New Supply Chain Disclosure Requirement

As you know, Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act brought about new disclosure requirements for public companies with respect to their sourcing of conflict minerals (tantalum, tin, tungsten and gold) from the Democratic Republic of Congo.  The SEC has not yet finalized rules on such disclosure.

Similarly, California has adopted a website disclosure requirement, with respect to company efforts to utilize supply chain management as a means to reduce human trafficking. The California Transparency in Supply Chains Act of 2010 became effective on January 1, 2012.  The Act requires any company that (1) is a retail seller or manufacturer, (2) does business in California and (3) has annual worldwide gross receipts that exceed $100,000,000, to disclose its efforts to eradicate slavery and human trafficking from the company’s direct supply chain for tangible goods offered for sale.

Doing business in California is broadly defined to include inter alia any company that has sales in excess of $500,000 in California or real property or other assets valued in excess of $50,000 in California.

Disclosure must include the level of due diligence that a company conducts with respect to its supply chain, including: supplier evaluation; audits; supplier certification requirements; policies, procedures and standards for failures to comply; and training.

The information must be posted on the company’s website, with a conspicuous link to the disclosure placed on the company’s homepage. Companies that do not have websites must provide written copies of the disclosure within 30 days of receiving a written request for the disclosures from a consumer.