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Special Contributed Op-Ed: As NBA cozies up to China to the tune of billions of dollars, sanctions exposure risk soars tied to actual, assumed forced labor, human rights abuses

The skinny:

  • As the NBA has cozied up to China to the tune of billions of dollars, they have collectively increased their exposure to potential fincrime compliance and U.S. Treasury sanctions breaches related to the country’s use of forced labor in certain regions, enhanced surveillance and human rights abuses against several groups – chiefly based on religious of ethnic grounds.
  • The issue in recent years has further mushroomed in complexity because, just as the U.S. has more aggressively designated companies and entities – and effectively asked all companies to assume the labor supply chain from certain regions is tainted – China has engaged in its own reverse charm offensive to scrub away, dismiss or doctor online and open source evidence of the practice.
  • Taken together, this means the NBA, its teams and apparel partners may have to take a page out of the book of longtime bank sanctions analytics teams – investing in human and technological resources to screen for buried connections to newly designated parties, or those engaging in similar production and shipping methods.

By Benjamin A. Gurvitch, J.D. Candidate, 2025
Staff Editor, Cardozo Law Review, Vol. 45, Benjamin N. Cardozo School of Law
Nov. 29, 2023

With editing and content contributions from ACFCS VP of Content, Brian Monroe

Every year, before the new National Basketball Association (NBA) season begins, we hear calls for the NBA and its Players Association (NBPA) to sever its ties with Chinese gear makers.

This year is no different, as the Congressional-Executive Commission on China (CECC), a group of bipartisan lawmakers and executive branch officials set up to monitor China’s human rights record, has called for the NBA and the NBPA to sever ties with Chinese gear makers amid allegations of links to forced labor in Xinjiang.

While these allegations are certainly concerning, it is vital to consider the broader implications of such a decision.

As the NBA has cozied up to China to the tune of billions of dollars, they have collectively increased their exposure to potential fincrime compliance and U.S. Treasury sanctions breaches related to the country’s use of forced labor in certain regions, enhanced surveillance and human rights abuses against several groups – chiefly based on religious of ethnic grounds.

The issue in recent years has further mushroomed in complexity because, just as the U.S. has more aggressively designated companies and entities – and effectively asked all companies to assume the labor supply chain from certain regions is tainted – China has engaged in its own reverse charm offensive. 

China has used a whole of government approach in a concerted effort across multiple platforms to use its political power, propaganda machine and global influence to change the narrative around its use of forced labor, issuing false statements, doctored data and putting pressure on companies and foreign dissidents and dissenters to bury them, dismiss them or discredit them, according to U.S. and international business advisories. 

What does this mean in practice?

That the NBA, their companies and any banks involved must give extra scrutiny to the shoe and apparel companies they use from China, Chinese shipping and manufacturing firms, Chinese sponsors and financial institutions involved – just as concrete, timely and accurate data disappears or is actively made inaccurate.

An examination of several NBA owners concluded that they collectively have well over $10 billion tied up in China. Predictably, Brooklyn Nets owner Joe Tsai, the co-founder of Chinese e-commerce giant Alibaba, has the most tied up.

Others include Miami Heat owner Micki Arison, the founder of cruise company Carnival, who has more than $375 million tied to a Chinese shipbuilding company which also builds Chinese naval vessels.

Further, Memphis Grizzlies owner Robert Pera’s company Ubiquiti, of which he is the founder and majority shareholder, derives nearly 10 percent of its revenue in Asia and has their manufacturing and logistics based in China.

Apart from owners, current and former NBA stars Dwyane Wade, Jimmy Butler, Klay Thompson, Kyrie Irving, CJ McCollum, Gordon Hayward, DeAngelo Russel, and Fred VanVleet all have shoe deals with either Anta or Li-Ning. Anta and Li-Ning both rely on Xinjiang cotton for their products.

In today’s interconnected global economy, severing ties with Chinese partners can have significant economic repercussions.

Take what happened in 2019 for example. Daryl Morey, then the General Manager of the Houston Rockets, sent a tweet expressing his support of Hong Kong’s “Fight for Freedom.”

