Supply Chain Law in China – Your Duty of Care

Meet your legal obligations in the Supply Chain Act or indirectly as part of the supply chain.

The guiding principle is to respect and protect human rights around the world.

What exactly is a supply chain?

The supply chain comprises all steps in Germany and abroad that occur before a product is ready for production, i.e. starting with the extraction of raw materials through to production, storage and delivery to the end customer.

To whom does the supply chain law apply?

The Act applies to companies of any legal form that have their principal place of business or statutory seat or branch office pursuant to Section 13d HGB in Germany and employ at least 3,000 employees in Germany. This also includes employees who are employed in Germany but have been posted abroad.

As of January 01, 2024, the threshold is 1000 employees.

What must be present in the company then:

• Appropriate and effective risk management to comply with due diligence requirements (implementation strategy) and conduct regular risk analyses.
• Definition of internal responsibilities (e.g. human rights officer)
• Complaints procedure
• Issuance of a policy statement
• Determination of prevention measures in the own company and towards the suppliers
• Taking corrective action
• Implementation of due diligence with regard to risks at indirect suppliers.
• Documentation and reporting

What is the Supply Chain Act intended to achieve?

• Prohibition of child labor
• Prohibition of forced labor
• Prohibition of disregard of national occupational health and safety requirements
• Prohibition of disregarding the freedom of association and the prohibition of discrimination
• Prohibition of lifting harmful soil pollution, water pollution, air pollution, harmful noise emission and excessive water consumption.

What exactly are the due diligence requirements under the Supply Chain Act?

• Identify, prevent human rights and environmental risks
• Re-perform regularly (for each new product or each new supplier).
• Implentation of appropriate measures (e.g. on-site inspections, interviewing the supplier’s employees, case studies)
• Contractual assurance from all suppliers that supply chains and supply chain act objectives are met.

Sanctions for non-compliance with the Supply Chain Act

• Exclusion from public contracting
• Periodic penalty payment up to 50 000 euros
• Fines for intentional and negligent violations up to 8 000 000 euros.

Supply Chain Law

Control of the supply chain law in China

The Supply Chain Due Diligence Act – in short: Supply Chain Act – has regulated due diligence requirements in the global movement of goods since June 2021. It is designed to ensure the protection of people and the environment in the production and distribution of goods around the world. This is intended, for example, to rule out the possibility of traders in third-world countries using child labor to produce their products.

For the time being, the law applies to companies with at least 3,000 employees in Germany; from January 1, 2024, the threshold will be 1,000 employees.

Frisch Agency can help you ensure compliance with the supply chain law when importing from China.

Obligations under the Supply Chain Act include:

• Establishment of a risk management system
• Definition of an in-house responsibility (e.g. human rights officer)
• Carrying out regular risk analyses
• Issuance of a policy statement
• Anchoring prevention measures within the company’s own business area and vis-à-vis direct suppliers
• Taking corrective action
• Establishment of a complaints procedure
• Implementation of due diligence with regard to risks at indirect suppliers
• Documentation and reporting

Non-compliance with the law carries drastic penalties: Sensitive fines (up to 800,000 euros, or 2 percent of global annual turnover) can be imposed, and from a fine of 175,000 euros, the companies concerned are excluded from public contracts for up to 3 years.

Monitoring the supply chain law in China is imperative for smooth business.

Not all producers in China behave in compliance with the supply chain law. Therefore, it is absolutely essential to conduct supply chain compliance checks in China.

Monitoring of the supply chain law in China by Agentur Frisch

We want hassle-free and lucrative trade relations. For this reason, we carefully select our business partners. In addition to the highest possible profit margins, this also includes compliance with applicable laws. It is short-term thinking to want to make greater profits with dubious suppliers – such business relationships end up costing more than they have brought in. Therefore, our producers ensure the reliable control of the supply chain law in China. You agree to ensure compliance with the law in the following respects:

• Child labor
• Forced labor
• national occupational health and safety requirements
• Freedom of Association and Prohibition of Discrimination
• harmful soil contamination, water pollution, air pollution, harmful noise emission and excessive water consumption

Environmental protection and human rights when importing from China

Agentur Frisch supports legislative efforts to ensure fair and clean imports. Careful selection of business partners and consistent control of the supply chain law in China is part of our company philosophy.

Agentur Frisch ensures compliance with the supply chain law for China import.

In this way, we make our contribution to a sustainable and livable world for all people. In this way, we also promote sustainable trade. As a German entrepreneur, you benefit from orderly, legally compliant transactions at every step of your import processing. You avoid severe penalties and sanctions, and thanks to the monitoring of the supply chain law in China, you can be sure in advance that there will be no problems with your China import in this regard either.

The Supply Chain Act and other provisions

In addition to the Supply Chain Act, a large number of other regulations, guidelines and standards exist. As an experienced China importer, we know the special conditions your product must meet. Therefore, we not only undertake the control of the supply chain law in China, but also offer you an all-round inspection of the requirements applicable to your product.

We would be happy to advise you personally on the monitoring of the supply chain law in China and other topics related to China imports!