Two Chinese PVC makers banned by US over forced labor

The U.S. Department of Homeland Security (DHS) banned imports from two more companies based in China as it continues efforts to keep forced labor practices out of the U.S. supply chain.

Goods produced by Xinjiang Zhongtai Chemical Co., Ltd. and Ninestar Corp. and eight of its Zhuhai-based subsidiaries are restricted from entering the United States.

The ban was announced June 9 and went into effect June 12. It is in response to the companies' participation in business practices that target members of persecuted groups, including Uyghur minorities, according to a DHS news release.

The two companies were added to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List by the interagency Forced Labor Enforcement Task Force (FLETF), which is led by DHS. The list now includes 22 companies.

U.S. Customs and Border Protection (CBP) began enforcing the UFLPA in June 2022. A year later, federal officials say they have examined more than $1.3 billion worth of goods likely manufactured with forced labor.

Eradicating forced labor from the U.S. supply chains will facilitate legitimate trade and strengthen the U.S. economy, according to Secretary of Homeland Security Alejandro Mayorkas.

"Our department will not tolerate governments abusing human rights and will continue to restrict all goods at our ports of entry that use materials or workers from the Xinjiang Uyghur Autonomous Region where the People's Republic of China aggressively oppresses and exploits Uyghurs and other Muslim-majority communities," Mayorkas said in a news release.

The DHS, CBP and U.S. Immigration and Customs Enforcement are leading the efforts to change importers' behavior and hold perpetrators accountable for egregious forced labor abuses.

"The use of forced labor offends our values and undercuts American businesses and workers. Forced labor is now a top-tier compliance issue, and businesses must know their supply chains. DHS and the Forced Labor Enforcement Task Force will continue their vigilant approach to implementing the Uyghur Forced Labor Prevention Act," said Robert Silvers, under secretary and chair of the Forced Labor Enforcement Task Force.

Because of the ban on goods produced by Xinjiang Zhongtai Chemical, PVC trade flows within China may be adjusted, according to Jonathan Chou, a markets reporter at ICIS who covers the chloro-alkali value chain in Asia.

Chou describes Xinjiang Zhongtai Chemical as a carbide-based PVC producer with 1.8 million metric tons of annual PVC production capacity.

More than 90 percent of Xinjiang Zhongtai Chemical's sales comes from domestic sales, Chou said.

"The ban won't have a large impact on its current operations," Chou said on an ICIS podcast called Chemical Connections. "On the other hand, we've seen that some PVC converters in China and Vietnam that are producing vinyl flooring and tiles have actually been asked by U.S. customs to declare that their raw material has not been sourced from the UFLPA list. Such converters have either been avoiding material produced from Xinjiang, which has primarily carbide-based roots. These converters are preferring to source from ethylene-based PVC instead whether it's from local producers in East China or true imports."

Total PVC exports from China this year increased significantly in the first quarter of 2023 and were up 35 percent from the fourth quarter of 2022, Chou also said.

"More producers in China have increasingly looked to the export markets as domestic PVC demand and consumption in China remains sluggish," Chou said, adding those that are carbide based will need to navigate increasingly complicated hurdles for export trade.

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