Importation and New Compliance Requirements
By George Benaur
Businesses engaged in the importation of products need to be aware of new regulations and compliance requirements in this area. This issue affects many businesses in the U.S., both large and small. In New Jersey, for example, the total dollar value of imported products (over $126 billion last year) is more than triple than the total value for exported products.
While exports lag behind imports, there is definitely a trend toward increased regulations of international supply chains. As my co-authors and I reported in the New Jersey Law Journal article last year, for example, the new Federal Acquisition Regulation (FAR) rule “Ending Trafficking in Persons,” which was finally issued earlier this year, imposes additional requirements on the levels of due diligence that U.S. government contractors need to conduct on their international supply chains. The American Bar Association (ABA) also adopted the ABA Model and Business Supplier Policies on Labor Trafficking and Child Labor last year.
Last month, in April 2015, the California Attorney General issued letters to retailers and manufacturers requiring them to respond whether they are in compliance with California Supply Chain Act, and also issued a Resource Guide for companies. It remains to be seen how the new legal developments will unfold, both in California and in other states that may choose to follow California’s lead. Will these matters be challenged in the courts and what judicial interpretations could come in the future regarding the ability of U.S. federal and state governments to regulate conduct of foreign vendors?
Despite some of the uncertainty as to how the new regulations will be enforced (e.g. whether there will be litigations), it is clear that there is increasing federal and state government scrutiny of global supply chains. Companies sourcing from overseas, and not only government contractors, need to pay close attention to the developments in this field. As the regulations continue to evolve, businesses should look carefully at their global supply chains, including what due diligence (if any) has been done on the source of the goods or services and what contractual protections are in place. Companies should analyze the issues, consider implementing a due diligence process for vetting vendors, and also consider consulting with counsel to include appropriate contractual representations from their foreign vendors, suppliers and/or agents, as part of working towards compliance with the regulations.