Product Sellers into California Market Will Have New Requirements to Disclose their Efforts to Eradicate Slavery and Human Trafficking in Their Global Supply Chain

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Commencing on January 1, 2012, retail sellers and manufacturers selling goods in the State of California will have new obligations to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains for tangible goods offered for sale. As we indicated in our earlier September 7th blog, there was a high likelihood that the bill SB 657, entitled the “California Transparency in Supply Chains Act of 2010” might be signed into law by the end of the month. On September 30th, Governor Schwarzenegger signed the bill stating, “I am proud that in California, we have enacted some of the toughest laws to punish human traffickers and protect their victims. This legislation will increase transparency, allow consumers to make better, more informed choices and motivate businesses to ensure humane practices throughout the supply chain.”

Who has a Duty to Comply?

Retail sellers and manufacturers selling goods into California and having annual worldwide gross receipts over $100 million dollars (as defined in California’s Revenue and Tax Code Section 25120) are subject to this law.

The Franchise Tax Board will be responsible for providing a list of all companies required to comply based on tax returns filed after January 1, 2011 to the Attorney General for enforcement purposes.

What are these New Compliance Duties?

Each retailer or manufacturer must disclose through a link on its web homepage that it does the following:

  • Engages in internal verification of product supply chains to evaluate and address risks of human trafficking and slavery (and must specify that this verification was not conducted by a third party)
  • Conducts audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains (and specify if the verification was not an independent, unannounced audit)
  • Requires direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking in the country or countries in which they are doing business.
  • Maintains internal accountability standards and procedures for employees or contractors failing to meet its standards.
  • Provides training program to employees and management on human trafficking and slavery, and mitigating risks within supply chains of products.

How will these duties be enforced?

The statute states that the exclusive remedy for a violations of this law shall an enforcement action brought by the California Attorney General for injunctive relief.

However, the statute also states that this section does not limit the remedies available for a violation of any other state or federal law, leaving some open questions as to whether for example, the unfair business practices law in Section 17200 et seq would be available to plaintiffs seeking to enforce this law’s disclosure provisions.

Combined with California’s new green chemistry laws, the burden and responsibility for product sellers in California to know, regulate, monitor and report on their entire global supply chain is increasing, whether it’s a toxic ingredient used, the manufacturing process is used, the types of energy and fuels used or possibly the labor used.

For more information contact Maureen Gorsen in our Sacramento office, 916-498-3305.