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Will This New Software Solve Xinjiang Traceability Challenges?

The forced labor within China’s Xinjiang Uyghur Autonomous Region (XUAR), and the cotton that has been produced from it, has shed light on one of apparel industry’s most urgent imperatives: the need to gain awareness of the materials comprising its garments. But as more global attention shifts to the human rights violations, apparel now must take a more important step—to eliminate these products from the supply chain altogether.

In the wake of these growing concerns, sister supply-chain technology providers Logility and NGC Software have launched a digital supply-chain traceability solution giving brand owners and retailers the tools to document the chain of custody from component origin to importer of record.

The announcement of the launch comes one day after U.S. Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) that blocks shipments containing cotton and cotton merchandise originating from the Xinjiang Production and Construction Corps (XPCC), a paramilitary organization that produces one-third of China’s cotton, as well as its scores of subordinate and affiliated entities.

The WRO also includes any products that are made in whole or in part with or derived from that cotton, such as apparel, garments and textiles, so the shipments don’t even have to come directly from China to be flagged.

With the solution, which can be accessed within both the Logility and NGC platforms, users can trace the chain of custody through all tiers in the supply chain in one “digital thread” while storing and managing all supporting documents related to every transaction between supply-chain trading partners.

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“Most companies are only dealing with their Tier 1 vendors, because that’s where they have the relationship,” Mark Burstein, president and chief strategy officer, NGC, told Sourcing Journal. “The finished garment company sells to one of the retailers in the U.S., and that retailer has really no relationship with the fabric mill. They might have nominated that fabric, but they really have no idea where the yarns are coming from, much less even where the cotton is coming from.”

To track the process, users can scan the initial documents detailing the transaction so the data is captured and automatically uploaded into the platform. This generates a compliance certificate that summarizes chain of custody, which includes all necessary information related to each exchange of products and materials from source to destination. Then, via electronic data interchange (EDI) technology, this data, including orders, shipments and invoices, can be shared digitally across the supply network without the need to share it manually.

Burstein said that his team first started to gain interest in a potential solution as the forced labor allegations began to gain momentum early this year. Then when the Uyghur Forced Labor Prevention Act started to take shape in Congress over the summer, he started going asking his biggest customers, “What do you think of this?”

Although some brands were uncertain about the Xinjiang situation at the time, given that the bill did not pass in the U.S. House until an overwhelming 406-3 vote on Sept. 22, many were already seeking ways to further improve traceability to gauge the environmental impact of their facilities, partners and materials used.

“I think that without this Xinjiang forced labor issue, this whole traceability thought would still just be a discussion. Nothing would be put into action,” Burstein said. “To me, this is the catalyst that will drive the industry to reduce the environmental impact.”

Boasting a combined portfolio of apparel and footwear brands and retailers such as Brooks Brothers, Carter’s, Destination XL, Fanatics, Foot Locker, Jockey International, Kontoor, Lacoste, Lacrosse Footwear, Spanx and VF Corporation, the sister supply chain platforms had significant incentive to get the traceability solution off the ground.

Logility and NGC also benefited from already having a built-in vendor management solution that onboarded all tiers within the supply chain—from the finished garment supplier, to the fabric mill, to the yarn spinners, and already could track purchase orders, invoices and packing lists to verify the traceability of these transactions.

With the foundation already in place, the idea-to-release timeline for the solution only ended up taking six weeks.

The introduction of this solution is an essential one for the future of the apparel industry, especially as the U.S. government has taken steps to ban imports from the Xinjiang region that have been manufactured via forced labor, including prison labor.

The H.R. 6210 Uyghur Forced Labor Prevention Act legislation, as it is currently drafted, will block the import of any goods into the U.S. that cannot prove the merchandise does not contain inputs originating in the region.

Although the legislation, if passed by the Senate and signed by the president, would take 120 days to go into effect, the WRO itself has been active since Nov. 30. This means that apparel brands can’t afford to delay their decision making process, whether they are either removing affected products before they enter the U.S. market or preparing to present evidence that proves the merchandise was not manufacturing using cotton that originated from the XPCC.

“It is a lot more urgent than people realize,” said Burstein. “Think about it. Goods on the water right now are going to be affected.”

Additionally, since Xinjiang reportedly produces more than 80 percent of Chinese cotton, according to Washington D.C.’s Center for Strategic & International Studies, apparel brands have the difficult task of identifying and tracing the exact source of their garments, and figuring out how they are going to replace these suppliers immediately.

“I would say that a large majority of my customers have been moving cotton production out of China for a while,” Burnstein said. “They’ve been slowly moving it out. But no one has moved cotton production out of China in its entirety.”

Various apparel brands have taken action to cut ties with companies that source materials from the region. In July, Patagonia said it would end sourcing from Xinjiang, and two months later, H&M Group confirmed plans to sever ties over the next year with a mill associated with a textile producer linked to Uyghur abuses.

Burstein is looking to position this new software solution as a guide to help brands navigate through the “top-down” process of examining their material origins. Unlike other industries overseen by the U.S. Food and Drug Administration, which requires transparency into the ingredients used and the precise amount include, apparel doesn’t abide by those rules, particularly since so much of it is assembled overseas.

“Let’s say I take a batch of cotton. If I could segregate this lot, this cotton goes into multiple fabrics and those fabrics go into multiple garments, then I would have a blockchain from the bottom up, starting with the ingredients going to the finished garment,” Burstein said. “That entire process—none of that exists in the apparel industry. So the only way that we can trace it is top down right now, which is the finished garment and back.”