Washington, D.C., — Beginning in October 2022, U.S. Customs and Border Protection detained electronics shipments from India valued at close to $43 million on suspicion under the Uygur Forced Labour Prevention Act. That represented one of the largest expansions thus far of the agency’s enforcement; CBP had largely homed in on goods arriving from China, according to a report from Reuters.
The UFLPA’s target was first and foremost Chinese goods-primarily those dealing with polysilicon used in solar panels-to address concerns about forced labor in China’s Xinjiang region. But the detentions of Indian shipments show it has become, in practice, at least, a more far-reaching law. CBP would not say what specific kinds of electronics have been detained, but based on what industry sources say, there is a good chance the affected products include solar panels made with polysilicon. Notably, polysilicon is considered one of the key materials in the production process for solar panels, and recently there have been forced labor allegations in Xinjiang, China, concerning the material.
The UFLPA bans imports of products made, fully or in part, in China’s Xinjiang region, unless companies can prove that their supply chains are free of forced labor. Against all the fact that China has never stopped denying such accusations, the U.S. has kept its stand very firm on such issues, ensuring extreme checks on products containing materials traced to that region.
Impact on Indian Electronics Shipments. But the latest detentions have somewhat dampened enthusiasm among Indian manufacturers that had positioned themselves as increasingly viable alternatives to Chinese suppliers, especially for U.S. solar project developers. In fact, the Indian solar industry has grown at breakneck speed; finished solar products imports from the country reached a high of $2.3 billion in 2023. The second quarter of 2024 accounted for 11% of U.S. solar panel imports from India, more than doubling its first-quarter market share, the highest market share for India in any quarter so far.
It is also contrary to the general growth of imports, given that nearly a third of the seized Indian shipments were banned from entering the U.S. market, in contrast to 5.4 percent for shipments coming from the leading solar component suppliers in Malaysia, Vietnam, and Thailand. This high refusal rate is therefore a setback for India’s rising solar industry, after it had been making considerable strides in captivating the U.S. market. In 2018, the US did not import any solar panels from India, making the recent increase quite significant for the sector.
Challenges before Indian Manufacturers
The detentions under the UFLPA pose a challenge for the Indian manufacturers that have been working to establish themselves as reliable suppliers of the U.S. solar industry. Scrutinizing the shipments from India would signal that CBP is expanding its UFLPA enforcement beyond China, perhaps to present new compliance challenges to other countries.
These detentions become all the more significant in view of the recent upward spiral in the demand for solar energy in the U.S. With the country moving on to complete dependence on renewable energy, the reliability and ethical sourcing of these solar component parts have come under much scrutiny. Indian manufacturers, who had wanted to fill the demand for solar panels in the U.S., especially after increased tariffs and restrictions on Chinese products, may find their efforts beset with hurdles because of the detentions made under the UFLPA.
Future Outlook
The recent detentions epitomize the broader implication of the UFLPA on global supply chains, especially on renewable energy. As the U.S. becomes even more aggressive in its execution of the UFLPA, manufacturers from all over the world will find themselves increasingly questioned with regard to their supply chain and sourcing practices. For the Indian manufacturer, compliance of their products with U.S. regulations will be key toward ensuring continuity and growth in market share within the U.S.
The impact of the UFLPA on Indian electronics shipments underlines how the country must try to maneuver in a very complex way through international trade regulations. What one country does often causes massive ripples in industries and markets, especially regarding global supply chains. Meeting these challenges head-on is crucial for India’s solar industry in the search for further growth, and it will be important in continuing to hold its position as a major player in the global renewable energy market.
Source: Information adapted and summarized from a report by Reuters.
Credits: Content adapted from reporting by Reuters.