By Kathleen M. Murphy, Mollie D. Sitkowski and Beata K. Spuhler

Both the Food and Drug Administration (FDA) and U.S. Customs and Border Protection (CBP) are expected to begin pilot programs to give additional benefits to importers who have secured their supply chains and internal controls this September. On August 20, 2013, the FDA announced it will begin accepting applications to participate in its Secure Supply Chain Pilot Program (SSCPP) which will run for two years, from February 2014 through February 2016. CBP has not yet officially announced, but is expected to announce within the next month, that it will begin a test pilot for its Trusted Trader Program.

Through the SSCPP, the FDA hopes to prevent the importation of adulterated, misbranded, or unapproved drugs by allowing the Agency to focus its resources on imported drugs that fall outside the program and may pose risks. The FDA plans to increase the rate at which entries of finished drugs and APIs selected for the program are given a “may proceed” without human entry review of examination. In effect, its pilot program will expedite the entry of covered products. The FDA will pick no more than 100 participants, with no more than five drugs per applicant beginning September 16, 2013 through December 31, 2013.

Applicants must submit a complete application using Form FDA 3676 and be the sponsor of a New Drug Application or the Abbreviated New Drug Application, or be the foreign manufacturer of the imported finished drug product or API. Among other requirements, the applicant must be a validated Tier II or Tier III participant in Customs-Trade Partnership Against Terrorism (C-TPAT), have a plan in place for promptly correcting concerns regarding its supply chain or specific importations and for recalling or correcting any finished drug products or APIs that do not meet FDA requirements, comply with certain recordkeeping requirements, and be in compliance with FDA’s registration, drug listing, and good manufacturing practice requirements for the past 3 years.

The FDA will periodically examine records and conduct random field examinations to audit participants’ shipments to both ensure continued compliance and evaluate the pilot program. The FDA will end a company’s participation if the applicant, its foreign manufacturer, or ultimate consignee gets a communication from the FDA citing violations of the Food Drug and Cosmetic Act relating to drug products or fails to comply with pilot requirements. The FDA will evaluate the pilot based on timeframes for passage of drugs through the entry process, the level of adherence by participants to the program criteria, and the impact of the pilot program. Based on that evaluation, the FDA may choose to implement a permanent secure supply chain program.

CBP also hopes to manage both supply chain security and trade compliance with its Trusted Trader Program. In March of this year, CBP announced the formation of a Trusted Trader Subcommittee within its Advisory Committee on Commercial Relations of CBP (COAC) with the objective of creating a pilot program by September. A Federal Register Notice announcing the first phase of the Trusted Trader Program is expected shortly. CBP has assured companies that the expanded Trusted Trader Program will have no effect on C-TPAT or its benefits.

With the Trusted Trader Program, CBP aims to create a holistic approach for companies to achieve trusted trader status. Traditionally, trusted traders are those companies who are members in either its C-TPAT or ISA programs. In effect, CBP will offer enhanced incentives and benefits by consolidating its current C-TPAT program with its ISA program. C-TPAT is a voluntary supply chain security program while ISA is a joint government-business initiative focused on internal controls that strengthen compliance with CBP rules and regulations regarding classification, valuation, etc. CBP is also considering whether and when Partner Government Agencies will participate in the new trusted trader status. CBP intends this change as a step in its long-term goal of creating a trusted trader program across U.S. government agencies. It also believes that this change will create an opportunity to enhance mutual recognition arrangements with foreign trading partners.

The expansion of the Trusted Trader Program will have other benefits in addition to creating a trusted trader program across U.S. government agencies and enhanced mutual recognition arrangements. Currently, CBP is giving priority consideration to importers who are members in both ISA and C-TPAT for participation in the industry-specific Centers of Excellence and Expertise (CEEs). Many importers who would like to take advantage of the industry-specific knowledge and centralized process of their imports offered by the CEEs are reluctant to join ISA. With the Trusted Trader Program, it is possible that CBP will expand many benefits offered under ISA to C-TPAT certified importers who are able to prove their internal controls are effective for compliance, although not quite as stringent (and costly) as those required under ISA.

Drinker Biddle will continue to monitor the Federal Register for announcements regarding the test pilot of CBP’s Trusted Trader Program. For more information on how your company can benefit from the FDA pilot or CBP’s expansion of the Trusted Trader Program, please do not hesitate to contact Kathleen Murphy, Beata Spuhler, Mollie Sitkowski or any other member of Drinker Biddle’s Customs and International Trade Team.

Source: Client Alert