US electronics firm struck deal to transport and hire Uyghur workers

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QINZHOU, China (Reuters) -U.S. remote-control maker Universal Electronics (NASDAQ:UEIC) Inc told Reuters it struck a deal with authorities in Xinjiang to transport hundreds of Uyghur workers to its plant in the southern Chinese city of Qinzhou, the first confirmed instance of an American company participating in a transfer program described by some rights groups as forced labor.

The Nasdaq-listed firm, which has sold its equipment and software to Sony (NYSE:SONY), Samsung (KS:005930), LG, Microsoft and other tech and broadcast companies, has employed at least 400 Uyghur workers from the far-western region of Xinjiang as part of an ongoing worker-transfer agreement, according to the company and local officials in Qinzhou and Xinjiang, government notices and local state media.

In at least one instance, Xinjiang authorities paid for a charter flight that delivered the Uyghur workers under police escort from Xinjiang’s Hotan city – where the workers are from – to the UEI plant, according to officials in Qinzhou and Hotan interviewed by Reuters. The transfer is also described in a notice posted on an official Qinzhou police social media account in February 2020 at the time of the transfer.

Responding to Reuters’ questions about the transfer, a UEI spokeswoman said the company currently employs 365 Uyghur workers at the Qinzhou plant. It said it treated them the same as other workers in China and said it did not regard any of its employees as forced labor.

Sony Group Corp, Samsung Electronics (OTC:SSNLF) Co Ltd, LG Corp and Microsoft Corp (NASDAQ:MSFT) each say in social responsibility reports they prohibit the use of forced labor in their supply chains and are taking steps to prevent it.

Sony declined to comment on specific suppliers. In a statement to Reuters, it said if any supplier is confirmed to have committed a major violation of its code of conduct, which prohibits the use of forced labor, then “Sony will take appropriate countermeasures including request for implementing corrective actions and termination of business with such supplier.”

A Microsoft spokesperson said the company takes action against any supplier that violates its code of conduct, up to termination of its business relationship, but that UEI was no longer an active supplier. “We have not used hardware from the supplier since 2016 and have had no association with the factory in question,” the spokesperson said.

A Samsung spokesman said the company prohibits its suppliers from using all forms of forced labor and requires that all employment be freely chosen. He declined to comment on UEI.

LG did not reply to requests for comment.

The UEI spokeswoman said the company covers the cost of the transfer of workers to its Qinzhou plant from a local airport or train station in Guangxi, the region in which Qinzhou is located. She said the company does not know how the workers are trained in Xinjiang or who pays for their transport to Guangxi.

Reuters was unable to interview plant workers and therefore was not able to determine whether they are being compelled to work at UEI. The conditions they face, however, bear hallmarks of standard definitions of forced labor, such as working in isolation, under police guard and with restricted freedom of movement.

UEI’s Uyghur workers are under surveillance by police during their transportation and life at the factory, where they eat and sleep in segregated quarters, according to details in Qinzhou government notices and local state media.

Programs like this have transferred thousands of Uyghur laborers to factories in Xinjiang and elsewhere. Amnesty International, Human Rights Watch and other rights groups, citing leaked Chinese government documents and testimony from detainees who say they were forced into such jobs, say the programs are coercive and part of China’s overall plan to control the majority-Uyghur population in the region.

In response to Reuters’ questions, China’s Ministry of Foreign Affairs did not address employment at UEI, but denied forced labor exists anywhere in the country.

“This so-called ‘forced labor’ is a completely fabricated lie,” the ministry said in a statement. “Xinjiang migrant workers in other parts of China, like all workers, enjoy the right to employment in accordance with the law. The right to sign a labor contract, the right to labor remuneration, the right to rest and vacation, the right to labor safety and health protection, the right to obtain insurance and welfare rights and other legal rights.”

Xinjiang authorities did not respond to requests for comment.

The U.S. Department of State, which has criticized China and several other governments for condoning forced labor, said the United States has found “credible reports of state-sponsored forced labor practices employed by the (Chinese) government in Xinjiang, as well as situations of forced labor involving members of these groups outside Xinjiang.”

A State Department spokesperson declined to comment on UEI, but said wittingly benefiting from forced labor in the United States was a crime under the U.S. Trafficking Victims Protection Act.

That law “criminalizes the act of knowingly benefiting, financially or by receiving anything of value, from participation in a venture, where the defendant knew or recklessly disregarded the fact that the venture engaged in forced labor,” the spokesperson said in a statement. The law imposes criminal liability on individuals or entities present in the United States, the statement added, even when the forced labor occurs in another country.

