One of the most interesting developments in the field of business and human rights is the way in which the project now seeks to leverage sanctions regimes and markets limiting strategies deployed in liberal democratic states. More interesting still is the way that liberal democratic states, once lukewarm to the BHR project, now may find it an especially valuable weapon in its sanctions and import restriction based foreign policy regimes. These are advanced to serve the interests of states first, and consequentially, that of human rights in economic activity.
The questions that emerge center on (1) the nature of the connection between human rights and sustainability reporting by CSOs and academic organizations and the sanctions and trade regimes interposed by states (like the US and EU); (2) the extent to which funding, especially by states, may bend foundation and governmental award work to more closely align with the implementation of trade based and sanctions regimes; (3) the autonomy of human rights and sustainability conversations where sanctions and trade regimes may begin to drive the discourse; and (4) the role of international bodies in coordinating and managing the rise of these state based sanctions and trade regimes with the global discourse on human rights and sustainability principles.
A recent example evidences this new symbiotic relationship may emerge in the shadow of the publication of the report, Driving Force:Automotive Supply Chains and Forced Labour in the Uighur Region (2022) and US trade and sanctions regimes. The Uyghur Forced Labor Prevention Act (UFLPA) was signed into law by President Biden on December 23, 2021. It "directs the Forced Labor Enforcement Task Force to develop a strategy for supporting enforcement of the prohibition on the importation of goods into the United States manufactured wholly or in part with forced labor in the People's Republic of China, especially from the Xinjiang Uyghur Autonomous Region, or Xinjiang." (UFLPA website). It is operationalized by "a rebuttable presumption that goods mined, produced, or manufactured wholly or in part in Xinjiang or by an entity on the UFLPA Entity List are prohibited from U.S. importation under 19 U.S.C. § 1307." (Ibid.).
That statute has been made easier to implement by the work of civil society organizations, academics, and universities, serving in the capacity of monitors and data managers.
In a six-month investigation undertaken by Laura T. Murphy, Kendyl Salcito, Yalkun Uluyol, Mia Rabkin, and a team of anonymous researchers, analysis of publicly available documents revealed massive and expanding links between western car brands and Uyghur abuses, in everything from the hood decals and car frames to engine casings, interiors and electronics. . . Consumers do not want cars made through exploitation. But a combination of weak enforcement of forced labour laws and the government’s blind eye to environmental standards in China, paired with convoluted supply chains has left the automotive industry reliant on abusive suppliers. Every major car brand – including Volkswagen, BMW, Honda, Ford, GM, Mercedes-Benz, Toyota, Stellantis brands (like Fiat, Chrysler, Dodge and Jeep), Tesla and NIO - is at high risk of sourcing from companies linked to abuses in the Uyghur region. (Sheffield Hallam University Driving Force).
The report, Driving Force:Automotive Supply Chains and Forced Labour in the Uighur Region (2022) was produced by Helena Kennedy Centre at SHU and Nomogaia, an independent CSO. It will likely prve invaluable to advance US policy against China (in the larger venues of their trade relationships and battles for normative global dominance), while also advancing, to some exctent, the operationalization of human rights based sensibilities in production.
The Executive Summary and Recommendations follow below.
Executive Summary
DRIVING FORCE: AUTOMOTIVE SUPPLY CHAINS AND FORCED LABOR IN THE UYGHUR REGION 1
This report is part of a series of investigative papers examining goods and materials whose production has been located in the Uyghur Region as part of a Chinese Government effort to repress Uyghur and other minoritized populations and erase traditional cultures. It relies on publicly available sources, including shipping data, corporate financial and media reporting, journalism, state propaganda, remote sensing data, and maps. Research was con- ducted in English, Mandarin and Uyghur languages. This report documents the automotive industry’s reliance on forced labor and other exploitation in the Uyghur Region.
Automotive parts manufacturing is big business. Globally, the au- tomotive parts manufacturing market is expected to reach nearly US $2 trillion by 2026.
China is one of the world’s top auto parts suppliers, exporting up- wards of US $45 billion worth in 2021. The United States auto- motive industry is particularly reliant on Chinese parts, receiving approximately a quarter (US $11.5 billion worth) in 2021.
Through proactive initiatives, China has risen from obscurity in the automotive and auto parts industry to become a global leader in just 20 years. The “Made in China 2025” plan to convert China from “a manufacturing giant to a world manufacturing power,” explicitly included the automotive and automotive parts indus- try. The plan also encompassed materials sourcing. Today China plays a disproportionate role in the processing of raw materials for car parts. Mining, refining, and manufacturing undertaken in the PRC undergirds much of the global automotive industry. Chi- na processes most of the world’s iron into steel, bauxite into alu- minum, and lithium and cobalt into battery-grade materials.
