The global supply chain compliance landscape has undergone a fundamental transformation in recent years. The combination of Section 301 tariffs on Chinese goods, the Uyghur Forced Labor Prevention Act’s rebuttable presumption, anti-dumping and countervailing duty orders covering hundreds of product categories, and an increasingly assertive CBP enforcement posture has made supply chain due diligence a legal compliance obligation — not merely a corporate social responsibility aspiration. US importers who cannot demonstrate that they know where their goods come from, who made them, and under what conditions, face detention of their shipments, retroactive duty assessments covering years of imports, civil penalties, and in serious cases criminal prosecution. The investment in robust supply chain due diligence is, in the current trade compliance environment, an essential business risk management function.
Supply chain compliance challenges are particularly acute for companies with long, complex, multi-tier global supply chains. Many of the most significant trade compliance risks are embedded not in the importer’s direct relationships with first-tier suppliers, but in those suppliers’ relationships with their own suppliers — the second, third, and fourth tiers of the supply chain that are often invisible to the importer. Raw materials sourced from sanctioned regions, components manufactured by Entity List companies, and processing steps that generate country of origin issues may all occur deep in the supply chain without the importer’s knowledge. Effective supply chain due diligence must look beyond first-tier suppliers to address these deeper supply chain risks.
Tariff Exposure and Supply Chain Restructuring
The Section 301 tariffs on Chinese-origin goods — currently ranging from 25 percent to 145 percent depending on the product and the specific tariff list — have created powerful financial incentives for supply chain restructuring. Companies that previously sourced from China have in many cases shifted production to alternative countries including Vietnam, Bangladesh, India, Mexico, Thailand, Malaysia, and Cambodia. However, these supply chain shifts create their own compliance risks: CBP and USTR have both identified evidence of tariff evasion through transshipment, where Chinese-origin goods are routed through third countries with minimal processing in an attempt to claim non-Chinese origin and avoid the Section 301 tariffs. CBP has significantly intensified its enforcement of tariff evasion, conducting factory visits, issuing Withhold Release Orders (WROs), and working with foreign customs authorities to verify the origin of goods.
For importers who have restructured their supply chains, demonstrating that the restructuring is genuine — that real manufacturing value is being added in the new country of origin, not merely a relabeling or minor processing operation — requires careful documentation of the production process in the new location. Country of origin analyses should be conducted and documented for each product category, identifying the specific manufacturing steps that constitute substantial transformation, the value added in each country, and the HTS classification of the inputs versus the finished goods. Where the country of origin analysis relies on a specific legal standard — such as the USMCA tariff schedule change rules or the general substantial transformation test — that standard should be applied correctly and its application documented.
Forced Labor Due Diligence
The UFLPA has elevated forced labor due diligence from a reputational risk management tool to a legal compliance requirement for any importer whose supply chain touches Xinjiang-origin materials. The sectors of greatest concern include: cotton and cotton-containing products (apparel, home textiles, footwear, some industrial textiles); polysilicon and solar panels (polysilicon is predominantly produced in Xinjiang, and a significant share of global solar panel production uses Xinjiang polysilicon); tomatoes and tomato products; and electronics components. However, given the breadth of Xinjiang’s economic activity and the government’s use of forced labor transfer programs that extend well beyond Xinjiang’s borders, the risk is not limited to these sectors.
Effective forced labor due diligence requires: mapping the supply chain at all tiers relevant to forced labor risk, going deep enough to identify raw material origins; assessing each supplier at each tier for indicators of Xinjiang-origin production or association with the government’s forced labor transfer programs; requiring suppliers to provide documentary evidence of origin for key raw materials and inputs; incorporating forced labor representations and audit rights into supplier contracts; conducting periodic supplier assessments and audits, supplemented by credible third-party verification where available; and monitoring the UFLPA Entity List and other government-issued forced labor advisories for new additions that may affect the supply chain.
The forced labor due diligence framework should be proportionate to risk: the most resource-intensive diligence is warranted for supply chains with the highest probability of Xinjiang-origin content — cotton, polysilicon, and related products — while supply chains with low Xinjiang exposure may require less intensive but still documented due diligence. A risk-tiered approach allows companies to allocate their compliance resources efficiently while demonstrating to CBP that they have applied appropriate judgment to each supply chain.
Anti-Dumping and Countervailing Duty Supply Chain Risk
Anti-dumping (AD) and countervailing duty (CVD) orders create supply chain compliance obligations that often surprise importers. An AD/CVD order applies to imports of a specific product from a specific country, often at very high duty rates (sometimes exceeding 100 or 200 percent of the product’s value). Circumvention of AD/CVD orders — through transshipment, minor processing in a third country, or sourcing finished goods that incorporate subject merchandise components — is a serious violation that can result in retroactive duty assessments covering years of imports, treble duties, and civil penalties.
Importers must be alert to AD/CVD circumvention risk when sourcing products in categories that are subject to US AD/CVD orders, particularly when the supplier is located in a third country and the product is made substantially from Chinese-origin inputs. The Department of Commerce has broad authority to investigate circumvention of AD/CVD orders and to extend the scope of the orders to cover circumventing goods. Importers who have inadvertently or unknowingly imported goods subject to AD/CVD orders through circumventing supply chains can face retroactive duty liability going back years. Due diligence in AD/CVD-sensitive categories should include verifying the country of origin of key inputs, assessing whether the third-country processing operations are sufficient to generate a new country of origin, and monitoring the Department of Commerce’s AD/CVD scope and circumvention determinations in relevant product categories.
Building a Supply Chain Compliance Program
An effective supply chain compliance program for trade purposes integrates multiple compliance functions that have historically been managed separately: trade compliance (tariff classification, country of origin, preferential treatment), customs compliance (entry accuracy, CBP enforcement), forced labor compliance (UFLPA and Section 307 obligations), and sanctions compliance (OFAC and export control screening). The integration of these functions — supported by a unified data architecture that maps the supply chain, stores supplier documentation, and supports compliance monitoring — is both more efficient and more effective than managing them as separate compliance silos.
Supplier engagement is the most challenging and most important element of supply chain compliance. Suppliers who are reluctant to provide documentation of their own manufacturing processes, raw material sources, or labor practices create a fundamental compliance risk for the importer: if the importer cannot document its supply chain, it cannot defend its trade compliance posture to CBP. Importers should build supply chain transparency requirements into their supplier contracts, make ongoing access to supply chain information a condition of continued business, and communicate clearly to suppliers that trade compliance is a business requirement, not a voluntary aspiration. Suppliers who are unable or unwilling to provide adequate transparency should be evaluated for replacement with suppliers who can meet the importer’s compliance requirements.