The State Department referred Reuters to the Justice Department for further comment on UEI; Justice did not respond.

The import of goods into the United States made wholly or in part by forced labor is also a crime under Section 307 of the Tariff Act of 1930. UEI told Reuters “a very small quantity” of products made at its Qinzhou factory are exported to the United States. It did not specify who purchases the goods.

The law is enforced by U.S. Customs and Border Protection, which can seize imports and start a criminal investigation of the importer. Customs said it does not comment on whether specific entities are under investigation.

Legal experts told Reuters there have been very few forced labor prosecutions in the United States over abuses overseas, given the difficulty of proving an offense. “As the law currently stands, there’s very little that the U.S. government can do to hold American companies accountable when they build, manage and profit from supply chains that engage in forced labor and other human rights abuses outside the United States,” said David McKean, deputy director of the International Corporate Accountability Roundtable, a coalition of rights groups.

Legislation before the U.S. Congress, called the Uyghur Forced Labor Prevention Act, was designed to toughen up restrictions by creating the legal presumption that any products made in Xinjiang are the result of forced labor, putting the burden on importers to prove they are not. The latest version of the legislation was passed by the Senate this year but has yet to pass the House of Representatives.

The UEI spokeswoman told Reuters the company does not conduct independent due diligence on where and how its workers are trained in Xinjiang. She said the arrangement is vetted by a third-party agent working with the Xinjiang government, who brokered the deal. She declined to identify that agent. Reuters could not determine if the agent is independent or works for the Xinjiang government.

‘VOCATIONAL’ INTERNMENT CAMPS

China has detained over 1 million Uyghurs in a system of camps since 2017 as part of what it calls an anti-extremism campaign, according to estimates by researchers and United Nations experts. China describes internment camps in the region as vocational education and training centers and denies accusations of rights abuses.

Organized transfers of Uyghur laborers to other parts of China date back to the early 2000s, according to state media and government notices from the time. The program has expanded since about 2016, Xinjiang officials said in late July, around the time the mass internment program began.

Xinjiang officials told reporters at a Beijing media conference in late July that transfers of workers outside of Xinjiang are common and voluntary. “There are many labor-intensive industries that fit the skills of people in Xinjiang,” said Xu Guixiang, a spokesman for the provincial government. “They go where the market needs them.”

Suppliers for some U.S. companies have been accused of using forced laborers transported from Xinjiang. The Australian Strategic Policy Institute (ASPI), a think tank, last year released a report identifying 83 brands linked to Uyghur labor transfer programs, citing Chinese-language documents, satellite-imagery analysis and media reports. None of the U.S. companies were directly involved in the transfers, however.

Aside from remote-control technology, UEI also makes home security products under the Ecolink brand. It has more than 3,800 employees in 30 countries and a market value of about $670 million. Its headquarters are in Scottsdale, Arizona, but the company has no plants in the United States.

The company’s two largest investors are funds run by BlackRock Inc (NYSE:BLK) and Eagle Asset Management, an affiliate of Carillon Tower Advisers.

BlackRock declined to comment. A spokesman for Eagle Asset Management said: “Since becoming aware of purported labor issues involving one of our investments, we immediately approached the company’s senior leadership and they have provided assurances that labor is paid, treated humanely and employed at-will. Should we learn otherwise, we will take appropriate action.”

GOVERNMENT FUNDING

Six groups of workers were transported from Xinjiang to the UEI factory between May 2019 and February 2020, according to Qinzhou government notices, confirmed to Reuters by government officials in Xinjiang and Guangxi.

In early 2020, as the new coronavirus began to spread in China and lockdowns crippled manufacturing, about 1,300 Uyghurs were transported from Xinjiang’s southern Hotan region. They were sent to factories around the country to alleviate labor shortages and help get them running again, according to officials cited by Chinese state media outlet Economic Daily in February 2020.

The police-escorted charter flights were funded by the Xinjiang government, according to Qinzhou government notices and an official in Hotan who spoke to Reuters in May.

UEI’s Qinzhou factory took more than 100 workers in the February 2020 transfer, according to notices on the Qinzhou government website, state media and Qinzhou officials. That was one of several transfers made under an agreement struck some nine months earlier between UEI and Xinjiang authorities. Reuters could not determine exactly where the workers came from.

