New TASK Act Forces Companies to Disclose China Supply Chain Risks and CCP Influence

The Transaction and Sourcing Knowledge Act, or the TASK Act, is a mandate to the Securities and Exchange Commission (SEC) to start considering new reporting requirements for publicly traded companies. Essentially, the SEC must explore making companies disclose specific details about their operations and supply chains, particularly those touching China. This isn't just about general ESG reporting; it targets two major areas: forced labor in supply chains and the influence of the Chinese Communist Party (CCP) on corporate decisions.

The Fine Print on Forced Labor

This bill goes straight after supply chain transparency, specifically demanding that the SEC look into requiring companies to report on their due diligence regarding products imported into the U.S. that might be linked to forced labor in Xinjiang, China. Think of it this way: if a major electronics company imports components, they would have to document the steps they took to ensure those components weren’t made using forced labor. For investors, this provides a clearer picture of human rights and geopolitical risk exposure. For the companies, it means a massive increase in auditing and compliance costs, especially for those with complex, multi-tiered supply chains where tracing every component back to its origin is already notoriously difficult.

Who Are You Doing Business With?

Beyond forced labor, the TASK Act requires companies to disclose transactions with entities the U.S. government has already flagged as problematic. This includes companies on the Department of Commerce’s “Entity List” or those designated by the Treasury Department as part of the Chinese Military-Industrial Complex. For instance, if a U.S. tech firm is selling software to a Chinese company on the Entity List, they would need to report that transaction. This provision aims to give investors a heads-up about the financial risks associated with doing business with restricted entities, which could face sanctions or further government action at any time. It's a risk management tool for the market, making companies lay their cards on the table about high-stakes international dealings.

Corporate Facilities and the CCP

Perhaps the most politically sensitive part of the bill requires U.S. companies with facilities in China to report two things annually: first, whether a Chinese Communist Party (CCP) committee operates within those facilities; and second, a summary of any corporate actions or decisions where that CCP committee was involved. This provision pulls back the curtain on the political realities of operating in China, where the CCP often maintains a presence inside foreign companies. While this disclosure offers unprecedented transparency into foreign political influence on U.S. corporations, it puts those companies in a tough spot. Reporting on the CCP’s involvement could expose them to political retaliation or operational difficulties from the Chinese government, creating a high-stakes balancing act between U.S. legal compliance and maintaining business operations abroad. This is a significant new layer of political risk that investors will have to weigh.