A large and growing share of that very environmentally damaging and energy-intensive work is undertaken in the repressive environment of the Xinjiang Uyghur Autonomous Region (or XUAR or Uyghur Region). While the Uyghur Region is not necessarily rich in all of the raw materials central to automotive manufacturing (such as iron for steel, copper for electrodes and plating, and bauxite for aluminum, or even the lithium used in the making of electric vehicle batteries), the PRC government has dedicated significant resources to moving the highly polluting and ener- gy-intensive processing of these raw materials into the Uyghur Region, requesting and sometimes requiring public and private companies to incorporate state-sponsored forced-labor pro- grams into their “social responsibility” commitments.
In its 14th Five-Year Plan covering the years 2021-2026, the XUAR government emphasized the importance of expanding Xinjiang’s processing of the materials most critical to the auto industry, namely iron, steel, and non-ferrous metals. These XUAR-based industries were meant to “go global” under this plan, and the automotive sector is explicitly highlighted.
The increased availability of processed raw materials in the Uy- ghur Region, coupled with extraordinary government incentives and lax implementation of labor and environmental protection
laws, led auto parts manufacturers to expand production in the region in recent years.
KEY FINDINGS
This report describes the expansion of auto parts and materials production in the Uyghur Region, documents the abuses commit- ted by some of the largest industry actors, and traces the prod- ucts of those businesses to western car brands, through direct and indirect supply chain links.
Using publicly available sources, including corporate annual re- ports, websites, and publicity campaigns; government directives and state media, and customs records, we identified the following:
• 96 mining, processing, or manufacturing companies rel- evant to the automotive sector operating in the Uyghur Re- gion, including at least 38 that have documented engage- ment in state-sponsored labor transfer programs.
• over 40 automotive-sector manufacturers in China that are sourcing from the Uyghur Region or from companies that have accepted Uyghur labor transfers across China.
• more than 50 international automotive parts or car manufac- turers (or their joint ventures) that are sourcing directly from companies operating in the Uyghur Region or from compa- nies that have accepted Uyghur labor transfers across China.
• more than 100 international automotive parts or car manu- facturers that have some exposure to forced Uyghur labor made goods.
Several major international auto manufacturers—including Volkswagen Audi Group, Honda, Ford, General Motors, Mer- cedes-Benz Group, Toyota, Tesla, Renault, NIO, and Stellantis Group had several supply chain exposures to the Uyghur Region.
The first several chapters of this report zoom in on three base metals that are central to car part and whole car manufacturing— steel, aluminum, and copper—to demonstrate the central role the Uyghur Region plays in the making of our cars.
Forced Labor Exposure in the Auto Industry
Steel: The world’s biggest supplier of steel—Baowu—is also the largest steel producer in the Uyghur Region, prolifically employ- ing labor transfers through state programs. Transferred Uyghur laborers marched for hours to factories during Covid lockdowns, then quarantined on-site in sub-standard housing to keep producing steel. Baowu’s Toutunhe smelter is surrounded by cot- tage steel industries including an array of auto parts makers that source steel from Baowu, engage in labor transfers of their own, and export directly to global markets through Ürümchi’s ‘land port’ for import/export.
Aluminum: Today, XUAR’s aluminum production is roughly 6.6 million tons per year, representing about a tenth of global pro- duction. The Uyghur Region produced more aluminum than India, Russia, Canada or any other major aluminum producer outside of China. Transferred Uyghur laborers work directly in the swelter- ing and dangerous smelting rooms as well as in hazardous car- bon anode manufacturing plants.. Labor transfers into aluminum smelters were documented as recently as 2022.
Copper: China smelts more copper than the rest of the world combined and is also the largest copper refiner. In the Uyghur Region, the largest copper miner and processor is Xinjiang Non- ferrous Metals Company. One of the world’s largest copper pro- cessors, Zijin Mining Group, is also active in the region. Xinjiang Nonferrous’s mining operations were used to architect and pilot transfer schemes to indoctrinate Uyghurs from southern XUAR through labor transfers. Workers experienced collective punish- ment and exposure to extreme workplace hazards in addition to being forcibly separated from their families.
In later chapters, we lay out findings regarding supporting infra- structure that has enabled the movement of parts production and other high-end manufacturing into the Uyghur Region. Bat- teries for both internal combustion engine (ICE) and electric ve- hicle battery (EVB) cars are being sourced from the region, as are wheels, tires, glass, interiors and other parts. These later chap- ters also document how some parts, like automotive electronics, involve cross-regional state-sponsored forced labor transfers.
