Small businesses with supply chains in Xinjiang will now have to take extra precautions. This is because the State Department has issued an update to its Xinjiang Supply Chain Business Advisory. With many small businesses counting on China for their supplies, this advisory will impact their operations.
In the original July 1 advisory, it said:
“Businesses with potential exposure in their supply chain to the Xinjiang Uyghur Autonomous Region (Xinjiang) or to facilities outside Xinjiang that use labor or goods from Xinjiang should be aware of the reputational, economic, and legal risks of involvement with entities that engage in human rights abuses, including but not limited to forced labor in the manufacture of goods intended for domestic and international distribution.”
State Dept. Issues Advisory on Doing Business in China Xinjiang Province
Running a small business requires less friction and obstacles from regulators. This is because they do not have the resources to address these challenges. When it comes to supply chains and international exposure, it is even more challenging. Finding new suppliers can end up costing more money, longer delivery times, and product quality issues.
Even though it is advisable to find multiple supply chains for the products you need for your small business, it is not always possible. But in a world where political decisions can dramatically change the fortunes of your enterprise, there is very little choice.
The key is to always look for suppliers, even during the good times, so you won’t have to shut your operations down. This means looking for regional suppliers with fewer political instability. Similarly, see if you can find local or national suppliers.
Updated Xinjiang Supply Chain Business Advisory
On July 13, four primary types of potential supply chain exposure to entities engaged in human rights abuses were discussed:
- Assisting or investing in the development of surveillance tools for the PRC government in Xinjiang. This includees 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.
- 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.
The advisory does not issue any warning outside of the Xinjiang region (for now). So, if the supply chain of your small business comes from other parts of China you are OK. However, there is another warning that is part of this advisory.
“The U.S. government is also aware of reports documenting the expansion of internment camps to Tibet and Inner Mongolia to arbitrarily detain other ethnic and religious minorities and documenting the use of forced labor beyond Xinjiang such as in the fishing industry. Businesses should similarly be aware of the potential reputational, economic, and legal risks of involvement with entities and individuals engaged in any human rights abuses in China or elsewhere.”
The situation in China is in flux, and as such you should keep your eye on any new developments in the country. The https://www.state.gov/ is a good source of information. Likewise, you can take a look at the U.S. Department of Commerce and your local Chamber of Commerce.