H.R. 8712: Uyghur Forced Labor Disclosure Act

This bill, known as the Uyghur Forced Labor Disclosure Act, seeks to amend the Securities Exchange Act of 1934 to impose new requirements on companies that are looking to register their securities with national exchanges or seeking to merge with listed companies. It aims to provide transparency regarding the use of forced labor in supply chains related to the Xinjiang Uyghur Autonomous Region (XUAR) in China. Below are the key provisions of the bill:

1. Certification Requirement

Companies applying to register their securities would be required to certify that they are disclosing information about their supply chains. Specifically, they must provide documentation showing:

• whether they or any affiliates are sourcing goods from the XUAR,
• whether those goods are produced using forced labor, and
• details about the facilities involved in their production or supply chain processes.

2. Types of Documentation

The documentation required includes:

• Identifying goods sourced from or through the XUAR, especially those with known labor abuses.
• Information about the extent to which any goods were mined or produced by entities engaged in forced labor.
• Identification of the specific facilities involved in the production of those goods.

3. Verification of Information

Companies must obtain independent verification of the disclosed documentation from third-party auditors. These auditors will have their identities kept confidential unless they choose to disclose them. Companies are also required to implement policies to protect against reprisals against auditors.

4. Public Disclosure

All documentation submitted by companies must be made publicly available by the Securities and Exchange Commission (SEC). This is aimed at ensuring transparency and accountability.

5. Compliance and Penalties

If companies fail to comply with these requirements, they could face penalties, including:

• Denial of their application to register securities on national exchanges, and
• A one-year ban on re-filing the application.

6. Reporting Obligations

Companies required to file annual reports must also disclose whether they have engaged with entities sourcing materials from the XUAR or using forced labor during the reporting period. They must provide detailed accounts of:

• The nature of their commercial activities,
• Revenue and profits related to affected goods,
• Alternative sourcing options, and
• Measures they have put in place to ensure due diligence.

7. Legislative Timeline and Repeal Clause

The SEC would need to issue rules for these requirements within 180 days after enactment. The provisions of the bill would be repealed eight years after enactment unless the President determines that the People’s Republic of China has ceased mass internment and forced labor practices.

8. Reports to Congress

The SEC is mandated to conduct and report on the compliance of companies with these new requirements on an annual basis. Additionally, the Government Accountability Office (GAO) is tasked to evaluate the effectiveness of the oversight regarding these certification requirements periodically.

Relevant Companies

• NKE - Nike, Inc.: The company sources a significant amount of its production from China and must ensure that none of its goods involve forced labor resulting from its supply contracts in the XUAR.
• AAPL - Apple Inc.: As a major tech company with significant manufacturing in China, Apple will need to highlight and verify that their supply chain does not include forced labor.
• TSLA - Tesla, Inc.: Tesla relies on a global supply chain for its vehicle components; it will need to disclose sourcing from areas linked to forced labor practices.