On January 1, 2012, the California Transparency in Supply Chains Act went into effect, requiring certain businesses to publicly disclose what specific actions, if any, they have taken to eliminate slavery and human trafficking from their product supply chains.
The disclosure must be posted on the company’s Web site and clearly linked from its home page. If the company doesn’t have a Web site, it must ensure any consumer inquiries are answered within 30 days.
Who Is Required to Disclose?
Retail sellers and manufacturers doing business in California with gross worldwide receipts of more than $100 million are subject to the requirements. Large retailers and manufacturers domiciled outside California but doing business in the state will also be affected, even if their operations in California are relatively small.
A retail seller or manufacturer is defined as a business entity that has properly reported its principal business activity as retail trade or manufacturing on its California tax return. This covers a range of companies, including clothing retailers, grocery stores, and metal manufacturers. A company is identified as doing business in California if any of the following is true: it’s organized or domiciled in the state, its California sales for the applicable tax year exceed the lesser of $500,000 or 25 percent of the company’s total sales, it has California property worth more than $50,000, or it has payroll in California greater than $50,000.
It’s estimated that 3,200 companies—approximately 3.2 percent of all companies doing business in the state—are directly subject to the Supply Chain Act.
It’s likely that wholesalers and distributors, regardless of size, will be asked to comply indirectly with this law if their customers are required to disclose.
We're Here to Help
Affected companies need to address and possibly monitor their supply chain immediately. If you have questions about how the Supply Chain Act may affect your organization or how to comply with it, please contact your Moss Adams LLP professional.