On June 9, the U.S. banned imports from China’s Ninestar Corp. and eight of its China-based subsidiaries. The ban was instituted by U.S. Customs and Border Protection (CBP), a unit of the Department of Homeland Security (DHS), using authority prescribed under the Uyghur Forced Labor Prevention Act (UFLPA), 19 U.S.C. §1307, signed by President Biden on December 23, 2021. Entities are banned when their names are added to the UFLPA Entity List in the Federal Register, and enforcement by CBP begins following a public announcement of those additions.

The UFLPA was created to prohibit the importation of goods into the United States manufactured or supported wholly or in part with forced labor in the People’s Republic of China (PRC), especially from the Xinjiang Uyghur Autonomous Region, or Xinjiang. Read more on the background of the ULFPA list, and the Forced Labor Enforcement Task Force Participation (FLETF) and the responsible Federal participating agencies.

Named on the UFLPA Entity List were Ninestar and its eight Zhuhai subsidiaries, which include Zhuhai Ninestar Information Technology Co. Ltd., Zhuhai Pantum Electronics Co. Ltd., Zhuhai Apex Microelectronics Co. Ltd., Geehy Semiconductor Co. Ltd., Zhuhai Pu-Tech Industrial Co., Ltd., Zhuhai G&G Digital Technology Co. Ltd., Zhuhai Seine Printing Technology Co. Ltd., and Zhuhai Ninestar Management Co. Ltd. Twenty-two companies in total are now on the list.

The government accused the named firms of violating Section 2(d)(2)(B)(ii) of 19 U.S.C. §1307, a classification in the UFLPA – “entities working with the government of Xinjiang to recruit, transport, transfer, harbor or receive forced labor or Uyghurs, Kazakhs, Kyrgyz, or members of other persecuted groups out of Xinjiang.” Another firm, a chemical company, was also included in the June 9 announcement, but it is not clear that there is any connection between that firm and Ninestar.

Reactions

Reactions to the ban from the involved parties were quick and, for the most part, predictable. Ninestar issued a statement that cautiously avoided acknowledging any complicity. A translation from the original Chinese via Google Translate reads roughly, “The company has been strictly abiding by the laws and regulations applicable to business development, abide by the applicable standards of international labor protection, fully protect the legitimate rights and interests of workers. The company continues to strive to provide all employees with equal, friendly and positive, work atmosphere and career development opportunities. At present, the company is comprehensively assessing the potential impact of this incident on the company and making a good response. The company will continue to pay attention to and follow up the aforementioned related matters, and strictly abide by the relevant rules and timely fulfill the obligation of information disclosure. The Company will issue further announcements as and when necessary.”

One of the greatest areas of speculation has been around Kentucky-based Lexmark, which was acquired by Ninestar (formerly Apex Technology) in 2016. Lexmark’s acknowledgment of the UFLPA ban slapped on its parent company has been circumspect. In a June 22 statement, the company acknowledged that Ninestar was one of its suppliers, though stating only a small portion of its manufacturing comes from Ninestar and its subsidiaries and that it would stop using Ninestar as a supplier immediately and substitute other suppliers for its needs. The company employed semantic subtleties to separate itself from Ninestar, telling the Wall Street Journal that “Ninestar investors have no operational control” of Lexmark while sending a letter to its dealers reiterating that it operates as an independent entity.

Lexmark says it will substitute other suppliers for the items it sources from Ninestar, but experienced industry observers wonder how fast Lexmark can really substitute the items it bought from Ninestar, which are believed to range from components to toner cartridges to whole printers (Lexmark-branded versions of Pantum models, perhaps?). Ninestar says it is the biggest player in the printer aftermarket — it acquired North Carolina-based Static Control, also not named in the UFLPA notice, in 2015.

And Lexmark may not be the only OEM affected by the ban. An August 2020 report in RTM World stated that Xerox’s “Everyday Toner” program, which offers toner for most major brands, used “Ninestar toners for its non-Xerox A4 printers.” It is also possible that Xerox sources printers from Pantum – ever notice the resemblance between the Pantum P2502W and the Xerox B230 (or the Lexmark B2236dw, for that matter)? A relationship between Xerox and Lexmark exists, with Lexmark being the first OEM partner of Xerox Financial Services. Whether a component or a whole printer, if Xerox is sourcing products from Ninestar, it too will have to adjust/re-engineer products on the fly.

