;

Shein is looking to lobbying, as the ultra-fast fashion company increasingly expands its footprint in the U.S., including by way of three domestic distribution centers aimed at catering to its growing consumer base of Western millennials and Gen-Zs. In addition to boosting its physical footprint in America, the Wall Street Journal reported last month that the privately-held Chinese entity is also planning to hire “at least several hundred employees at its U.S. corporate headquarters in Los Angeles, its Washington, D.C., office and potentially in other American cities,” currently boasting more than 400 staffers in the U.S., up from a little over a dozen in 2019. 

Taken together, such efforts raise the stakes for the company, hence Shein’s move to retain counsel at Akin Gump Strauss Hauer & Feld, as well as Hobart Hallaway & Quayle Ventures, to lobby on “legislative and regulatory issues impacting the apparel industry and e-retailers, including trade and tax related matters,” according to a lobbying registration form filed by Shein on September 1. The firms will also engage in “general [government-focused] education regarding SHEIN’s presence, operating footprint, and economic impact in the United States.” 

The bigger picture here is that the disclosures from Shein come as lobbying (i.e., efforts to influence government action) and political spending continues to be big business for corporations. “In the 2020 election cycle, alone, private interests spent $486 million on campaign contributions to U.S. federal election candidates and over $7 billion to lobby Congress and federal agencies,” according to DePaul University management professor Richard Devine and Florida State University professor of strategic management R. Michael Holmes, who claim that “the 2022 cycle could be a record period if recent trends are any indication.” 

Data from campaign finance monitor the Center for Responsive Politics shows that companies that are most affected by government regulation spend more when it comes to campaign contributions and lobbying, per Devine and Holmes. They point to the operations of Facebook owner Meta, for example, which “could be heavily affected by government legislation, whether from laws concerning net neutrality, data privacy, or censorship.” This is why Meta spent “nearly $7.8 million in contributions and $36.4 million in lobbying during the 2020 cycle.”

While fashion is a sector with relatively low-levels of regulation (something that may be in the process of changing), that has not stopped big players from spending on lobbying efforts, either directly or by way of the trade organizations to which they belong. The National Retail Federation, for instance, spent more than $7 million on lobbying activity in 2021. At the same time, the American Apparel and Footwear Association, whose members range from Levi’s and Lululemon and to Supreme-owner VF Corp. and Versace, boasted almost $600,000 in lobbying expenditures. 

At the core, companies spend on lobbying and political contributions when they “have vested interests and operations in a state” – or on a federal level – “that are subject to regulation,” Devine and Holmes state. “Regulation creates uncertainty for [companies’] management – which they do not like. Spending helps alleviate the uncertainty by influencing what regulation may be imposed.”

Studying corporate political strategy and involvement in U.S. state politics, which saw them examine political contributions by publicly traded companies in elections for governor and the legislature across the 50 U.S. states., Devine and Holmes say that the following four major insights stood out. While not specifically focused on fashion/retail, such insights are, nonetheless, telling for – and about – industry entities across the board …  

1. Corporations spend when they are worried about negative media coverage prompting what they perceive to be potentially harmful regulations. Media coverage can drive public perceptions of corporations and influence politicians’ views. In particular, media coverage can amplify misdeeds of companies across states, which worries managers who do not want to see new regulations. In line with this, we found that the companies spent 70 percent more in states they operated in when national media coverage was more negative rather than less negative. We found that this effect was exclusive to national media coverage as opposed to local media coverage. Specifically, when local media coverage was more negative, it did not appear to affect political spending. 

2. Corporations spend when there are powerful social movement organizations – for example, environmental protection groups – within a state. “Public relations firms are routinely engaged to monitor activists and the media, because if you don’t watch them, they can create regulatory change. You have to get ahead of it,” an executive said. Social movement organizations (e.g., Sierra Club and the Rainforest Action Network) help shape public opinion on important issues, pursue institutional change and can prompt legal reform as well, which is a concern to corporations. Our research indicated that in states where they had operations, companies spent 102 percent more when facing greater opposition from social movement organizations than they would have on average. 

3. Corporations spend to gain a seat at the legislative table to communicate their interests. Our interviewees shared with us that companies spread their contributions around to those politicians who they believe will listen to their causes and concerns – regardless of party. They described themselves as wanting their voices heard on particular issues and as important players in the states in which they operate due to the employment and tax base they bring to states. Boeing, for example, was the largest private employer in Washington state for decades and has been able to secure tax breaks as a result. This is despite documented environmental problems that Boeing’s operations have had in the state.

4. Corporations spend because they see it as consistent with their responsibility to stakeholders. “Companies mostly want certainty, they want to know the bottom line, and engagement can create opportunities,” said one political affairs consultant. Corporations have a legal and ethical responsibility to their stakeholders. Company leaders often believe they are upholding their responsibilities to shareholders, employees, communities, customers, and suppliers by participating in the political process. 

Reflecting on the stakes, Devine and Holmes state that “there can be huge repercussions for companies in state regulation.” The passage of regulations in large states like California, for example, “can have nearly as much impact as a national regulation, making their passage far more significant for companies working nationally.” 

Going forward, in light of “the changed business landscape – and increased operating costs – caused by the coronavirus pandemic,” they say that they expect that businesses across the country will continue to be interested in influencing policies, and that “this interest will likely translate into significant spending in the upcoming election, to both major parties and their candidates.” 

Fashion operates in a space with relatively minimal regulations, particularly when compared to other industries in the United States. In the absence of stringent rules, and in the face of a growing footprint thanks to increasingly complex supply chains and rising rates of consumption, and consumers that are increasingly demanding information about the environmental, social, and governance (“ESG”) elements of companies’ operations, fashion industry entities have largely turned to self-regulation. This has prompted an onslaught of mechanisms – from third-party certifications, such as B Corp. status, and controversial standardized measures like the Higg Index to the adoption of brand-crafted ESG-centric action plans – that are almost entirely devoid of legal consequences in the event that a company and/or its board fails to follow through. 

As for the fashion and apparel-focused regulations that do exist, they are not without drawbacks and/or loopholes. Laws that aim to ensure the safety of consumers, for instance, have been enforced with “an undercurrent of caveat emptor,” according to Melissa Gamble, an assistant professor in the Fashion Studies Department at Columbia College Chicago – or in other words, the laws make it so that “buyers are responsible for checking the quality and suitability of goods before a purchase is made.” At the same time, federal wage and hour laws are “often rendered ineffective [at protecting garment workers] when manufacturers subcontract cut and sew work to other companies,” Gamble says, thereby enabling these brands to avoid liability by arguing that they cannot be responsible for what they – as the retailer and not the manufacturer – cannot control. 

While this has been the status quo for the industry for quite some time, change appears to be afoot. Signals are coming by way of new government initiatives and new laws that are being implemented in Europe. As part of a more extensive climate bill, France, for example, passed a law requiring a “carbon label” to be included on garments and textiles to help inform consumers about the impact of their purchases. This law follows closely on the heels of an “anti-waste” law passed in 2020 by the French government that prohibits the destruction of excess inventory and samples, among other things, Gamble notes, saying that, taken together, these developments indicate that “fashion industry regulations and the larger regulatory environment is, indeed, shifting.” 

All the while, the U.S. is seeing a rise in fashion-centric legislation that is worth keeping an eye on. With that in mind, here is a running list of key domestic legislation that industry occupants should be aware of – and we will continue to track developments for each and update accordingly … 

PENDING LEGISLATION

New York Fashion Workers Act

Introduced: March 23, 2022 by State Sen. Brad Hoylman and Assemblymember Karines Reyes

The New York Fashion Workers Act (S.8638-A / A.9762-A) aims to mandate registration of and impose duties upon model management companies and creative management companies,” and provide complaint procedures and penalties for violations by amending the New York state labor code. If enacted, the bill – which is co-sponsored by New York State Sen. Brad Hoylman and New York State Assembly Member Karines Reyes – will regulate management agencies and provide labor protection for figures designated as independent contractors, from runway models to makeup artists, stylists, and influencers, among others.

Key Provisions: The Fashion Works Act would create new compliance requirements for “retail stores, manufacturers, clothing designers, advertising agencies, photographers, publishing companies, or any other such person or entity that receives modeling services from a creative, directly or through intermediaries.” Such obligations center on things like payment (companies will be required to pay models/creatives within 45 days); contracts (companies will be required to provide models/creatives with copies of contracts and agreements; and contracts between a company and a model/creative will be limited to two years and cannot be renewed without affirmative consent); and disputes. 

