2026.08.17 NI, Tianling (Carey Nee)、ZHU, He (George)、WANG, Haopeng
I. Background to Order No. 834
Provisions of the State Council on Industrial and Supply Chain Security (No. 834 Order) took effect in April 2026. The No. 834 Order focuses on the boundaries governing the collection and external provision of information relating to domestic industrial and supply chains. Considering the EU Corporate Sustainability Due Diligence Directive (CSDDD) and the French and German supply chain due diligence rules, many overseas enterprises - especially those based in the European Union - require enterprises to conduct risk-based ESG due diligence on their supply chains. Overseas compliance requirements are an operational imperative but China regulates security in industrial and supply chains. Against this backdrop of overlapping regulations, the established ways of conducting supplier due diligence (particularly ESG due diligence involving substantial qualitative and quantitative data) and responding to customer questionnaires, business partners and rating agencies may face serious compliance challenges.
II. Overall Impact of Order No. 834 on Supply Chain Due Diligence
No. 834 Order does not prohibit enterprises from conducting supplier due diligence; rather, it draws clear lines. Whether a foreign-invested enterprise is conducting due diligence on its suppliers, the overseas headquarters of a foreign-invested enterprise is conducting due diligence on its China subsidiary, or a domestic enterprise is conducting due diligence on another, any collection in China of supply-chain-related data is subject to the applicable Chinese laws (and any cross-border data transfer triggers additional statutory obligations). If an enterprise crosses the compliance boundary by requesting, providing or transmitting sensitive industrial information abroad, both the enterprise and its due diligence service provider may face regulatory risks. Overseas compliance requirements do not excuse non-compliance with the domestic requirements. Article 13 of Order No. 834 brings unlawful investigations and other information-collection activities within the regulatory ambit, while Article 17 encourages law firms and other professional service providers to provide legal services. Legal counsel should therefore be involved in questionnaire design, information classification and the design of channels for providing information across borders.
III. Key Practical Implications
1. Supply chain due diligence questionnaires should not take a one-size-fits-all approach, and cross-border data transfers require caution: In the past, some brands may have directly requested a supplier's complete set of underlying records. Information should now be handled by category and sensitivity level, with particular care taken to determine whether it includes important data, trade secrets, export-controlled information or information that is sensitive from an industrial security perspective. As a general matter, such information should be retained in China, with only appropriately redacted and aggregated summaries provided overseas. Article 13 of Order No. 834 does not itself create a separate approval procedure for cross-border data transfers. The applicable existing rules governing cross-border data transfers must still be determined based on the type and volume of the data, the recipient and other relevant factors.
2. Due diligence requests from customers and other parties should not be satisfied without careful examination: When dealing with customers and other parties, enterprises should first assess whether the questionnaire is compliant. Questions that raise compliance concerns may be declined and accompanied with an appropriate explanation.
3. Ensure compliance throughout the due diligence process and exercise caution when participating in due diligence.
When a brand (or its appointed auditor) conducts an on-site factory visit, it should clearly distinguish what can and cannot be done. Where an audit is outsourced, the engaging party should provide clear guidance to the appointed service provider.
IV. Our Practical Recommendations for Clients
We recommend that enterprises engage a Chinese law firm familiar with ESG and legal due diligence, counter-foreign sanctions and data compliance laws to prepare a compliance review checklist. Enterprises should use this checklist to conduct a self-assessment, and identify and remediate issues in their existing supply chain compliance and ESG management systems, with the review focusing on the following aspects:
1. Whether compliance-oriented resilience assessments have been conducted for suppliers/business partners in key sectors;
2. Whether any agreements containing discriminatory provisions have been entered into with suppliers/business partners;
3. Whether due diligence questionnaires have been reviewed from a compliance perspective, including whether they involve cross-border data transfers; and
4. The compliance of guidelines for auditing suppliers/business partners or responding to audits.
Performing this work and maintaining proper records will help enterprises demonstrate, at the management-system level, that they have fulfilled their duty of care, reduce the likelihood of issues arising and mitigate compliance risks if an issue does arise.
If you would like to learn more about reassessing and developing your enterprise's ESG or legal due diligence systems, or require assistance with due diligence, supply chain management, training or other related matters, please contact us at ecoenvpro@junhe.com.
JunHe's EHS and ESG Team: JunHe is one of China’s leading full-service law firms. We are internationally recognized for providing high-quality legal services and have a professional team of over 1,000 members. JunHe is a pioneer in the development of China’s ESG legal practice and maintains a dedicated team of EHS lawyers, offering clients comprehensive legal services in EHS and ESG. JunHe’s ESG team comprises members with multidisciplinary backgrounds, including those with expertise in EHS, product quality, labor and employment, anti-corruption, data and tax compliance, as well as a thorough understanding of corporate governance. Leveraging the expertise of other specialized compliance teams within the firm’s compliance practice group - such as antitrust and unfair competition, intellectual property, trade compliance and criminal compliance - the team has a sustainability approach to provide tailored legal services to enterprises across various industries. Our services include EHS compliance audits, ESG due diligence in supply chain management and M&A transactions, drafting ESG reports for disclosure purposes and conducting specialized legal and compliance assessments related to ESG. We also assist investors and enterprises in establishing and enhancing their ESG management systems, identifying their ESG compliance obligations and providing staff training - all as part of a comprehensive service package.
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