Social Compliance: Obstacles to Crossing the Border

On March 25, 1911, the Triangle Shirtwaist Company factory in New York City caught fire, trapping nearly all of the 600 workers inside. Most of the workers were teenaged girls, working 12-hour days for a mere $15 a week. Within 18 minutes, it was all over. Forty-nine workers had burned to death or been suffocated by smoke, 36 were dead in the elevator shaft and 58 died from jumping to the sidewalks. With two more dying later from their injuries, a total of 145 people died due to the fire. This tragedy is probably the most infamous incident in American industrial history that led to the social and ethical supply chain responsibility programs of today. Many of the victims died as a result of neglected safety features and locked doors within the factory building. The tragedy led to the development of a series of laws and regulations that better protect the safety of workers all around the world.

While many of us were probably introduced to worker abuse by reading Upton Sinclair’s book The Jungle, we also probably thought many of these sub-standard working conditions had been eradicated since 1906, when the book was published. However, the importance of social compliance reignited during the mid-to-late 1990’s when a number of reports highlighted worker abuses and embarrassed many retailers and brand manufacturers (some will recall the Kathy Lee clothing line sold in K-Mart). As a result, many companies simply updated their corporate Codes of Conduct and established a formalized approach for auditing suppliers’ production facilities.

And while ethical sourcing and supply chain responsibility has made huge inroads over the past few decades, the news in 2018 continues to underline the importance of transparency and traceability in the supply chain. The recent five-year anniversary of the Rana Plaza tragedy in Bangladesh, concerns over exploitation of Syrian refugees in Europe, and the continuing fight against deforestation by cattle ranchers in the Amazon (even after years of awareness campaigns and NGO opposition) are just a handful of the stories making the headlines this year.

For every organization, when it comes to ethical and social compliance, the question is no longer, “Should we do this?”, but rather, “How deep do we go?”

Increased Enforcement

While reputational risk remains a big threat for companies that don’t have full visibility into their supply chains, regulatory risk carries the potential for huge fines. In addition, regulatory risk can quickly morph into reputational risk, as headlines about seizures and violations kill stock prices and scare off consumers.

The passage of the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) gave additional enforcement teeth to US Customs and Border Protection (CBP), and they aren’t shying away from using it. The regulation closed the “consumptive demand” exemption that allowed imports of goods suspected to be made by forced or slave labor if those products weren’t made in sufficient quantity in the US to meet total US demand.

So far this year CBP has issued two Withhold Release Orders (WRO) on imports, one in March for toy imports from a specific company in China suspected to be made by forced labor, and one in April for cotton products from Turkmenistan. The latter WRO was issued following a petition by the Cotton Campaign alleging that cotton products from Turkmenistan are manufactured “wholly or in part” with cotton harvested by forced labor. Companies that can prove that their goods were not made by forced labor can obtain release with proper documentation, including a certificate of origin and a detailed statement showing evidence that forced labor was not involved, such as a supply chain audit report. The ability to quickly trace a product to its source via an automated global trade management system is key in these circumstances.

It’s not just the TFTEA that companies must comply with. Multiple government agencies have the power to bring your supply chain to a halt thanks to various regulations, such as the Food Safety Modernization Act (FSMA), California SB 657 (California Transparency in Supply Chains Act) and UN sanctions against North Korean labor in supply chains.

Since the November 2017 sanctions on North Korea, CBP has been diligent about seeking out merchandise produced with forced labor or the labor of North Korean nationals or citizens anywhere in the world. CBP can take a variety of actions to combat the entry of such merchandise, including issuing a CBP summons or Request for Information, and, where appropriate, detaining, excluding, seizing, or withholding release of merchandise that violates applicable laws and regulations.

“I didn’t know” simply isn’t an acceptable defense. Consumers won’t buy it, and ignorance certainly won’t get you out of a legal bind.

Traceability in Action

The benefits of traceability aren’t just limited to regulatory compliance risks, but full traceability and transparency can help your company minimize the risks associated with codes of conduct and ethical sourcing to protect brand integrity.

The complexities of global supply chains can’t be understated, but that doesn’t mean social and ethical compliance is impossible. Companies that implement a consolidated global trade management solution that connects the trading partner community with product data and retailers’ orders can achieve better results. To reach this level of all-encompassing product safety and compliance, integration between the technology solutions already in use is crucial. Having a technology solution working for you will help companies navigate this new era of social and ethical compliance.

It’s time to be as proactive as possible.

  • Leverage technology systems to manage trading party and service provider data.
  • Build strong and collaborative relationships with your suppliers.
  • Participate with trade associations and other groups to share, while learning from others.
  • Consult experts with industry knowledge to help.

The role of social compliance continues to morph alongside the global trade landscape. Compliance professionals must not only adhere to corporate standards and government regulations but have also become responsible for creating and nurturing strong, ethical corporate cultures which insulate organizations from financial, legal and reputational risk.

To learn more, download Amber Road’s eBook Stopped at the Border: Why Product Testing Matters.

Gary Barraco, Director of Global Product Marketing, is responsible for developing strategic product marketing direction and presenting the Amber Road brand and solutions worldwide. As the platform evangelist, Gary develops and launches customer insights, go-to-market plans, product messaging and content, and field marketing tactics which establish Amber Road’s solutions as a standard in the Global Trade Management space.  Previously, Gary was VP, Industry Development for ecVision for 9 years prior to its acquisition by Amber Road. He has 20 years of active military service where his primary specialty was providing marketing support to Army National Guard recruiting and retention operations in New Jersey. Gary received a BS from the State University of New York and is currently pursuing a Master’s degree at Moravian College.