China Restricts Supply of Components to Top U.S. Drone Maker

How the Auto Industry and Others Can Rid Supply Chains of Modern Slavery

November 2, 2023

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As awareness of modern slavery in global supply chains grows, more industries are feeling the heat from enforcement of anti-slavery regulations around the world. The automotive and aerospace sectors came under heavy scrutiny this year.

A report from the UK’s Sheffield Hallam University revealed that most of the top global automakers have exposure to forced labor through suppliers of aluminum, copper, glass, batteries and more. Many of those suppliers — or their sub-tier suppliers — are based in China’s Xinjiang region, known for widespread abusive labor practices and detainment of Uyghur and ethnic Muslim minorities.

Some companies named in the report likely faced enforcement of the U.S. Uyghur Forced Labor Prevention Act (UFLPA), which presumes goods and parts sourced in the Xinjiang region are made with slave labor, unless importers can prove otherwise. In fact, imports of auto and aerospace products detained by U.S. Customs and Border Protection (CBP) during 2023 rose 180% in June and July, compared to the first five months of the year. This surge in enforcement shows just one possible consequence of not being proactive in removing forced labor from supply chains.

A new guide from Exiger, Eliminating Modern Slavery in Global Supply Chains, offers insights on how to identify and mitigate this serious supply chain risk.

Knowing Your Suppliers Isn’t Enough

The U.S. Congress launched an investigation into top automakers and their supply chains in March 2023. But the auto industry is not alone in facing UFLPA enforcement actions; the CBP website shows detentions that impact apparel, agriculture, pharmaceuticals, electronics, and more. Every industry that relies on global supply chains must conduct due diligence to combat the problem of modern slavery.

“With today’s supply chains, it’s not enough for automakers to know who their suppliers are,” wrote Trevor Stansbury, President of Supply Chain Transformation at Exiger, in an op-ed for The Hill. “To gain certainty that they’re not unknowingly sponsoring modern slavery, violating federal trade laws or creating vulnerabilities in their production, automakers need to know what they’re buying. They need visibility into products, parts and raw materials, all the way to the proverbial ‘hole in the ground.’”

This level of detail is critical because suppliers that use forced labor often work hard to conceal locations where they source goods.

“Third-country manufacturing, where countries beyond China produce goods made with inputs from Xinjiang, is becoming increasingly common,” said Eric Choy, Executive Director of the Office of Trade at CBP. In fact, most of the shipments that customs has stopped and inspected haven’t been from China. The value of imports detained from Malaysia and Vietnam far exceed those that originated in China, according to CBP data.

[Watch the Replay | Experts discuss UFPLA: One Year In and Looking Ahead]

Invest in Due Diligence and Avoid Costly Losses

Investing in tools that aid due diligence efforts and provide deeper visibility into supply chain tiers can pay dividends in the form of business security, legal compliance, cost savings and reputational value.

Advanced technology, like solutions in the 1Exiger platform, can help speed up the processes of ESG risk due diligence and gaining end-to-end supply chain visibility, which otherwise could involve hiring more personnel and manually updating complex spreadsheets.

“I don’t think medium to large companies can get their forced labor [due diligence] and their supply chains under control without technology anymore. It’s just too much,” said Cindy Deleon, Founder and Managing Director of Deleon Trade LLC, during a recent expert panel discussion on the UFLPA.

“If you’re a car manufacturer and you have not started mapping your supply chains for the critical minerals and the parts of the sub-assemblies that are going through China and where they are getting their goods from, you are running a real peril,” Exiger CEO Brandon Daniels said in a recent Reuters interview.

Think of Your Reputation

News coverage of UFLPA-related detentions and congressional investigations has raised consumer awareness of modern slavery’s stain on supply chains. Many shoppers reject apparel not made with sustainable and slavery-free standards, and car buyers may weigh similar factors.

“Consumers do not want cars made through exploitation,” the Sheffield Hallam report declared. Studies of consumer attitudes lend support: 81% of consumers said ethical sourcing of items they buy matters in their buying decisions. The potential loss of customers and their trust due to a brand’s connection to forced labor — even in sub-tier levels of the supply chain — can cause lasting damage.

Slave-Free Alliance, a nonprofit “working toward a slave-free supply chain,” encourages organizations to document efforts to combat modern slavery. This helps with reporting and compliance efforts, but it’s also an opportunity to demonstrate transparency for customers, investors and other stakeholders. Several multinational companies post details about their anti-slavery efforts on their websites.

Some companies have also cited their reliance on Exiger technology for modern slavery due diligence as part of their annual statements, like these from Qantas and Hilton.

Exiger uses proprietary AI and machine learning technology to track nearly 17 million supply chains, and our extensive database aggregates 7 billion source records of supply chain installations and 1.3 billion contract records. These capabilities — along with our forced labor database, the largest in the world — can give you the necessary visibility to comply with anti-slavery regulations and achieve resilience in your supply chain.

For more on how to comply with the UFLPA and protect supply chains, download our free guide, Eliminating Modern Slavery in Global Supply Chains.