[co-authors: James Lindop and Peter McCormack, Eversheds Sutherland (International) LLP Team]
Welcome to the latest edition of our quarterly global supply chain horizons providing you with an update on the key developments from around the world
China: Export ban of critical minerals to the US
On December 2, just within the next 24 hours after the US announced further export controls on advanced semiconductors (see below) in relation to China, China announced new restrictions relating to critical minerals originating or exported from China, including a ban on the export of gallium, germanium, antimony, and superhard materials to the US, and tightened scrutiny over end-use and end-user controls in relation to graphite related dual-use items to be exported to the US.
Impact: The export ban is expected to further disrupt the supply chains of multinational businesses which source the relevant materials, with the US as the potential destination of their products. Further trade restrictions are expected as the US and China strengthen their respective trade controls. Businesses should therefore closely monitor developments to stay informed.
China: Regulations on Export Control of Dual-Use Items
On December 1, China’s new Regulations on export control of dual-use items, which are goods, technologies and services with both civilian and military applications, entered into force. Key features of the new regime include:
- introducing the extraterritorial effect of PRC export controls
- establishing a simplified licensing arrangement for the temporary exports of dual-use items
- expanding the grounds for designating persons on the ‘Control List’ identifying importers and end-users of concerns, and introducing a ‘Watch List’
- clarifying the requirement to re-apply for or amend export licenses in cases of ‘key’ or ‘non-key’ modifications of an intended export
- imposing new reporting obligations on trading businesses and related service providers; and
- introducing one unified list identifying items subject to export controls and a new classification system
For more information, view our Asia Competition, Trade and Foreign Investment Team’s briefing.
Impact: The Regulations mandate strict compliance with PRC export controls rules, and create potential liability not only for PRC exporters but also service providers involved in the dealings. Non-PRC entities such as foreign importers and end-users may also be scrutinized and subject to trade restrictions in the future if they are found to have breached relevant end-user or end-use restrictions. To ensure compliance, businesses are advised to revisit their current compliance measures in relation to exports from the PRC and strengthen their global trade compliance program accordingly.
China: Energy law
On November 9, China’s first energy law was approved. Effective from January 1, 2025, the law aims to strengthen the legal framework for energy security and promote green, low-carbon practices.
The law covers energy planning, development and utilization, market systems, reserves and emergency measures, technology innovation, and legal responsibilities. It sets clear objectives for green energy, supports mechanisms like green electricity certificates, and encourages renewable energy development, including wind and solar power.
Impact: The new energy law effectively promotes the development of renewable energy, which may lead to lower investment barriers in it. This is expected to stimulate investments in and demand for renewable solutions within the supply chain.
Hong Kong: Waste Disposal (Amendment) Bill 2024
On October 18, the Waste Disposal (Amendment) Bill 2024 was published. The bill aims to align with the Basel Convention’s amendments on the control of transboundary movements of electrical and electronic waste (EEW) and ensure proper management of the same. This bill will expand the scope of materials subject to import and export controls from hazardous EEW to cover all EEW under the permit control system, whereby exports will require prior consent from the import state and any transit states, and imports will only be permitted if it is satisfied that the EEW will be managed in accordance with laws. The amendments are set to take effect on January 1, 2025.
Impact: Once the Bill takes effect, importers and exporters of EEW will have to apply for a permit before effecting the proposed shipments. Where businesses fail to ensure compliance, they may be faced with seizures of their shipments and potential enforcement actions. To mitigate risks, businesses should enhance their waste management practices, and ensure robust tracking systems for EEW. Proactive adaptation will be crucial to mitigating infringement risks and maintaining supply chain resilience.
EU: Deforestation-free Products Regulation delayed
On December 3, the European Council and Parliament agreed to postpone the application of the EU deforestation regulation by 12 months, now effective from December 30, 2025, for large businesses and June 30, 2026, for micro-and small enterprises. The text of the Regulation must now be formally agreed on by the two institutions at an upcoming meeting. Further discussions on the European Parliament’s November 14 amendments, including the new “no risk” category for countries with stable or increasing forest areas, are expected to be discussed.
Impact: The Deforestation-free Products Regulation is crucial for businesses as it mandates compliance with deforestation standards, impacting supply chains by requiring traceability and transparency. Businesses must ensure their products do not contribute to deforestation, which involves rigorous monitoring and reporting. Affected businesses should make use of the extended compliance dates, ensuring that systems for monitoring and reporting are in place.
