What Happened? This spring, representatives from China's Ministry of Commerce (“MOFCOM”) met with Walmart executives in China (“PRC”) to discuss allegations that Walmart had asked its Chinese suppliers to reduce prices or offer some sort of discount to help Walmart offset the costs of the Trump Administration's ever-increasing tariffs on Chinese goods. The type of meeting was actually an arranged meeting called a “Yue Tan” (约谈).
A “Yue Tan” is an administrative pre-investigation step where officials from a PRC agency will require a representative from the company (usually its registered Legal Representative or other executive/management level personnel) to attend a “talk” or informal interview (not an interrogation). It is a common administrative pre-investigation step that government officials use to make initial contact with a company, ask questions to understand allegations against or suspected violations of law by the company, inform the company of possible risks and actions against it, and advise the company on possible corrective measures it can take to reduce the risk of further government action.
Why It Happened: The “Yue Tan,” or talk, was arranged allegedly due to allegations that Walmart had requested that its Chinese suppliers reduce prices or offer some sort of discount to help Walmart offset the costs of the Trump Administration's ever-increasing tariffs on Chinese goods. While the precise law or regulation under which the talks with Walmart were initiated are unclear, MOFCOM does administer China's Unreliable Entities List, which provides MOFCOM a basis to investigate and sanction companies for, among other things, actions perceived as intentionally or unfairly harming Chinese suppliers.
Investigations for the Unreliable Entities List can be initiated based on a third-party report or by MOFCOM itself. MOFCOM investigations involve requests for statements and documentary evidence from the company as well as witness interviews. If, based on the investigation, MOFCOM decides to add a company to the Unreliable Entities List, sanctions can include fines, restrictions and/or prohibitions on investments, business activities, and/or import/export activities in China, as well as restrictions or prohibitions on foreign employees and transportation for local employees. Notably, these sanctions do not account for possible reputational and brand damage for the entity.
Why It Is Important: Over the last several months, the market has experienced extreme uncertainly in the face of regular, retaliatory increases on tariffs between the US and China. In such a volatile economic environment, Walmart's actions are not uncommon in the world of business and supply chain management across industry sectors. Companies, whether Chinese, American, or otherwise, are constantly re-negotiating contracts and prices with Chinese suppliers and diversifying supply chains to accommodate for the global trade, tariff, and business environment.
What the recent “talk” with Walmart suggests is that these seemingly common business behaviors are now going to be viewed through the lens of the “US-China Trade War 2.0,” which raises the risks for foreign companies operating across borders, but especially in China. It is a “warning” from the PRC government that it will not tolerate any attempt that it believes amounts to unfair market action against Chinese companies and consumers, including attempts to pass along costs of U.S. tariffs.
The Chinese government has signaled that it will use such legal tools as one lever in the trade war against private companies. In the face of the Walmart action, therefore, when considering seemingly standard actions to accommodate changes to tariffs and the global trade environment, companies would be well-advised to consider any attendant and unintended risks.
Has It Happened Before? Walmart and other store-based and e-commerce giants are not the only entities susceptible to this type of action by the PRC, as automotive suppliers and OEMs, energy companies, and textile and clothing companies have all encountered similar challenges. For example:
- PVH Group - In September 2024, MOFCOM announced an investigation into PVH Group for taking what MOFCOM believed were “discriminatory measures” against its suppliers.Those “discriminatory measures” are alleged to including taking certain business actions designed to sever supply relationships in, and move its supply chain out, of Xinjiang in response to allegations by other foreign governments indicating forced labor in the region. In February 2025, MOFCOM announced that it was adding PVH Group to the Unreliable Entities List.
- Illumina – In late 2024, MOFCOM announced an investigation into Illumina for taking what MOFCOM believed were “discriminatory measures” against China's biomedical market.While unconfirmed, the PRC asserted that Illumina engaged in lobbying efforts for a US statute (BIOSECURE Act), which may have restricted the ability of entities who partnered with certain Chinese companies to receive US federal funding.As a result, in February 2025, MOFCOM announced that it was adding Illumina to the Unreliable Entities List.
Anti-Foreign Sanctions Law Development: In late March 2025, China's State Council promulgated the “Implementing Regulations for the Anti-Foreign Sanctions Law” (“Implementing Regulations”). The 22 articles of the Implementing Regulations are designed to clarify how China will enforce its Anti-Foreign Sanctions Law, and empowers relevant departments of the PRC government to identify, investigate, and implement countermeasures against entities and individuals suspected of enforcing foreign sanctions to the detriment of a Chinese individual or entity. These Implementing Regulations, combined with the timing of the regulatory actions against Walmart, PVH, and Illumina, suggest a new landscape and attitude towards enforcement by Chinese authorities as a purported measure to counter sanctions by foreign governments.
What Walmart, PVH, Illumina, and the new Implementing Regulations Mean for You: Whether it is renegotiating with suppliers to accommodate for rising costs and shifting tariffs, moving or diversifying supply chains in response to foreign market regulations, or lobbying for favorable policy in your home country, the Walmart, PVH and Illumina cases all point to new considerations for foreign companies operating in China. Companies engaging in these actions should now consider a broader cross-border strategy that includes both US and Chinese legal implications. Having a qualified legal team with knowledge and expertise of the regulatory, commercial, and trade environments in the US in China can help you navigate such pitfalls and mitigate investigative and enforcement risk in China.
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