Modern Slavery Act 2026: Your China Supplier Due Diligence Checklist

What the Modern Slavery Act Requires

The Modern Slavery Act 2018 (Cth) requires entities with an annual consolidated revenue of AUD 100 million or more to publish annual Modern Slavery Statements. These statements must describe:

• The entity's structure, operations, and supply chains
• The risks of modern slavery in the entity's operations and supply chains
• The actions taken to assess and address those risks
• How the entity measures the effectiveness of those actions

Even businesses below the AUD 100 million threshold face growing pressure from larger supply chain partners who require modern slavery compliance as a condition of doing business.

The key word in modern slavery compliance is "genuine." Template compliance — a statement that describes policies but not actions — is increasingly scrutinised. The Australian Government expects to see evidence of active due diligence, not just documentation of good intentions.

Why China Presents Specific Supply Chain Risks

China has made significant progress in labour law enforcement over the past two decades, but risks of forced labour and exploitation persist in certain industries and regions. Specific risk factors for Australian businesses sourcing from China include:

Manufacturing supply chains with multiple tiers

Many products sourced from China involve component supply chains that extend several tiers below your direct supplier. Your direct supplier may be compliant, but sub-suppliers who provide materials or components may not be. This is particularly relevant in textiles, electronics, and agriculture.

Migrant worker vulnerability

Workers from rural areas who migrate to manufacturing centres are among the most vulnerable to exploitation. Language barriers, contract fraud, and confiscation of identity documents remain concerns in some sectors.

High-risk product categories

Industries with labour-intensive production, complex supply chains, or seasonal demand patterns carry elevated risks. These include textiles and apparel, electronics assembly, footwear, toys, and agriculture.

Vulnerability to subcontracting

Suppliers under price pressure may subcontract production to facilities that do not meet your standards. Without active monitoring, subcontracting can introduce modern slavery risk into your supply chain.

The Due Diligence Framework: Five Steps

Effective due diligence for modern slavery in China supply chains requires five interconnected steps. Each step builds on the last.

Step 1: Map Your Supply Chain

Before you can manage supply chain risks, you need to understand your supply chain. This means:

• Identify every supplier you source from directly
• Map the first tier of sub-suppliers (your supplier's suppliers of key components or materials)
• Identify the countries and regions where production occurs
• Note which products or product components carry the highest labour intensity

For most Australian businesses, this mapping exercise will reveal that your supply chain extends significantly beyond the supplier you deal with directly. In textiles, for example, the chain from raw cotton to finished garment may involve six or more entities across three or four countries.

Practical action: Request your direct supplier's own supply chain documentation — their supplier list, subcontracting policies, and any existing audit reports. Push for transparency at every tier.

Step 2: Assess Risk by Supplier and Product Category

Not all suppliers carry the same risk. Conduct a structured risk assessment for each supplier based on:

Country and region risk: Certain Chinese provinces and cities have higher concentrations of labour-intensive manufacturing and elevated reports of exploitation. Research relevant risk indicators.

Industry risk: Labour-intensive industries carry inherently higher risk. Electronics assembly, textile production, footwear, and agricultural products rank among the highest risk globally.

Supplier characteristics: Suppliers that subcontract production, use temporary or migrant workers, have limited audit history, or face significant price pressure carry elevated risk.

Your leverage: A supplier that represents a small fraction of your purchasing volume has less incentive to comply than a strategic supplier. Your leverage affects what you can realistically require.

Practical action: Develop a simple risk matrix rating each supplier as high, medium, or low risk. Allocate your compliance resources accordingly. High-risk suppliers require direct engagement and verification; lower-risk suppliers may be managed through documentation and periodic review.

Step 3: Require and Verify Supplier Compliance

Once you have assessed risk, take action at each supplier:

For high-risk suppliers:

• Require suppliers to confirm in writing that they do not use forced or child labour
• Require suppliers to have a modern slavery policy and to cascade requirements to their own suppliers
• Conduct or commission independent audits of production facilities
• Visit the factory in person to observe conditions directly
• Interview workers (through an interpreter) to assess the accuracy of management statements

For medium-risk suppliers:

• Require annual self-assessment questionnaires on labour practices
• Request copies of existing audit reports or third-party certifications
• Conduct periodic factory visits, at minimum every two years

For lower-risk suppliers:

• Include modern slavery compliance requirements in your standard purchase agreements
• Request annual confirmations of compliance

Practical action: Add a modern slavery compliance clause to all purchase agreements with Chinese suppliers. The clause should require suppliers to represent that they do not use forced labour, to notify you of any incidents, and to allow audit access.

Step 4: Conduct Independent Audits

Third-party audits are the gold standard for supply chain verification. They provide independent evidence of conditions that management may not accurately represent.

Options for China-based audits:

International audit firms: SGS, Bureau Veritas, Intertek, and QIMA all operate in China with established audit methodologies. Costs typically range from AUD 500-2,000 per day depending on facility size and audit scope.

Specialist modern slavery auditors: Organisations like Sedex, amfori BSCI, and the Fair Wear Foundation offer audit frameworks specifically designed to assess modern slavery and labour exploitation risks.

In-house visits: For smaller orders or exploratory verification, a factory visit by your own staff or a trusted local representative is more accessible than a formal audit — though less rigorous.

Audit reports should cover:

• Worker recruitment practices and any use of recruitment fees
• Employment contracts and whether workers understand their terms
• Wages, hours, and overtime practices
• Freedom of movement and whether identity documents are retained
• Presence of migrant workers and their conditions
• Health and safety conditions
• Dormitory and accommodation conditions where applicable

Practical action: For high-risk suppliers, commission at minimum one independent audit per year. Build audit requirements into your purchase agreements so the supplier expects and cooperates with the process.

Step 5: Document Everything

Documentation is the foundation of your Modern Slavery Act statement. The Australian Government's guidance is clear: you must be able to demonstrate the actions you have taken.

This means keeping records of:

• Your supply chain mapping exercise and risk assessment outputs
• All communications with suppliers about compliance requirements
• Purchase agreement clauses relating to modern slavery
• Audit reports and any corrective action plans arising from audits
• Factory visit reports
• Worker interview records
• Any incidents reported and how they were resolved
• Training provided to staff on modern slavery identification

Practical action: Maintain a compliance file for each high-risk supplier. Assign internal responsibility for collecting and updating documentation annually.

Modern Slavery Risk in Specific Sourcing Categories

Different product categories carry different levels of supply chain risk. Here is a practical guide by category:

Electronics and components

Risk factors: Multi-tier supply chains, use of raw materials from high-risk regions, use of contract labour in assembly. The electronics supply chain is one of the most complex globally.

Due diligence: Verify component suppliers at two tiers below your direct supplier. Focus on areas where tin, tantalum, tungsten, and gold (3TG minerals) are sourced — these are associated with heightened exploitation risk.

Textiles and apparel

Risk factors: Labour-intensive production, extensive subcontracting, migrant worker vulnerability. The raw materials supply chain (cotton, synthetic fibres) also carries risk.

Due diligence: Conduct audits focused on wages, working hours, and freedom of movement. Request dye and chemical safety certifications for fabric suppliers.

Furniture

Risk factors: Manual assembly processes, use of wood from supply chains with deforestation and forced labour associations, spray finishing and chemical exposure.

Due diligence: Verify wood sourcing through FSC or PEFC chain-of-custody certifications. Conduct audits focused on finishing and chemical handling processes.

Machinery and industrial equipment

Risk factors: Generally lower direct labour risk at the assembly stage, but subcomponents and casting/forging operations may carry elevated risk.

Due diligence: Focus audit attention on casting, forging, and surface treatment sub-suppliers.

Building a Supplier Code of Conduct

A Supplier Code of Conduct formalises your expectations and provides the contractual foundation for compliance requirements.

The Code of Conduct should address:

• Prohibition on forced labour, slave labour, and human trafficking
• Prohibition on child labour
• Freedom of movement and non-confiscation of identity documents
• Fair wages meeting or exceeding legal minimums
• Reasonable working hours with overtime paid at legally required rates
• Safe and healthy working conditions
• Prohibition on discrimination and harassment
• Right to collective bargaining
• Requirements for sub-suppliers to meet the same standards

Include the Code of Conduct in all new purchase agreements. For existing suppliers, communicate the Code and request written acknowledgment.

