Understanding the California Transparency in Supply Chains Act
California’s Supply Chains Act 101
Are you aware of the California Transparency in Supply Chains Act (California’s Supply Chains Act)? As experts in transportation management, warehousing, and order fulfillment, we wanted to tell you about the importance of California’s Supply Chains Act, what it potentially means for your business, and how you can comply with its established requirements.
- What is the California Transparency in Supply Chains Act?
As of January 1, 2012, California law requires that certain large companies disclose to the public the extent of their efforts, if any, to ensure that the goods they sell are not produced by workers who are enslaved, coerced, or otherwise forced to work, or who have been the victims of human trafficking.
California’s Supply Chains Act does not regulate a company’s labor practices, nor does it require companies to reveal confidential, proprietary, and/or trade secret information. Instead, it requires businesses subject to the law to simply disclose their practices in five areas so that consumers can make better informed purchasing decisions.
- Are all companies required to comply with the law?
Not all companies are required to comply. A company must only comply with California’s Supply Chains Act if it meets these three requirements:
- It identifies itself as a retail seller or manufacturer on its California state tax returns.
- It does business in the state of California, as defined by Revenue and Taxation Code.
- It has annual worldwide revenue of at least $100 million.
A company is considered to be “doing business in the state” if it is actively engaging in any transaction for the purpose of financial gain or profit, as defined in the California Revenue and Taxation Code. Furthermore, the California Franchise Tax Board evaluates information from state tax returns each year to determine which companies must comply with the Act.
- How must a company make its California’s Supply Chains Act disclosure available to the public?
If a company has a website, the required disclosure must be accessible through a “conspicuous and easily understood link” on the company’s homepage. The link should go directly to the disclosure page, without requiring the consumer to click multiple links to access the information.
For example, a good practice would be to include the link to the California’s Supply Chains Act disclosure information on the homepages of both a company’s corporate and retail websites, and the websites of all of the company’s brands.
Companies without websites must provide a written disclosure within 30 days of receiving a written consumer request. The written disclosure must satisfy the same requirements as the web-based disclosure.
- What information must the disclosure include?
A company must address five topics in the disclosure.
- Disclose to what extent, if any, that the retail seller or manufacturer engages the verification of product supply chains to evaluate and address risks of human trafficking and slavery. The disclosure should specify if the verification was not conducted by a third party.
- Disclose to what extent, if any, that the retail seller or manufacturer 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.
- Disclose to what extent, if any, that the retail seller or manufacturer 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.
- Internal Accountability. Disclose to what extent, if any, that the retail seller or manufacturer maintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking.
- Disclose to what extent, if any, that the retail seller or manufacturer 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.
- How is the law enforced?
The Attorney General of California has exclusive authority to enforce California’s Supply Chains Act and may file a civil action for injunctive relief.
Ultimately, companies stand to gain by complying with California’s Supply Chains Act. They strengthen their relationships with consumers and help reduce the demand for goods brought to the supply chain through tainted labor practices.
Taylored Fulfillment Services is a fully integrated third-party logistics provider specializing in wholesale, retail, and direct-to-consumer unit fulfillment. Headquartered in Iselin, New Jersey, they operate 1.5 million square feet of warehouse and distribution space strategically located near the nation’s busiest ports, including Los Angeles, Long Beach, and New York. Since its humble beginnings in 1992, Taylored Fulfillment Services has grown to become a national leader in distribution, fulfillment, and warehousing.