Worldwide: Hot Topics In Supply Chain Compliance

The last few years have seen a proliferation of new supply chain-focused regulations and other compliance obligations, a trend which isn't likely to abate any time soon. In this Alert, we provide an overview of selected supply chain compliance items that should be on the radar screen of healthcare industry legal and compliance professionals in 2017.

Anti-Human Trafficking

Anti-human trafficking compliance is a newer area of focus for many healthcare companies as a result of recently adopted disclosure and compliance requirements and increasing stakeholder scrutiny.

The UK Modern Slavery Act (MSA). Starting this year, the MSA will require a significant number of healthcare companies to annually publish on their websites a statement describing the steps that they have taken during the preceding fiscal year to ensure that slavery and human trafficking are not taking place in any of their supply chains or in any part of their own businesses. This requirement applies to "commercial organisations" doing business in the United Kingdom, irrespective of home country, that provide goods or services and have worldwide turnover of at least Ł36 million.

Each company will need to tailor its statement to its particular risk assessment and compliance program. There are no mandatory topics that must be covered in the statement, although the MSA recommends that the following disclosure topics be addressed: (1) organizational structure, business model and supply chain relationships; (2) policies in relation to slavery and human trafficking; (3) slavery and human trafficking due diligence processes; (4) the parts of the business and supply chains where there is a risk of slavery and human trafficking taking place and the steps taken to assess and manage that risk; (5) the effectiveness in ensuring that slavery and human trafficking are not taking place in the business or supply chains, measured against appropriate key performance indicators; and (6) the training available to staff.

For additional Ropes & Gray resources describing the MSA in substantially more detail, including the statement requirement and action items for establishing a compliance program, see here.

The UK Labour Standards Assurance System (LSAS). LSAS was commissioned by the UK Department of Health and NHS Supply Chain, which procures products for the National Health Service. LSAS is the foundation of NHS Supply Chain's ethical procurement strategy. Initially introduced in 2012 in connection with its Framework Agreement for Surgical Instruments, NHS Supply Chain is introducing LSAS compliance into other contracts.

LSAS has 15 action points, including the following supply chain facing items: (1) adopting a labor policy for the supply chain that among other things addresses the use of child and forced labor; (2) assessing the extent to which labor standards are at risk of being abused within the supply chain; (3) communicating the policy and other relevant information to identified suppliers, collecting and verifying information relating to labor standards performance and responding to the information and evidence collected to drive continual improvement of labor standards throughout the supply chain.

There are four audit levels under LSAS, each of which requires a specified level of compliance with the LSAS action points: (1) Foundation - the vendor has begun to consider how labor standards relate to its business and there is some documentation in place for an auditor to review; (2) Implementation - the vendor has started to implement processes and procedures to manage labor standards, including processes to identify risk in the supply chain; (3) Established - the vendor has in place a robust system for managing labor standards and risk is being effectively mitigated where uncovered; and (4) Progressive - the vendor demonstrates leadership level management of labor standards, going beyond audit to tackle the root cause of issues and risks uncovered and is engaging with key stakeholders, partnerships and projects to do so.

Suppliers must at a minimum be audited to Level 1/Foundation within six months of contract launch for NHS Trusts to purchase supplies through NHS Supply Chain, with later deadlines to achieve compliance with higher LSAS levels.

The US Federal Acquisition Regulation (FAR) Anti-Human Trafficking Provisions. The FAR governs the US Federal government's procurement process and applies to not only prime contractors, but in many cases subcontractors and agents as well. The anti-human trafficking provisions of the FAR were significantly expanded in March 2015. Because the amendments apply only to contracts and new task orders under existing indefinite delivery/indefinite quantity contracts entered into after that time, the FAR anti-human trafficking compliance requirements are only now starting to impact the compliance programs at many companies.

There are two principal compliance obligations under the FAR anti-human trafficking provisions. First, there are nine prohibited activities applicable to contractors and subcontractors (which also includes indirect subcontractors) and their employees and agents. This portion of the rule applies to all contracts.

Second, the FAR anti-human trafficking provisions require a compliance plan and periodic certifications if the contract is for goods or services acquired or to be performed outside the United States with an estimated value that exceeds $500,000. For purposes of calculating the dollar threshold, commercially available off-the-shelf items are excluded.

