U.S. Issues Updated Xinjiang Supply Chain Business Advisory

Trade Update • JULY 15, 2021

The U.S. Department of State along with several other federal government departments, issued a joint statement this week announcing the release of an updated Advisory warning businesses of the heightened risks for businesses with supply chain and investment links to Xinjiang.

The updated advisory comes in response to the Chinese government’s “ongoing genocide and crimes against humanity in Xinjiang and the growing evidence of its use of forced labor.”

Updated Information

Highlights of the updated Xianjing Supply Chain Business Advisory include the following:

• Information from the Department of Labor and the Office of the U.S. Trade Representative, which are now co-signatories;
• Notes that the Chinese government is perpetrating genocide and crimes against humanity in Xinjiang;
• Provides specific information regarding risks related to investment in China-based companies linked to surveillance and forced labor in Xinjiang;
• Strengthens recommendations for businesses regarding the risks and potential exposure related to supply chains and investment links to Xinjiang, including but not limited to surveillance;
• Updates the list of U.S. government enforcement actions in and in connection to Xinjiang;
• Adds information on silicon and polysilicon supply chains linked to Xinjiang; and
• Provides a list of other countries’ relevant regulatory provisions and information on forced labor in supply chains.

Due Diligence May Not be Enough

Despite repeatedly urging businesses and individuals to undertake heightened due diligence to identify potential supply chain links to entities operating in Xinjiang, the advisory also cautions that such efforts are “likely to face obstacles to conducting adequate due diligence to fully identify and avoid complicity in human rights abuses linked to Xinjiang.”

Significant obstacles such as government controls, the lack of government and corporate transparency, the threat of detention of auditors and workers, and a police state atmosphere in Xinjiang has led audit companies to refuse to conduct audits in this region, the advisory says.

Companies at Risk

Given the severity and extent of human rights abuses, including genocide and crimes against humanity in Xinjiang, the advisory warns that businesses and individuals who do not exit supply chains, ventures, and/or investments connected to Xinjiang “could run a high risk of violating U.S. law.”

Potential legal risks include: violation of statutes criminalizing forced labor including 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; and violation of the prohibition of importations of goods produced in whole or in part with forced labor or convict labor.