5 August 2026: A turning point for supply chain due diligence in China?

SUMMARY: China’s decision to place the Responsible Business Alliance (RBA), Verité and four other due diligence and traceability organisations under its counter-sanctions regime creates uncertainty for companies conducting supply chain due diligence in China. The move could affect audits, supplier assessments, traceability programmes and forced labour compliance activities linked to laws such as the UFLPA, EU Forced Labour Regulation and EU Batteries Regulation, raising the risk of conflicting legal obligations between China and Western markets.

Written by James Lewry

China has designated the RBA, Verité, and four other organisations under its counter-sanctions regime. What does this now mean for companies conducting due diligence in China?

This article was prepared within hours of the announcement described below. At the time of writing, none of the designated organisations has issued a public response, and there is no official guidance on how the measures will be interpreted or enforced in practice. The analysis below reflects what is known on 5 August 2026, together with our first reading of the implications. It is not legal advice, and companies with potential exposure should seek qualified counsel. We will update this article as the situation develops.

What has happened

On 5 August 2026, China’s Ministry of Commerce (MOFCOM) published Order No. 2 of 2026, placing six US entities on China’s countermeasure list under the Anti-Foreign Sanctions Law (AFSL). The measures took effect immediately. The six designated entities are:

• Responsible Business Alliance (RBA), one of the world’s most influential industry coalitions for responsible supply chains, whose ecosystem includes the Validated Assessment Program (VAP), together with its initiatives, the Responsible Labour Initiative (RLI) and the Responsible Minerals Initiative (RMI);
• Verité Group, Inc., the labour rights organisation whose research, assessment methodologies and tools underpin much of the forced labour due diligence practised globally;
• Altana Technologies, Inc., a supply chain mapping and AI platform widely used by companies, and reportedly by US Customs and Border Protection, to trace multi-tier supply chain relationships;
• Applied DNA Sciences, Inc., a provider of DNA-based traceability used to verify the origin of cotton and other materials;
• Stratum Reservoir, LLC, a laboratory services firm whose isotopic and geochemical analysis capabilities are relevant to origin verification; and
• Human Rights in China (HRIC), a US-based advocacy organisation.

The measure is short but sweeping. Organisations and individuals within China are prohibited from engaging in transactions, cooperation or other related activities with the listed entities.

MOFCOM describes the designations as countermeasures against recent US sanctions on Chinese companies imposed “under the pretext of so-called forced labour”, which China characterises as a serious violation of international law and an infringement of its sovereignty, security and development interests. The six entities are accused of assisting and supporting what China describes as illegal US sanctions relating to Xinjiang. The announcement follows the United States’ decision on 31 July 2026 to add 43 China-based companies to the UFLPA Entity List, covering sectors including aluminium, copper, gold, cotton, apparel, seafood, food processing and transportation infrastructure.

This is, to our knowledge, the first time that a widely used responsible sourcing and supply chain due diligence coalition has been directly designated under China’s counter-sanctions framework. That is what makes this announcement different from previous rounds of measures and why it deserves the attention of any company with due diligence obligations and a Chinese supply chain footprint.

A sudden announcement, five years in the making…

This announcement did not come out of nowhere. It is the latest, and probably the most consequential, step in a five-year build-up of Chinese counter-sanctions law that has been on a collision course with the due diligence obligations imposed on companies by the US, the EU and others.

China’s toolkit began with the Unreliable Entity List (2020), the MOFCOM Blocking Rules (2021), and the Anti-Foreign Sanctions Law (2021) and was later supplemented by implementing regulations. For several years, these instruments were rarely used, largely against defence contractors, politicians, and a small number of due diligence data providers.

But that changed on 31 March 2026. China’s State Council introduced Decree No. 834, the Regulations on the Security of Industrial and Supply Chains, the country’s first regulation dedicated to industrial and supply chain security. Then, on 7 April 2026, it issued Decree No. 835, the Regulations on Countering Improper Foreign Extraterritorial Jurisdiction. Both took effect immediately, with no transition period.

There are three important features of these decrees:

1. Restrictions on supply chain information gathering. Article 13 of Decree 834 provides for action where organisations or individuals violate Chinese law while conducting supply-chain-related investigations or information collection in China. It does not expressly prohibit all foreign compliance questionnaires, audits or traceability activity. However, the breadth of the wording, the absence of detailed implementing guidance and the national-security framing create material uncertainty about activities to meet foreign due diligence or import-control requirements.
2. Penalties for compliance-driven commercial decisions. Terminating or restricting a Chinese supplier in order to comply with foreign sanctions or import bans can trigger investigation and countermeasures, including fines, import and export restrictions and Unreliable Entity List designation, with potential for the decrees to open the door to civil claims by terminated Chinese counterparties.
3. Formal blocking and personal liability. Decree 835 strengthens China’s ability to block foreign laws that it considers to reach improperly into China. It allows the authorities to prohibit companies and individuals from following or supporting those laws, impose penalties and, where an existing criminal offence has been committed, pursue criminal action.

The designations are an early indication that China is prepared to use this legal framework against organisations involved in the implementation, assurance, and verification of foreign forced-labour measures that China considers illegitimate.

Why does the RBA designation matter so much?

