June 17, 2022
The next phase of US-China economic and technological decoupling
The Rebuttable Presumption:
President Joe Biden signed the UFLPA into law in December 2021, and enforcement of the Act begins on June 21st, 2022. The Act bans the import of goods or commodities from China produced with forced labor through a “rebuttable presumption,” which states that all goods produced in Xinjiang and/or supply chains connected to Xinjiang are presumed to have used forced labor and are therefore banned from importation into the United States. In other words, the Act’s rebuttable presumption assumes that all US importers with supply chains connected to Xinjiang in any way ultimately used forced labor unless the importer can prove their supply chains are free from forced labor via a complicated, costly public review process.
The impact of global supply chains:
Billions of dollars’ worth of raw materials, minerals, and products are exported from Xinjiang each year, including 40% of the global production of polysilicon (a critical material for solar energy production), 20% of the world’s cotton, 20% of calcium carbide, and 5% of global aluminum production. By banning all of these items from import into the US, the Act will further decouple the American and Chinese economies by forcing multinational companies operating in the United States to source the same materials from other countries, likely at higher prices. This will pose significant challenges to already fragile global supply chains for green energy products, rare earth minerals, food items, and pharmaceutical precursors.
A new tool for economic statecraft:
Policymakers and legislators may consider broader utilization of the rebuttable presumption for national security authorities and legislation. For example, the rebuttable presumption fits a missing regulatory and enforcement gap in existing authorities for export controls. Currently, the US government struggles to enforce export control regulations at scale due to the “knowledge requirement,” which states that companies must “know” they are exporting controlled technology to military end-users in China, Russia, and other high-risk jurisdictions. Without such “knowledge,” companies may avoid civil and criminal penalties by simply pleading ignorance.
The UFLPA’s rebuttable presumption offers a unique tool for policymakers and legislators to close this export control loophole by simplifying the regulation to state any entity in China is presumed to support military modernization if they meet a specific requirement (e.g., state-owned enterprises, etc.). If appropriately implemented, a rebuttable presumption for export controls could simplify an archaic and complicated export control system, lower compliance costs for industry, and further protect critical dual-use and emerging US technology.
Opinions expressed by non-resident (senior) fellows do not necessarily reflect the opinion of the Atlantic Council GeoTech Center.
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