American solar energy companies are reportedly having difficulty complying with the Uyghur Forced Labor Prevention Act (UFLPA), a law that went into effect in June requiring importers to prove their goods are not tainted with slave labor from the oppressed Uyghur Muslims of China’s Xinjiang province.
The UFLPA sets tough standards for importers to affirmatively demonstrate that no forced labor was employed in harvesting raw materials or assembling finished products. Everything imported from Xinjiang is presumed tainted unless proof to the contrary is provided.
The industry that seemed most likely to have trouble complying with the UFLPA was textiles, since a great deal of China’s – and, by extension, the world’s – cotton is produced in Xinjiang, and the supply chains for cotton blends in textiles are often murky.
According to a Wall Street Journal (WSJ) report on Tuesday, the solar industry is running into trouble as well, with several shipments detailed or outright refused by U.S. customs since the UFLPA took effect:
Lawyers, auditors and analysts have warned clients that delays are piling up. Top China-based solar-panel manufacturers Longi Green Energy Technology Co. , Jinko Solar Co. and Trina Solar Co. are among those affected, people with knowledge of the events say. Longi has temporarily halted a panel factory in Vietnam that supplies the U.S. as a result, some of those people say.
It is likely to be six months before import challenges related to the new law are resolved, wrote Philip Shen, managing partner at boutique investment bank Roth Capital Partners LLC, in a research note on July 30. In a worst-case scenario, U.S. customers could see 10 gigawatts or more of supplies delayed, Mr. Shen wrote in an earlier note, equivalent to nearly half of what the U.S. installed last year.
As with the cotton blends in textiles, solar panels can include components mixed from several different sources. The brutal Chinese government is the dominant global player in solar energy, and Xinjiang produces about 41 percent of the global supply of polysilicon, which is vital to solar panel construction.
The solar industry knew polysilicon would be scrutinized, so both importers and Chinese suppliers had the necessary paperwork ready – but they were not prepared for U.S. Customs to demand proof that an essential component of polysilicon called quartzite was also free of forced labor. The quartzite mining industry was apparently not prepared to answer such questions.
“Because the panels may have to sit in warehouses for months while companies negotiate with customs officials, some suppliers are choosing to take back the shipments and send them elsewhere,” the WSJ reported.
Even before the new U.S. law went into effect, the WSJ noted that Chinese silicon manufacturers were facing forced labor allegations serious enough to prompt hold orders on solar energy product shipments. The latest disruptions to the supply chain are reportedly adding 30 percent or more to the cost of some solar projects.
Bloomberg News reported in March that “rising demand for solar energy threatens to increase the risk of forced labor in the supply chain.”
Human rights advocates warned that China’s antipathy toward independent investigations makes it extremely difficult to verify that supply chains are free of forced labor. Previous studies found Xinjiang’s polysilicon and quartzite production made disturbingly heavy use of coerced labor, “undergirded by the constant threat of re-education and internment.”
Researchers at the Rights Lab at the University of Nottingham said the “increase in demand for solar energy is likely to worsen conditions for workers.”