The California Transparency in Supply Chains Act requires large retailers and manufacturers doing business in California to publicly disclose what they do — if anything — to address forced labor and human trafficking in their product supply chains. It applies to companies classified as retail sellers or manufacturers on their California tax return, with more than $100 million in annual worldwide gross receipts. The statute does not require you to audit suppliers, train employees, or certify materials. It requires you to tell consumers whether you do.
Whether Your Company Is Covered
Three criteria must all be met. Your principal business activity code on your California tax return must classify you as a retail seller or a manufacturer. You must be “doing business” in California, meaning actively engaging in transactions for financial gain in the state. And your annual worldwide gross receipts must exceed $100 million.1State of California Department of Justice – Office of the Attorney General. SB 657 Related Code Sections
The tax-return classification is easy to overlook. If your primary activity is wholesale distribution, logistics, or services rather than retail trade or manufacturing, the Act does not reach you, whatever your revenue looks like.
Gross receipts are calculated by reference to Section 25120 of the Revenue and Taxation Code — the gross amounts realized from sales, services, rents, royalties, interest, and dividends, without subtracting cost of goods sold.2Franchise Tax Board. Multistate Audit Technical Manual Chapter 7500 – Sales Factor The number is worldwide, not California-only. A company with $60 million in U.S. sales and $50 million overseas is over the threshold.
You don’t self-identify. Each year, the California Franchise Tax Board reviews state tax returns and sends the Attorney General a list of companies meeting the criteria. As of the most recent publicly available count, roughly 1,700 companies had been identified as likely subject to the law.3California Department of Justice. The California Transparency in Supply Chains Act – A Resource Guide
One boundary worth flagging: the Act covers only “tangible goods offered for sale.”1State of California Department of Justice – Office of the Attorney General. SB 657 Related Code Sections Service businesses that meet the revenue threshold and appear on the FTB’s radar still have no disclosure obligation if they don’t sell physical products.
What the Disclosure Must Say
The statute requires you to disclose “to what extent, if any” you take steps in five specific areas.4State of California Department of Justice – Office of the Attorney General. California Transparency in Supply Chains Act Those two words — “if any” — carry the whole design of the law. A company that does nothing to police its supply chain can still comply by saying so. This is a transparency statute, not a conduct statute. The legislature’s theory is that informed consumers will reward strong programs and punish weak ones, so market pressure carries the enforcement work the statute itself does not.
Your disclosure must address each of these five areas. You can say you do nothing in a category, but you cannot skip the category.
- Verification. Describe your process for evaluating and addressing forced labor risks in your product supply chains. If the verification is not conducted by a third party, you must say so.1State of California Department of Justice – Office of the Attorney General. SB 657 Related Code Sections
- Audits. State whether you audit suppliers against your company’s standards for trafficking and slavery. If audits are not independent and unannounced, you must disclose that.
- Certification. Disclose whether you require direct suppliers to certify that their materials comply with slavery and trafficking laws in the countries where they operate.
- Internal accountability. Describe any standards and procedures for employees or contractors who fail to meet the company’s anti-trafficking expectations.
- Training. Explain what training, if any, you provide to employees and managers with direct supply chain responsibility, focused on identifying and reducing trafficking risks.
The drafting pattern is worth noticing. For verification and audits, the statute specifically requires you to flag the absence of third-party or independent involvement. The legislature wanted consumers to know not just whether these checks happen, but whether they carry any outside credibility.
Where the Disclosure Has to Live
The disclosure must appear on your company’s website behind a “conspicuous and easily understood” link on your homepage.1State of California Department of Justice – Office of the Attorney General. SB 657 Related Code Sections The Attorney General’s resource guide recommends placing the link at the top or bottom of the page where consumers naturally scan, and making the link text at least as prominent as surrounding navigation, ideally in a font that is larger and darker than nearby items.3California Department of Justice. The California Transparency in Supply Chains Act – A Resource Guide Labels like “Supply Chain Transparency” or “California Transparency Act” are common.
If your company does not maintain a website, you must provide a written copy of the disclosure to any consumer who requests one in writing, within 30 days of the request.
Penalties for Noncompliance
The California Attorney General holds exclusive enforcement authority, and the only remedy the statute authorizes is injunctive relief. The AG can sue to force your company to post the required disclosure. The Act itself does not impose monetary fines or civil penalties. No private consumer, advocacy group, or competitor can bring a claim directly under this statute.
That narrow enforcement mechanism is often criticized, but for compliance planning it means the practical exposure is reputational rather than financial. The FTB’s annual list makes it straightforward for the AG’s office to see which companies should be disclosing and have posted nothing.
Where Private Lawsuits Can Still Reach You
The Act blocks private suits under its own terms, but it explicitly preserves remedies under other state and federal laws. Plaintiffs have tried to use California’s Unfair Competition Law to challenge companies that fail to disclose labor practices. In one such case, a consumer sued a chocolate manufacturer for not disclosing child and forced labor in its supply chain. The Ninth Circuit rejected the theory, holding that without an affirmative misrepresentation, the manufacturer had no duty to disclose labor conditions on its product labels, and the omission was not deceptive under the UCL.5United States Court of Appeals for the Ninth Circuit. Hodsdon v. Mars, Inc.
The line that draws is worth internalizing. A company that says nothing about its supply chain sits in a different legal position from one that markets itself on ethical sourcing and can’t back it up. Silence is hard to sue over. Affirmative claims invite scrutiny under consumer protection statutes independent of the Transparency Act.
Federal Laws That Can Still Stop Your Shipments
California’s law is about disclosure. Federal law goes further and can actually block goods at the border, so a clean California disclosure does not insulate you from separate federal exposure.
Section 307 of the Tariff Act of 1930 (19 U.S.C. § 1307) prohibits importing any goods “mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor.” U.S. Customs and Border Protection enforces the ban and can seize shipments at the border.6Office of the Law Revision Counsel. 19 U.S. Code 1307 – Convict-Made Goods; Importation Prohibited
The Uyghur Forced Labor Prevention Act, signed into law in December 2021, creates a rebuttable presumption that goods produced wholly or in part in China’s Xinjiang Uyghur Autonomous Region, or by entities on the UFLPA Entity List, are made with forced labor and are barred from entry into the United States.7U.S. Department of Labor. Uyghur Forced Labor Prevention Act A disclosure under California law can accurately describe your audit program while federal authorities detain the same company’s imports because those audits missed forced labor in a covered region.