Supply Chain Due Diligence Conflict: China’s Countermeasures to U.S. Sanctions in Relation to Products Made with Forced Labour

This blog was originally posted on 27th October, 2026. Further regulatory developments may have occurred after publication. To keep up-to-date with the latest compliance news, sign up to our newsletter.

Authored by Nedaa Yousef, Regulatory Compliance Analyst, ADHERENT

---

Key Insight

Forced labour compliance is increasingly a matter of trade compliance and market access. China’s Decrees 834 and 835 create additional considerations for companies conducting supply chain due diligence, particularly when collecting or disclosing information to meet foreign regulatory requirements.

Table of Contents

• The U.S. Approach to Forced Labour and Supply Chain Due Diligence
• China’s Countermeasures: Decrees 834 and 835
• Practical Considerations for Companies Operating in China
• Frequently Asked Questions

As 2026 draws to a close, a brief reflection on the year’s compliance themes and trends highlights the growing importance of forced labour and the associated supply chain due diligence requirements for companies engaged in international trade. This topic has attracted considerable attention from compliance professionals, and rightly so. The issue can no longer be treated solely as an ethical commitment to human rights and dignity; it is increasingly becoming a matter of trade compliance and market access.

The U.S. Approach to Forced Labour and Supply Chain Due Diligence

Forced labour has been at the centre of compliance discussions since the adoption of the Uyghur Forced Labor Prevention Act (UFLPA) in December 2021. The Act established a rebuttable presumption that products sourced, wholly or partially, from China’s Xinjiang Uyghur Autonomous Region (XUAR), or linked to organisations included on the UFLPA Entity List, are manufactured using forced labour. Consequently, such products are barred from entering the U.S. market under Section 307 of the Tariff Act of 1930 (19 U.S.C. § 1307), unless the importer rebuts the presumption. These requirements have necessitated greater caution in conducting supply chain due diligence and ensuring that products comply with applicable regulatory requirements.

However, the issue has gained further prominence following the announcement by the Office of the U.S. Trade Representative (USTR) that it would initiate investigations into the acts, policies, and practices of the economies of the United States’ top 60 trading partners concerning their failure to impose and effectively enforce prohibitions on the importation of goods produced using forced labour.

These investigations prompted countermeasures and other actions by several of the economies under investigation, particularly after USTR’s findings concluded that 54 economies had failed to impose and effectively enforce import bans on products made using forced labour. In response, several of these economies adopted new customs regulations prohibiting the importation of such goods.

China’s Countermeasures: Decrees 834 and 835

The measures adopted by the United States against China, including tariffs, have prompted the Chinese government to introduce countermeasures, including Decrees 834 and 835. Both decrees have significant implications for supply chain due diligence practices in China, particularly where information-gathering activities and disclosure obligations intersect with foreign regulatory requirements.

Decree 834: Industrial and Supply Chain Security

Effective from 31 March 2026, Decree 834 sets the framework for identifying, monitoring, and safeguarding China’s industrial and supply chains against perceived external threats. The framework targets strategically important sectors, including defence, batteries, solar energy, rare earths, and semiconductors. The Decree, however, securitises supply chain issues. Its opening provisions (Articles 1–2) refer to the National Security and Anti-Foreign Sanctions Laws, and “national security” is emphasised in almost every article. Treating the issue as one of national security highlights its political dimension, which should not be overlooked in the following analysis. This is evident not only in the legal basis of the regulation but also in the language used. For example, Article 14 uses the terms “foreign state”, “region or international organization”, and “international law” when referring to “actions that harm the security of China’s industrial and supply chains”.

The Decree has nonetheless caused concern among companies, particularly over Article 13, which provides for action by the relevant authorities where information-gathering activities relating to industrial and supply chains are conducted within China in violation of applicable Chinese laws and regulations. In addition, Article 14 provides that “taking discriminatory prohibitions, restrictions or other similar measures against China in terms of industrial and supply chains, or by implementing or assisting in actions that harm the security of China’s industrial and supply chains” will be investigated and met with actions to protect national security. The breadth of these provisions raises questions about whether certain activities routinely undertaken as part of corporate compliance programmes, including ESG audits and forced labour investigations conducted to meet the requirements of the UFLPA, could fall within the scope of these restrictions.

The Decree also establishes enforcement mechanisms under Articles 15 and 16, authorising trade and investment restrictions, entry and visa bans, and administrative or criminal liability for entities or individuals found to have violated the applicable rules. Consequently, companies conducting supply chain due diligence in China may need to assess not only the information they collect, but also whether the methods used to obtain it could fall within the scope of the decree’s restrictions.

Decree 835: Countering Improper Extraterritorial Jurisdiction

Effective from 7 April 2026, Decree 835 seeks to counter foreign laws and measures that China considers to constitute improper extraterritorial jurisdiction. These may include the U.S. Uyghur Forced Labor Prevention Act, the EU Corporate Sustainability Due Diligence Directive (CSDDD), and investigations conducted under the EU Foreign Subsidies Regulation.

To achieve this objective, the Decree establishes several mechanisms that could directly affect how companies respond to foreign regulatory requirements. It empowers the Ministry of Justice and other state bodies to issue blocking or prohibition orders that prevent compliance with targeted foreign measures. Importantly, it also establishes a Malicious Entity List targeting organisations and individuals that promote or implement foreign sanctions or restrictions against Chinese counterparts. In addition, the Decree creates a civil cause of action through which affected Chinese parties may seek damages before Chinese courts where compliance with foreign measures results in the termination of business relationships or otherwise causes them harm.

