Why Chinese Suppliers Aren’t Always Aligned with Your Compliance Efforts (Part 1)

Big Political Changes, One Common Sentiment

Last year proved to be an era of disruption. According to Pew Research, more than 60 countries went to the polls, with incumbents everywhere facing heated battles to keep their seats. For many of us watching, these political shifts signaled a major change in public mood on topics including geopolitics, taxes, regulations, and more. 

But for all the disruption 2024 brought, there seems to be one sentiment the wider Western world–and its varying political parties–agree on: business with China cannot continue as it has. This attitude is especially loud when it comes to forced labor concerns in Chinese supply chains. 

Current Laws Against Forced Labor in China

Prior to these sweeping political changes, governments were already strongly opposed to forced labor practices in China. In Europe, the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD)—along with numerous country-specific regulations—mandate suppliers to screen their supply chains (including sub-tier suppliers, if possible) for forced labor and human rights violations. Similarly in the U.S., laws such as the Uyghur Forced Labor Prevention Act (UFLPA) expressly prohibit the import of  goods to the U.S. that involve any goods produced using forced labor, especially from the Xinjiang region in Northwest China.

“Tough on China” Remains Popular in the West

Pew Research found that 81% of Americans hold an unfavorable view of China, with many citing concerns around the country’s global influence, attitude towards other nations, and territorial disputes. 

The rest of the world’s attitude reflects a similar, negative sentiment. Of 24 countries surveyed, two-thirds held a negative view of China. Countries with a majority unfavorable view include Japan, South Korea, Australia, Canada, and Sweden. 

It’s no wonder then that Western lawmakers continue to believe that regulations targeting China and protecting domestic industries remain politically popular. 

In the U.S., the desire to appear “tough on China” remains a subject that garners broad agreement from both sides of the political aisle. (This can be seen in bills like the Uyghur Human Rights Policy Reauthorization Act of 2024, which was co-sponsored by then-Senator Marco Rubio (R-FL) and Senator Jeff Merkley (D-OR).) This has led to both the outgoing Biden administration and the current Trump administration directing government bureaus to maximize pressure on China from a forced labor and economic perspective.  

To avoid getting caught in the crosshairs of this trade war, global companies with suppliers in China (especially the Xinjiang region) are ramping up their due diligence efforts around trade compliance. But getting solid answers to questions about forced labor and other trade compliance issues is only getting more challenging. 

Why It’s Hard to Get Chinese Suppliers Onboard

Getting Chinese suppliers to comply with your due diligence efforts can be challenging, but it’s not always for the reasons you think. Chinese suppliers often struggle to comply with requests due to direct pressure from government and local officials. 

While your Chinese suppliers likely understand that market regulations require you to show your supply chain is free of forced labor, questions around forced labor, human rights, and working conditions put them in a difficult position.

This is in part because the Chinese government has made its position clear that there is no forced labor in Xinjiang. As a result, any efforts by Chinese companies to not utilize domestic Chinese products produced in that region will come off as inflammatory to government officials. 

This leaves Chinese suppliers in an awkward spot, with foreign companies pressuring them to be more transparent about their supply chain while domestic regulators push them to continue doing business with local companies no matter what. 

Trade Compliance Is a Moving Target for All Involved

Virtually every month, the U.S. Government is adding more and more entities to its numerous entities and sanctions lists. 

• In 2023, the U.S. added 2,500 entities to its Specially Designated Nationals (SDN) List, a roster of individuals and organizations subject to sanctions. This represents a 16% increase in sanctioned entities in just one year.
• In 2024, the Department of Homeland Security (DHS) added 73 new entities to the UFLPA Entity List, a 284% increase compared to 2023. 

This explosion of sanctions is forcing companies to rapidly escalate their trade compliance efforts in order to keep up with the ever-changing geopolitical landscape. 

Companies also face a unique challenge given the retroactive nature of sanctioning: as soon as an entity is added to a sanction list, companies must divest themselves of it. Ties to a listed entity are an immediate cause for noncompliance.

This process, of course, can–and often does–leave compliance teams constantly struggling to keep up with trade compliance regulations, especially when one or two dozen entities are added on a given day, often without advanced notice. 

Read Also: What Is Sanctions Forecasting, and How Can Companies Use It to Identify Future Sanctions?

The Trouble with Taking a Direct Approach to Chinese Suppliers

While the most obvious approach to dealing with supply chain sanctions is to address the issue head on and gather relevant data to resolve any uncertainty, when it comes to China, direct and to-the-point data collection efforts might have unintended consequences. This can be especially true for multinational firms with a sales presence in China. As of 2025, there have been several high-profile cases which have shown that procuring information about forced labor, conducting due diligence, and taking action against forced labor is a minefield for businesses. 

The Case of Calvin Klein and the CCP

In September 2024, China investigated the popular clothing brand Calvin Klein for suspected “discriminatory measures” against Xinjiang cotton companies. Calvin Klein was accused by China’s Ministry of Commerce of “boycotting Xinjiang cotton and other products without any factual basis.” Calvin Klein faced a difficult position: trying to comply with U.S. and EU trade laws inadvertently put the company in hot water with Chinese officials, a key market at the time. While the company was not ultimately sanctioned by China, the message was clear: ceasing business with companies due to forced labor accusations would not be tolerated. 

Raids on Data Collection Consultancies in China

In 2023 and 2024, several business consultancies specializing in industry data collection and due diligence were also raided across China. In this case, many of the consultancies involved were collecting information on Chinese domestic market business practices and conditions, which was then packaged and given to foreign companies. The information was collected using the commonly-used method of “expert interviews” where industry professionals are interviewed (and sometimes compensated) about market conditions and other insights. Despite the common use of these information-gathering methods, the Chinese government’s raids suggest that the tolerance for them domestically may be limited. 

Why In-Person Audits Also Aren’t Enough for Due Diligence

One important note amongst UFLPA and forced labor compliance efforts is that the U.S. government does not consider in-person audits in China to be sufficient enough in being to detect forced labor due to “workers’ inability to speak freely” and “harassment that auditors often face while operating in China.” This further limits foreign companies’ options to gather information about potential forced labor risks in their supply chain. While China does not have a specific policy that limits due-diligence activities, the boots-on-the-ground reality suggests that representatives attempting to conduct due diligence in numerous parts of China have been harassed and restricted for their efforts.

What Can Manufacturers Do?

In part two of this series, we’ll look at practical steps companies can take to discuss trade compliance issues with their Chinese suppliers. 

Find Risky Suppliers in Your Supply Chain Before They’re Sanctioned

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Sanctions Forecasting In Action: Zijin Mining Group Co. Ltd

On January 15, 2025, the DHS added 37 new entities to the UFLPA Entity List, including Zijin Mining Group Co., Ltd., one of the world’s largest copper refiners. Zijin has ties to major Tier 1 suppliers in the electronics and automotive space. Z2Data’s Supplier Insights had already flagged Zijin as a likely candidate for future sanctions over 200 days in advance, on June 13, 2024.

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