Biden administration targets four Chinese companies with import bans over forced labor allegations

The Biden administration ordered a ban on U.S. imports from Chinese-based Hoshine Silicon Industry Co. over forced labor allegations, according to the Reuters news agency.

The U.S. Commerce Department separately restricted exports to Hoshine, three other Chinese companies and what it said is the paramilitary Xinjiang Production and Construction Corps (XPCC), saying they were involved with the forced labor of Uyghurs and other Muslim minority groups in Xinjiang.

The news agency quoted China’s foreign ministry spokesman as saying China will take “all necessary measures” to protect its companies’ rights and interests.

(Read “SEIA has a ‘strong sense’ that U.S. solar supply chains are shifting, but hard numbers are scarce.”)

The three other companies added to the U.S. economic list include Xinjiang Daqo New Energy Co, a unit of Daqo New Energy Corp.; Xinjiang East Hope Nonferrous Metals Co, a unit of Shanghai-based manufacturer East Hope Group; and Xinjiang GCL New Energy Material Co., part of GCL New Energy Holdings Ltd.

The Commerce Department said the companies and XPCC “have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, forced labor and high-technology surveillance against Uyghurs, Kazakhs, and other members of Muslim minority groups in” Xinjiang.

John Smirnow, general counsel and vice president of market strategy at the Solar Energy Industries Association said, “The news of enforcement action on solar products coming from the Xinjiang Uyghur Autonomous Region (XUAR) is not unexpected and we fully support the Biden administration’s efforts to address any forced labor in the solar supply chain.”

He said the U.S. lacks transparency into supply chains in the Xinjiang region, and “there is too much risk in operating there.”

Smirnow said that for that reason, last October SEIA began calling on solar companies to leave the region. In April, the trade group released a traceability protocol to help ensure there is not forced labor in the supply chain.

“SEIA will continue to work with the administration and our partners to stand against forced labor and build a clean energy future we can all be proud of,” Smirnow said.

Gregory Wetstone, president and CEO of the American Council on Renewable Energy, said “Forced labor has no place in the clean energy transition. Today’s announcement is consistent with longstanding U.S. law, and we fully support the Biden administration’s enforcement action.”

Negative impact

At least some of the companies listed by the Commerce Department are manufacturers of monocrystalline silicon and polysilicon used in solar panel production.

Philip Shen of Roth Capital Partners said in a note to clients that the move could have a “significant negative impact on the whole U.S. solar industry.” He said that Hoshine is an annual supplier of around 800,000 MT of a raw material needed for polysilicon production.

Shen said that module imports may now need to prove that there is no content from Hoshine in order to enter the U.S. “Access to solar modules in the U.S., in our view, could be severely limited by this order as we believe isolating and tracing through the supply chain could present a significant challenge.”

Adding to pressure on the Biden administration, members of the U.S. House Ways and Means Committee sent a letter urging customs officials to “immediately take aggressive enforcement actions” regarding polysilicon products entering the United States from Xinjiang, China. The letter to acting U.S. Customs and Border Protection commissioner Troy Miller was dated June 10 and was signed by two dozen members of the congressional tax writing committee.

Zero tolerance

Reuters said that Hoshine Silicon Industry said on an investor platform that it backed the Chinese foreign ministry’s reaction, adding that the firm does not export industrial silicon to the United States directly and that the impact on its business would be limited.

Xinjiang Daqo New Energy Co. sent the news agency an email saying the company has “zero tolerance” towards forced labor, and that it does not sell directly to U.S. companies, or buy from the United States, and there would not be “a significant impact on the company’s business.”

Last September under the Trump administration, U.S. Customs and Border Protection (CBP) issued five Withhold Release Orders (WRO) on products from the Xinjiang region. Products included hair products, apparel, cotton, and some computer parts.

Th Biden administration may have had no choice but to act on the ongoing allegations of forced labor in the solar supply chain, said Mark D. Herlach, a partner in the Washington, D.C. law firm Eversheds Sutherland. “No one wants to be in a position of not responding to forced labor,” he told pv magazine in an interview.

In a note to clients, the firm said that possible sanctions could have implications on purchasers of panels. Implications could include direct legal jeopardy, financing challenges, supply chain disruptions, and reputational risk. The note said that reputational concerns, for example, have led major brands such as Calvin Klein, Gap, H&M, IKEA, Patagonia, and Tommy Hilfiger to stop buying cotton sourced from Xinjiang.

This article was updated on June 24 to include a statement from John Smirnow at the Solar Energy Industries Association, and Gregory Wetstone of ACORE.

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