by Mark Kopp, Yusen Logistics (Americas) Inc.
CBP takes a new look at audits
The November issue of American Shipper has a great article on new audit procedures by Customs and Border Protection (CBP).1 The article starts by reminding us of CBP's switch from enforced compliance to informed compliance. As we've all been working under this system for over 20 years, what's new?
CBP is moving away from focused assessments and moving to audit surveys. CBP has 350 auditors and there are over 300,000 importers in the United States. As full audits can take as long as a year to complete, CBP does not have the resources to thoroughly review every importer.
Audit surveys are short questionnaires sent to importers CBP believes to be a compliance risk in certain areas. The surveys are triggered by "shipment and trend analysis by CBP specialists, internal modeling showing problems in an area such as counterfeit goods…or other information that arouses suspicion." Audit surveys could also be triggered by anonymous tips or criminal investigators.
If an importer's actions come to the attention of CBP through the above information, the importer will receive an "informed compliance package." The letter will highlight CBP's potential cause for concern. It also encourages importers to monitor their transaction data though their Automated Commercial Environment (ACE) portal. In the "package" there will be "a DVD that points out penalty statutes and related regulations" as well.
We're the government, we're here to help
According to CBP the hope is importers will review their import procedures and make corrections and/or prior disclosures if necessary. However the letter ends with a warning that because the importer has been provided with this information, future violations may result in seizures, forfeitures or monetary penalties. In other words, it may be too late. The fear in the importing community is that there may be a formal investigation already underway.
What can you do?
All importers should be doing the following as a matter of good business practice for protection in the case of a formal investigation:
Create a compliance manual and make sure employees follow it.
Request advice on classification, valuation and trade preference programs.
Request rulings from CBP.
Consistently perform post entry reviews.
Post entry reviews may also allow an importer to identify duty and cost savings by reviewing classification, valuation and trade preference opportunities.
We received an "informed compliance package" now what?
Inform management about what it might mean for the company and the risks involved. You will also need to conduct a risk assessment of the issues raised by the compliance letter. Check that any prior disclosures and corrective actions taken in the past are still in place and working. Additionally, identify possible loss of revenue and penalties in areas highlighted by the compliance letter.
An importer can only do so much due diligence. Hope you do not receive an "informed compliance package," but the jury is still out. CBP may have reason to be investigating your company – or this could be your opportunity to get management on board for a strong compliance program.
Mark Kopp is currently the Senior Manager for Import Compliance for Yusen Logistics (Americas) Inc. Mark has over 30 years experience in all aspects of supply chain management and compliance - from product development and buying, cargo management and shipping, customs brokerage, to warehousing, distribution and retail sales. He has managed/directed imports for Kinney Shoe Corporation, Woolworth Corporation, Russ Berrie & Co. and DHL. He has also served on the Footwear Distributors & Retailers of America government customs council, been a member of the Board of Directors for the Toy Shippers Association, and been an instructor at The World Trade Institute in New York. Currently, he is a member of the NY/NJ Freight Forwarders & Brokers Association and serves on the American Apparel & Footwear Association Government Relations Committee. Mark graduated from Franklin & Marshall College in Lancaster, PA with a B.A. in Political Science.
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