Commercially Connected shorts - 1 July 2026

Round-up of knowledge

Welcome to Commercially Connected shorts, our weekly bitesize newsletter summarising the latest updates in UK and EU commercial law.

This week we look at:

• Half-year hit: the key regulatory developments shaping 2026
• EU steel industry safeguarding Regulation in force
• China: counter-sanctions and EU due diligence obligations
• Guidelines on EU Forced Labour Regulation published

Half-year hit: the key regulatory developments shaping 2026

In our latest Commercially Connected Bitesize podcast we discuss the key regulatory developments shaping 2026 for Commercial lawyers, including developments impacting supply chain, ESG and sustainability, consumer law, cybersecurity, digital and data. We consider what these changes mean for commercial contracts and share practical considerations for organisations navigating an increasingly complex regulatory environment. Listen here: Commercially Connected Bitesize podcast.

EU steel industry safeguarding Regulation in force

• The EU Steel Industry Regulation applies from 1 July 2026. It introduces a new EU safeguarding regime for steel imports, to address the impact of global overcapacity on the EU market. It replaces expiring 2019 measures and reflects the strategic importance of the steel sector.
• The Regulation establishes tariff quotas for a wide range of steel products, with a 50% duty applied to imports exceeding those quotas. Quotas are administered quarterly and apply broadly to all countries outside the EEA, including FTA partners.
• The Regulation also introduces, from 1 October 2026, a requirement to evidence the “melt and pour” origin of a product (i.e. the country in which raw steel or iron is initially produced in liquid form and cast into its first solid state) to prevent circumvention and enhance supply chain transparency. It also grants the Commission powers to allocate quotas and adjust volumes, and to apply bilateral safeguard measures on imports from countries with which the EU has an FTA.

The Regulation materially tightens EU import conditions for steel, increasing costs for imports exceeding quotas and introducing new compliance requirements for importers. It is intended to protect EU steel producers from import pressure linked to global overcapacity, but may raise input costs and supply constraints for downstream industries.

China: Counter-sanctions and EU due diligence obligations

If your business operates across the EU and China, you may now face an increasing risk of misalignment between legal and regulatory obligations. For example, certain EU law requirements (such as those around sanctions compliance and supply chain due diligence) could, in some circumstances, be seen in China as “unjustifiable” or “improper” extraterritorial measures. This may give rise to regulatory risk, including investigations or restrictions on business activities in China. China has strengthened its counter sanctions regime, meaning that compliance activities (including audits, data gathering and internal investigations) may require careful handling to make sure they are consistent with local legal and regulatory requirements.

Under China's counter-sanctions laws, foreign companies and individuals determined to have acted to the detriment of China’s national security could be exposed to the risk of designation. Depending on the scope of each designation, this can include asset freezes, transaction bans and restrictions on access to the Chinese market.

At the same time, efforts to limit or adjust due diligence activities in China to manage local regulatory considerations may create challenges in meeting EU expectations. Chinese rules place constraints on foreign-led investigations and information gathering across supply chains (for example, ESG audits, environmental reporting or carbon footprint mapping), which may be needed under frameworks such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). Limiting or adjusting these activities could leave companies without the evidence they need, potentially increasing exposure to enforcement action by EU regulators.

More broadly, global compliance policies designed around EU or US expectations may not always align fully with local legal and regulatory conditions in China, requiring careful coordination between headquarters and local teams.

The key issue is how expectations across jurisdictions interact in practice. This does not mean that due diligence activities are problematic in China. Rather, it emphasizes that how you act, explain and document your decisions matters, including the rationale provided for them. Where actions are framed primarily by reference to EU or US regulatory requirements, this may increase regulatory sensitivity in some contexts, compared to approaches supported by commercial or operational rationale.

Steps to take to reduce exposure include:

• Review your compliance policies, recognising that a single global compliance policy may not work for China and will need to be tailored for it.
• Assess the legal risk under the relevant Chinese rules before taking action involving a Chinese counterparty and make sure any decision can be justified on ordinary commercial grounds.
• Carry out due diligence, mapping where your business connects with China, such as across suppliers, customers, joint ventures, data flows, etc., so you understand where the exposure sits. Review your due diligence processes for all activities relating to China.
• Check your contracts for whether standard clauses on sanctions, compliance obligations, audit rights and termination provisions may need to be narrowed or adapted for China.
• Assess relevant reporting and tracking obligations under EU legislation to avoid over-compliance.
• Consider other relevant EU obligations. For example, the EU Deforestation Regulation requires traceability and origin data. Those requests can overlap with the kind of supply-chain scrutiny that Chinese rules are sensitive to.
• Expect the position to evolve as the framework is still developing. Further measures and guidance are likely to require adaptation over time.

For further information see our briefing: China: Counter-sanctions and EU due diligence obligations

With thanks to James Lindop, Dominque Strieder, Mark D. Herlach, Jack Cai, Woody Yim and Kirath Bharya

Guidelines on EU Forced Labour Regulation published

On 26 June 2026 the European Commission published Guidelines on the EU Forced Labour Regulation, which applies from 14 December 2027. This follows a call for evidence earlier this year.

The Regulation prohibits economic operators from placing or making available on the EU market, or exporting from the EU, products made with forced labour.

The Guidelines clarify how the Regulation will be applied in practice, supporting a strict prohibition on placing on the market or exporting products made wholly or partly with forced labour anywhere in the supply chain. They confirm the Regulation’s broad product scope – it applies to all products across all sectors and geographies, and includes agricultural products and “extracted” products, such as minerals and other raw materials – and the fact that the prohibition applies if forced labour is used at any stage of the supply chain, whether inside or outside the EU. Forced labour comprises work or services extracted from a person under coercion and for which the person has not offered themselves voluntarily, and the Guidelines include details of risk indicators to help businesses identify forced labour in practice. 

Enforcement is centred on a risk-based investigative regime, under which competent authorities can request extensive supply chain information, rely on a wide range of evidence, and impose binding decisions and fines where violations are found. Such decisions may require the withdrawal, banning and disposal (or replacement) of affected products across the EU market. 

Although the Regulation does not impose mandatory due diligence obligations, the Guidelines emphasise risk-based, supply-chain due diligence as a key mechanism for businesses to identify and mitigate exposure and demonstrate compliance. They refer to the OECD six-step due diligence framework as an appropriate benchmark: integrate forced labour due diligence into organisational policies and risk management; identify and assess the risk of forced labour in operations, supply chains and other business dealings; prevent, mitigate and eliminate risk; continuous monitoring; communicate how risks are addressed; and remediate the impact of forced labour.

The Commission has also launched a Forced Labour Single Portal to provide further information to businesses on how to prepare for the Regulation. From 14 December 2027 this can also be used for the purpose of submitting information about potential breaches of the ban on forced labour.

All businesses supplying products into, within or out of the EU should now be preparing for compliance with the Forced Labour Regulation. This will include mapping product supply chains and identifying where forced labour risks may arise, including at raw material, manufacturing, processing and logistics stages. They should then assess those risks using recognised indicators and integrate forced labour checks into procurement, supplier onboarding, contract terms, audit rights and risk management processes. Where risks are identified, businesses should take appropriate steps to prevent, mitigate or eliminate them, keep evidence of the decisions taken, monitor suppliers on an ongoing basis, and be ready to provide information to competent authorities if requested. They should also review product withdrawal and crisis-response processes, as enforcement action may require affected products to be withdrawn, disposed of or replaced.