U.S. Ban on Cotton From China’s Xinjiang Region Could Disrupt Sleep Products Supply Chain

Trade data shows that China produces 22% of the world’s cotton, of which more than 80% comes from the Xinjiang Uyghur Autonomous Region. Earlier this year, U.S. Customs and Border Protection began enforcing a Withhold Release Order regarding cotton produced in XUAR. The WRO could have a significant impact on the mattress and other sleep products supply chain.

The order is based on information that cotton products were produced at some stage in the supply chain using detainee, prison or forced labor in the XUAR. U.S. law prohibits the importation of merchandise produced, wholly or in part, by convict labor, forced labor, and/or indentured labor, including forced or indentured child labor.

In taking this action, CBP stated that it “will not tolerate the Chinese government’s exploitation of modern slavery” to make goods that when imported “hurt American businesses that respect human rights and also expose unsuspecting consumers to unethical purchases.”

Under the WRO, Customs may detain imports of cotton and products containing cotton. Importers then have 3 months to demonstrate that the imports did not exploit forced labor at any point in their supply chain. The order applies to products that contain cotton and cotton blends, including recycled cotton fiber.

CBP also notes that cotton produced in Xinjiang is shipped to other areas of China and to third countries for processing into fabric and other intermediate and finished products, all of which is covered by the WRO. Finally, CBP states that the WRO applies to goods entered into U.S. commerce from a foreign trade zone or a bonded warehouse.

If Customs detains an entry of imported cotton-containing products under the WRO because at least some of the cotton may have originated in the XUAR, the importer has three months either to export the goods to another country or prove that the imported merchandise was not produced in whole or in part in the XUAR using forced labor.

According to a series of FAQs released by the CBP, supporting documentation should trace the supply chain from the cotton’s point of origin, to the production and processing of downstream products, to the merchandise imported into the United States.

The types of documents that a detention notice will request will include (but are not limited to) the following:

Affidavit from yarn producer and the source of raw cotton that identifies where the raw cotton was sourced.
Purchase order, invoice, and proof of payment for the yarn and raw cotton.
List of production steps and production record for the yarn, including records that identify the cotton and cotton producer of the raw cotton.
Transportation documents from cotton grower to yarn maker.
Supporting documents related to employees that picked the cotton, time cards or the like, wage payment receipts, and daily process reports that relate to the raw cotton sold to the yarn producer.

Some of this evidence may be difficult for the importer to obtain, especially if the importer does not have direct contact with all parties in the supply chain. An importer contending that its entry should be released from detention because it was not produced using forced labor must also sign and submit a detailed certificate of origin.

Industry observers anticipate that CBP will initially focus its enforcement resources primarily on cotton-containing products exported from China. Nevertheless, the WRO applies to any imported product containing cotton produced in the XUAR, regardless of whether that product was exported from China or elsewhere to the United States. As CBP becomes more aware of how XUAR-sourced cotton is being distributed in global commerce, or if it learns of efforts to circumvent the WRO by transshipping products containing XUAR cotton through third countries, expect CBP’s enforcement priorities to shift.

CBP provides the following resources importers can use to better understand and address the risks of forced labor in global supply chains: