Client Alert

Privacy Shield-Certified Organizations: Key Takeaways from the Privacy Shield Annual Review

11 Feb 2019

The EU regulators’ recent report on the second annual review of the EU-US Privacy Shield provides some valuable compliance reminders for organizations that have certified or intend to certify to the Privacy Shield program. The report, which mainly focuses on the EU regulators’ ongoing concerns about the US government’s access to personal data and their desire to see more substantive certification reviews by the US government, details oversight efforts currently being undertaken by the Department of Commerce (Commerce) and the Federal Trade Commission (FTC). As the report makes clear, both Commerce and the FTC have significantly increased their oversight and enforcement of the Privacy Shield program. The report provides a useful roadmap for organizations to avoid getting caught in the US government’s enforcement crosshairs.

This alert highlights some of the key findings of the European Data Protection Board’s Report on the Second Annual Review of the EU-US Privacy Shield (EDPB Report) with respect to the commercial functioning of the Privacy Shield, reviews the US government’s current Privacy Shield compliance oversight initiatives, and provides a list of compliance tips for Privacy Shield-certified organizations.


Commercial Aspects of the Privacy Shield
While commending the actions taken by US authorities to implement the Privacy Shield program, the European Data Protection Board (EDPB) expressed its ongoing concerns about the commercial aspects of the Privacy Shield.

The EDPB welcomed Commerce’s new guidance (FAQs) on the Accountability for Onward Transfer Principle and Processor obligations under the Privacy Shield which discusses the need for contracts when transferring personal data to controllers and agents and clarifies how a Privacy Shield-certified Processor should comply with the Principles. It also laid down a marker that it expects Commerce to issue further guidance on the Notice and Choice Principles (e.g., how individuals can opt-out of processing for new purposes and the timing of the provision of notices) and a clarification of the scope of access rights. With respect to the access issue, the EDPB is concerned about access rights being limited to stored data.

The EDPB expressed dissatisfaction with Commerce’s certification and re-certification process because it focuses more on the formal rather than substantive requirements. Specifically, the checks conducted by Commerce do not examine the substance of the principles, such as, for example, checking to see if the data transferred to a US controller are necessary and proportionate to the stated purpose. Instead, for example, Commerce reviews certifications and re-certifications to ensure that the companies have registered with an independent recourse mechanism, paid their contribution to the Arbitral Fund, comply with the Privacy Shield Supplemental Principle 6 (Access), provided complete and consistent certification information, and addressed the 13 required elements in their privacy notices and policies.

To prevent organizations from naming non-US subsidiaries as entities covered by the Privacy Shield, Commerce has produced more internal guidance for reviewing applications in order to identify foreign entities.

The EDPB welcomed the increased compliance oversight and supervision by US authorities but stated that it would like to see Commerce undertake more substantive checks, particularly with regard to onward transfers. In particular, it would like Commerce to make use of its ability to request copies of relevant privacy provisions of companies’ contracts with agents.

Privacy Shield Compliance Oversight by the US Government
The EDPB highlighted the following compliance oversight and supervision measures taken by Commerce, the FTC, and the Department of Transportation (DoT):