EU: Packaging and Packaging Waste Regulation
On November 27, the European Parliament approved the Packaging and Packaging Waste Regulation (PPWR). PPWR aims to enhance packaging circularity and tackle waste levels across the EU, mandating affected businesses to focus on design changes and material selections to achieve specific recycling performance standards. It will apply to all types of packaging and packaging waste, regardless of the material or origin, affecting both EU and non-EU businesses. The European Council must now approve the Regulation.
Impact: The PPWR will drive significant changes in supply chains by requiring businesses to overhaul packaging processes and collaborate closely with suppliers. This Regulation mandates investment in sustainable packaging solutions and adherence to new recycling standards. Businesses must prepare for these changes during the 18-month transition period, focusing enhancing the circularity of packaging materials across their supply chains.
EU: Cyber Resilience Act
On November 21, the Cyber Resilience Act was published in the Official Journal. It sets horizontal cybersecurity requirements for products with digital elements. This regulation ensures that connected products are secure throughout their lifecycle, impacting supply chains by requiring rigorous cybersecurity standards from design to market availability. It mandates CE marking for compliant products, enhancing consumer trust and security. The Act will enter into force 20 days after publication and apply three years later, with some provisions effective earlier.
Impact: The Cyber Resilience Act will mandate stringent cybersecurity standards for digital products, which will be considered by businesses across the supply chain. Businesses and their partners must implement robust cybersecurity measures and obtain CE marking. This regulation enhances product safety, builds consumer trust, and mitigates risks, ultimately fostering a more secure and resilient supply chain ecosystem
EU: Forced Labour Products Regulation
On November 19, the European Council adopted the Forced Labour Products Regulation. This Regulation prohibits the import, sale, and export of such products. It establishes a framework for legal action and mandates the creation of a database to identify forced labor risk areas. Member state authorities will investigate and share information on violations. The Regulation will apply three years after its publication in the Official Journal.
Impact: The Forced Labour Products Regulation is part of the EU’s broader effort to enforce stricter supply chain due diligence. Expected to apply by Q4 2027 at the earliest, businesses should use this time to review and implement policies against forced labor, including supplier codes of conduct, procurement policies, and ongoing due diligence audits.
EU: Product Liability Directive published
On November 18, the new Product Liability Directive (PLD) was published in the Official Journal. The PLD aims to protect consumers, promote new technologies, and ensure a level playing field for producers. These new rules simplify the process for injured parties to claim damages and provide clear guidelines for manufacturers. Key elements include liability for digital products and online platforms, accountability for modified products, easier access to evidence for claimants, and liability for non-EU manufacturers.
Impact: The PLD will increase litigation risk and legal complexity for businesses, requiring them to adapt to new liability rules for digital and modified products. This will enhance consumer protection and foster innovation, ensuring a fairer market. Businesses should work with supplier chain partners to ensure product information is readily available.
EU: Proposal to Consolidate EU ESG Reporting Requirements
On November 8, the European Commission President announced plans to combine the Corporate Sustainability Reporting Directive (CSRD), EU Taxonomy Regulation, and Corporate Sustainability Due Diligence Directive. into a single omnibus law, to be published in 2025. This aims to reduce regulatory burdens by eliminating redundant and overlapping requirements. The initiative aligns with the Budapest Declaration's call for a "simplification revolution" and seeks to cut reporting requirements by at least 25% in the first half of 2025. The focus will be on maintaining the law's content while streamlining compliance processes.
For more information, view our briefing.
Impact: The EU’s proposal to consolidate ESG reporting aims to reduce regulatory burdens and streamline compliance, enhancing transparency and accountability in supply chains. Despite this, businesses already complying with the Taxonomy Regulation and CSRD, should continue to comply with the EU legislation and await official legislative proposals.
EU: Implementing Regulation under NIS2
On October 17, the European Commission adopted a draft Implementing Regulation under the revised Network and Information Systems Directive (NIS2). The draft Regulation details specific measures entities must implement, including policies on access control, incident reporting, security testing, and supply chain security. Additionally, covered entities must ensure direct suppliers and service providers can provide a sufficiently high level of security.
Impact: The new measures will require covered entities to enhance supply chain due diligence, ensuring suppliers meet more stringent data security standards. To prepare, businesses should proactively review and work with their suppliers to establish adequate data security procedures.
UK: Response published on Scope 3 GHG emissions reporting consultation
On November 21, the Government published a response on a consultation on Scope 3 greenhouse gas (GHG) emissions reporting in the UK, including the Streamlined Energy and Carbon Reporting (SECR) framework. Key findings highlight the high costs associated with data collection and verification, particularly for small and medium-sized enterprises. Opinions on the Streamlined Energy and Carbon Reporting SECR framework were mixed, with suggestions for digitalization and policy streamlining to enhance its effectiveness.
Impact: The Government’s stance on legislation in this area remains uncertain. As highlighted in the report, businesses should be mindful of potential barriers to successful Scope 3 emissions reporting. As a preliminary step, businesses should engage with suppliers to evaluate the current availability of emissions data.
UK: Update on Deposit Return Scheme
On November 20, the Department for Environment, Food and Rural Affairs updated its policy on drinks container deposit return schemes (DRS). The government committed to:
- laying regulations for England and Northern Ireland in November 2024
- appointing deposit management organizations in April 2025
- launching the scheme in England, Scotland, and Northern Ireland in October 2027
The statement also notes a delay in Wales, with the Welsh Government planning its own DRS.
Impact: Once implemented, businesses involved in the production, distribution, and retail of drinks containers will need to establish collection and recycling infrastructure, manage logistics for transporting containers, and adjust retail operations for returns. Manufacturers must design recyclable containers and update labels to comply with DRS regulations. These changes will require significant coordination across manufacturers, retailers, logistics providers, and recycling businesses.
UK: Principles for Carbon and Nature Market Integrity
On November 15, the Department for Energy Security and Net Zero (DESNZ) published six Principles for Carbon and Nature Market Integrity. These principles guide responsible participation in voluntary markets for carbon and nature credits, emphasizing minimizing impacts, using high integrity credits, and transparent sustainability reporting. DESNZ confirmed they will consult in early 2025 on implementing these principles, aiming to improve market integrity and increase usage. The Government plans to endorse standards like the ICVCM Core Carbon Principles and VCMI Claims Code of Practice, and will seek feedback on incorporating these into policy and regulation.
Impact: Once implemented, businesses may be required to minimize their environmental impacts across their supply chain before using voluntary market credits. New measures will aim to improve the sustainability and resilience of supply chains, aligning them with national and international environmental goals.
UK: Legislation restricting to new coal mining licenses
On November 14, the Government announced legislation to ban new coal mining licenses, reinforcing its commitment to clean energy. This move aims to phase out coal, the largest source of CO2 emissions, and transition to renewable energy sources. The ban will support the UK's climate goals, create new jobs in clean energy sectors, and enhance air quality. Limited exceptions will be made for safety or restoration purposes.
Impact: The ban on new coal mining licenses will accelerate the transition to clean energy, significantly impacting supply chains. Businesses must source alternative energy supplies, leading to changes in logistics, increased costs, and new supplier relationships. This shift supports sustainable supply chains, reduces carbon footprints, and aligns with the UK’s climate goals, fostering innovation and resilience in energy sourcing and distribution.
UK: Government response to the Product Safety Review
On November 5, the Government published its response to the Product Safety Review. The response confirmed the Government would prioritize the sale of safe goods online and address cross-sector hazards. Key points include:
- developing a responsive regime for emerging hazards
- stronger responsibilities for online marketplaces
- voluntary digital labeling to reduce business costs
- enhanced leadership and coordination by the Office of Product Safety and Standards
- central repository for product safety data
The Government plans to use the Product Regulation and Metrology Bill to enforce these measures. Future legislation may address hazards like button batteries and lithium-ion batteries. The response also considers aligning UK measures with evolving EU product safety laws. Further consultations and secondary legislation are anticipated.
Impact: The Government’s response indicates the direction of future policy. As such, businesses and their supply chains should make use of this time to prepare for more stringent requirements. Sufficient preparations include aligning to the new regulations under the Product Regulation and Metrology Bill, as well as with EU product safety laws. Affected businesses should work with supply chain partners to effectively prepare for the upcoming changes.
UK: Great British Energy Bill
On October 30, the Great British Energy Bill underwent its first reading in the House of Lords. The Bill seeks to establish Great British Energy as a publicly owned, operationally independent business. Its goals include increasing clean energy production, reducing greenhouse gas emissions, and improving energy efficiency.
Impact: This Bill addresses immediate energy security challenges and long-term climate goals by promoting the production, distribution, storage, and supply of clean energy. Businesses may benefit from increased investment opportunities, and new energy initiatives, particularly in renewable energy sources like wind and solar.
