Why Companies with Supply Chains in Xinjiang and China Need to Act Now

1 February 2022

It’s a year since the UK Government announced business measures over human rights abuses in the Xinjiang province of China. In this piece we reflect on those measures and what might come next. We also look at what action prudent businesses should take now if they are concerned about products from Xinjiang in their supply chain, or how products they export to China are being used.

The situation in Xinjiang

The actions of the Chinese authorities in the Xinjiang region of Western China have attracted global concern and criticism. The Foreign, Commonwealth & Development Office’s Human Rights and Democracy report of July 2020 found that over 1 million Uyghurs and other ethnic minorities had been detained in internment camps in Xinjiang. The report found evidence of suppression of religious and cultural freedoms, invasive and indiscriminate surveillance and increased reports of forced labour. The area is a significant producer of cotton and solar-grade polysilicon, an essential component of solar panels.

On 22 April 2021 the House of Commons passed a motion stating that crimes against humanity and genocide were being carried out in Xinjiang. Legislators in other jurisdictions have made similar declarations.

The UK’s Business Measures

In January 2021, in response to the growing concerns over human rights abuses, the government introduced a series of “business measures” for the region. These included:

  • A review of export controls as they apply to Xinjiang.
  • A promise of the introduction of financial penalties for organisations who fail to meet their statutory obligations to publish annual modern slavery statements, under the Modern Slavery Act.
  • The introduction of guidance to UK business setting out the risks faced by companies with links to Xinjiang.
  • A commitment to use public procurement rules to exclude suppliers where there is sufficient evidence of human rights violations in supply chains.

In March 2021 the UK Government imposed asset freezes and travel bans against four Chinese government officials, as well as the Public Security Bureau of the Xinjiang Production and Construction Corps. The government’s review of export controls has not, as far as we know, been concluded.  Financial penalties for Modern Slavery Act violations have not been introduced and, if they are, are likely to have minimal impact. Without further reform to the Modern Slavery Act they would only affect companies with a turnover greater than £36 million.

What Next for the UK?

Two key pillars of the UK’s strategy on Xinjiang remain unimplemented. The House of Commons Foreign Affairs Committee has called for the implementation of these, and a series of stronger measures to accompany them. They have suggested further reform of the Modern Slavery Act so a greater number of companies could face fines for failing to properly address forced labour in their supply chains.

In December 2021 permission was granted by the High Court for two NGOs to challenge the government’s stance on imports from Xinjiang. They are arguing that a historic British law prevents the importation of goods produced in foreign prisons; and that it is not permissible under the Proceeds of Crime Act for companies to purchase the proceeds of an atrocity crime. Key British allies, including the United States, have taken a far stronger stance, with the US placing a “ban” on imports from Xinjiang in December 2021. The Winter Olympics, due to begin on 4 February 2022, are set to bring China’s troubling human rights record into renewed focus and the Government will face increasing pressure to act.

Why act now?

The direction of travel is towards further restrictions on imports from Xinjiang, and export controls. The  Foreign Affairs Committee was “seriously concerned that products and materials made from Uyghur forced labour” were making their way into UK value chains; and noted that  forced labour in Xinjiang was “pervasive, widespread, and extremely difficult to monitor effectively”. Those working on the importing of products need to begin work on supply train transparency now to ensure they are ready to deal with any restrictions on imports in the UK, and the bans on imports being implemented elsewhere. Those exporting goods to China should look carefully now at due diligence processes to satisfy themselves that they are clear about the end users, particularly if they are involved in supplying technology that could be used in surveillance and repression.  

FURTHER INFORMATION 

If you have any questions regarding this blog, please contact Fred Allen in our Public Law team.

ABOUT THE AUTHOR

Fred Allen is a senior associate within the Public Law Department and International Crime Group. His clients have included businesses, trade associations, religious institutions, schools, education providers, charities, and private clients including high net worth individuals, and senior political and business figures.  

 

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