Lawmakers launch bill to ‘protect’ US firms from EU due diligence requirements

Republican Senator Bill Hagerty has introduced a bill to prohibit US companies across a range of extractive and manufacturing industries from participating in foreign due diligence legislation – with the EU’s CSDDD as a clear target.

The Prevent Regulatory Overreach from Turning Essential Companies into Targets (PROTECT USA) Act states that no foreign due diligence law that goes further than US law may be applied to US companies. It also gives the US President free range to take “any action [they] determine is in the public interest to protect an entity integral to the national interests of the United States from an adverse action related to a foreign sustainability due diligence regulation”.

In addition, the bill seeks to give private companies the power to sue anyone who violates its terms in US courts, meaning firms could sue corporate leaders that work to comply with foreign due diligence requirements. Penalties for violating the law could include fines of up to US$1 million.

More than 300 US companies due to comply with CSDDD

Around 315 US companies are estimated to fall under the scope of the EU’s Corporate Due Diligence Directive (CSDDD), which requires non-EU companies that generate at least €450 million of turnover in the EU to eliminate human rights and environmental abuse risks from their supply chains.

They include tech giants Google, Amazon and Apple, agribusiness firms ADM and Cargill, manufacturing firms like Ball Corporation, Caterpillar and General Electric, as well as oil and gas companies like ExxonMobil and Chevron.

“American companies should be governed by US laws, not unaccountable lawmakers in foreign capitals,” said Senator Hagerty. “The European Union’s ideologically motivated regulatory overreach is an affront to US sovereignty. I will use every tool at my disposal to block it.”

CSDDD in jeopardy

The move comes as the Corporate Sustainability Due Diligence Directive (CSDDD) is under threat. The legislation passed after weeks of heated debate in May 2024 was already watered down from previous drafts, with an estimated 5,300 companies having to comply (instead of the original 16,000).

The law mandates large firms operating in the to eliminate environmental and human rights risks from their supply chains or face fines of up to 5% of turnover, and also forces them to adopt a 1.5ºC-aligned climate transition plan, as well as net zero targets.

However, after the EU Parliament election last June, the European Commission launched a U-turn on its own regulations with the so-called omnibus proposal – which would eliminate large firms legal liability for environmental and human rights violations in their supply chains, as well as only requiring due diligence with tier 1 suppliers.

This would effectively make the law “toothless” according to CSDDD advocates.

The omnibus directive is set to face its first vote in a deeply divided EU Parliament on April 1.