply chain visibility and integrity rather than simple ESG box-checking. And the UFLPA is only the beginning. Germany and the EU already are working on even broader legislation that, together with expanding sanctions against Russia, will require enhanced transparency and trust across global supply chains.
I’m reminded of what happened in the wake of 9/11. The mandate to protect against terrorist attacks and insulate the international financial system from terrorist financing upended global trade. What seemed impossible at the time quickly became possible and standard. Today, we’re all better off for it. We should keep that experience in mind as the implications of UFLPA — and countering modern slavery generally — make themselves felt over the next several years.
Alan Bersin is co-founder and chairman at AI supply chain company, Altana. Prior to that, he was Commissioner of U.S. Customs and Border Protection and Assistant Secretary, and Chief Diplomatic Officer for the U.S. Department of Homeland Security during the Obama administration. He also served as U. S. Attorney in San Diego and “border czar” for the U.S./Mexico Border during the Clinton administration.