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Buying Product From China? Don’t Forget U.S. State Laws
When buying from China, don’t forget the laws in your own country and state.
Because your company is located in and/or conducts business in China, it is of course subject to China’s laws and regulations and should take steps to address Chinese compliance concerns. If the company exports products from China, it will also be subject to various laws in the importing country. If that importing country is the United States, your company may also need to consider regulatory requirements in those U.S. states to which the product is shipped, and in which the product is marketed and sold. Surprisingly enough, our clients sometimes forget this.
One such U.S. state-specific law that often trips up companies that buy product from China is California’s Transparency in Supply Chains Act that became effective on January 1, 2012. This law applies to retail sellers and manufacturers that (1) conduct business in California, (2) file tax returns in California, and (3) have annual worldwide gross receipts exceeding $100,000,000. If a company does not satisfy all three conditions, the law does not apply to the company’s operations.
The purpose of the California Transparency in Supply Chains Act is a worthy one: to help prevent global human trafficking and slavery. The law requires retail sellers and manufacturers described above to include conspicuous links on their websites to information about their companies’ efforts to address human trafficking and slavery. By requiring easy access to such information, California ensures that consumers can understand companies’ efforts to combat human trafficking and slavery.
Information posted on a company’s website must at a minimum include the following:
- whether and to what extent the company verifies its supply chains for human trafficking and slavery risks and if such verifications are conducted by third parties;
- whether and how the company audits its suppliers’ compliance with the company’s standards on human trafficking and slavery and whether such audits were independent and/or unannounced;
- whether and the extent to which the company requires direct suppliers to certify that input materials comply with applicable laws concerning slavery and human trafficking;
- how the company holds its employees or contractors accountable if they fail to meet the company’s standards on slavery and human trafficking; and
- whether the company provides training on human trafficking and slavery to management and employees with supply chain responsibilities.
Importantly, the California law does not require that companies have in place any particular programs addressing slavery and human trafficking issues or that companies adopt procedures to address these issues. The law only requires that companies post on their websites a link to information detailing what efforts, if any, the companies have undertaken to address slavery and human trafficking. Companies without websites must provide consumers information about such efforts within 30 days of receiving requests for such information.
In addition, the only penalty for violating the law is an injunction – generally an order that the violating company implement processes so that it complies with the law.
Demonstrating its resolve to enforce this law, in April 2015 California’s Department of Justice issued letters concerning the California Transparency in Supply Chains Act to a large number of California retailers and manufacturers. These letters informed the recipients that they may be subject to California’s Transparency in Supply Chains Act such that they need to evaluate whether they are currently complying with the law’s requirements.
California’s Transparency in Supply Chains Act generated considerable attention in the international business community and media. This interest was generated by the important social goals the law promotes as well as the very public way in which companies must comply with the law.
But California’s law is only one example of the many different types of national, provincial, state, area, county, city, and town laws faced by businesses operating in China that may source from or ship to other countries. Companies with operations throughout different geographic regions face significant challenges in inventorying and evaluating different areas’ regulatory risks. Strategic companies will undertake the necessary efforts to identify and prioritize regulatory requirements and compliance risks. In this way, companies can address state-specific laws such as the California Transparency in Supply Chains Act in a collaborative, methodical manner to ensure that operations are not disrupted.
For more on the California Transparency in Supply Chains Act and how companies doing business with China should deal with it, check out The California Transparency in Supply Chains Act at the China Manufacturing Bulletin.
The post Buying Product From China? Don’t Forget U.S. State Laws appeared first on China Law Blog.
We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.
Source: http://www.chinalawblog.com/2015/07/buying-product-from-china-dont-forget-u-s-state-laws.html