UK: The Producer Responsibility Obligations (Packaging and Packaging Waste) Regulations 2024
On October 24, the draft Producer Responsibility Obligations (Packaging and Packaging Waste) Regulations 2024 were laid before parliament. The extended producer responsibility regime, under the Environment Act 2021, mandates packaging producers to cover the costs of waste management, aiming to reduce packaging use and promote eco-friendly options. The regime’s start was delayed to October 2025.
Impact: The regulations create a framework that holds various entities in the supply chain accountable for the packaging they produce, distribute, and manage. Producers must ensure packaging is recyclable, report data, and pay fees for waste management. This promotes sustainable practices, reduces environmental impact, and encourages the use of eco-friendly materials.
UK: Strategic Plan for Long-Term Energy Infrastructure
On October 22, the UK Government announced the National Energy System Operator (NESO) will be commissioned to develop a strategic spatial plan for energy infrastructure, aiming to provide a blueprint for Great Britain’s energy needs until 2050. This plan will accelerate the transition to clean energy, reduce grid connection waiting times, and provide stability for investors. It will focus on electricity generation and storage, including hydrogen assets, and integrate considerations for other sectors like transport and water supply. The first iteration will be published in 2026.
Impact: The UK’s strategic plan for long-term energy infrastructure will be crucial for businesses as it outlines future energy needs and opportunities until 2050. Businesses should prepare by aligning their investments with clean energy initiatives and enhancing grid connection capabilities. The report may highlight key areas for development, such as renewable energy sources, hydrogen assets, and integration with other sectors, providing a roadmap for sustainable growth and stability in the energy market.
US: Export Controls on certain Semiconductors announced
On December 2, the Department of Commerce's Bureau of Industry and Security (BIS) announced new export controls on advanced semiconductors used for military applications. These measures focus on semiconductor manufacturing equipment, software tools, and high-bandwidth memory, and add 140 entities to the Entity List.
Impact: This action is part of efforts to protect national technology and maintain national security through limiting China's ability to produce advanced semiconductors. These rules will affect both US and foreign firms using American technology. In response, China has criticized the new rules and are expected to publish similar measures in response. This could disrupt semiconductor and electronic supply chains, leading to shortages and higher costs.
US: National Blueprint for a Clean & Competitive Industrial Sector published
On November 18, the Department of Energy published the National Blueprint for a Clean & Competitive Industrial Sector. The document details plans to reduce carbon emissions across the manufacturing sector by as much as 58% by 2040, and 87% by 2050. The plan aims to decarbonize U.S. industry, enhancing national and international supply chains by promoting clean energy and reducing greenhouse gas emissions.
Impact: Key goals include accelerating deployment of low-carbon solutions, increasing data use for efficiency, and fostering innovation. This blueprint aims to boost economic competitiveness, create jobs, and improve public health, while ensuring the US leads in global clean manufacturing efforts.
US: Executive Order prohibiting U.S. investments in certain technologies
On October 28, the U.S. Department of the Treasury issued a Final Rule to implement President Biden’s Executive Order 14105, prohibiting U.S. investments in certain technologies in countries of concern, notably China. This rule targets semiconductors, quantum information technologies, and AI, aiming to prevent advancements that threaten U.S. national security.
Impact: The new rules will require businesses to halt investments in semiconductors, quantum information technologies, and AI within countries of concern. This will require businesses to reassess investment strategies. Supply chains could face disruptions, requiring businesses to find alternative suppliers, leading to higher costs and delays. Enhanced due diligence will be essential to ensure compliance with the new regulations.
US: EPA Finalizes Cancellation of Pesticide DCPA
On October 22, the U.S. Environmental Protection Agency (EPA) finalized the cancellation of all products containing the pesticide dimethyl tetrachloroterephthalate (DCPA) under the Federal Insecticide, Fungicide, and Rodenticide Act. This decision was based on studies showing thyroid toxicity and potential irreversible harm to unborn babies whose pregnant mothers are exposed to DCPA from handling, entering or working in areas where DCPA has already been applied. The cancellation prohibits the distribution and sale of products containing DCPA, and also prohibits the use of existing stocks of products containing DCPA.
Impact: Businesses involved in the distribution, sale, and use of DCPA-containing products must halt all activities. These businesses should work with supplier to identify and replace DCPA with safer alternatives, update safety protocols, and train employees on handling new products. This change also necessitates revising procurement processes and ensuring all suppliers adhere to the updated safety standards.
Further reading
Co-authored by Nathan Handoll (Eversheds Sutherland Knowledge Team)
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