Companies must design the compliance plan to fit their particular facts and circumstances. The compliance plan must be appropriate to the size and complexity of the contract and the nature and scope of its activities, including the number of non-US citizens expected to be employed and the risk that the contract will involve services or supplies susceptible to trafficking in persons. In addition, the compliance plan must at a minimum include the following elements: (1) an awareness program; (2) a grievance process; (3) a recruitment and wage plan that meets specified requirements; (4) a housing plan, if the contractor or subcontractor intends to provide or arrange housing; and (5) procedures to prevent violations and to monitor, detect and terminate agents, subcontractors or subcontractor employees that have engaged in prohibited activities.

If required, certifications must be provided in connection with the contract award and annually. The contractor must certify that: (1) a compliance plan and procedures to prevent prohibited activities and to monitor, detect and terminate a contract with a subcontractor or agent engaging in prohibited activities have been implemented; and (2) after having conducted due diligence, either, to the best of the contractor's knowledge and belief, there have been no occurrences of prohibited activities or, if they have occurred, appropriate remedial and referral actions have been taken.

For more information on the FAR anti-human trafficking rule, see our Alert here.

Trade Facilitation and Trade Enforcement Act. This Act, which was adopted in early 2016, repealed the "consumptive demand" exception to the US Tariff Act. The Tariff Act bans the importation of foreign goods and merchandise produced or manufactured in whole or in part by convict, forced or indentured labor. However, under the consumptive demand exception, the prohibition did not apply to the extent that US demand exceeded domestic supply.

Since the adoption of the Act, several shipments of goods from China have been detained by US Customs and Border Protection for having been produced using forced labor. For purposes of assessing risk, commodities and products used in the healthcare industry appear on both the Department of Labor's List of Goods Produced by Child Labor or Forced Labor and its List of Products Produced by Forced or Indentured Child Labor. Over time, third party tips alleging convict, forced or indentured labor in supply chains are likely to increase, which will put additional pressure on pre-emptive supply chain mapping for at-risk commodities and products. 

Proposed French Human Rights Legislation. During November 2016, the French National Assembly adopted a bill that would require large French companies to adopt a vigilance plan to identify and prevent serious human rights violations, including at the subcontractor and supplier level. Requirements of the vigilance plan would include: (1) risk mapping; (2) procedures for assessing subsidiaries, subcontractors and suppliers; (3) risk mitigation; (4) a reporting and grievance mechanism drawn up in consultation with representative trade union organizations; and (5) a mechanism for monitoring the compliance measures implemented and evaluating their effectiveness. If adopted into law, this legislation will impact the supply chains of large French companies, including those in the healthcare industry, irrespective of where the supplier is located.

Conflict Minerals

Conflict minerals regulation will continue to be dynamic in 2017.

US Conflict Minerals Rule. The Conflict Minerals Rule was adopted pursuant to the Dodd-Frank Act. The Rule requires US public companies that manufacture or contract to manufacture products that contain tin, tantalum, tungsten or gold (3TG) to, among other things: (1) make supply chain inquiries to determine the source of the 3TG in their in-scope products; (2) if the 3TG originated or there is reason to believe may have originated in the Democratic Republic of the Congo region, conduct due diligence in accordance with the Organisation for Economic Co-operation and Development's Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas; and (3) annually publicly report on their compliance.

President Trump and the Republican-majority Congress are expected to seek to roll back at least some aspects of Dodd-Frank. The repeal of the Conflict Minerals Rule is explicitly provided for in the Financial Choice Act, which was introduced in the House during the last term. However, at present, most of the Conflict Minerals Rule remains very much in effect and is likely to remain so for at least the current reporting period, which requires filings in respect of calendar 2016 to be made by May 31, 2017. In the meantime, the Securities and Exchange Commission's April 2014 stay of the mandatory audit requirement under the Rule is expected to remain in effect for this year (see our Alert discussing the audit stay here).

