Supply Chain Diligence Issue Gets A Jolt

Calling it “an accelerating movement,” a post from law firm White & Case looks at new rules, either adopted or proposed, requiring increased due diligence re supply chains in three major jurisdictions: the United States, the EU and Germany. Meanwhile, the usual connotation of  the issue – that it refers to abusive practices in our existential adversary China or in poorly regulated venues in Africa and Asia – was temporarily bumped off center stage by a New York Times expose about the widespread use of refugee immigrant children in supply chains inside the US.

Included in the White & Case post is discussion of the United States’ Uyghur Forced Labor Prevention Act (“UFLPA”); the EU’s proposed Corporate Sustainability Due Diligence Directive (“CSDDD”) and its proposed Forced Labor Regulation; and the German Act on Due Diligence in Supply Chains. The UFLPA goes beyond the ban on products made wholly or in part by forced or indentured child labor, per Section 107 of the Tariff Act or 1930, to include a rebuttable presumption that anything produced, even in part, in the Xinjiang Uygur Autonomous Region of China was made by forced labor and is thus subject to import prohibition. A high bar is set for rebuttal, and there is no de minimus exception.

The White & Case post includes a chart that compares the four regulatory regimes that are discussed in term of status; the entities they cover; the due diligence policies and process they require; transparency/reporting requirements; human rights areas covered; environmental areas covered; and enforcement mechanisms/ civil liability.

The recent blockbuster New York Times expose found the presence of Central American migrant children in US supply chains is not a matter of occasional slipping through the cracks but rather has become, in the face of a tight labor market, an essential component of the economy in such industries as construction and food production, including but not limited to slaughter houses. Some major US companies are named. This explosive story, picked up by virtually every major outlet and news feature program, may have set a modern record of sorts for the shortest elapsed time between the appearance of a muckraking article and high-level political response. Within days after it appeared, politicians in both parties were expressing outrage and floating proposals. Republicans focused on the failure of administration Health and Human Services, alleging that in its haste to move migrant children out of border holding facilities into the hands of “sponsors,” the agency set the table for rampant abuse. Response from Democrats included a proposal from Senator Brian Schatz, Democrat of Hawaii, for a bill that would increase penalties for labor law violations and, significantly, apply the law to staffing agencies, which are widely used by companies and are, according to the Times article, unregulated under current law.  -Today’s General Counsel/DR