Why is "we didn't know" becoming the most expensive sentence in business?

In February 2024, U.S. Customs impounded thousands of Volkswagen, Porsche, Bentley, and Audi vehicles at American ports. Not for safety defects. Not for emissions cheating. For a single electronic subcomponent — made by a supplier linked to forced labor in Xinjiang.

Volkswagen didn’t deny the component existed. They said they didn’t know it was there.

That sentence used to be a defense. Now it’s a confession.

Once Upon a Time, Ignorance Was Free

Supply chain ignorance used to be standard operating procedure. You didn’t know your Tier 3 suppliers. You didn’t trace your raw materials. You didn’t audit the subcontractor your contractor hired. That wasn’t negligence because it was normal, just the way things were. The information didn’t exist, or it was prohibitively expensive to gather.

The cotton was still picked in the same fields. The minerals were still mined in the same places. The components were still assembled in the same factories.

Nothing about the physical supply chain changed.

What changed was the cost of knowing.

Verification Got Cheap

A German laboratory called Agroisolab can now test a garment’s cotton fibers and, through stable isotope analysis, determine exactly where the cotton was grown. Bloomberg sent Shein garments to this lab. The isotope signatures proved that the cotton originated in Xinjiang, contradicting the company’s sourcing claims.

Any garment. Any fiber. Post-purchase. Geographic origin confirmed.

Satellite imagery can now detect deforestation in real time at 30-centimeter resolution. Ferrero used it to verify that 99.7% of its palm oil is deforestation-free. When investigators used the same technology on Wilmar — one of the world’s largest palm oil traders — they discovered a shadow company linked to its co-founder had destroyed 215 square kilometers of rainforest.

Blockchain systems trace cobalt from artisanal mines in the DRC through smelters and cathode plants to the final battery. Social media whistleblowers document factory conditions in real time. Customs databases cross-reference supplier relationships against entity lists.

The infrastructure of verification now exists. And it’s getting cheaper every year.

The Legal Ratchet

The Uyghur Forced Labor Prevention Act, which took effect in June 2022, didn’t just ban goods made with forced labor. It flipped the burden of proof.

Under the old framework, the government had to prove a product was made with forced labor before blocking it. Under UFLPA, every product from Xinjiang is presumed tainted. The company has to prove it isn’t.

Since enforcement began, over 12,500 shipments have been examined, totaling $3.68 billion in value. More than 5,000 detained. Over 1,700 were denied entry entirely and detentions increased 30% in 2024.

Germany’s Supply Chain Due Diligence Act, effective since 2023, makes companies with over 1,000 employees responsible for their entire supply chain. Fines up to 2% of global turnover.

The EU’s Corporate Sustainability Due Diligence Directive goes further, with fines up to 5% of worldwide turnover and allowing victims to sue for damages. Under these laws, the obligation isn’t to know. It’s to investigate. Failure to investigate is itself a violation.

“We didn’t know” isn’t just unconvincing anymore. In a growing number of jurisdictions, it’s legally irrelevant.

The Asymmetry

Here’s what makes this structural rather than political.

H&M announced in 2020 that it would stop sourcing cotton from Xinjiang due to concerns about forced labor. China retaliated — stores closed, products delisted from Chinese platforms, $1.25 billion in annual revenue threatened.

Shein shipped garments with Xinjiang cotton to the U.S. using a loophole that exempted packages under $800 from customs screening. That loophole closed in 2025.

The company that acknowledged the problem was punished by one market. The company that ignored it was eventually caught by another. Neither path was safe.

The only variable that mattered was whether the company could explain its supply chain — to hostile regulators, to investigative journalists, to isotope laboratories, to customs agents with entity lists.

What This Actually Means

The question for every company that sources, manufactures, or distributes physical goods is no longer do you comply with the law?

Is it can you reconstruct the origin of every input in your product to someone with the technology to check?

Not because the world became more ethical. Because the world became more legible. And in a legible world, the cost of not-knowing is no longer zero.

It’s whatever your supply chain can’t explain.