The ultimate fate of the Conflict Minerals Rule is likely to turn on whether Congress decides to take a narrow or broad brush approach to Dodd-Frank repeal. However, even if the Rule is repealed, many large companies have indicated that they will continue to expect suppliers to trace the origin of the 3TG in their products, maintain compliance programs and responsibly source 3TG. These requirements will ripple through many supply chains in much the same way as if the Rule were to remain in effect.

Finally, NGOs continue to review and rank filings. This past year, one NGO survey ranked both medical device companies and drug manufacturers, the latter for the first time as a separate category. As is the case with other supply chain compliance and corporate social responsibility issues, larger consumer facing brands that are perceived as compliance laggards face the greatest risk of being targeted by NGOs and socially responsible investors.

EU Conflict Minerals Regulation. During November 2016, the EU Council, Commission and Parliament reached an informal final agreement on a conflict minerals regulation. The Regulation generally will require EU smelters and refiners and direct importers of 3TG into the European Union to conduct due diligence using the OECD Guidance framework if they are sourcing from conflict-affected and high-risk areas anywhere in the world. For more information on the pending Regulation, see our Alert here.

The text of the final Regulation is expected to be released soon, after which it will be submitted for approval to the Council and the Parliament. The Regulation will take effect on January 1, 2021.

The Regulation generally will not impose compliance obligations on manufacturers or sellers of components or finished products. However, many larger "downstream undertakings" will expect their suppliers to make supply chain inquiries and source 3TG from conflict-free smelters and refiners. This will result in compliance obligations, to meet commercial requirements, for a significant number of supply chain participants that are not subject to the Regulation. In addition, many larger downstream companies and the NGO community are expected to push for voluntary supply chain compliance prior to 2021.


The continuing phase-in and expansion of RoHS (Restriction of Hazardous Substances) and REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals) to new substances and product categories will require enhancements to supply chain compliance programs in 2017 and beyond.

RoHS. RoHS prohibits electrical and electronic equipment that contains enumerated toxic substances in specified concentrations from being placed on the EU market. RoHS also contains affirmative compliance requirements, such as requiring "CE" markings and declarations of conformity.

There currently are six restricted substances under RoHS, coupled with phase-ins for eleven product categories that run through July 2019 (many categories have already been fully or partially phased in). During mid-2015, four new substances – all phthalates – were added. Restrictions on the use of these substances generally will take effect during July 2019 and July 2021.

REACH. REACH is more broadly intended to protect human health and the environment from risks posed by chemicals. REACH contains procedures for collecting, assessing and reporting information to customers and the European Chemicals Agency on substances manufactured in or imported into the European Union. For some substances, REACH goes further, requiring authorization or restricting how the substances can be supplied or used.

There currently are approximately 170 substances of very high concern (SVHCs) on the REACH candidate list, and the list continues to grow. In addition, pursuant to a decision of the EU Court of Justice in September 2015, the .1% weight to weight REACH reporting threshold must be applied at the individual article or component level, rather than at the finished good or complex product level, which in many cases greatly expands the requirement to drill down and report on SVHC content in products.

About our Supply Chain Compliance Practice

Ropes & Gray has a leading supply chain compliance and corporate social responsibility practice. We advise clients across a broad range of regulations, commodities and geographies, and our clients include leading public and private companies and trade groups from every major industry.

With on-the-ground expertise in the United States, Europe and Asia, we are able to take a holistic, global approach to supply chain compliance and CSR, to help clients efficiently and effectively structure and implement their supply chain compliance and CSR programs and mitigate risk.

For further information on our supply chain compliance practice or if you would like to learn more about the topics in this Alert, please contact your usual Ropes & Gray attorney or contact us here.

Ropes & Gray Supply Chain Compliance and CSR Mailing List

Click here to join the Ropes & Gray Supply Chain Compliance and CSR mailing list to receive Alerts, articles and program announcements relating to supply chain compliance, or to sign up for other Ropes & Gray mailing lists.

Ropes & Gray Supply Chain Compliance and Corporate Social Responsibility Resource Center

As part of our commitment to excellence in this area, we have developed the Resource Center as a free educational tool for our clients, friends and other stakeholders. The Resource Center is the most extensive complimentary collection of supply chain compliance resources and is frequently updated to reflect new developments in this dynamic area. Click here to go to the Resource Center.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.