Section 3

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Transparency in supply chains

This section imposes a duty on retail sellers and manufacturers doing business in California and with gross receipts of over $100 million to disclose their efforts to eradicate slavery and human trafficking from their direct supply chain for retail goods. The section requires such businesses to disclose on their websites what, if anything, they are doing to:

a) Verify product supply chains to evaluate and address risks of human trafficking and slavery;

b) Audit suppliers to evaluate their compliance with company standards for trafficking and slavery in supply chains;

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

d) Maintain internal accountability standards and procedures for employees and contractors failing to meet company standards regarding slavery and trafficking; and

e) Provide training to employees and management with direct responsibility for supply chain management, particularly with respect to mitigating risks within the supply chain.

Notes

The only remedy for a violation of this section by failing to report is an action brought by the Attorney General for injunctive relief.  However recent class actions have relied on disclosures under the Act to argue that companies have misled consumers about the presence of slavery in their supply chains and their efforts to eradicate it, where disclosures have been contradicted by media reports of forced labour in the production of relevant goods.  It is argued that the alleged false disclosures constitute consumer fraud, since the consumers would not have purchased the products if they had known their source, and accordingly damages have been claimed.

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Section 3. Section 1714.43 is added to the Civil Code, to read:

(a)(1) Every retail seller and manufacturer doing business in this state and having annual worldwide gross receipts that exceed one hundred million dollars ($100,000,000) shall disclose, as set forth in subdivision (c), its efforts to eradicate slavery and human trafficking from its direct supply chain for tangible goods offered for sale.

(2) For the purposes of this section, the following definitions shall apply:

(A) “Doing business in this state” shall have the same meaning as set forth in Section 23101 of the Revenue and Taxation Code.

(B) “Gross receipts” shall have the same meaning as set forth in Section 25120 of the Revenue and Taxation Code.

(C) “Manufacturer” means a business entity with manufacturing as its principal business activity code, as reported on the entity’s tax return filed under Part 10.2 (commencing with Section 18401) of Division 2 of the Revenue and Taxation Code.

(D) “Retailseller”means a business entity with retail trade as it sprincipal business activity code, as reported on the entity’s tax return filed under Part 10.2 (commencing with Section 18401) of Division 2 of the Revenue and Taxation Code.

(b) The disclosure described in subdivision (a) shall be posted on the retail seller’s or manufacturer’s Internet Web site with a conspicuous and easily understood link to the required information placed on the business’ homepage. In the event the retail seller or manufacturer does not have an Internet Web site, consumers shall be provided the written disclosure within 30 days of receiving a written request for the disclosure from a consumer.

(c) The disclosure described in subdivision (a) shall, at a minimum, disclose to what extent, if any, that the retail seller or manufacturer does each of the following:

(1) Engages 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.

(2) Conducts 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.

(3) Requires 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.

(4) Maintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking.

(5) Provides 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.

(d) The exclusive remedy for a violation of this section shall be an action brought by the Attorney General for injunctive relief. Nothing in this section shall limit remedies available for a violation of any other state or federal law.

(e) The provisions of this section shall take effect on January 1, 2012.

Law / United States / Transparency in Supply Chains Act (California)

The California Transparency in Supply Chains Act was enacted to promote transparency and accountability in corporate supply chains.  The aim of the Act is to provide consumers with information about their efforts to eradicate slavery and human trafficking, to enable consumers to distinguish between companies based on their efforts.  The Act applies to retailers and manufacturers doing business in California and having annual worldwide gross receipts in excess of $100 million.