The Biden administration’s narrowly focused ban on Chinese solar products is designed to confront alleged human-rights abuses in the Xinjiang region without stifling the fast-growing use of renewable energy in the U.S.

The order imposed Thursday, which affects the import of silica-based products made by Hoshine Silicon Industry Co., Ltd., represents one of President Joe Biden’s biggest steps yet to counter alleged mistreatment of China’s ethnic Uyghur Muslim minority.

Yet it falls short of a broad regional ban some activists had urged on solar imports from Xinjiang, a manufacturing hub where advocacy groups and a panel of United Nations experts say Uyghurs and other minorities have been forced to work against their will. China has denied the allegations, saying they’re an attempt to undermine successful businesses.

“The United States will not tolerate modern-day slavery in our supply chain,” Homeland Security Secretary Alejandro Mayorkas said in a briefing Thursday.

The Department of Homeland Security “is deeply concerned by credible and growing reports of China’s state-sponsored use of forced labor and other human-rights violations in the Xinjiang region,” Mayorkas said. Chinese companies are profiting from these abuses, he said, to the detriment of “law-abiding businesses that respect international labor standards” and “consumers who may unwittingly purchase goods made in conditions of modern-day slavery.”

Hoshine has a wide reach as the dominant supplier of metallurgical silicon used to make polysilicon, a chief ingredient in solar panels and semiconductors worldwide. Its customers include Daqo New Energy Corp., Wacker Chemie AG and a unit of GCL-Poly Energy Holdings Ltd., according to a Sheffield Hallam University analysis.

Supply Chains

Still, U.S. solar companies, which rely heavily on imported photovoltaic panels, had already begun shuffling supply chains in anticipation of the action, and a leading trade group had already unveiled a traceability tool aimed at helping solar importers and manufacturers track the supply of materials.

“If there’s evidence of forced labor, we don’t want it in our supply chain,” Solar Energy Industries Association Chief Executive Officer Abigail Ross Hopper said in an interview at Bloomberg’s headquarters in New York Thursday. “The desired outcome is to ensure there’s no forced labor in our supply chain.”

Hopper said the trade group is “appropriately concerned” that China might retaliate.

Chinese Foreign Ministry Spokesman Zhao Lijian said the U.S. was trying to cripple the industrial development of Xinjiang and seeks to force poverty and unemployment on the region.

“China strongly condemns the sanctions that the U.S. imposes on Chinese companies based on lies and disinformation,” he said at a regular press briefing in Beijing. “China will take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies.”

The administration’s move is unlikely to be the final word on the subject. White House officials took pains Thursday to emphasize that investigations into forced labor allegations were ongoing. Mayorkas said the U.S. is aggressively investigating “the use of forced labor in silicon supply chains and a broad range of other industries.”

Biden has prioritized the fight against climate change and is seeking to dramatically boost the U.S. use of renewable power. But the intersection of the solar supply chain with alleged forced labor creates a conflict between the president’s environmental and human rights goals.

“Our environmental goals will not be achieved on the backs of human beings in a forced-labor environment,” Mayorkas said. “We’re going to root out forced labor wherever it exists.”

The targeted approach represents a “substantive but measured first shot across the bow by the Biden administration,” Height Capital Markets analyst Benjamin Salisbury said in a note to clients Thursday. The administration “needs solar industry support to reform human rights practices as it attempts to balance a conflicting U.S. labor and environmental agenda,” Salisbury said.

Hoshine’s shares fell 7.2% in Shanghai trading Thursday, while U.S. manufacturer First Solar Inc., which makes its panels without polysilicon, was up 7.1% to $85.92 at 12:25 p.m. in New York on Thursday, after rising as much as 9.3%, the most intraday since January.

The Biden administration’s actions could benefit First Solar, prompting “accelerating orders from utility-scale developers to avoid traceability issues in the future,” Jeff Osborne, an analyst at Cowen & Co., said in a research note.

First Solar cheered the import restrictions, arguing they should spur additional efforts to boost domestic manufacturing. “There must never have to be a choice between fighting climate change and standing up for human rights because neither issue is mutually exclusive,” the company said in an emailed statement.

Under the “withhold release order” issued Thursday, personnel at all U.S. ports of entry were instructed to immediately detain shipments of silica-based products made by Hoshine and its subsidiaries. Although imports of Hoshine products have declined recently, the U.S. has directly imported about $6 million in goods from the company over the past two and a haf years, with additional imports of about $150 million in downstream products, according to U.S. Customs and Border Protection.

Separately, the U.S. Department of Labor updated its “List of Goods Produced by Child Labor or Forced Labor” to include polysilicon made with forced labor in China.

The Commerce Department also added five Chinese entities to its export blacklist, a move that bars American companies from selling to those companies without U.S. government approval. They are Hoshine; Xinjiang Daqo New Energy Co. Ltd.; Xinjiang East Hope Nonferrous Metals Co. Ltd.; Xinjiang GCL New Energy Material Technology, Co. Ltd.; and Xinjiang Production and Construction Corps., which has previously been sanctioned.

Hoshine, East Hope and GCL-Poly didn’t reply to emailed requests for comment. Daqo could not comment on the issue, head of investor relations Kevin He said in a text message.

The order gives the U.S. the ability to block all products that use Hoshine’s metallurgical silicon, said Nathan Picarsic, a founder of consultancy Horizon Advisory.

“They’ve targeted a key upstream company that feeds into the entire solar supply chain,” Picarsic said. “It’s a smart initial move, but it’d be foolish to think that it’ll solve the entire problem.”

First Step

The Biden administration has other tools to ratchet pressure on Beijing, including through a program of presumptive restrictions on imports from Xinjiang, the Peterson Institute for International Economics said in a forthcoming report.

Lawmakers and organized labor leaders that had sought a regional import ban called the administration’s order a first step in weaning forced labor from global clean energy supply chains but insisted more action is needed.

“An important next step is to release a regional withhold release order which would ensure that no corporations can benefit from egregious worker rights violations in the production of solar products,” Cathy Feingold, the international director of the AFL-CIO, said in an email.

Republican Senators Marco Rubio and Rick Scott, both of Florida, said Congress should go further by passing legislation to broadly bar goods and products made with forced labor in Xinjiang.

“Washington must work to make sure no taxpayer dollars are used to prop up the Communist Party of China and its horrific human rights abuses,” Scott said in a statement.