This caused Chinese state television and a media partner with a streaming deal upwards of $1.5 billion to say they would no longer feature Houston Rockets basketball games.

In addition, the shoe company Li Ning suspended their partnerships with the team. Former player Enes Kanter Freedom has also been outspoken against the Chinese government’s treatment of the Uyghurs.

Sanctions risks tied to China rise in the face of forced labor ‘presumption’

While current or former players may feel they have the freedom to speak, overall, the league has not come together on the issue in a unified voice.

To put it bluntly: the NBA’s response has for the most part been lackluster.

It is important to note at the outset that, under the Uyghur Forced Labor Prevention Act (UFLPA), goods with links to China’s Xinjiang region are presumed to be tied to forced labor and banned from the U.S. in most cases.

The UFLPA established a tacit presumption that the importation of goods produced wholly or in part in the Xinjiang Uyghur Autonomous Region of China (XUAR) were produced using forced labor.

Legal analysts believe the act could create fresh challenges for any foreign company sourcing merchandise, products or services from the region.

“The centerpiece of the Bill is the introduction of a U.S. import ban on goods mined, produced or manufactured wholly or in part in the XUAR, produced by certain entities working with the XUAR government to recruit, transport, harbor or receive forced labor or produced by entities that source material from the XUAR,” according to attorneys at Debevoise.

The Bill creates a “rebuttable presumption that such goods must be banned unless U.S. authorities determine by clear and convincing evidence that the goods were not produced through the use of forced labor.”

The Bill also “authorizes sanctions against persons determined to be engaged in, responsible for or facilitating forced labor in the XUAR,” meaning that even if a foreign supplier or sponsor is not on a sanctions list now – it might be in the future.

This is a major presumption which the NBA should be taking seriously.

Even allegations of ties to companies employing forced labor should garner more reaction than we have seen from the NBA thus far.

Additionally, In December 2022, the Office of Foreign Assets Control (OFAC) for the first time issued Global Magnitsky (GloMag) sanctions for human trafficking abuses.

The sanctions targeted companies, individuals, and vessels involved in forced labor on a China-registered distant-water fishing fleet.

This move now links both the supplier of the products being created with forced labor – and even those not created using forced labor – with the shipping, trade or import-export companies they are using, which themselves could be the weak link in the supply chain engaging in human rights abuses through the use of forced labor.

It is arguably only a matter of time before a Chinese gear making company is hit with a GloMag sanction.

What could this foreshadow? The NBA would be wise to not be associated with these companies when that time comes.

Taken together, this means the NBA, its teams and apparel partners may have to take a page out of the book of longtime bank sanctions analytics teams – investing in human and technological resources to screen for buried connections to newly designated parties, or those engaging in similar production and shipping methods.

In all likelihood, the NBA is probably trying to toe the line of maintaining their business relations and league presence in China while not actively supporting forced labor and any other human rights violations.

The NBA should engage in a practice very familiar to fincrime bank compliance and sanctions teams: a sanctions, forced labor or human rights abuse risk assessment.

This could include asking questions of foreign suppliers including how and where do they source their workers, do they produce anything that is “dual-use” and could be used for a shoe or shirt, but also for surveillance and monitoring of persecuted groups?

If the NBA does not want to completely sever their ties with China, they should consider the following alternatives.

It is not hard to understand why it is mutually beneficial for the NBA and their Chinese counterparts to maintain business relations.

People commonly say that the NBA, and sports leagues in general, is in the business of “entertainment.” I strongly disagree. The NBA is in the business of making money. Period.

However, this should never be at the cost of supporting forced labor or any sort of human rights violation.

Compliance with ethical business standards is a legal obligation for businesses. The NBA also has their own Licensee and Supplier Code of Conduct, which prohibits the use of any forced labor.

One option that the NBA has is to leverage this legal obligation to ensure compliance with business standards.

Additionally, the NBA has a long history and major influence in China.

It is China’s most popular sports league and, according to the NBA, more than 300 million people in China play basketball.

The NBA could leverage their influence to promote educational initiatives that raise awareness about human rights issues, ethical business practices and responsible consumer choices.

