Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

First Round of Changes to CBP’s Focused Assessment Audit Rules Now in Effect

Posted October 10, 2014

After a period of stakeholder outreach by Customs and Border Protection (CBP) over the summer, the first significant updates in more than a decade to the agency’s Focused Assessment (FA) program took effect at the beginning of October. The aim of the changes to the audit process is to enable CBP to be more targeted in its approach to assessing risk, but some trade experts feel the new modifications could prove to be a major headache for importers.
FA Audit
The FA program is the comprehensive audit process used by CBP to evaluate whether an importer’s compliance program is fit for purpose.  FAs are performed by the CBP’s Regulatory Audit division and involve a comprehensive assessment of a company’s internal controls over its import activities to determine whether they pose an acceptable risk for complying with all applicable laws and trade regulations. Key areas that are commonly addressed by FAs include classification, valuation, use of free trade agreements, use of special duty free provisions, and antidumping/countervailing duties.

Although the fundamental nature of the FA program is not changing – the three phases comprising pre-assessment survey (PAS), assessment compliance testing (ACT), and follow-up audit, will essentially stay the same – modifications to the program will provide CBP auditors with greater flexibility to determine whether import activities pose an acceptable or unacceptable risk and will allow for the process to be more adaptable to the individual importer’s situation.

The main ways that importers will be affected by the FA changes are:

  • Increased emphasis on the consideration of significance/materiality in making audit decisions;
  • Expanded guidance on tailoring the audit approach to suit the specific circumstances of the importer;
  • Replacing sample size matrices with more general sample size ranges; and
  • Incorporating changes in report language to limit scope or review findings and applicability.

It should be noted that the current round of updates implemented as of October 1 affect only the initial PAS phase of the audit and are geared to aligning the CBP’s risk assessment procedures with the audit risk model presently set out in other government auditing standards.

The international trade law firm Sandler, Travis & Rosenberg, P.A.  recently posted a lengthy article to their “Trade Report”  publication outlining in more detail some of the notable changes to the FA Pre-Assessment Survey Audit Program that importers should be aware of.  The piece also includes a number of sound recommendations to help companies lower their risk of non-compliance and be better prepared for a customs audit.

A Powerpoint presentation concerning updates to the FA program is also available on the CBP website here.