US bans seven Chinese companies on forced labour grounds.

American authorities continue to ramp up their enforcement of the ban on the import of goods made by forced labour in general, and the Uyghur Forced Labor Prevention Act (UFLPA) in particular.

In the last ten months US Customs and Border Protection (CBP) has detained 3,121 shipments worth over $1bn under the UFLPA. They have also added seven companies*, and multiple subsidiaries, to the UFLPA Entity List. Inclusion on the Entity List effectively means that it is prohibited to import goods made, farmed or mined by the company in question. The ban extends to goods containing materials produced by the company. The seven companies have combined revenues of over $73bn.

If you are unfamiliar with the ban on the import of goods made by forced labour and the Uyghur Forced Labor Prevention Act, read our advisory here.

Companies banned on forced labour grounds

In this article we examine the seven companies in question.

1.       Camel Group Co., Ltd. $1.1bn revenue Camel Group is a significant battery manufacturer. It’s 7,000 employees can produce 32 million lead-acid car batteries and enough lithium-ion batteries to power 40,000 electric cars, every year.

The company claims to export to over 80 countries and sell to brands including Audi, Ford, GM, Honda, Hyundai, Nissan, Peugeot, and VW. Its batteries are also used in machines ranging from fork-lifts to golf carts.

2.       Ninestar Corporation and its eight Zhuhai-based subsidiaries[1]. Ninestar claims to be the fourth largest printer manufacturer in the world. It’s subsidiary Geehy Semiconductor manufacturers computer chips and is also sanctioned. With revenues of $3.5bn, Ninestar is one of the largest companies to have been targeted on forced labour grounds by the US.

Ninestar majority owns Lexmark International and sells printers under the Pantum brand. In addition to its own brand printers, Ninestar manufactures replacement chips and toner cartridges for use in other manufacturers’ printers. These are sold under the G&G, Lemero and Smart Mate brands.

Geehy Semiconductor’s chips are designed for a wide array of applications, including automotive, smartwatches, earphones, printers and printer cartridges.

Ninestar joins a list of 13 entities that, the US Government asserts, work with the government of Xinjiang to transfer victims of forced labour to other parts of China for exploitation. Its inclusion serves to remind that UFLPA covers all of China, not just Xinjiang.

3.       Xinjiang Zhongtai Chemical Co. Ltd (XZC). Another large company, with revenues of $7.7bn and 22,000 employees. XZC makes large volumes of PVC resin, caustic soda, viscose fiber and calcium carbide. Its products are consumed in a wide range of industries, in particular apparel, flooring and building materials.

The CBP’s decision to sanction XZC is likely informed by an extensive report published by Sheffield Hallam University, which documented labour practices in Xinjiang’s PVC industry and its export, for final conversion into flooring, in Vietnam.

Xinjiang is a major producer of PVC and XZC is only the third largest manufacturer in the region. We therefore anticipate that other manufacturers will be sanctioned in due course.

4.      Chenguang Biotech Group Co., Ltd. and its subsidiary Chenguang Biotechnology Group Yanqi Co. Ltd.  Chenguang’s 2,000 employees make a wide variety of food colourings, spices and extracts, medical extracts and natural sweeteners. These products are refined from plants including ginger, cumin and black and capsicum peppers.

Xinjiang is a significant producer of paprika and Chenguang deals extensively in the spice. We anticipate further action by the CBP aimed at Chinese almonds, peppers, paprika and walnuts.

5.      Xinjiang Tianmian Foundation Textile Co (XTFT), formerly called Xinjiang Tianhong/Texhong Foundation Textile Co., Ltd. XTFT was part of the $3.2bn revenue Texhong International Group, though the group claims to have sold it in 2021. XTFT is a cotton milling company. In 2021, Sheffield Hallam University researchers identified that Texhong was an active participant in the Chinese Government’s labour transfer programmes in Xinjiang.

6.      Xinjiang Tianshan Wool Textile Co. Ltd., manufactures cashmere clothing, including articles it sells under its own “SS”, “GTS” and “Tianshan” brands. Professor Laura Murphy of Sheffield Hallam University asserts that the company has publicly celebrated its participation in labour transfer schemes and “touts the ‘two-faced’ self-criticisms and condemnations of others, reminiscent of the Cultural Revolution, that their employees are forced to engage in, which they claim ideologically transforms the workers.”

7.      Xinjiang Zhongtai Group Co. Ltd is a very large conglomerate, with revenues of $68bn and 45,000 employees. Its main products are caustic soda, PVC and viscose. Its subsidiaries also supply aluminium and graphene. A recent Washington Post report found that “the company openly embraced Uyghur labour transfers as recently as 2020” and that it supplies aluminium and graphene to electric car manufacturers. Xinjiang Zongtai is the parent company of Xinjiang Zhongtai Chemical Co. Ltd, which was placed onto the US list in June 2023 (see above).

Expanding forced labour risk

Credible reports suggest that up to a million Uyghurs and other Xinjiang ethnic groups are being exploited in conditions of forced labour via the Chinese Government’s “re-education” and “labour transfer” programmes. See our previous advisory for further information.

The diverse range of companies covered by the latest rounds of sanctions illustrates the depth and size of Xinjiang’s industrial base and, by extension, the wide range of goods that maybe produced by victims of forced labour in the region.

Victims of China’s alleged forced labour programmes are also relocated from Xinjiang to other parts of the country. Ninestars’ main factories are located close to Macau, nearly 3,000km from Xinjiang, for example.

Companies need to take action

Companies need to conduct due diligence of their supply chains for human rights risk, consistent with the CBP’s guidelines.  This should include assessment and monitoring of suppliers.

Human rights risk is not contained to Xinjiang, or indeed China. Due diligence should extend across global supply chains to reflect this reality.

For support on human rights due diligence, contact us.

*Note that this advisory was updated on the 28th September 2023, with the addition of three recently sanctioned companies.

[1] Zhuhai Ninestar Information Technology Co. Ltd., Zhuhai Pantum Electronics Co. Ltd., Zhuhai Apex Microelectronics Co., Ltd., Geehy Semiconductor Co., Ltd., Zhuhai Pu-Tech Industrial Co., Ltd., Zhuhai G&G Digital Technology Co., Ltd., Zhuhai Seine Printing Technology Co., Ltd., and Zhuhai Ninestar Management Co., Ltd