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New California Law Requires Supply Chain Disclosures

The California Transparency in Supply Chains Act of 2010 is set to go into effect January 1, 2012.

Are you ready?

The new law, which will impose disclosure obligations on all retailers and manufacturers that do business in California and have annual gross receipts that exceed $100,000,000, is designed to eradicate slavery and human trafficking from its direct supply chain for tangible goods offered for sale.

As explained in detail here, the legislation will require these retailers and manufacturers to disclose how they:

Engage in verification of product supply chains to evaluate and address risks of human trafficking and slavery. The disclosure shall specify if the verification was not conducted by a third party.

Conduct audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains. The disclosure shall specify if the verification was not an independent, unannounced audit.

Require direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the country or countries in which they are doing business.

Maintain internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking.

Provide company employees and management, who have direct responsibility for supply chain management, training on human trafficking and slavery, particularly with respect to mitigating risks within the supply chains of products.

As the law also specifies, the exclusive remedy for a violation of this section shall be an action brought by the Attorney General for injunctive relief.

The California Transparency in Supply Chains Act of 2010 falls short of requiring companies to trace and audit materials in the supply chain. However, it will certainly draw attention to which actions are or are not being pursued, and it certainly makes sense to begin planning for compliance now, well before the law goes into effect on January 1, 2012.

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