7 Key US & EU Regulations for Apparel & Textile Supply Chains

New laws and regulations are compelling apparel and textile businesses to make major shifts to how they operate across the US and EU.

But do you know which regulations apply to your business to avoid non-compliance risks?

The repercussions of non-compliance can be severe – including hefty fines, reputational damage, and even legal action – making it non-negotiable to understand and comply with these regulations.

Download the global regulatory handbook to learn about all the current (and upcoming) legislation affecting the apparel and textile industry.

Contents:

1. US Uyghur Forced Labor Prevention Act (UFLPA)
2. EU Ban on Products Made with Forced Labor
3. EU Corporate Sustainability Reporting Directive (CSRD)
4. EU Corporate Sustainability Due Diligence Directive (CSDDD)
5. EU Deforestation Regulation (EUDR)
6. The New York Fashion Act
7. The FABRIC Act

1. US Uyghur Forced Labor Prevention Act (UFLPA)

The UFLPA, which came into effect in June 2022, mandates that any imported goods produced either wholly or in part in identified risk origin are presumed to be made using forced labor and therefore prohibited from entering the US market. The law, codified under the Tariff Act of 1930, places the burden of proof on importers to demonstrate that their goods are not produced using forced labor.

The UFLPA allows the U.S. Customs and Border Protection (CBP) to detain shipments without extensive investigations. Importers need to provide “clear and convincing evidence” that there was no forced labor in goods produced in identified risk origin or provide evidence that the goods are not produced in the banned region or by companies listed on the DHS Entities list.

Section 307, even before UFLPA, prohibited the importation of cotton and cotton products from Xinjiang, Turkmenistan, and Uzbekistan, due to forced labor concerns, where CBP issued Withhold Release Orders (WROs) to detain suspect shipments, unless importers can prove they were produced without forced labor.

Since the UFLPA came into effect, over 9,000 shipments, worth $3.4 billion, and 68 entities have been listed as presumed ineligible to import into the U.S. due to forced labor connections.

How to comply with the UFLPA?

• Prove no connection, financial or otherwise, with banned entities in the supply chain
• Verify and prove no forced labor within the supply chain
• Verify raw materials like cotton are not from high-risk regions

Visit our UFLPA resources for more information.

2. EU Ban on Products Made with Forced Labor

On September 14, 2022, the EU Commission proposed a regulation to ban products made with forced labor from entering, exiting, or being sold in the EU market, and which received its final approval from the Parliament on April 23, 2024. The EU Ban on Products Made with Forced Labor applies to all sectors, products, and companies, regardless of where they are manufactured or exported, compelling companies to ensure their supply chains are free from forced labor in order to do business in the EU.

The law will take effect in 2027, three years after its approval. Authorities will investigate compliance through a two-phase process. The first phase includes a risk-based approach to assess potential violations, drawing on submissions from civil society, company records, and existing databases. If concerns arise, a full investigation will follow, and if evidence of forced labor is found, companies must withdraw or dispose of the products and face penalties for non-compliance.

How to comply with the EU Ban on Forced Labor?

• Strengthen your due diligence and verification processes
• Maintain detailed records of your supply chain
• Identify and evaluate high-risk origins
• Trust but verify your suppliers’ claims

3. EU Corporate Sustainability Reporting Directive (CSRD)

The CSRD builds upon the foundation laid by the Non-Financial Reporting Directive (NFRD), expanding the scope and depth of sustainability reporting requirements – requiring companies operating within or connected to the EU to report on a board range of environmental, social, and governance (ESG) issues.

The directive mandates double materiality, meaning companies must disclose both the financial risks posed by sustainability challenges and the impacts of their operations on the environment and society. Starting in 2024, companies will need to include this information in their annual reports published in 2025 and be verified by third parties.

Fashion businesses need to start preparing for compliance timelines based on their company size, with large EU companies starting in 2024 (reflected in reports published in 2025) and listed SMEs in 2026.

The European Commission plans to develop and publish specific standards for the apparel and footwear industry by 2026.

How to comply with the CSRD?

