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Human Trafficking, Your Supply Chain and the California AG Office

4 Mar, 2016 By: Jeffrey D. Knowles, Venable LLP’s Advertising, Doreen L. Manchester


Human trafficking is a global scourge and one that has the full attention of officials at all levels of law enforcement. It was a hot topic at the National Association of Attorneys General’s Winter Meeting in February. And, while individual attorneys general (AGs) have created task forces and other methods of reducing human trafficking, California may have one of the most innovative mechanisms of raising awareness and reducing instances of human trafficking through mandatory public disclosure by certain businesses doing business in California.

The California Transparency in Supply Chains Act (CTSCA) went into effect in 2012. While there have been few enforcement efforts, if you do business in California, it is wise to understand and comply with CTSCA.

CTSCA applies to retailers or manufacturers doing business in California with annual worldwide gross receipts that exceed $100 million. CTSCA looks to a company’s self-classification from state tax filings to determine “retailer” or “manufacturer” status. Further, CTSCA will apply if your business is organized or domiciled in California; has sales in California of more than $500,000, or that constitute at least 25 percent of total sales; owns property in California of more than $500,000 in value or 25 percent of its total property; or pays compensation in California more than $50,000 or 25 percent of total compensation. CTSCA defines “gross receipts” as “the gross amounts realized … on the sale or exchange of property, the performance of services, or the use of property or capital … in a transaction that produces business income.”

Notably, CTSCA does not prohibit transactions with foreign suppliers, even if there is a risk of human trafficking or forced labor. Disclosure and information are CTSCA’s goals. CTSCA requires businesses to disclose how it addresses human trafficking or forced labor throughout its supply chain. A company must disclose whether it:

  • Evaluates supply chains for risks of human trafficking and slavery
  • Audits suppliers to determine compliance with company standards for anti-trafficking
  • Requires direct suppliers to certify that their inputs comply with the laws regarding slavery and human trafficking of the country (or countries) in which they are doing business
  • Maintains internal accountability protocols for employees or contractors
  • Provides training to employees managing the supply chain

California Attorney General Kamala Harris published a guidebook to help explain how businesses can comply with CTSCA. Given the inclusive nature of the Act, it will likely have a broad impact when California begins enforcement. In light of AG and public interest, now is probably a good time to understand your supply chain and CTSCA compliance.

Jeffrey D. Knowles is the chair of Venable’s Advertising, Marketing, and New Media practice group. Doreen L. Manchester is an attorney in the group. They can be contacted at (202) 344-4000.


About the Author: Jeffrey D. Knowles

Jeffrey D. Knowles

About the Author: Doreen L. Manchester

Doreen L. Manchester

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