Education is a powerful tool for creating change. The beautiful game of basketball often transcends political and cultural boundaries.

Promoting education and awareness could contribute to building bridges, strengthening ties between people from different backgrounds, and breaking down stereotypes. Decades ago, the NBA hardly had any international players.

Now it is a completely global game with players hailing from all over the world.

Compliance considerations: China a thicket of fincrime risk blindspots

Even so, while the NBA could use its newfound influence for good – and the message that all humans deserve to be treated with dignity, respect and fairness – it will be facing active resistance by China authorities to scrub, obfuscate and falsify concrete connections to the use of forced labor.

That is, according fresh guidance in a “Xinjiang Supply Chain Business Advisory Addendum,” released by a host of U.S. agencies in September.

As U.S. authorities ratcheted up pressure on the People’s Republic of China (PRC) with the various congressional acts to not use forced labor and mistreat certain groups, the country did the opposite.

“PRC authorities did not take any steps to change policies in response to mounting public concern over Xinjiang abuses and the contamination of international supply chains with goods produced by state-sponsored forced labor there in 2022,”  according to the advisory, which updated a similar missive issued in 2021.

“To the contrary, the government and affiliated commercial entities continued to engage in a concerted campaign to dispel these accusations through vehement denial” through a bevy of methods, including:

  •      misleading public messaging;
  •      state-ordered, politically motivated academic research;
  •      falsified cotton production and harvest mechanization data;
  •      localized propaganda campaigns targeting consumers in trade partner countries;
  •      the establishment of false supply chain policy initiatives as alternatives to preexisting international monitoring and compliance programs;
  •      new sanctions on foreign government officials critical of PRC abuses; and pressure on international companies.

These tactics could make finding accurate data to ensure a bank, shipper or company is not tied to foreign forced labor all the more challenging.

So what could or should NBA teams be considering for Chinese suppliers, according to U.S. authorities?

Plenty, according to the prior 2021 “Xinjiang Supply Chain Business Advisory,” which “urges businesses and individuals to undertake heightened human rights due diligence to identify potential supply chain links to entities operating in Xinjiang, linked to Xinjiang …or utilizing Uyghur or other ethnic and Muslim minority laborers from Xinjiang.”

Such heightened due diligence is in line with several pieces of guidance issued in recent years by many of the most influential world bodies and global business organizations, including: 

One of the documents issued by the groups that would be required reading for the NBA – and fincrime compliance and sanctions screening teams – is a “A Checklist & Guidance for Assessing Compliance,” with international recommendations and requirements to identify and avoid foreign operations using forced labor.

The aim of the checklist is to “help compliance personnel perform better assessments. Such assessments are a key link in the implementation of corporate codes of conduct and enable auditors to identify forced labour at enterprise level and in global supply chains.”

Broadly speaking, the guidance states than an “effective social audit can make an important contribution to the identification, prevention and eradication of forced labour,” in several higher risk areas, including prison labor, coercion, human trafficking and forced labor.  

Some of the tactics to uncover potential forced labor include:

  •       A review of relevant company and employee documentation;
  •       An inspection of the workplace and related facilities (e.g. dormitories);
  •       On and off-site interviews with workers and their representatives; and
  •       Interviews with different management representatives.

The guidance also states that answers to certain questions can help raise or mitigate the risk of the operations using forced labor.

Some of the checklist questions include:

  •       Does the employer use any prison labour?
  •       Do all workers have the right to enter into employment voluntarily and freely, without the threat of a penalty?
  •       Do workers have the freedom to terminate employment (by means of notice of reasonable length) at any time without a penalty?
  •       Is there any evidence of the use or threat of physical or sexual violence, harassment or intimidation against workers, their families or close associates?
  •       Do workers earning wages on a piece-rate or performance related basis earn the legally mandated minimum wage?
  •       Is there any evidence that workers are required to lodge deposits or that unlawful or unauthorized deductions from wages are made with the aim of indebting workers?
  •       Do wage advances or loans provided to workers comply with national law?
  •       Are workers forced to work in order to repay an actually incurred or inherited debt?
  •       Are workers forced to work more overtime hours than allowed by national law or (where relevant) collective agreement, under the menace of a penalty?

