by Nicholas Groom

(Reuters) – Electric vehicle batteries and other car components are the latest products in Washington’s sights as it tries to sever any ties between the United States and suspected forced labor in China, according to a document seen by Reuters, statistical agencies and sources.

So far, the US law, which came into effect a year ago, prohibits the import of goods from the Xinjiang region such as solar panels, tomatoes and cotton.

Now, critical components for the auto industry such as lithium-ion batteries, tires, aluminum and steel from Xinjiang are increasingly at risk of being seized by US customs.

This increased surveillance by the US Customs and Border Protection Service could make life difficult for automakers who will have to provide strong evidence that their supply chains are not tied to Xinjiang.

The United States accuses China of establishing forced labor camps for the Uyghur minority and other minorities in Xinjiang. These accusations are denied by China.

More than a year after the Uyghur Forced Labor Prevention Act went into effect, shipments of solar panels from China are languishing in US warehouses.

The number of installations using solar energy for utilities fell 31% last year due to limited supply of solar panels, according to the Association of Solar Energy Industries, which claim although conditions have improved this year.

Solar energy and battery electric vehicles are two key sectors for the Biden administration, which wants to move away from fossil energy in its fight against climate change.

When the shipments are seized, US Customs provides the importer with a list of products from previous examinations and the documents required to prove they have no connection to forced labor, they claim.

This list, of which Reuters was able to obtain a recent version, was updated between April and June to include batteries, tires, aluminum and steel, said a spokesman for US customs.

When the law took effect last year, cotton, tomatoes and polysilicon, a chemical compound used in solar panels, were the main targets of US authorities.

“The timing of these changes does not reflect any strategic or operational shift,” a customs spokesperson said in a statement, adding that the list of products was “not exhaustive.”

The agency did not respond to questions about the heightened scrutiny of auto imports and says it is focusing “where the risks are high”.

In a report to Congress last month, Customs listed lithium-ion batteries, tires and “other automotive components” as “potential risks” to watch out for.

Since February, 31 automotive and aerospace shipments have been seized, customs data shows.

The value of metal seizures, such as steel and aluminum, has increased from $1 million per month at the end of 2022 to more than $15 million per month currently.

EXPOSURE

While the numbers remain low in the face of $1 billion in seized imports in the solar power sector, the auto industry is on high alert, according to lawyers and supply chain experts.

“Supply chains are very complex, and a seizure would be very disruptive to an automaker,” says Dan Solomon, an attorney who advises manufacturers on potential forced labor risks at Miller & Chevalier.

“There is no doubt that the builders are focused on this,” he said in May at a private event bringing together industry leaders in Detroit.

The focus on the automotive sector follows a study by Britain’s Sheffield Hallam University published in December which claimed that the near majority of automakers were exposed to products made using forced labor in Xinjiang.

The study led to an ongoing investigation by US Senate Finance Committee Chairman Ron Wyden.

“REAL DANGER”

Of the 13 automakers contacted by Reuters, four – Mercedes-Benz USA, Volkswagen, Denso and ZF Friedrichshafen AG – say they have no products seized under the Uyghur Forced Labor Prevention Act.

Ford, Bosch, General Motors, Honda, Toyota, Stellantis and Magna said in separate statements that they had conducted the necessary checks to ensure their supply chains were free from forced labor but did not whether or not they had any property seized under the Uyghur Forced Labor Prevention Act.

Tesla and Continental AG did not respond to a request for comment.

“If you’re an automaker that hasn’t started tracing your supply chains for critical minerals…passing through China to identify where those goods are coming from, you’re in real danger,” says Brandon Daniels, CEO of Exiger, a provider of supply chain management software.

(Reporting by Nichola Groom in Los Angeles, David Shepardson in Washington, JanSchwartz in Hamburg and Daniel Leussink in Tokyo; Zhifan Liu, editing by Blandine Hénault)

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