Thousands Of Cars Are Stuck At U.S. Ports Due To A Part Linked To Forced Labor In China

Forced labor, slavery, whatever you want to call it—it’s an abhorrent thing. So much so that the U.S. has sought to ban the products using such labor from its shores. The problem is that global supply chains are so densely interwoven that it’s easy for a company to throw up its hands and state that it is unaware of what goes into the products it sells. The problem has recently come home for a number of automakers, though, who have seen vehicles held by customs officials due to import restrictions on the products of forced labor.

As covered by the Financial Times, thousands of cars from Porsche, Audi, and Bentley have reportedly been impounded across a number of U.S. ports. The cause of the problem is allegedly down to an electronic component in the vehicles that was sourced from “Western China.” It’s believed that around 1,000 Porsches, several thousand Audis, and several hundred Bentleys have been held by authorities. If you’re drawing a connection there, it’s that all these brands belong to the Volkswagen Group.

The issue has frustrated many owners eagerly awaiting their new cars. Reports shared on the Rennlist forums have said that dealers are advising customers that cars may not be released until April 2024. Early speculation suggested the questionable component could have been sourced from Belarus, but it’s now believed to be a part of Chinese origin.

The Uyghur Forced Labor Prevention Act is at the center of the matter, which was signed into force in 2021. The goal of the legislation was to prevent the importation of products from China that may have been produced by forced labor, both in the western Xinjiang region and beyond. The Xinjiang area is notable for its Uyghur population, which has been subject to repression and forced labor by the Chinese government. Prior to the Act, the U.S. government had previously banned imports of several goods, including cotton and tomato products from the Xinjiang region. Despite many reports on the matter, the Chinese government denies any human rights abuses in the area.

A letter to customers waiting for vehicles noted the hold up was due to “a small electronic component that is part of a larger control unit, which will be replaced,” according to the Financial Times, without directly outlining what the component was. Sources speaking to the outlet noted that the automaker’s parent company, Volkswagen, was not aware of the source of the components. The parts are said to have been sourced by an indirect supplier to Volkswagen, some way down the supply chain.  Sources also noted that Volkswagen notified the US government of the matter as soon as it became aware of the problem.

“As soon as we received information of allegations regarding one of our sub-suppliers, we have been investigating the matter. We will clarify the facts and then take appropriate steps,” noted Volkswagen in a statement to the outlet. “These may also include the termination of a supplier relationship if our investigations confirm serious violations.” The company also noted it “takes allegations of infringements of human rights very seriously, both within the company and in the supply chain.”

The issue is a complex one for Volkswagen, which currently maintains a partnership with Chinese firm SAIC. The company has recently stated it will be re-examining its own presence in the Xinjiang region due to further recent allegations. As reported by Reuters, the company has come under fire regarding the construction of a test track in Xinjiang, in which it’s alleged an engineering firm hired by Volkswagen and SAIC used Ugyhur forced labor.

Volkswagen has a number of plants across China, with much attention often focused on the Urumqi plant in Xinjiang, run in partnership with SAIC with a contract until 2029. The factory was the topic of an audit last year, with a December report stating no evidence of forced labor was found. However, the fresh attention has led Volkswagen to reconsider its position. It currently employs only approximately 197 employees, down from a high of 650, and car production no longer takes place at the facility. Instead, it is presently used as a distribution hub.

The issue can be a minefield for global companies to navigate. It’s easy enough to audit a Tier 1 supplier that delivers parts directly, but drilling down further can be difficult. A full audit involves looking into all the suppliers the Tier 1 manufacturer uses, and then going on from there to look at where raw materials are coming from.

Xinjiang’s status as an industrial powerhouse only makes the matter more difficult. One recent report from Human Rights Watch noted that 10% of the world’s aluminum comes out of the Xinjiang region. In fact, Xinjiang itself now produces more aluminum than any country besides China itself. The report notes that the products of forced labor from this area could readily end up in everything from car bodies to engines and batteries. The outlet has worked to find a link between the region’s aluminum output and automotive production, with the suspicion that Chinese partners of major automakers could be relying on these supplies. Volkswagen responded to queries from Human Rights Watch over the matter, but the answers aren’t as positive as you’d hope for.

 Indeed, when asked what steps it takes to ensure SAIC-Volkswagen is not purchasing aluminum from a producer linked to Xinjiang, Volkswagen stated: “We have no transparency about the supplier relationships of the non-controlled shareholding SAIC-Volkswagen. We therefore ask for your understanding that we do not make any statements about this question.”

Until forced labor practices stop, issues like these will continue to dog automakers. Compliance with ever-stricter import laws will require rigorous supply chain surveillance or a hard cutting of ties with suppliers sourcing parts and materials of questionable origins. Companies that fail to do so would have to reasonably expect to face more import headaches in the future.

Image credits: Volkswagen, Bentley