Input Stories

A sweeping new European Union regulation could saddle America’s manufacturers with costly red tape—undermining U.S. sovereignty and manufacturing growth here at home.

What’s happening: The EU’s Corporate Sustainability Due Diligence Directive, approved by the Council of the European Union in 2024, has prompted calls from both U.S. and European companies as well as several EU nations for the European Parliament to scale back this unworkable and extraterritorial mandate.

• EU nations must act: Member states are required to translate the directive into national law by July 2027.

What it is: CSDDD forces companies to identify and mitigate potential social and environmental risks across every stage of a product’s life cycle—from sourcing to disposal.

• Extraterritorial impact: While EU lawmakers have proposed to reduce the number of non-EU companies that would be subject to CSDDD, the latest proposal would still apply to U.S. companies that have more than 1.5 billion euros in net annual EU turnover.
• Deep reach: Companies subject to CSDDD will be responsible for the actions of their direct business partners and will have to assess the risks posed by their indirect business partners if there is a prospect of an adverse impact. As a result, the directive’s requirements could stretch deep into manufacturers’ supply chains, implicating small, privately held and non-EU businesses.

Why it matters: The directive would impose sweeping due-diligence requirements on U.S. companies with EU ties—and even those indirectly connected through supply chains.

• Compliance squeeze: The scope of the burdensome mandate would introduce significant operational complexity, compliance costs and potential for bottlenecks and delays throughout the complex, global manufacturing supply chain.
• Liability risk: CSDDD would also expose manufacturers to significant legal liability, as the directive allows EU nations to impose penalties up to 5% of a company’s global turnover.

What’s at stake: Manufacturers already face nearly $350 billion in annual regulatory costs at home. CSDDD would add to this burden—subjecting America’s manufacturers to job-killing European red tape and ceding U.S. regulatory authority.

• It would undermine the Trump administration’s progress on regulatory modernization, a priority the NAM has championed from the start.

What’s next: President Trump has rightly flagged CSDDD as a threat to the trading relationship between the U.S. and the EU, and the U.S.–EU framework agreement announced earlier this year prioritizes addressing concerns about the impact that CSDDD would have on U.S. companies.

• The EU has been considering revisions to CSDDD but has not addressed some of its most damaging aspects, including its extraterritorial provision that would apply to manufacturers in America and their suppliers. The Legal Affairs Committee of the European Parliament failed to remove that provision in its recent compromise omnibus legislation. U.S. policymakers should take note as this compromise legislation advances through the EU’s process.

The bottom line: “CSDDD would impose significant, extraterritorial burdens on America’s manufacturers,” said NAM Managing Vice President of Policy Charles Crain. “Manufacturers appreciate the Trump administration standing up for our industry on the world stage, and we urge both American and European policymakers to protect U.S. companies from this costly and unworkable burden.”