For many multinationals, the RBA is the operating system for their supply chain due diligence, particularly in electronics, automotive and retail and consumer goods. Its designation raises immediate, practical questions, such as:

• What happens now to audits in China? The VAP is one of the most widely used social audit programmes in Chinese manufacturing. RMI’s Responsible Minerals Assurance Process (RMAP) assesses a significant share of the world’s smelters and refiners, many of which are located in China. If organisations and individuals in China cannot transact or cooperate with the RBA, the ability of Chinese sites to host, commission or participate in these audits is squarely in question. Audit firms operating in China that conduct assessments under RBA programmes face their own version of the same question.
• What about membership and participation? Many RBA members are multinationals with substantial Chinese subsidiaries. Whether a Chinese subsidiary’s involvement in the membership, tools, training or working groups of the RBA constitutes prohibited cooperation is unclear, as is the position of Chinese companies that are themselves members or that participate in RMI as smelters, refiners or downstream companies.
• Can data and tools still be used? RBA platforms, self-assessment questionnaires, e-learning and grievance mechanisms (such as worker voice tools) all involve flows of information to and from Chinese sites. Under a broad reading of the prohibition, and of Decree 834’s information provisions, these routine flows could become legally sensitive.

Taken together, the designations of Altana, Applied DNA Sciences, and Stratum Reservoir appear to target key elements of the technical due diligence infrastructure. These companies provide the tools to evidence UFLPA compliance and to respond to EU Forced Labour Regulation expectations. Chinese counterparties’ ability and willingness to participate in testing, mapping and origin-verification activities involving the designated providers are now in doubt and require case-by-case review. The designation of Verité is also a sign that the target is not a single organisation but the assurance ecosystem underpinning forced labour due diligence.

The implications extend beyond forced labour. The RBA designation may also affect companies preparing for due diligence under Chapter VII of the EU Batteries Regulation. Many battery supply chains rely on RMI templates, RMAP smelter and refiner assurance, supplier mapping and origin information generated in or relating to China. Companies should identify where their EUBR due diligence system depends on a Chinese supplier, facility, employee or audit firm interacting with the RBA or another designated entity, and assess whether alternative evidence or assurance arrangements may be needed.

Information is limited and key questions remain:

• Scope of “cooperation”: whether the prohibition captures indirect engagement, for example a Chinese supplier completing a questionnaire that a foreign customer submits to an RBA platform, or hosting an audit commissioned by a foreign buyer against an RBA standard through a third-party audit firm.
• Territorial reach: the order applies to organisations and individuals “within China”, but the treatment of foreign-invested enterprises in China, Chinese employees of multinationals, and Hong Kong entities is untested.
• Enforcement: whether China intends active enforcement or primarily a deterrent signal; historically its counter-sanctions tools have been used with restraint, but Decrees 834 and 835 provide a much more operational machinery, including personal liability.
• The response of the designated organisations: the RBA and others, have yet to comment publicly, and their guidance to members, particularly on scheduled audits in China, will be critical.
• The response of Western regulators: US and EU authorities have not indicated whether, or how, they will accommodate the conflict of obligations this creates for companies subject to the UFLPA, the EU Forced Labour Regulation, CSDDD or national supply chain laws such as the German LkSG.

So, has due diligence found its limit?

Not quite, but the picture is unclear. The model that global brands have relied on for two decades, namely third-party social audits, industry coalition membership, shared assessment platforms and, more recently, forensic traceability, depends on suppliers being willing and legally able to participate. The announcement, layered on top of Decrees 834 and 835, calls into question the participation of the world’s most important manufacturing economy.

“Companies’ legal obligations under the UFLPA, the EU Forced Labour Regulation, CSDDD, and equivalent regimes have not changed, nor has their responsibility to respect human rights under the UN Guiding Principles, which applies exactly in situations where national law makes respect for human rights harder to operationalise.”

The task now is to distinguish between the objectives of due diligence, which endure, and the instruments, which may need to adapt. It is also worth remembering that audit- and certificate-led assurance in China was already subject to well-documented limitations. In that sense, this announcement forces a conversation that our responsible business community has needed for some time.

Practical implications and next steps for businesses

Although positions may shift within days, we suggest companies with Chinese supply chain exposure take the following steps now:

1. Do not over-react. This is a developing situation and there are many unanswered questions (see above). Abruptly terminating Chinese suppliers, or visibly exiting China-facing programmes, carries its own legal risk under Decrees 834 and 835 and the Unreliable Entity List, and may harm workers without improving human rights outcomes. Decisions should be deliberate, documented and based on legal advice.
2. Take legal advice early. The core issue is a conflict of obligations and what US and EU law requires may now be prohibited by Chinese law. Engage counsel qualified in Chinese law alongside sanctions and trade counsel, and consider whether exemption or clarification routes exist under the Chinese framework.
3. Map your exposure to the designated entities. Identify every touchpoint between your business (including Chinese subsidiaries and employees) and the six entities: RBA membership and working groups, scheduled VAP or RMAP audits at Chinese sites, use of RBA platforms and questionnaires by Chinese suppliers.
4. Review imminent audit and assessment activity in China. Audits scheduled at Chinese sites under RBA programmes in the coming weeks should be reviewed with counsel before proceeding. Consider the position of the site, its workers and the audit firm, not only your own. Pausing an audit pending clarity is a defensible interim step; proceeding as if nothing has happened is not.
5. Document constraints, decisions and alternative measures. If elements of a China due diligence programme must be suspended or restructured, record the legal basis, advice received, alternatives considered, decisions made and compensating measures adopted. This documentation may be important in demonstrating a proportionate response under due diligence legislation.

Concerned about how these developments could affect your due diligence programme in China? Get in touch with our team