Civil penalties for failure to comply would include fines of up to $3,000 for the initial violation and up to $5,000 for each additional violation. Intentional failure to comply with registration constitutes a class B misdemeanor. 

Potential Implications: “Construed broadly,” Morgan Lewis attorneys Leni Battaglia, Melissa Rodriguez, and Carolyn Corcoran state that the bill “could have massive implications not only for traditional model or creative management companies using fee-based structures, but also for retailers who directly hire models/creatives for studio photoshoots and ad campaigns.” 

Current Status: The Fashion Workers Act advanced out the Senate Labor committee, but failed to receive a final floor vote in the final days of the session. It will be considered in the 2023 legislative session, which begins in January.

Fashioning Accountability and Building Real Institutional Change Act

Introduced: May 12, 2022 to Senate by U.S. Sen. Kirsten Gillibrand (D-NY); Jul. 21, 2022 to House of Rep. by Rep. Carolyn Maloney

Aimed at “accelerat[ing] domestic apparel manufacturing and establishing new workplace protections to cement the U.S. as the global leader in responsible apparel production, the Fashioning Accountability and Building Real Institutional Change (“FABRIC”) Act (S. 4213 / H.R. 8473would “amend the Fair Labor Standards Act of 1938 to prohibit employers from paying employees in the garment industry by piece rate, to require manufacturers and contractors in the garment industry to register with the Department of Labor, and for other purposes.” 

Key Provisions: The FABRIC Act would establish a nationwide garment industry registry through the Dept. of Labor to “promote transparency, hold bad actors accountable, and
level the playing field;” create new requirements to hold fashion brands and retailers, as well as
manufacturing partners jointly accountable for workplace wage violations; and set hourly pay in the garment industry and eliminating piece rate pay until the minimum wage is met. 

The bill would allow for fines of up to $50 million for violations.

Potential Implications: A key point of contention in this bill comes by way of the “Joint and Several Liability of Brand Guarantors” provision, which would hold brands accountable for violations that occur under the watch of their suppliers. Specifically, the FABRIC Act states, that “a brand guarantor who contracts with an employer of an employee … for the performance of services in the garment industry shall share joint and several liability with such employer for any violations of the employer under this Act involving such employee.” This has prompted pushback from the American Apparel and Footwear Association and the Council of Fashion Designers of America, which called for a more limited approach to joint liability. 

the bill writers included a clause on joint liability. Thus, brands (including licensors) as well as subcontractors will share joint liability for any violations, including the payback of lost wages and additional damages, where applicable.

Current Status: The FABRIC Act is in the Senate Finance Committee for study and in the House Ways and Means and Education and Labor Committees for study. 

New York Fashion Sustainability and Social Accountability Act

Introduced: October 8, 2021 by State Sen. Alessandra Biaggi

Focused on establishing sustainability reporting requirements for large fashion industry entities, the New York Fashion Sustainability and Social Accountability Act (S7428 / A8352), if enacted, would require fashion retail sellers and manufacturers of a certain size – namely, global apparel/footwear manufacturers and retail sellers that “actively engag[e] in any transaction for the purpose of financial or pecuniary gain or profit” in New York and that whose global annual revenue exceeds $100 million – to map portions of their supply chains and disclose environmental and social due diligence policies. 

Key Provisions: “The Fashion Act” would mandate that companies that do business in New York and that meet the annual revenue threshold: (1) Map a minimum of 50 percent of their supply chain across all production tiers; (2) Publish a social and environmental sustainability report that addresses the due diligence policies, processes and activities conducted to identify, prevent, mitigate and account for potential environmental and social risks, as well as the results of each; (3) Disclose their actual and potential negative ESG impacts including greenhouse gas reporting, impacts on water and chemical management, volume of production replaced with recycled materials, and the monitoring and improving of labor conditions; and (4) Set and meet annual targets to reduce their environmental footprint, specifically greenhouse gas emissions, including estimated timelines and quantifiable benchmarks for improvement.

Failure to comply could subject companies to fines of up to 2 percent of their annual revenues over $450 million. 

Potential Implications: As drafted, The Fashion Act would have “a very far reach that would impact and require compliance from nearly every major fashion brand,” according to Dentons’ Matthew Clark, Babette Marzheuser-Wood, Jessica Argenti, and Larissa Sapone. At the same time, Ropes & Gray stated in a note earlier this year that “given the potentially onerous nature of some of the proposed [reporting] elements” at play, “there is significant opposition in some quarters to the bill in its current form.”

