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Business & Human Rights Update: UK Government announces further supply chain restrictions

Business & Human Rights Update: UK Government announces further supply chain restrictions

The UK's Foreign Secretary has stated that businesses that fail to comply with their obligations under the Modern Slavery Act could face further fines. This comes amidst an announcement of restrictions faced by companies with links to the Xinjiang province of China, where the UK has highlighted continued evidence of the abuse of the Uyghur Muslims.

Overview

The evidence outlined by the UK Government includes allegations of forced sterilisation, extra-judicial detention and forced labour. The proposals are intended to "send a clear message that these violations of human rights are unacceptable, and to safeguard UK businesses and public bodies from any involvement or linkage with them".

The recent UK Government announcement (i) highlights specific measures relating to the Xinjiang region and (ii) reminds businesses that the Modern Slavery Act (MSA) is currently under review, re-emphasising the likelihood of new measures being introduced under the MSA later this year (as explored in our related article on Transparency in Supply Chains).

 

Outline of key measures

Further information on potential measures can be found in the UK Government's latest briefing here, but in summary involve:

  • a review of export controls as they apply to Xinjiang to determine which additional specific products will be subject to export controls in future;
  • new, robust and detailed guidance to UK business setting out the specific risks faced by companies with links to Xinjiang (see section 6.1 in the related Government publication here); and, more generally,
  • the introduction of financial penalties for organisations that fail to meet their statutory obligations to publish annual modern slavery statements, under the MSA.

Unlike the United States, where the U.S. Department of the Treasury has specifically sanctioned several Chinese government entities and officials in connection with rights abuses in the Xinjiang region, the UK has yet to put in place specific sanctions against individuals or entities linked to the region. Nonetheless, a coalition of businesses and labour organisations, including retailer Marks & Spencer's, have signed a Call to Action to encourage companies to examine their supply chain. The Call to Action notes over 80% of China’s cotton is grown in the Uighur region, accounting to almost 20% of production globally.

Meanwhile, the UK Government continues to publish and update its Overseas Business Risk pages, which include information for UK businesses on how to identify and mitigate political, economic and human rights risks when trading overseas. These pages will be a useful due diligence tool for businesses wanting to learn more about the broad range of risks potentially faced when carrying out business in higher risk jurisdictions.

 

Next steps for businesses

As a result of the new measures, businesses will need to closely review whether they have any suppliers or business links with Xinjiang, and, if so, consider whether any further due diligence is necessary to adequately protect the business from potential risks in this area. More generally, the recent UK Government measures point towards an increased scrutiny in relation to the MSA and supply chains; it will thus be important for businesses to closely monitor progress in this area and, where applicable, continue to promote the goals outlined in their existing MSA statements.

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