January 5, 2012  Volume 4, No. 1

This edition of Currents is from Glenn Nieves, Esq., a member of the business practice team. Please contact Glenn Nieves to inquire about the subject matter of this issue.

On January 1, 2012, The California Transparency in Supply Chains Act of 2010 ("Act") went into effect. The Act requires a covered company to report, on its website, the activities it engages in to monitor its supply chains to prevent human trafficking and slavery. A covered company is defined in the Act as any retail seller or manufacturer doing business in California that has annual worldwide gross receipts exceeding $100 million. A company may be subject to the Act even if its principal place of business is outside of California or a majority of its gross receipts are obtained from income generating activities outside of California if a company is 'doing business in California'. A covered company must clearly post the mandatory disclosure outlined in the Act on its website. The disclosure can be based on what a company is already doing to monitor its supply chain and may describe existing company procedures and policies that are relevant for disclosure purposes.

In order for a covered company to fully comply with the Act, its disclosure must include the following:

1. Verification. A covered company must describe to what extent it engages in the verification of product supply chains to evaluate and address risks of human trafficking and slavery. The company must specify if the verification was not conducted by a third party.
2. Auditing. A covered company must also describe to what extent it conducts audits of suppliers to evaluate supplier compliance with company standards regarding human trafficking and slavery in its supply chain. A covered company must also specify if the audits were independent and unannounced.
3. Certification. A covered company is further required to describe to what extent it requires its direct suppliers to certify that materials incorporated into its products comply with laws regarding slavery and human trafficking in the country or countries in which they are doing business.
4. Internal Accounting. A covered company must disclose to what extent it maintains internal accountability standards and procedures for employees or contractors who fail to meet company standards regarding slavery and trafficking.
5. Training. Finally, a covered company must disclose to what extent it provides company employees and management, who have direct responsibility for supply chain management, training regarding human trafficking and slavery issues, particularly with respect to mitigating risks within the supply chain.

Failure to comply with the Act may subject a covered company to an injunctive relief action brought upon by the California Attorney General.

Contact Us
For further information on complying with the Act, please contact Glenn Nieves, Esq. at GNieves@clarktrev.com or at 213.629.5700. Website: www.ClarkTrev.com.

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