Current Status: The Fashion Act was referred to the Consumer Protection Senate Committee in January 2022. 

ENACTED LEGISLATION

California Garment Worker Protection Act

Intended to prevent wage theft, mandate fair pay and improve working conditions for the roughly 45,000 garment workers in the state of California, The California Garment Worker Protection Act (SB 62) was signed into law by California Governor Gavin Newsom on September 27. Among other things, the law requires that employees engaged in garment manufacturing must be paid an hourly rate not less than the minimum wage, and cannot be paid a piece rate. 

Key Provisions: The Act: (1) prohibits piecework pay; (2) creates joint and several liability for unpaid wages for “brand guarantors,” along with manufacturers and contractors; and (3) creates new recordkeeping requirements for manufacturers and brand guarantors. 

Employees may seek to recover unpaid wages and associated penalties by filing a claim with the Labor Commissioner against the contractor, garment manufacturer and brand guarantor, and the Act may also pursue other applicable remedies under California or federal law. 

Potential Implications: Although SB 62 may “ultimately curb the practices of some ‘bad actors’ in the garment industry,” Sheppard Mullin’s Robert Foster and Morgan Forsey have claimed that “the more immediate impact of the new law’s requirements will likely be that some companies contract with garment manufacturers outside of California, thereby decreasing the number of garment manufacturers and workers in California.”

Effective Date: January 1, 2022

First proposed over two years ago in December 2020, the Digital Services Act made headlines in April after the European Parliament (the European Union’s legislative arm) reached a provisional agreement with the individual EU Member States to move forward with the process of finalizing the Digital Services Act . In the wake of that agreement, the EU Council formally approved the Digital Services Act on October 4, a move that is expected to set forth new accountability and fairness standards for online platforms, social media platforms, and other internet content providers, depending on the entity’s size, societal role, and the impact it has on individuals’ lives.

Broadly speaking, the Digital Services Act (“DSA”) will counter the sale of illegal products and services on online marketplaces and aims to combat illegal and harmful content on online platforms, such as social media. At the same time, the Digital Services Act also broadly aims to increase transparency and fairness in online services. In a similar vein to past comprehensive EU legislation, the DSA gives individuals control through transparency requirements that entities must abide by, requiring new judicial or alternative dispute mechanisms to be implemented to allow individuals to challenge content moderation decisions and/or seek legal redress for alleged damages caused by an online platform. The DSA will also require a certain amount of transparency into entities’ algorithms that are used to recommend content or products (i.e., target) to individuals.

Background and EU Legislative Process

The DSA is a small piece of a larger package of laws and regulations that have slowly made their way through the EU legislative process. One piece of that package, the Digital Markets Act (“DMA”), which was already agreed to in March 2022, focuses on regulating anti-competitive and monopolistic behavior in the technology and online platform (digital and mobile) industries. The DMA is at the forefront of a global trend that is seeing regulators look to antitrust legislation as a way to regulate technology companies and online services.

With the principal agreement in place, the Digital Services Act will now be taken up in a co-legislative manner, meaning the individual EU Member States (France, Germany, etc.) must take up and pass the DSA for full approval by the EU Council, which is made up of representatives from each EU Member state. In tandem, the European Parliament will take up the DSA for approval. Once the European Parliament and full EU Council approve the DSA, it will be finalized and effective. As proposed, the DSA will take effect on the later of 15 months after it becomes effective, or January 1, 2024.

However, very large online platforms will have a shortened timeline and must comply with the DSA within 4 months of its effective date.

There is a dearth of details of what might end up in the final version of the Digital Services Act, and the final scope and impact of the new law will not be known until the final text is released. However, the EU has provided some insight and general principles that will guide the final text. These insights can help entities that must prepare for the DSA.

Spectrum of Applicability

The DSA applies to “digital services,” which broadly includes online services, including online infrastructure, such as search engines; online platforms, such as social media; and/or online marketplaces and even smaller websites. Additionally, the DSA will apply regardless of where an entity is established. If an entity is an online service that operates in the EU, it must comply with the DSA. However, as mentioned above, the applicability of the specific requirements will depend on the size and impact the service has.