Reverberations across the aftermarket

To get a feel for the ripple effect the ban will have across the aftermarket, we spoke to Keli Posch and Eric Martin of Clover Environmental Solutions, whose Clover Imaging division is the largest cartridge remanufacturer in North America.

“No one saw this coming,” said Martin, who believes the ban will have lasting positive effects on the remanufacturing industry. “There’s a lot of price pressure from the [less expensive] clone cartridges coming in,” he said. “There’s definitely a market for those low-cost cartridges, especially on Amazon. Ninestar plays a huge part in that.” Ninestar sells its products under dozens of brand names, creating the appearance of competition. Posch says the effect on the supplies market will likely not be on components, but on the new compatible cartridges segment.

Will the Ninestar ban make selling in the U.S. market more difficult for China-based components and finished cartridge makers? “Potentially,” says Martin. “We’re already seeing that some buyers are very hesitant right now to move their business to another Chinese company where this may happen again.” Businesses that are already having to make major changes to their supply chain will definitely be doing their due diligence before selecting another Chinese manufacturer.

(Martin and Posch stated that Clover does not buy any finished goods from Ninestar, and although they have sourced some chips from the company in the past, since the ban was announced they have refused delivery of a shipment and canceled future P.O.s.)

A statement from the European Toner and Inkjet Remanufacturers Association (ETIRA) implores all European companies and public bodies to stop the purchase of products from the listed companies. Noting that Ninestar companies are very active in the EU, the statement warns that “EU distributors would be wise to quickly distance themselves from Ninestar now to avoid being associated with forced labor. They should switch to reuse cartridges from European remanufacturers.” ETIRA is also calling for EU and national authorities to immediately investigate for possible similar violations of European rules on sustainable sourcing, protection of human rights, etc.  

Guilty until proven innocent

It has been reported that Ninestar has approached USCBT to meet and understand what is necessary to drop the ban, but that is not an easy task. According to the Federal Register, “Beginning on June 21, 2022, the UFLPA requires the Commissioner of U.S. Customs and Border Protection to apply a rebuttable presumption that goods mined, produced, or manufactured by entities on the UFLPA Entity List are made with forced labor, and therefore, prohibited from importation into the United States under 19 U.S.C. 1307.” The importance of the principle of “rebuttable presumption” in this statute is what gives the ULFPA its teeth and differs from one of the primary principles of U.S. law — that a defendant is innocent until proven guilty. In the implementation of the ULFPA statute, when an entity is placed on the list it is done so by one or more government agencies providing information concerning a possible violator to the FLETF group for review, and a majority vote of that group results in that entity being added to the ULFPA ban list. So, when an entity is publicly added to the list, that firm is judged to be in violation of 19 U.S.C. §1307 and prohibited from entry to the United States – and thus must prove its innocence by gathering its proof and making a request to be removed from the UFLPA Entity List. While FLETF decisions on requests for removal are not appealable, the requesting entity can submit a new request for removal if it can provide new information supporting the request.

What do you need to know?

To our knowledge, when new companies are placed on the UFLPA Entity List, the entity is not informed beforehand – it is simply announced. If you or one of your suppliers are importing from the PRC, it is possible that your firm or your supplier is currently under consideration as a candidate for the UFLPA Entity List. Industry players that import goods from the PRC might want to consider the following:

  • USCBP/UFLPA has named “printing products” as a target for investigation because they are produced in Xinjiang Uyghur Autonomous Region, or Xinjiang. Review and investigate the sources of your products with respect to 19 U.S.C. §1307. Know the sources for your components if sourced from the PRC; whatever you know, find out more.
  • Seek out official information with respect to 19 U.S.C. §1307 — for example, the CBP’s UFLPA Operational Guide for Importers.
  • Begin to develop a list of second/alternative sources for products/components in the event that a supplier you source from ends up on the UFLPA Entity List.

The reverberations of this ban are sure to be felt for a while. We will continue to follow the story and provide updates.

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serves as a senior analyst for BPO Media. With more than 40 years of experience in the printing industry as an analyst, product developer, strategist, marketer, and researcher, he has covered the printing and supplies sectors for prominent market research firms such as Lyra Research, InfoTrends, and BIS Strategic Decisions, and served with major OEMs such as Samsung, NEC, and Diablo Systems/Xerox. McIntyre is the former managing editor of Lyra’s Hard Copy Supplies Journal and has conducted research and consulting engagements examining issues such as market and business strategies, product positioning, distribution channels, supplies marketing, and the impact of emerging technologies.