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The Morning Risk Report: Companies Face Compliance Challenges Under U.S. Forced-Labor Law Targeting China
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Good morning. Companies must take a multipronged approach to stay on the right side of a strict new U.S. law aimed at curbing forced labor in China, compliance experts said, with steps such as sourcing products from other countries and visiting Chinese suppliers for spot checks.
The Uyghur Forced Labor Prevention Act, which went into effect last month, gives U.S. Customs and Border Protection the power to block importing goods with ties to Xinjiang, the home region of China’s Uyghur minority group, because those goods are presumed to be made with forced labor. Companies can in theory rebut that presumption, but the burden is heavy, Risk & Compliance Journal's Richard Vanderford reports.
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Content from our Sponsor: DELOITTE
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The Big Deal About Data in M&A
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In a world where data is often an organization’s most valuable asset, data management is fast becoming a fundamental competency for realizing value from M&A transactions Read More ›
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Compliance experts and companies, particularly those that deal with cotton, tomatoes and solar-panel ingredient polysilicon—Xinjiang exports explicitly flagged as enforcement targets in the statute—are scrambling to understand how the law will be enforced in practice. They expect a period of painful adjustment.
“A lot of companies are flat-footed right now,” said Brandon Daniels, chief executive of Exiger LLC, a risk and compliance software company. “I don’t think that they appropriately and properly prepared.”
Mr. Daniels said he is starting to see clients consider switching to suppliers in other countries, such as Vietnam, or in some cases even acquiring their China-based suppliers so that they can exercise direct control. Raw materials commonly associated with China can also be found elsewhere, he said, adding that India has ample supplies of rare-earth materials now commonly sourced from China. [Read more]
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A regulatory approach to reducing carbon pollution from power plants such as this West Virginia coal-fired facility is curbed under the recent ruling.
PHOTO: DANE RHYS/BLOOMBERG NEWS
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Supreme Court climate ruling adds obstacles to SEC policies. The Supreme Court’s decision to curb the Environmental Protection Agency’s powers could provide legal ammunition for challenges to financial regulations envisioned by the Securities and Exchange Commission and other agencies.
The SEC is regarded by legal analysts as an obvious target for challenges employing the logic in the EPA case. The Wall Street regulator is drafting rules to require public companies to disclose climate risks and greenhouse-gas emissions. The ruling’s impact, moreover, could be wider-ranging, touching on initiatives from the Federal Trade Commission, the Consumer Financial Protection Bureau and other agencies, legal analysts said. [Read more]
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EU sets first rules to regulate cryptocurrencies. European Union officials agreed on rules that would regulate the crypto market in the bloc, forcing platforms to seek authorization to operate and providing safeguards to users.
The agreement still needs to go through Brussels’ complex legal process and might not kick in until 2024. However, officials say it will make the EU the first broad region with common crypto-asset regulation in the world. Some countries have national legislation governing digital assets, but these would mark the first EU-wide rules. [Read more]
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A Canadian-Chinese billionaire is standing trial in mainland China more than five years after he mysteriously disappeared from Hong Kong, marking progress in a protracted case that has baffled the country’s business community.
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President Biden is expected to roll back some tariffs on Chinese imports soon, a decision constrained by competing policy aims: addressing inflation and maintaining economic pressure on Beijing.
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Chinese apparel giant Shein has captured the market for bargain-seeking Gen-Z shoppers by offering huge varieties of cheap apparel every day. Along the way, it has picked up a long list of complaints of copyright theft from big brands and boutique designers.
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The first half of 2022 looks like a ‘jobful’ downturn, in which output fell and companies kept hiring. SPENCER PLATT/GETTY IMAGES
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If the U.S. is in a recession, it’s a very strange one. The U.S. economy has experienced 12 recessions since World War II, and each one included two features: Economic output contracted and unemployment rose.
Today, something highly unusual is happening. Economic output fell in the first quarter and signs suggest it did so again in the second. Yet the job market showed little sign of faltering during the first half of the year. The jobless rate fell from 4% last December to 3.6% in May.
It is the latest strange twist in the odd trajectory of the pandemic economy, and a riddle for those contemplating a recession. If the U.S. is in or near one, it doesn’t yet look like any other on record. [Read more]
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PHOTO: JONATHAN HAN/THE WALL STREET JOURNAL
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Crypto’s domino effect is widening, threatening more pain. Turmoil in the digital-assets ecosystem has grown in recent weeks, with losses in cryptocurrencies blowing holes in balance sheets and pushing firms near bankruptcy.
After a pair of cryptocurrencies crashed, wiping out billions of dollars in value in May, a British Virgin Islands court this past week ordered a hedge fund that had survived several crypto downturns to liquidate. Another platform that counts the hedge fund as an investor capped withdrawals while evaluating how the hedge fund’s woes would affect its liquidity.
A handful of crypto players have established financial ties throughout the market and added to risk by borrowing and lending digital assets among themselves, with at least one lender, Celsius Network LLC, drawing on collateral to do its own borrowing. [Read more]
Related:
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Sanctions pain for Russians is eased by cash from Moscow. Russia is papering over the impact of sanctions by spreading its multibillion-dollar oil and natural-gas windfall across the economy.
The money has eased the pain of sanctions on Russians. But the economy is struggling with inflation that is well above levels in the West and shortages that are causing big declines in production. The economy is set to contract by 10% this year, according to estimates by the government and economists.
Government officials are beginning to express concern about the cost of trying to stimulate the economy while funding the war. [Read more]
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Google’s new location-history deletion policy, which covers places such as abortion clinics and domestic-violence shelters, is to take effect in the coming weeks.
PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
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Google to delete abortion-clinic visits from location history. Google said it would begin automatically deleting visits to abortion clinics from its users’ location history, a move that comes amid growing calls for tech companies to ramp up privacy controls in the wake of last week’s Supreme Court decision to eliminate the constitutional right to an abortion. [Read more]
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TikTok responds to senators’ concerns over user data. TikTok said it is making progress on its plan to upgrade data security in response to U.S. government concerns, while acknowledging that some Chinese staffers still have access to data on American users while that process is being finalized. [Read more]
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Vast cache of Chinese police files offered for sale in alleged hack. A vast trove of data on Chinese citizens allegedly siphoned from a police database, some of which checks out as legitimate, is being offered for sale by an anonymous hacker or hacking group. If confirmed, it would mark one of history’s largest leaks of personal data. [Read more]
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Walmart, the biggest private employer in the U.S., says it is reviewing its abortion coverage.
PHOTO: ANGUS MORDANT/BLOOMBERG NEWS
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Walmart, Target show divergence on companies’ abortion coverage. Employees of Target Corp. have access to health-insurance plans that broadly cover abortion. Walmart Inc.’s health plans don’t cover an abortion unless the health of the mother is at risk or the fetus couldn’t survive birth.
The rival retailers’ policies highlight the range of coverage at the largest U.S. employers, whose health plans have come into sharper focus since last week, when the Supreme Court overturned the constitutional right to an abortion and left the question of its legality to the states. Target is among companies adding a benefit that covers travel expenses to get an abortion. Walmart says it is reviewing its abortion coverage. [Read more]
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Tesla Inc. vehicle deliveries fell quarter-over-quarter for the first time in more than two years, reflecting an extended shutdown in China, supply-chain disruptions and challenges associated with opening two new factories.
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Atlantic City casino workers reached a tentative deal with the Hard Rock Hotel & Casino, averting a strike that could have started during the Fourth of July holiday weekend, according to the union.
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