• Disclose ESG factors impacting financial and operational performance (outside-in materiality); the European Commission has introduced the “European Sustainability Reporting Standards (ESRS) to standardize sustainability reporting across the EU
• Report on the impact of your activities on the environment and society (inside-out materiality)
• Report on sustainability issues, including environmental and human rights impacts
• Certify your sustainability reports through accredited independent auditors

4. EU Corporate Sustainability Due Diligence Directive (CSDDD)

Among the most contentious legislations, the European Council passed the CSDDD in March 2024, targeting businesses with over 1,000 employees and a net global turnover of 450 million euros, and which is expected to take effect by 2027. The directive requires companies operating in Europe to identify, mitigate and remedy environmental and human rights violations in their own operations, subsidiaries, or supply chain partners.

Enforcement of the CSDDD will be determined by individual Member States, with sanctions including financial penalties based on annual turnover and civil liability to make sure victims receive compensation for damages resulting from non-compliance.

How to comply with the CSDDD?

• Implement risk-based systems to monitor and prevent violations of human rights and environmental impacts across your supply chain
• Assess both upstream and downstream activities within your value chains
• Take corrective action to remediate any identified violations to avoid liability
• Prepare for potential financial penalties and civil liabilities for non-compliance

Download our CSDDD whitepaper for more information.

5. EU Deforestation Regulation (EUDR)

Under the EUDR, only products sourced from land that has not been degraded or deforested after December 31, 2020, can be imported into or exported out of the EU. The law prohibits the trade of commodities such as leather, rubber, wood, coffee, cocoa and more that are not deforestation-free, have not been produced in accordance with the relevant legislation of the country of production, and are not covered by a due diligence statement. Operators and traders need to trace commodities back to their production plots and ensure compliance with laws on land use, labor rights, and human rights.

Businesses must conduct due diligence to verify that their products are deforestation-free, which involves collecting relevant data, preparing a Due Diligence Statement, and submitting it through a public system. The regulation places the burden of proof on importers and allows for penalties such as fines or product withdrawal if compliance is not demonstrated.

How to comply with the EUDR?

• Conduct thorough due diligence to prove your products and value chains are deforestation-free
• Gather documentation proving legal production and compliance with the EUDR
• Compile a due diligence statement, detailing country of origin and geolocation, and conduct annual reviews
• Eliminate risk from your forest product supply chains

Download our EUDR whitepaper for more information.

6. The New York Fashion Act

The New York Fashion Act is a groundbreaking piece of legislation seeking to hold major fashion businesses accountable for their environmental impact. Although it recently passed through the New York State Assembly’s Ways and Means Committee, it did not reach a vote in time. But still, the support for the act is growing, with over 90 co-sponsors and backing from a diverse coalition of brands, NGOs, and even celebrities. This reflects a significant push towards sustainable practices within the fashion industry.

How to comply with the Fashion Act?

Brands and retailers conducting business in New York and generating over $100 million in annual global income must:

• Map and disclose at least 50% of your suppliers by volume across all tiers
• Set baseline and reduction targets for energy usage, greenhouse gas emissions, water, and chemicals
• Report the amount of product produced based on material type
• Prepare for potential fines of up to 2% of annual revenues for non-compliance

7. The FABRIC Act

The FABRIC Act, reintroduced by Senator Kirsten Gillibrand and Congressman Jerrold Nadler, aims to improve conditions for U.S. garment workers by addressing the misuse of piece-rate pay and enhancing domestic apparel manufacturing. The Act attempts to create a $50 million annual support program through the Department of Labor, which will provide grants and technical assistance to manufacturers while holding brands accountable for their labor practices.

How to comply with the FABRIC Act?

To comply with the FABRIC Act, manufacturers and brands should consider the following steps:

• Transition from piece-rate pay to a consistent wage structure
• Participate in the support program for grants and technical assistance for facility upgrades and training
• Maintain transparency in labor practices and establish accountability measures for manufacturing partners
• Create training and workforce development programs for employees to enhance skills and safety
• Register with the newly established garment industry registry to follow minimum labor standards