There are four categories of online services according to the DSA: (1) intermediary services; (2) hosting services; (3) online platforms; and (4) very large platforms. Each subsequent category of online service is also considered a sub-category of the preceding type of online service, meaning the requirements placed on intermediary services are also placed on hosting services, etc. Intermediary services include those entities that provide network infrastructure, with some examples being internet service providers and domain registrars. Hosting services include cloud and website hosting services. 

Online Platforms include online marketplaces, app stores, economy platforms, and social media sites. And finally, very large online platforms include those online platforms that serve and reach over 10 percent – or about 45 million – of consumers in the EU.

DSA Requirements

The requirements of the DSA are cumulative and will depend on the size and impact of a given company. In lieu of many specifics and details, entities can, nonetheless, begin preparing for the types of policies and procedures that will be required. The requirements that the EU has outlined for the proposed DSA are broken down below by the specific categories of online services.

Intermediary Services – If an entity is considered an intermediary service, it must implement policies and procedures related to the following areas: (1) transparency reporting; (2) terms of service/terms and conditions that account for defined EU fundamental rights; (3) cooperation with national authorities; and (4) accurate points of contact and contact information, as well as appointed legal representatives, where necessary.

Hosting Services – If an entity is considered a hosting service, the entity must comply with the above intermediary service requirements. Additionally, a hosting service must: (1) report criminal offenses (likely related to the sale of illegal products and services, or the posting of illegal and harmful content); and (2) increase transparency to its consumer base through notice and choice mechanisms that fairly inform the individual consumer.

Online Platforms – If an entity is considered an online platform, it will need to comply with the above intermediary service and hosting service requirements.

Additionally, an online platform must implement policies and procedures that address: (1) complaint and redress mechanism (that includes both judicial and alternative dispute remedies); (2) the use of “trust flaggers;” (3) abusive notices and counter-notices (e.g., dark patterns); (4) the verifications of third party suppliers on online marketplaces (including through the use of random or spot checks; (5) bans on targeted advertising to children and on target advertising based on special characteristics (e.g., race, ethnicity, political affiliation); and (6) transparent information on targeting and recommendation systems.

Specifically, the obligations imposed related to “trust flaggers” will require online platforms to allow trusted flaggers to submit notices related to illegal content or products and services on the given online platform. For an individual to be considered a “trusted flagger” they must meet certain certification requirements. Certification is only granted to those that: (1) have expertise in detecting, identifying, and notifying supervisory authorities of illegal content; (2) is able to exercise its responsibilities independent from the specific online platform; and (3) can submit notices to the proper authorities in a timely, diligent, and objective manner.

Very Large Platforms – Very large platforms are the most regulated sub-category of online services under the DSA. These entities must comply with the requirements set forth for intermediary services, hosting services, and online platforms. Additionally, they must: (1) implement risk management and crisis response policies and procedures; (2) conduct internal audits, and have external audits conducted, of the services; (3) implement opt-out mechanisms so individuals can opt out of targeted advertising or user profiling; (4) share data with public authorities and independent researchers; (5) implement internal and external-facing codes of conduct; and (6) cooperate with authorities in response to a crisis.

The transparency and audit requirements set forth for very large platforms will require annual risk assessments to identify any significant risks to the platform’s systems and services. The risk assessment must include reviews of the following (1) illegal content, products, and/or services; (2) negative effects on defined EU fundamental rights, especially with respect to privacy, freedom of expression and information, anti-discrimination, and the rights of children; and (3) manipulation of the services and systems that could result in negative effects on public health, children, civic discourse, the electoral system, and national security.

In addition to the risk assessment, independent external auditors will need to conduct assessments of the services and systems at least once a year. Such auditors will need to produce a written report and very large platforms will need to implement and maintain policies and procedures to remedy any identified issue.

Penalty For Noncompliance

Individual EU Member States will have the freedom to implement the specific rules and procedures for how penalties will be issued under the DSA. In the most recent draft, the DSA called for penalties that are “effective, proportionate and dissuasive” meaning the penalties imposed could be imposed where no direct damages occurred or be in excessive of any direct damages. As proposed, any entity that violates the DSA can face a penalty up to 6 percent of its annual revenue.

