Five Compliance Best Practices for … CTPAT Compliance Requirements

As an accompaniment to our biweekly series on “What Every Multinational Company Should Know About” various international trade, enforcement, and compliance topics, below find an update to our series on compliance checks that every multinational company should consider. Give us two minutes and we’ll give you five suggested compliance best practices that will benefit your international regulatory compliance program.

The Customs-Trade Partnership Against Terrorism (CTPAT) program is a voluntary supply chain security program whereby a company agrees to work with U.S. Customs & Border Patrol (CBP) to improve the security of the company’s supply chain. Participating in the CTPAT program offers several benefits to companies, including expedited processing times, enhanced security, reduced Customs inspections, and cost savings — as well as access to special CBP training, workshops, and resources — all of which helps companies strengthen their supply chain security practices. Although the provision is aimed at terrorism, becoming part of CTPAT helps shore up the reliability and accountability of a company’s supply chain more generally.

Nonetheless, CBP imposes significant compliance obligations on CTPAT participants, which CBP has significantly strengthened in the last few years. Some key areas to examine to determine if your organization meets the latest requirements include:

1. Confirm Your Company Has a CTPAT Compliance Program, Including Coverage of the Social Compliance Program Requirements: CBP expects that CTPAT participants will have a compliance program designed to implement minimum security requirements that justify the loosened scrutiny of imports by CTPAT participants. You should ensure that your compliance program covers all required security elements and is consistent with current CBP requirements.
2. Confirm Your Company Meets Current Minimum Security Criteria, Including Updated Criteria for Corporate Security, People and Physical Security, and Transportation Security: In 2019, Customs updated the CTPAT criteria to add additional coverage points, especially in the areas of cybersecurity, protection of the supply chain against agricultural contaminants and pests, and prevention of money laundering and terrorism financing. The minimum security requirements also were updated to include heightened requirements for business partner security and the security of cargo containers. You should confirm your company has implemented these procedures to match the enhanced compliance expectations.
3. Confirm Your CTPAT Compliance Incorporates New Social Responsibility Requirements: CTPAT includes social responsibility requirements focused on protecting workers’ rights within the supply chain. CTPAT expects its certified partners to ensure fair treatment of workers, prohibit forced labor, and promote a safe and healthy work environment. This includes maintaining policies against child labor, ensuring safe working conditions, providing fair wages and hours, and addressing any abuse or harassment. Compliance with these standards is essential for CTPAT certification and fosters a supply chain that respects both security and ethical standards.
4. Confirm Your CTPAT Compliance Incorporates New Forced Labor Requirements: CTPAT requirements have been updated to include forced labor requirements in the areas of supply chain mapping, code of conduct requirements, evidence of social compliance program implementation, supplier training, and non-compliance remediation plans. These new requirements are intended to bring existing U.S. forced labor requirements into the CTPAT infrastructure, including the need for CTPAT participants to take concrete actions to identify risk points for the use of forced labor at any point in their supply chains. If it has not done so, your organization should review the latest CTPAT Trade Compliance Handbook to ensure it is implementing these new supply chain requirements.
5. Ensure Your Organization is Identifying CTPAT-Related Red Flags and Following Up on Potential Breaches: CTPAT violations often can be identified by monitoring and by following up on red flags within a supply chain that signal potential security or social compliance issues. These red flags include inconsistencies in shipment documentation, vague supplier information, missing employment records, or unusually low labor costs, which may indicate exploitative labor practices. Additionally, evidence of restricted worker movement, signs of forced labor, and an excessively high turnover rate may point to issues such as inadequate worker protections or substandard working conditions. Conducting regular audits, reviewing supplier contracts, monitoring for signs of falsified records, and interviewing employees anonymously are effective ways to identify these red flags and prevent CTPAT violations.

If you have questions or concerns about this article, please feel free to reach out to the author or your Foley & Lardner attorney. Would you like more practical compliance tips like these? Click Here to Register for our email list to receive future biweekly emails and practical international regulatory compliance tips.

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