Strict Data Privacy and Supply Chain Due Diligence Laws Continue to Present Challenges

China’s Personal Information Protection Law and the U.S. Uyghur Forced Labor Prevention Act, respectively taking effect last November and last month in the two biggest economies, will continue to impact businesses that operate and source globally and have significant implications on HR.

Increasing localization due to China’s data privacy law  

China’s new data privacy law (PIPL) made changes to the cross-border transfer of employees’ personal information and requires employers to acquire a separate consent from employees as well as an approval from local authorities when transferring personal information of a Chinese employee to another country. Similar requirements apply to customers’ data transfer, which eventually prompted a few companies to pull out of certain global products and instead provide local services in recent months.

For HR management, companies that have regional HR heads based outside of China—a practice commonly adopted by multinational companies—should understand the law and ensure compliance. Violation could result in significant financial and operational penalties. One way to prepare for the changes is to update employee handbooks and consent forms to make sure informed consent is covered in these situations.

U.S. forced labor law will bring more scrutiny from ESG investors and governments

The Uyghur Forced Labor Prevention Act signals a new era of global supply chain diligence for companies. The measure contains a rebuttable presumption that any goods produced in the Xinjiang region of China, or by entities identified by the U.S. government on the UFLPA Entity List, are presumed to be made with forced labor and thus are prohibited from entry into the United States. Technically, a company can provide evidence needed to overcome the rebuttable presumption. However, one of the items required is “a list of all workers engaged in production of the items at an entity subject to the rebuttable presumption, along with wage information and residency status,” which is currently subject to China’s data privacy law and will be difficult to acquire.

Accordingly, HR leaders should play a critical role in companies’ global supply chain principles and practices as ESG investors and governments have been increasing their interest in and concerns over labor issues in other parts of the world related to business. The new forced labor law will continue to spotlight this area and more governments are considering following suit.