Looking Forward

Once implemented and effective, which still requires signatures from the President of the European Parliament and the President of the Council, as well as publication in the Official Journal of the European Union, the DSA will set the standard for requirements related to fairness, transparency, and responsibility that online services must comply with. Entities that fall within any of the DSA’s four categories of in-scope digital services will need to begin investing resources into policies and procedures to address the various topics addressed in the DSA.

The DSA sets out a compliance deadline of January 2024, or 15 months after the DSA’s final effective date. This gives a number of entities time to jump-start their compliance efforts. However, the base compliance deadline is a bit deceptive as a large number of entities will likely fall within the very large platform category. Such entities will only have 4 months post-DSA effective date to come into compliance and cannot afford to final approval of the DSA to jump-start their compliance programs.


Lucas Schaetzel is an associate in Benesch Friedlander Coplan & Aronoff LLP’s Intellectual Property/3iP Practice Group. (This article was originally published in May 2022 and has been updated to address the approval from the EU Council.)

California Governor Gavin Newsom signed off on a new law that he says signals the state’s desire to “go further than any other” when it comes to cutting down on the production of plastic and single-use packaging. Characterized as “the most significant overhaul of California’s plastics and packaging recycling policy in history,” the Plastic Pollution Prevention and Packaging Producer Responsibility Act requires, among other things, for 30 percent of single-use packaging to be recyclable, reusable or compostable by 2028, 40 percent by 2030 and 65 percent by 2032, and the new law puts the onus on companies, meaning that certain brands and retailers will likely be impacted. 

Signed into law on June 30, the Plastic Pollution Prevention and Packaging Producer Responsibility Act consists of multiple mandates aimed at cutting down on the amount of new plastic produced, increasing recycling rates within the state of California, and ensuring that companies do the heavy-lifting in making this shift. For example, the law requires that in addition to “producers” offering up single-use packaging – whether it is plastic or not – that is entirely recyclable or compostable by 2032, plastic producers must reduce the level of plastic in single-use products (including single-use plastic bags) by 25 percent by 2032. 

(The law defines a “producer” as a “person who manufactures a product that uses covered material and “who owns or is the licensee of the brand or trademark under which the product is used in a commercial enterprise, sold, offered for sale, or distributed in the state.” As such, it applies to both in-state and out-of-state entities that do business in California. As for “covered material,” that refers to any “single-use packaging that is routinely recycled, disposed of, or discarded after its contents have been used or unpackaged, and typically not refilled or otherwise reused by the producer.”)

The Plastic Pollution Prevention and Packaging Producer Responsibility Act places additional burdens on companies in the business of manufacturing plastic products, with the California law requiring that plastic producers join a producer responsibility organization and collectively contribute $5 billion over the next ten years to fund recycling. 

“As with other extended producer responsibility laws,” the Plastic Pollution Prevention and Packaging Producer Responsibility Act“ seeks to leverage business relationships to effectuate change throughout the supply chain,” according to Keller and Heckman LLP’s Jean-Cyril Walker and Alexa Pecht. As such, the law “does not focus on packaging manufacturers but rather, those companies that sell or distribute ‘products’ using such packages in the state.” In other words, the new law will “primarily affect those companies that put their product name and brand on the covered material, whether or not they have actually manufactured the plastic packaging.” 

While cosmetics and haircare companies immediately come to mind, Walker and Pecht say that they anticipate that the effects of the new regulation “will be felt throughout the supply chain, as product manufacturers and/or brand owners, alike, incorporate compliance in purchase agreements.” In a recent note, attorneys from ArentFox Schiff echoed this sentiment, stating that due to the size and importance of the California market, the new law is expected to “prompt a nationwide change in the plastics industry, as companies are likely to adapt to California’s standards regardless of whether their products are also sold elsewhere.” They encourage companies to start “looking for ways to achieve the reduction and recycling requirements of the new law and provide the appropriate products to customers.” 

At the same time, a separate bill that is set for a vote in the California Senate Appropriations Committee (potentially as soon as this summer) could hit companies and retailers, including those in the fashion space, even more significantly. If enacted, AB-2026 – which focuses on the recycling of plastic packaging – would specifically require “e-commerce” entities that “ship purchased products in or into the state” to reduce the units of single-use plastic packaging they use by a certain percentage by January 1, 2030. The bill states that such single-use plastic includes things like “plastic shipping envelopes, cushioning, and void fill, and expanded and extruded polystyrene.”