Batteries: Batteries for traditional car engines are 60% lead, by weight. Smelting lead, either through recycling or from mining, is hazardous for workers and downwind communities, which has been a major driver for closing lead smelters in eastern China. Since 2017, the government has licensed five lead-acid battery manufacturers to smelt lead and produce batteries in the Uyghur Region. The largest of these, Camel Group, has faced sanctions for “frequent blood lead incidents.” Transferred workers from southern XUAR were subjected to state-sponsored labor trans- fer and to a “closed” pre-job training involving military and ideo- logical indoctrination. EV batteries require lithium, nickel, cobalt, graphite, and manganese. China processes 60% of the world’s lithium, with a growing percentage of that refining underway in XUAR. Xinjiang Asia-Europe Rare Metal is the largest lithium ac- tor in the Uyghur Region, receiving “assigned” workers since at least 2017. Its partners include upstream suppliers of the world’s largest lithium-ion battery producers.
Electronics: Electronics manufacturing has moved into the Uy- ghur Region in the last few years. This chapter, however, focus- es on long-distance labor transfers, moving Uyghurs to eastern China for work. Manufacturers for some of the world’s most fa- mous electronics brands have benefited from state-sponsored labor transfers of Uyghurs. We document the state transfer of Uyghur individuals to companies making circuit boards, central control systems, safety control systems, touchscreens, trans- formers, inductors, connectors, and wiring solutions for the au- tomotive industry. Many of these companies have been identified as engaged in China’s repressive programs by journalists and researchers, but the companies’ connections to the automotive industry have not been fully explored.
Other parts: Exploitation is acute in the manufacture of car parts that do not require capital-intensive, heavy-industry infrastruc- ture. The sewing of interior cushions and floor mats is underway in factories adjacent to some of the Uyghur Region’s most repres- sive internment camps, such as the Lop County #4 Education and Training Center internment camp where the notorious photo of Uyghurs in matching blue jumpsuits, fenced in and surrounded by armed guards, was taken. Companies carrying out the manufac- ture of these parts are deeply linked to global markets.
Between raw materials mining/processing and auto parts man- ufacturing, we found that practically every part of the car would require heightened scrutiny to ensure that it was free of Uyghur forced labor.
In some cases, Uyghur forced labor is apparent at multiple steps in parts manufacturing, including mining, refining, pre-fabri- cation, and manufacturing. But just one step of the production chain with confirmed forced labor incidents is sufficient to trigger import bans or due diligence red flags in several Western jurisdictions.
AN INDUSTRY-WIDE PROBLEM THAT REQUIRES INDUSTRY-WIDE SOLUTIONS
We traced the customers of companies that mine, process, and manufacture products relevant to the automotive industry that have engaged in forced labor in the Uyghur Region. The results were startling—practically every major traditional automotive and electric vehicle manufacturer has significant exposure to forced labor in the Uyghur Region. The auto industry cannot wait another day to trace their supply chains back to the raw materi- als. To do anything short of full tracing would be an enormous legal, ethical, and reputational risk.
Manufacturers have indicated that thorough supply chain tracing is out of reach and that understanding the situation in the Uyghur Region is a challenge. Despite acknowledging their responsibili- ties under domestic law, internal governance, and public expec- tations to respect human rights, their human rights due diligence efforts to date have been incommensurate with the supply chain risks they face. Current efforts through industry associations and certification schemes emphasize links to raw materials mining but are comparatively blind to the processing and refining in- volved in converting ore into forged, rolled, cast or manufactured car parts and do not take account of the significant expansion of manufacturing of car parts in the XUAR in recent years.
This report provides a starting point for identifying materials and parts at most significant risk of being sourced directly or indi- rectly from abusive facilities in the XUAR and models a method- ology for companies to vet and adjust their own supply chains to withdraw from the Uyghur Region crisis. It also provides clarity to automotive industry actors that the forced labor risks are, in fact, pervasive in their supply chains. Though the report cannot address every single company in the region, evidence shows that the parts manufacturing, materials processing, and mineral min- ing associated with the automotive industry is substantially taint- ed with forced labor. This report shows that the automotive in- dustry should conduct significantly more thorough supply chain tracing to ensure that it is not complicit in the forced labor regime in the Uyghur Region.
A significant, swift shift in supply chains is needed to extricate the automotive sector from the Uyghur Region. Other industries that rely on similar raw materials (e.g. alloys of steel, copper, aluminum, and silicon) are comparably implicated in abuses under- way in the processing of these materials. The information provided in this report should serve as a wakeup call to manufacturers across sectors worldwide and as a foundation for cross-sectoral collaboration to end forced labor in raw materials and manufacturing.
