Costco Supplier Code of Conduct: What Brands Must Know About Factories, Subcontractors and Audits

Oct 25

5 min read

Auditor with a clipboard speaking with a factory manager on an orderly production floor

The Costco Supplier Code of Conduct is the document that decides whether your factory, and every factory behind it, is acceptable to Costco. Most founders hear about it late, usually when a buyer asks for a list of every facility that touches the product. This guide summarizes what the Code says, based on Costco’s own published PDF, and what to prepare before that request arrives.

Today is October 25, 2026.

A note on sources. The Code we read is labeled “Updated December 2023” on Costco’s website. A separate Costco disclosure on human trafficking and slavery is dated “Revised August 2018.” Costco may have updated either since, so check Costco’s current Code. This is a summary, not a legal reading.

What the Code Is Built On

The Code draws on the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work and the UN Universal Declaration of Human Rights. Where local law is missing or weaker than the Code, Costco expects suppliers to meet the Code’s higher standard.

The Main Requirements

Child labor: Workers must meet the legal minimum age. If no local minimum exists, they “must be at least fourteen (14) years old.” Workers under 18 are barred from hazardous tasks, heavy lifting and night work.
Forced labor and trafficking: Work must be voluntary. Prison labor is prohibited, and workers may not be charged recruitment fees.
Abuse and discipline: Workers must be treated with dignity. Abuse, harassment, corporal punishment and illegal or excessive fines are prohibited.
Hours and wages: Regular and overtime hours must not exceed legal limits or “60 hours per week, whichever is more strict.” Workers must receive “at least one day off in a seven-day workweek.”
Discrimination and unions: Discrimination and interference with union rights are prohibited.
Health and safety: Fire and evacuation drills are required “every twelve (12) months,” and electrical panels, wiring and outlets must be inspected “at least monthly.”
Environment: Hazardous waste must be handled responsibly. Eliminating ozone-depleting chemicals and recycling are strongly encouraged.
Management: Each facility must name a person responsible for compliance.
Grievances: Facilities must offer workers an anonymous, confidential way to raise concerns, and track the submissions and their resolution.

Subcontractors: The Part Brands Miss

This is where brands most often get caught. According to the Code:

Suppliers must be able to trace all components and ingredients to their source.
On request, they must provide names, addresses and contact details for every entity in the supply chain, including subcontractors and home workers.
Every facility producing Costco merchandise must be disclosed to and approved by Costco.
“Unauthorized subcontracting” means moving any part of an order to a facility without full disclosure and Costco’s consent. It can lead to termination, canceled orders, suspension and cost reimbursement.

If you use a co-packer, and your co-packer uses an outside facility for a step like printing or filling, Costco expects to know about it first.

Audits

The Code says Costco may audit facilities directly or through a third party, with or without advance notice, and that audits may cover subcontractors. Facilities must give access to records and allow private interviews with workers. Coaching interviewees or retaliating against workers or auditors is prohibited. The supplier pays for audits. The Code also says Costco’s interpretation of the Code and audit reports is “binding and conclusive.”

A source difference to know about. The 2018 disclosure says Costco arranges audits of “certain facilities of selected suppliers,” with emphasis on private-label suppliers and higher-risk products or origins, and that “Sub-suppliers generally are outside the scope of the audit.”

The 2023 Code says audits may cover subcontractors. The newer Code is the better guide for planning, but ask Costco how it applies to your product.

Violations and Consequences

Critical violations include illegal child labor, forced labor, abuse, bribery, falsified records, immediate life-safety risks and denied auditor access. They must stop immediately, the supplier must submit a corrective action plan, and sanctions can reach “cancellation of the purchase order or contract.” A second critical violation lets Costco interrupt or end the relationship.
Other violations require a corrective action plan with deadlines. Costco sets re-audit dates and may terminate if full compliance is not achieved in a reasonable time.
Costco says it generally prefers corrective action over sanctions, and may impose greater or lesser penalties case by case.
Dishonesty, bribery and falsified records can end the relationship. Gifts to Costco staff or auditors are prohibited.

Costco also runs a confidential ethics hotline at costco.ethicspoint.com. Retaliating against anyone who reports in good faith “may result in termination of the business relationship.”

Your Costco Supplier Code of Conduct Readiness Checklist

Read the current Code on Costco’s website, and keep a dated copy.
Map your supply chain: every facility, subcontractor and home-work arrangement for your product.
Get written confirmation from your co-packer about which facilities touch your product.
Ask for disclosure and approval of every facility before production, not after.
Review hours and day-off records against the 60-hour and one-day-in-seven rules.
Check fire drill and electrical inspection logs for the required intervals.
Confirm a grievance channel exists and is tracked.
Name a compliance owner at each facility.
Budget for audits, since the supplier pays.
Write a corrective action process, so you can respond quickly if a finding appears.

Common Mistakes

Assuming a co-packer’s compliance is automatically yours.
Letting a subcontractor step in during a rush without approval.
Keeping no records on hours or inspections.
Treating the audit as a one-time event.
Overlooking ingredient and packaging traceability.
Waiting for the buyer to ask for the facility list.

Why This Is a Brand Strategy Issue

A supply chain problem is a brand problem. Members trust Costco, and Costco expects its suppliers to protect that trust. A brand with a clean, documented supply chain moves faster through approval and has fewer surprises later. It also gives you a story to tell your buyer with confidence.

Work With Fractional Brand Managers

FBM helps emerging brands get ready for Costco, including the supplier documentation and facility mapping buyers expect. If you are not sure what your co-packer’s subcontractors look like, we will help you find out before Costco does.

Call 732-433-7873 | info@fractionalbrandmanagers.com | www.fractionalbrandmanagers.com

This article is general information, not legal advice. It summarizes Costco’s published Code (updated December 2023) and a 2018 disclosure, both of which may have changed. Confirm current requirements with Costco. We are not affiliated with Costco Wholesale.

Summary Table

Topic	What the Code says
Minimum age	Legal minimum, or at least 14 if none
Work hours	Legal limit or 60 hours per week, whichever is stricter
Rest	At least one day off in seven
Facilities	All must be disclosed to and approved by Costco
Audits	With or without notice; supplier pays
Critical violations	Can lead to canceled POs or contracts