EU businesses warn China’s new supply chain law puts firms on collision course with bloc’s rules
· EUobserverThe measure covers any commercial decisions that could be seen as affecting China’s supply security, including decisions to stop supplying Chinese customers or to exit China-related supply chains.
EU businesses warn China’s new supply chain law puts firms on collision course with bloc’s rules
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By Wester van Gaal,
Amsterdam
,
A major EU business lobby group has criticised China’s new supply chain law, warning it gives authorities sweeping powers to investigate and act against companies or individuals it believes are interfering with supply chains.
The measure, known as Regulation 834, took effect immediately last week and is intended to “to take precautions against security risks in industrial and supply chains” and “preserve national security.”
The legislation comes as global supply chains have become a key battleground in geopolitical rivalry, with the US imposing tariffs, EU and other nations implementing trade defences against Chinese exports and Beijing responding with its own export controls on rare earths.
It is still unclear how the new regulations will be implemented.
And some of its “unclear and vague provisions…increases the risk of doing business in or with China,” the European Union Chamber of Commerce in China said in a statement on Monday (13 April).
The rules cover any commercial decisions that could be seen as affecting China’s supply security, including decisions to stop supplying Chinese customers or to exit China-related supply chains.
Previously, Chinese rules of this kind were only triggered when businesses were seen to be following US or EU sanctions. The new rules can be set off by ordinary commercial decisions.
And unlike before, authorities do not need to prove that a company intended to harm China.
“There is no specific language that clarifies which specific activities could be construed as threatening, leaving open the possibility that several legitimate commercial decisions could be interpreted as such,” the letter also noted.
The EUCCC is especially concerned about the risks faced by individual employees, warning they could be “punished through exit bans” and pointing to the lack of a “clear and transparent legal process” around such measures.
Conflict with EU law
Under the rules, companies or individuals that collect information on Chinese supply chains could be found in violation of the law.
This potentially conflicts with EU rules which oblige firms to audit and map their supply chains as part of their due diligence requirements.
“There is a risk that the information that needs to be collected as part of this process could be interpreted as violating Chinese law,” the chamber said.
Under Article 16 for example, companies and individuals based in China must ‘strictly execute’ any countermeasures the government imposes.
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The measure covers any commercial decisions that could be seen as affecting China’s supply security, including decisions to stop supplying Chinese customers or to exit China-related supply chains.
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Author Bio
Wester van Gaal is our economics editor. He joined EUobserver in September 2021. Previously, he was editor-in-chief of Motherboard, Vice Media’s technology and science website, and worked as a climate economy journalist for The Correspondent. He is based in Amsterdam, the Netherlands.