August 16, 2012 Articles

Complying with the California Transparency Supply Chains Act

By Matthew A. Fischer

On January 1, 2012, the California Transparency in Supply Chains Act, S.B. 657, went into effect and has been codified in Section 1714.43 of California’s Civil Code. The act applies to retail sellers and manufacturers doing business in California that have annual worldwide gross receipts exceeding $100 million. The broad scope of the act means it will impact many companies located outside of California that either have significant sales in the state or supply companies that do business in California. Affected companies must disclose their efforts, if any, to ensure that their product supply chains are free from slavery and human trafficking. While the act only requires disclosure of a company’s practices, the real teeth in the law lies in the court of public opinion, as the obvious intent is to guide consumers’ purchases based on companies’ human rights policies.

The act has far-reaching consequences because, even if it does not apply to a company, that company’s customers who do conduct business in California will require the company to certify that the materials used in its products comply with the laws regarding slavery and human trafficking of the countries in which it conducts business.

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