The Department of Homeland Security is expanding its scrutiny of solar companies in the US, asking for information about their supply chains, an indication the Biden administration is poised to toughen enforcement of a ban on products linked to Chinese forced labor.
An extensive questionnaire was sent to companies by US Customs and Border Protection earlier this month, according to two people familiar with the matter, marking a widening effort to seek disclosure about the provenance of modules, panels and other products. Previously, importers only had to provide such information to the agency if it detained their shipments for inspection.
The request comes amid questions about how the US is enforcing a ban that went into effect in June 2022 on the import of goods made or originating in China’s Xinjiang region, which has been tied to the alleged oppression and forced labor of the Uyghur minority and is also the world’s top producer of polysilicon, a primary ingredient in most solar panels.
A Customs and Border Protection representative didn’t respond to a request for comment, and it’s not clear how many questionnaires have been sent or which companies received them.
A draft of the 19-page survey, which was seen by Bloomberg News, asks importers for invoices and other documentation from distributors, wholesalers, exporters and resellers, including organizational charts and locations of production facilities, sales offices and research and development facilities. It asks for the identities of shareholders and lists of parent companies and subsidiaries. There are also questions about procedures and measures companies are taking to prevent the use of forced labor, child labor, convict labor and indentured labor in their supply chains.
“Producers are going to have trouble answering some of the questions,” said Scott Sklar, director of George Washington University’s Solar Institute, who previously served as chair of the Commerce Department’s Renewable Energy and Energy Efficiency Advisory Committee during the Obama administration. “They are relying on the manufacturer overseas. They don’t have a police force that goes over there. There is a certain level of trust.”
Pol Lezcano, a solar industry analyst at BloombergNEF, said smaller companies don’t have as much oversight over and documentation from their upstream suppliers as bigger, vertically integrated solar companies. Making it harder is that quartzite and metallurgical grade silicon — the base materials for solar cells — are often mixed from multiple sources that could be linked to Xinjiang. Documentation for these inputs is mostly self-reported and not supported with evidence, according to supply-chain traceability firms interviewed by BNEF.
Yet the prospect of earning higher margins in the US than in other markets will ultimately motivate firms to provide the necessary documentation, Lezcano said.
The survey indicates that Customs will be taking a strong enforcement approach and could be “tricky” to answer for small to medium-size solar companies that don’t have stable supply chains, Roth Capital Partners LLC wrote in a note to clients Monday. The note said that the increased scrutiny could be beneficial for larger solar manufacturers such as JinkoSolar Holding Co. and First Solar Inc. that have “mostly cleared the UFLPA gauntlet.”
Global concerns that Chinese officials were incarcerating or forcing members of the Uyghur minority to work in factories led Congress to enact the Uyghur Forced Labor Prevention Act, known as UFLPA, in December 2021. The Chinese government has denied any human rights violations in Xinjiang, saying its policies there are aimed at education, eradicating extremism and alleviating poverty.
The Customs bureau’s website shows that since June 2022 the agency has detained more than $2 billion worth of products categorized as electronics, which are primarily solar panels according to industry analysts. After reviewing supply-chain documents, officials barred about one-quarter of the total for violating the UFLPA.
The law, which covers a range of products from tomatoes to shoes, bars the import of goods partly or wholly made in Xinjiang unless companies can prove the products have no ties to forced labor. Some industry groups and members of Congress have criticized Customs for uneven enforcement of the law, including for not doing enough to stop the transshipment of goods through other countries.
The request for information is welcome news to advocates of stepped-up enforcement. “It’s been an open secret that some industry heavyweights and major domestic manufacturers have strong connections to Xinjiang and have been laundering cells and modules made with dubious and unverified polysilicon into the United States without CBP scrutiny,” said Bret Manley, executive director of the not-for-profit Energy Fair Trade Coalition. “Meanwhile, the market has been flooded with Indian modules using the same cells from Chinese manufacturers that have already been excluded by CBP under the UFLPA.”
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