The scope of the designation mechanism is particularly significant. Decree 835 targets foreign organisations and individuals that “promote or participate in implementing” identified foreign extraterritorial measures. This extends the scope of sanctionable conduct beyond the direct implementation of foreign measures to include advocacy, lobbying, or even encouraging industry peers to sever business relationships with Chinese entities. 

Practical Considerations for Companies Operating in China

Taken together, Decrees 834 and 835 create additional regulatory considerations for companies seeking to fulfil international supply chain due diligence obligations while operating in China. Whereas Decree 834 focuses on safeguarding industrial and supply chain security by restricting certain information-gathering activities, Decree 835 addresses compliance with foreign measures considered to constitute improper extraterritorial jurisdiction. Their combined implications are particularly relevant to companies whose forced labour compliance programmes require the collection, verification, transfer, or disclosure of information relating to Chinese suppliers.

To date, no implementing guidelines have been issued to clearly define the boundaries of these restrictions. Consequently, a European company seeking to fulfil its obligations under the CSDDD may find itself confronted with Chinese regulations that prohibit or restrict precisely the types of information collection that EU requirements may necessitate.

It can be argued that the regulations target politically sensitive investigations, particularly those involving forced labour and sanctions-related supply chain tracing, rather than ordinary commercial quality management activities. Additionally, they do not appear to prohibit routine supply chain compliance measures altogether. Rather, they may restrict information disclosure where specific countermeasures apply, such as the issuance of blocking orders or requests originating from foreign authorities. The risk may therefore increase where information collection is required by a foreign authority. It remains unclear whether indirect disclosures also fall within the scope of these restrictions.

Nonetheless, the resulting compliance risk is clear.

For companies, this debate has an important compliance dimension. Where supply chains are highly concentrated in a single jurisdiction, businesses may have limited flexibility to change suppliers, obtain alternative sources of information, or introduce different verification arrangements. If regulatory restrictions also complicate the collection or disclosure of supply chain information, companies may face additional challenges in assessing forced labour risks and demonstrating compliance with applicable requirements. Supply chain resilience and due diligence should therefore be considered together, rather than treated as separate compliance objectives.

As a result, companies operating in China may need to reconsider how they conduct supply chain audits and gather information to meet foreign regulatory requirements. Companies should adopt a more structured, risk-based approach to supplier due diligence rather than suspending data collection altogether. This approach should involve assessing which information is essential, documenting the regulatory purpose behind each request, and considering how requests can be framed and channelled to reduce the risk of being construed as implementing foreign sanctions or discriminatory measures. Such precautions may also help avoid unnecessary exposure for suppliers.

One possible approach is to engage local, non-U.S. service providers or adopt alternative verification standards and methodologies when conducting audits. Although this approach may present additional challenges and costs, local service providers may have a better understanding of the local regulatory context and how audit processes can be structured to comply with Decrees 834 and 835.

Another practical consideration is to review and revise contracts with Chinese suppliers. Rather than relying on broad or explicit contractual provisions requiring the disclosure of supply chain data, companies could seek agreement on specific verification methods and procedures. These may include engaging local inspectors or implementing other valid and robust verification mechanisms capable of meeting the expectations of global markets.

Ultimately, companies must navigate the tension between fulfilling international supply chain due diligence obligations and complying with China’s domestic regulatory requirements. A carefully structured, risk-based approach, supported by appropriate local expertise, clear contractual arrangements, and proportionate verification mechanisms, may help companies manage these competing obligations without abandoning their broader supply chain compliance objectives.

FAQ

• What is the U.S. Uyghur Forced Labor Prevention Act (UFLPA)?
  The Act established a rebuttable presumption that products sourced, wholly or partially, from China’s Xinjiang Uyghur Autonomous Region (XUAR), or linked to organisations included on the UFLPA Entity List, are manufactured using forced labour. Unless the presumption is rebutted, such products are barred from entering the U.S. market under Section 307 of the Tariff Act of 1930 (19 U.S.C. § 1307).
• What does China’s Decree 834 address?
  Decree 834 sets the framework for identifying, monitoring, and safeguarding China’s industrial and supply chains against perceived external threats. It also provides for action relating to certain information-gathering activities and measures considered harmful to the security of China’s industrial and supply chains.
• What does China’s Decree 835 address?
  Decree 835 seeks to counter foreign laws and measures that China considers to constitute improper extraterritorial jurisdiction. Its mechanisms include blocking or prohibition orders, a Malicious Entity List, and a civil cause of action through which affected Chinese parties may seek damages.
• How could the decrees affect companies’ supply chain due diligence?
  Companies may need to assess not only the information they collect, but also whether the methods used to obtain it, and the disclosure of that information, could fall within the scope of the decrees’ restrictions.
• What practical steps may companies consider?
  A structured, risk-based approach to supplier due diligence is recommended, including documenting the purpose of information requests, considering local non-U.S. service providers or alternative verification methods, and reviewing contracts with Chinese suppliers to agree on specific verification procedures.

See Adherent in Action

Discover how agentic AI is reshaping product compliance for global enterprises.

BOOK A DEMO