What risks do NBA teams face: from sanctions snags to reputational ruin

U.S. agencies in the recent business advisories have sounded the alarm that a wide array of entities could face exposure and penalties related to China’s use of forced labor.

“Businesses, individuals, and other persons, including but not limited to investors, consultants, labor brokers, academic institutions, and research service providers…with potential exposure to or connection with operations, supply chains, or laborers from the Xinjiang-region, should be aware of the significant reputational, economic, and legal risks,” the advisory noted.

“Given the severity and extent of these abuses…businesses and individuals that do not exit supply chains, ventures, and/or investments connected to Xinjiang could run a high risk of violating U.S. law.”

The potential legal risks include:

  •       Violation of statutes criminalizing forced labor;
  •       Knowingly benefitting from participation in a venture, while knowing or in reckless disregard of the fact that the venture has engaged in forced labor;
  •       Sanctions violations if dealing with designated persons;
  •       Export control violations;
  •       Violation of the prohibition of importations of goods produced in whole or in part with forced labor or convict labor.

In all, the advisory discusses four primary types of potential supply chain exposure to entities engaged in human rights abuses:

  •       Assisting or investing in the development of surveillance tools for the PRC government in Xinjiang, including tools related to genetic collection and analysis;
  •       Sourcing labor or goods from Xinjiang, or from entities elsewhere in China connected to the use of forced labor of individuals from Xinjiang, or from entities outside of China that source inputs from Xinjiang;
  •       Supplying U.S.-origin commodities, software, and technology to entities engaged in such surveillance and forced labor practices; and
  •       Aiding in the construction and operation of internment facilities used to detain Uyghurs and members of other Muslim minority groups, and/or in the construction and operation of manufacturing facilities that are in close proximity to camps and reportedly operated by businesses accepting subsidies from the PRC government to subject minority groups to forced labor.

Compliance teams can also be extremely helpful by looking for transactional red flags.

At the outset, transactions in China should be carefully scrutinized due to the high-risk nature of the country.

Further, when examining transactions with companies operating in regions with concerns about forced labor, considerations such as mismatched invoices, payments to unrelated parties, and a lack of transparency related to operations, ownership, or supply chain practices may warrant further investigation.

Aside from compliance teams, banks are also heavily involved in the transactions.

These banks should consider engaging in thorough due diligence and risk assessment processes to mitigate the risk of being involved in transactions linked to entities engaging in forced labor.

At a minimum, these due diligence steps should include more rigorous know-your-customer (KYC) reviews, supply chain analysis, screening against sanctions lists, and enhanced transaction monitoring.

The risk rating considerations should minimally include geographical and industry risk, as well as open-source intelligence dives to uncover past incidents or allegations of using forced labor or being tied to blacklisted entities, individuals or companies.

Some might argue that engaging constructively with Chinese gear makers allows the NBA to create change within the industry.

They might say that while collaboration and partnership have the potential to drive lasting change and set new industry standards, cutting ties may inadvertently harm the very people the NBA aims to protect.

However, this “constructive engagement” approach was the failed approach during the Apartheid era and has been largely discredited.

In other words, this should not be the path forward for the NBA.

This is, without a doubt, an extremely important, complicated, and delicate issue.

If the NBA does not want to sever their ties with these Chinese businesses, they must either leverage their ethical and legal obligations or use their collective influence to create change.

If this does not work, then they must take a stand against human rights violations and sever any ties they might have with Chinese businesses allegedly linked to forced labor – including more nebulous connections to regions known to be rife with the loathsome practice.

About the author

Benjamin Gurvitch is a second year law student at the Benjamin N. Cardozo School of Law and a Staff Editor on the Cardozo Law Review.

He graduated from Binghamton University in May 2020 and worked for two years as a Paralegal at Sullivan & Cromwell LLP prior to attending law school.

He currently resides in New Jersey with his wife. Benjamin is still searching for a summer associate position for Summer 2024.

He can be reached at 561-246-7515.

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