US Pushes for EU CSDDD Carveout: What Apparel Buyers Must Watch

The United States has formally asked the European Union to scale back the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) for American firms and their overseas suppliers. A five-page submission from the U.S. Mission to the EU warns that the bloc’s recently narrowed sustainability rules still create unreasonable burdens on U.S. commerce. For apparel brands and retailers sourcing from Asia, the dispute could redraw the map of supplier audits and traceability obligations that define EU-bound production today.

Washington asked the European Commission to designate the United States a "negligible risk" jurisdiction under CSDDD, to presume compliance for companies operating under U.S. corporate-governance rules, and to exclude non-EU companies from the directive’s direct scope wherever possible. It also wants due diligence and enforcement confined to a company’s EU subsidiaries or European business partners, and to goods produced in, or services supplied from, the EU.

The most consequential demand for fashion concerns the second tier and beyond. Washington has asked that producers and farmers that do not directly supply a CSDDD-covered company not face audits or information requests. Critics including advocacy group SOMO told Sourcing Journal that this would exclude the cotton growers, spinners, tanneries and mills where many of the industry’s most serious forced-labor, wage and environmental risks are concentrated. "Over 90 percent of human rights and labor abuses happen deep in supply chains, beyond the first tier," said SOMO’s Joseph Wilde-Ramsing.

The dispute plays out against an already-shrunken CSDDD. The EU’s Omnibus I simplification package lifted the directive’s threshold to more than 5,000 employees and €1.5 billion in net worldwide turnover, removed the climate-transition-plan requirement and eliminated the harmonized civil-liability regime. Companies are expected to begin complying with the revised due-diligence requirements in July 2029. CSRD was similarly narrowed, with mandatory data points cut by more than 60 percent.

For OEM and ODM factories in China, Bangladesh, Vietnam and other hubs, the practical message is to expect more buyer requests, not fewer. EU brands will keep asking for evidence beyond the cut-and-sew floor: mill-level chemical inventories, fiber origin documentation, tier-two wage records and cotton provenance. Smart factories should maintain updated mill-to-garment traceability files, OEKO-TEX Standard 100 and GOTS certificates, and ZDHC-aligned wastewater reports, so they can answer buyer questionnaires in days rather than weeks.

As an OEKO-TEX Standard 100-certified OEM/ODM factory with more than 12 years serving EU and U.S. buyers, Northern Garment supports clients navigating overlapping CSDDD, CSRD and UFLPA documentation requirements through maintained fabric-traceability records, certified mill lists and English-language compliance documentation.

Sources: [Sourcing Journal: US Seeks EU Due Diligence Carveout for American Firms]