Red Flags to Watch For

During factory visits and audits, these indicators suggest elevated modern slavery risk:

• Workers who appear frightened, unwilling to speak freely, or defer to management during conversations
• Identity documents retained by the employer
• Workers recruited through third-party agents who charge recruitment fees
• Wages below legal minimums or wages that do not allow a decent standard of living
• Excessive overtime or inability for workers to refuse overtime
• Workers unable to leave the facility freely during non-working hours
• Lack of employment contracts or contracts in a language the worker does not understand
• Physical safety hazards or overcrowded dormitory conditions
• Presence of security personnel controlling worker movement

If you observe any of these indicators, stop the engagement pending further investigation. Document what you observed. Report to your compliance team. Consider whether the incident requires notification to authorities.

What Winning Adventure Global Does

Winning Adventure Global provides on-the-ground verification of Chinese suppliers for Australian businesses. Our China-based team conducts factory visits, worker interviews, and supplier assessments that go beyond document review. We help clients build compliance frameworks that satisfy the Modern Slavery Act and protect their supply chains.

We document every engagement thoroughly, providing the evidence trail that supports your Modern Slavery Act statement.

If you need to assess supplier compliance, book a free 30-minute assessment call.

Related Articles

• How to Verify a Chinese Supplier — The complete verification framework
• Factory vs Trading Company — Understanding who you are actually dealing with
• Visiting Chinese Factories Checklist — Practical guide to factory visits

Frequently Asked Questions

Does the Modern Slavery Act apply to my business?

The Modern Slavery Act applies to entities with an annual consolidated revenue of AUD 100 million or more. Even if your business is below this threshold, large supply chain partners may require modern slavery compliance as a condition of doing business. Additionally, businesses below the threshold may face liability for knowingly profiting from modern slavery in their supply chains.

What is the difference between modern slavery and poor working conditions?

Modern slavery specifically involves coercive control: forced labour where workers cannot leave freely, debt bondage where workers are trapped by recruitment fees, or human trafficking. Poor working conditions — while serious — do not necessarily constitute modern slavery. However, poor conditions are a risk factor for modern slavery and should be addressed regardless.

How do I know if my Chinese supplier uses forced labour?

Direct indicators include: workers unable to leave freely, identity documents confiscated, workers recruited through debt bondage arrangements. Indirect indicators include: unusually low wages relative to industry, excessive overtime, lack of employment contracts, and workers who appear fearful. Audits and worker interviews are the primary tools for detection.

What should I do if I discover modern slavery at a supplier?

Stop the engagement immediately. Document what you found. Report to your compliance and legal team. Consider notification to the Australian Federal Police (for trafficking) or the Fair Work Ombudsman (for labour exploitation). Terminate the supplier relationship. Review your purchasing practices — if you are putting unsustainable price pressure on suppliers, you may be inadvertently creating conditions that enable exploitation.

How often should I audit my China suppliers?

For high-risk suppliers, at minimum once per year. For medium-risk suppliers, every two years. For lower-risk suppliers, every three to five years or when circumstances change (new supplier, new product line, new production location). Any credible allegation should trigger an immediate investigation.

Can I rely on my supplier's own audit reports?

Supplier self-assessments provide some information but are not sufficient for high-risk categories. Audits conducted by the supplier's own team are not independent. Request audits from accredited third-party audit firms. For critical supply chains, conduct your own visits and interviews in addition to third-party audits.

How do I conduct worker interviews during a factory visit?

Worker interviews should be conducted in a private setting — away from management. Use a bilingual interpreter who is not affiliated with the supplier. Ask open-ended questions about recruitment, wages, working hours, and freedom of movement. Observe body language. Note any reluctance to answer or any inconsistencies in responses. Do not ask leading questions.

What documentation do I need for my Modern Slavery Act statement?

You need records of: your supply chain mapping, risk assessments conducted, actions taken to address identified risks, audit reports and findings, corrective action plans, any incidents reported and how they were resolved, and staff training on modern slavery identification. The more specific and recent the records, the stronger your statement.

How does modern slavery legislation in China affect my compliance?

China has its own labour laws and has criminalised human trafficking. However, enforcement varies. Australian businesses cannot rely on Chinese law compliance as sufficient — they must actively verify that their supply chains are free from exploitation. The Australian Modern Slavery Act extraterritorial application means Australian businesses are accountable for their global supply chains.

What is the single most effective step I can take for supply chain compliance?

Conduct factory visits. No document review, questionnaire, or third-party audit is as effective as standing in the production facility, observing conditions directly, and speaking with workers privately. A one-day factory visit by a qualified bilingual inspector is the most cost-effective compliance investment most Australian businesses can make.