  • Quarterly “false claims reviews.” Commerce conducts quarterly reviews to identify organizations that have started, but not finished, an initial or re-certification or that did not submit their annual re-certification at all. Identified organizations receive a certified letter from Commerce, warning that they will be referred to the FTC or DoT if they do not fulfill outstanding requirements or withdraw properly from the program. Organizations are given 30 days to respond to the letter. Commerce compiles a list of organizations that fail to take action and respond to the letter.
    • According to the EDPB Report, Commerce has made 100 referrals to the FTC, 56 of those were made in the second year of the program. Simultaneously with the referral, an organization is removed (at least temporarily) from the “active” Privacy Shield list.
  • Random Compliance Checks. Commerce conducts spot checks of randomly selected Privacy Shield participants to verify: 1) that the point(s) of contact responsible for the handling of complaints, access requests, and other issues arising under the Privacy Shield are available 2) that the organization’s publicly-facing privacy policy is available for viewing by the public 3) that the organization’s privacy policy continues to comply with the self-certification requirements described in the Framework and 4) that the organization’s chosen independent recourse mechanism(s) is available to investigate and resolve complaints. Organizations must respond to these questionnaires within 30 days. If the response is not satisfactory, the organizations receive a certified warning letter requiring the organization to indicate within 30 days how it has addressed the concerns. If these concerns are not resolved within 30 days, the organization is listed as “inactive” and the case is then referred to the FTC or DoT. Even if the case was resolved within the 30 days, Commerce confirmed that it could still refer the organization to the FTC.
    • Commerce has performed a sweep of 100 randomly chosen organizations.
    • Commerce subsequently sent more in-depth compliance questionnaires to 21 organizations that showed minor or more significant issues (e.g., there was no response from the designated point of contact, the privacy policy was not accessible online, or it was missing one or more of the required elements from the notice.
  • Random Web Searches.  Commerce conducts random searches on the Internet, looking for false claims of Privacy Shield participation.
    • The EDPB reported that only a few cases have been referred to the FTC.
  • Proactive Media and Internet Searches. Commerce has designated one person to follow the media and do keyword searches to identify possible breaches of the Privacy Shield commitments.
  • Regular Checks for Broken Privacy Policy Links. Commerce performs regular checks for broken links to the privacy policy on the Privacy Shield list.


  • Enforcement Actions. The FTC brought five new Privacy Shield cases in 2018: two against organizations that did not complete their certification and three where the certification had lapsed. In most of these cases, the organizations failed to verify the deletion, return, or continued application of the Privacy Shield Principles to personal data transferred under the Privacy Shield.
  • Investigations. The FTC received about 100 referrals (eight of them were made public) but, in most cases by the time the referrals arrive at the FTC, they have been resolved.
  • Civil Investigation Demands (CIDs). As an experiment, the FTC has started to send out proactively CIDs to monitor compliance with the Privacy Shield Principles. The objective is to identify where it is profitable to spend resources.


  • Currently there is no airline participating in the Privacy Shield and only very few ticket agents.
  • The DoT has not received any Privacy Shield complaints to date.


The EDPB Report provides a useful roadmap for organizations to avoid getting caught in the US government’s enforcement crosshairs. To reduce the chances that an organization’s certification will be rejected, delayed, marked as “inactive,” and/or referred to the FTC for enforcement review and action, organizations should take the following steps:

At The Time of Certification or Annual Re-certification

  • Provide complete and consistent information in the certification application or renewal application.
  • Make sure the privacy notices and policies address the 13 required elements of the Privacy Shield.
  • Only US entities may certify to the Privacy Shield, so make sure no foreign entities are listed in the certification application.
  • Register with an independent recourse mechanism.
  • Pay the contribution to the Arbitral Fund.
  • Be prepared to provide to Commerce, upon request, with copies of relevant privacy provisions of the organization’s contracts with agents.
  • If an organization starts the certification or annual re-certification process, make sure to complete the process – Do not leave the application unfinished.
  • If an organization receives a certified letter from Commerce about the need to fulfill any outstanding requirements (or withdraw properly from the program), respond to the letter within 30 days. Otherwise, the organization will likely be referred to the FTC for enforcement action and will be removed from the “active” Privacy Shield list.
  • Do not reference the Privacy Shield until the organization’s certification is complete and listed as “active” on Commerce’s Privacy Shield List.

After Certification

  • Make sure the organization’s privacy policy is easily accessible.
  • Respond in a timely fashion to any Privacy Shield requests or concerns.
  • Make sure the information on the independent recourse mechanism is easily accessible.
  • Respond to any in-depth compliance questionnaires from Commerce within 30 days.
  • Respond to any warning letters from Commerce within 30 days, addressing any concerns raised in a thorough manner. Otherwise, if these concerns are not resolved within 30 days, the organization will be listed as “inactive” and the case will then referred to the FTC or DoT.
  • Assign someone in the organization to be responsible for regularly checking for broken links to the Privacy Shield privacy policy.


  • If an organization withdraws from the program, make sure to verify the deletion, return, or continued application of the Privacy Shield Principles to personal data transferred under the Privacy Shield.


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