Legislators have not yet revealed the percentage reduction that the law will require companies to make from their 2023 calendar year to the start of 2030. Although, the bill does specify that such a mandate would only apply to companies that have annual gross sales greater than $15 million and more than 100 full-time-equivalent employees. 

California is not the only one taking a close look at use of plastics and single-use packaging; it is the fourth state to pass such an extended producer responsibility bill. Beyond that, “there is there is increasing private sector focus as recently reflected in the number of shareholder proposals urging companies to ramp up efforts to reduce plastics waste,” according to WilmerHale’s Peggy Otum, Shannon Morrissey and Tessa Opalach. “During the 2022 proxy season, more than a dozen plastics-related shareholder proposals appeared on proxy ballots,” generally requesting that the company issue reports to “identify how environmental sustainability efforts could be advanced through development of comprehensive sustainable packaging policies and reducing reliance on plastics.” 

“Two of the proposals passed and a few others received more than 30 percent favorable votes, indicating significant support from shareholders for action to address plastics waste,” per Otum, Morrissey and Opalach, who note that the “increasing trend of plastics-related regulation, enforcement, and litigation is coalescing to present a host of potential legal and reputational risks to both the producers of plastics packaging and the companies they supply.” 

After being signed into law in December, the Uyghur Forced Labor Prevention Act (“UFLPA”) took effect this week. The law, which officially went into force on June 21, creates a rebuttable presumption that any goods that were “mined, produced, or manufactured, wholly or in part, in the Xinjiang Uyghur Autonomous Region” were made using forced labor, and bars their importation into the U.S., unless the importer can produce documentation within 30 days that meets the “clear and convincing evidence” standard in order to qualify for an exception.

Direct imports into the U.S. from Xinjiang have fallen significantly in light of enduring reports of detention camps in the Xinjiang region in northwest China where ethnic Uighurs and other Muslim minorities are reportedly forced to “learn Chinese and memorize propaganda songs” and to work as part of a sweeping “re-education” campaign. The UFLPA could, nonetheless, have sweeping consequences for the fashion industry given its breadth, as well as the extent to which apparel manufacturers rely on cotton from the Xinjiang region. After all, the law applies not only to products shipped directly from Xinjiang, but also to shipments that come from other countries but that contain products made from cotton (and other raw materials) and/or labor tied to Xinjiang. 

This stands to make the applicability of the law greater given the fact that “a wide range of raw materials and components from [the Xinjiang region] find their way into factories in China or in other countries, and then to the U.S.,” according to the New York Times.

From a purely-cotton-perspective, the potential impact of law is striking. The U.S. imported about $9 billion worth of cotton goods from in 2020, according to former Executive Assistant Commissioner Office of Trade, U.S. Customs and Border Protection Brenda Smith, as previously reported by the AP. In terms of the Xinjiang region, alone, it is responsible for 85 percent of China’s cotton, and an estimated 20 percent of the global cotton supply by the Worker Rights Consortium. “Virtually the entire [global] apparel industry” – high fashion and luxury names, included – “is tainted by forced Uighur and Turkic Muslim labor,” the labor rights monitoring organization told the Guardian  last summer, due in large part to the difficulty that comes with tracing the origins of garments and their composite parts in multi-national brands’ sweeping supply chains.

Now that the UFLPA is firmly in place, Steptoe & Johnson LLP’s Jeffrey Weiss and Claire Schachter suggest that companies engage in the following initial steps … 

Evaluate the effectiveness of the existing company-wide supply chain due diligence system for assessing and mitigating forced labor risks – including g., all internal and independent third-party risk assessment/auditing systems; supplier code of conduct monitoring and enforcement; engagement with direct and indirect suppliers; forced labor risk training, etc. – and determining whether the individual components and due diligence system as a whole are likely to satisfy the CBP Guidance/UFLPA Strategy guidance and what modifications/additional processes, if any, may be needed;

Develop detailed supply chain maps for products imported into the United States in order to identify and assess the risks of any links to Xinjiang or listed entities/facilities/products and develop mitigation strategies;

Develop an efficient approach for gathering and preparing necessary supply chain documentation for potential submission to CBP in the event any shipment is detained and the company seeks to demonstrate the shipment is outside the scope of the UFLPA or that it qualifies for an exception to the rebuttable presumption; and

Monitor developments on UFLPA implementation, including additional guidance from CBP, likely to be released over the coming months.