UEI’s operation underscores the role played by agents in supplying companies with Uyghur workers.

The UEI spokeswoman confirmed the company entered into an agreement with Xinjiang authorities in 2019 after being approached by the third-party agent. UEI said the same agent hires and pays the workers and that UEI does not sign individual contracts with the workers.

The spokeswoman declined to disclose what the Uyghur workers are paid, beyond saying that they receive the same as others at the facility, which is “higher than Qinzhou local minimum wage.”

The Economic Daily reported that workers sent in UEI’s February 2020 transfer are expected to make around 3,000 yuan ($465) a month. That compares with the average manufacturing wage in the province of Guangxi of 3,719 yuan, according to China’s national bureau of statistics.

UEI’s Uyghur employees are part of a much bigger system. Two separate labor agents hired by Hotan and Kashgar authorities in Xinjiang told Reuters they had each been set targets of placing as many as 20,000 Uyghurs annually with companies outside the region.

They, and one other agent, showed Reuters copies of three contracts for transfers already completed this year. These included a January contract to transport 1,000 workers to an auto parts factory in Xiaogan, Hubei province, who had to undergo “political screening” prior to transfer.

The three agents told Reuters that separate dormitories, police escorts and payments overseen by third-party agents are routine elements in such transfers.

“Uyghur workers are the most convenient workers for companies,” one of the agents told Reuters. “Everything is managed by the government.”

The Uyghurs of UEI are kept under tight watch all along this labor-supply chain.

Photographs published online by the Economic Daily and an official social media account of Qinzhou police, dated Feb. 28, 2020, show the workers lining up before dawn outside the airport in the city of Hotan before taking the flight.

“Get to work quickly and get rich through hard work using both hands,” one manager employed by Xinjiang authorities told the gathered workers, according to an account published online by the Qinzhou Daily. Accompanying photos show the workers dressed in blue and red uniforms.

More than a dozen uniformed police officers escorted the same workers through the Nanning Wuxu airport and onto buses, according to posts on a social media account of a Qinzhou police unit and a post by the Qinzhou government. The buses were then escorted by police vehicles to the UEI factory in Qinzhou, some 75 miles (120 km) away.

SEPARATE DORMS, POLICE ‘EDUCATION’

The mostly young Uyghur laborers at UEI’s plant sleep in separate dormitories and eat in a segregated canteen under the watch of managers assigned by Xinjiang authorities. Non-Uyghur laborers are not subject to such monitoring. The managers stay with the Uyghur workers throughout their employment, according to state media, local police notices and government officials who spoke to Reuters.

UEI said the canteens were established to provide local Uyghur food, and says it allows Xinjiang workers to share dormitories “as they wish.”

The Uyghurs must participate in what are described as “education activities” run by Qinzhou police and judicial authorities within the UEI facility, as part of the agreement between the U.S. firm and local authorities, according to notices on the government website of the Qinzhou district where UEI’s factory is located.

Reuters could not determine what those activities involve. Beijing has said that legal education is a key aspect of the training programs in Xinjiang’s camps. The education activities in UEI’s factory only apply to the Uyghur workers, according to two Qinzhou government notices.

The UEI spokeswoman said UEI is “not aware of specific legal education activities” that Uyghurs take part in at its plant.

‘TERRORISTS, XINJIANG PEOPLE AND MENTAL PATIENTS’

Two Reuters journalists visited the Qinzhou factory in April during a local public holiday when the plant was not running. Women in Uyghur ethnic dress were visible inside the compound.

Half a dozen police arrived, followed by a delegation of officials from the Qinzhou Foreign Affairs Office. The officials confirmed that Uyghur laborers worked in the factory, which is run by UEI’s wholly owned China subsidiary Gemstar Technology. The officials said Gemstar had taken the lead in setting up the May 2019 agreement to transfer workers. The officials told Reuters not to take photos of Uyghurs in the factory.

The district of Qinzhou where UEI is located has surveillance measures targeting Uyghurs that predate the transfers. A June 2018 procurement document seen by Reuters shows police there purchased a 4.3 million yuan ($670,000) system that establishes blacklists of “high-risk” people. These include “terrorists, Xinjiang people and mental patents.”

The document also lists a specific need for “automatic alarms” – a computer system that sends alerts via an internal messaging system to police when Uyghurs from Xinjiang are detected in the area.

According to a March 2020 post on the official Qinzhou police website, UEI agreed to provide daily reports on the workers to police.