RECOMMENDATIONS
Based on the severity and pervasiveness of forced labor identi- fied in this report and the extent to which it pervades automotive supply chains, we recommend that governments and businesses take immediate action. We recommend the following:
1. Governments and legislatures should enact and implement mandatory human rights due diligence laws and ensure the laws require companies to address human rights risks beyond first-tier suppliers, in recognition that abuses can easi- ly be distanced from direct suppliers under state-controlled economic systems. Laws and enforcement should apply to the full supply chain, without exception. In addition to countries that already have enacted human rights due diligence laws (e.g. Germany and Norway), or are developing them (the European Union), human rights due diligence laws should be a priority for countries with deep involvement in the automotive industry, such as Japan and South Korea.
2. Governments and legislatures should enact and implement bans on imports linked to forced labor. Forced labor import bans are a necessary complement to mandatory human rights due diligence, especially where state-sponsored repression prevents companies from conducting on-the- ground assessments of forced labor risks. Forced labor bans should include specific provisions to identify and prohibit the import of goods linked to state-sponsored forced labor.
3. Governments should identify the automotive sector as a priority for the implementation of forced labor import bans. Governments should devote substantial resources to identifying automotive parts and materials linked to forced labor. The United States should, in particular, name the aluminum, steel, and automotive industries as high-priority sectors un- der the Uyghur Forced Labor Prevention Act (UFLPA).
4. Governments should require that all procurement (including the purchase, lease, and rental) of automobiles for official use be free of parts made in whole or in part in the XUAR.
Recommendations to Car Companies
1. Car companies should work individually and collectively to conduct or commission their own supply chain mapping and analysis of raw materials mining and processing and parts manufacturing in the XUAR.
2. Corporations in the automotive industry and commodities trading firms should engage in both internal and cross-sec- tor collaborative efforts to cease sourcing all products mined, made, or manufactured, in whole or in part, in the Uyghur Region. This would include ending business rela- tionships or contracts, whether direct or indirect, with any companies that have operations in the Uyghur Region or that have accepted government-supplied laborers from the Uyghur Region in other parts of China.
3. In adherence to the UN Guiding Principles on Business and Human Rights, automotive companies conducting enter- prise-wide human rights due diligence should prioritize links to the XUAR as a matter of urgency, as the human rights im- pacts are severe and pervasive in the region. Given the impossibility of conducting meaningful assessments of forced labor risks at facilities in the XUAR, car companies’ due diligence efforts should focus on identifying supply chains links to the XUAR and working with suppliers and sub-suppliers to responsibly exit the region.
Auto manufacturers should publicly report on findings of supply chain links to the XUAR to facilitate knowledge of supply chain risks across the automotive industry and in- dustries with related supply chains. Decisions to terminate procurement relationships should also be made public to inform other industry actors of identified supply chain prob- lems and promote supply chain transparency.
Car companies should not assume that suppliers or sub-sup- pliers, including mines, mineral processors, and other facili- ties, are free from links to forced labor in the XUAR, whether at their own facilities or in their supply chains, simply be- cause they have made an attestation to that effect, received an industry certification, or conducted an audit pursuant to industry initiatives or supply chain due diligence schemes.
Auto manufacturers should exit the Uyghur Region at every level of their supply chain and cease doing business with suppliers implicated in Uyghur forced labour in line with the demands of the Coalition to End Forced Labour in the Uyghur Region.
Remediation of harms inside China is impossible at this time, so car companies are recommended to collaborate with raw metals industries and industry associations to im- plement reparations to Uyghurs and other minoritized pop- ulations in the diaspora working to address oppression and exploitation in the Uyghur Region.
Recommendations to other Stakeholders
1. All financial institutions and other investors (e.g. commodities traders) should divest from all companies operating in the XUAR or using state-supplied laborers from the Uy- ghur Region. Passive investment index funds should de- list the companies identified in this report as engaging in state-sponsored labor transfers.
2. The London Metal Exchange should suspend issuing war- rants to and withdraw current warrants for any companies linked directly or indirectly to state-sponsored labor transfers in the Uyghur Region. The voluntary “LME Passport” program, wherein metals traders provide ESG information and traceability/transparency data about the ingots they are trading on the exchange, should be made mandatory, and the disclosures should include full supply chain data, describing the origin of the ore, and the locations for mining, processing, smelting, other refining, and trading undertaken.
No comments:
Post a Comment