Trade Compliance

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

Preparing for the Worst: Getting Ready to Be Audited by Customs

Posted June 26, 2019

Seeing as how the current U.S. government remains doggedly fixated on the imposition of tariffs as the central feature of its global trade policy, it should come as no surprise that revenue collection has become a “re-prioritized” trade issue for U.S. Customs and Border Protection lately. As CBP acts more vigorously to enforce measures the administration sees as protecting U.S. economic security, companies need to be responding by taking adequate preventative measures now in order to ensure they aren’t unnecessarily exposed to risk in the event of an audit down the road.

In connection with its more robust enforcement efforts, CBP is reportedly in the process of increasing the number of auditors from 370 to at least 500. Expansion of the Regulatory Audit office is in accordance with implementation of the CBP’s strategic plan as mandated under the 2016 Trade Facilitation and Trade Enforcement legislation. The overall goal of the administration’s sweeping new trade agenda is unequivocally protectionist in nature, with revenue collection now viewed as a “re-prioritized” issue for the agency.

In this regard, CBP recently reported that fiscal year 2018 saw a 4% increase in the number of audits completed, a more than 30% increase in the number of trade penalties issued, and a boost in the $42.2 million total revenue that the agency collected from audits.

These figures highlight the increasing level of scrutiny being applied by CBP and should serve to galvanize companies into taking preventative action now in order to avoid possibly getting stung with costly fines and penalties later through having being complacent, neglectful or otherwise unprepared when customs auditors come knocking on your door.

What Can Importers Do?


1. Internal Assessment/Audits and Remediation

The best precaution is to undertake a comprehensive analysis of your import data and assess all of your trade-related activities to identify any potential problems that may be in need of addressing. This process – which can involve outside experts but need not necessarily always have to – should also reveal whether any of the weaknesses uncovered in the assessment are of an urgent nature or can be progressively mediated over time. If any violations are uncovered, being proactive in disclosing this information to CBP will not only reduce fines or penalties but will also establish a good faith defense in the event of an audit.

2. Review and/or Establish Policies/Procedures

When everyone is following policies and procedures, your organization runs more smoothly than it would otherwise. In the same way, companies need up-to-date policies and procedures on how best to deal with customs if they are to avoid encountering problems in this complex and often tricky area. If operating guidelines have never been formally established before, then development of such instructions should be made an immediate priority. If adequate policies and procedures are in place, then making them more accessible and foremost in the mind of employees should be rank highly in any future planning.

3. Always Be Proactive

In recent years CBP has moved to addressing compliance problems through its single-issue “quick response” method that is designed to deal with specific objectives within a short period of time. While this symptomatic single-issue approach isn’t without advantages in terms of resolving matters promptly and helping to avoid more intensive audits, if not managed properly, however, or if treated too casually without ever dealing with the root cause of the problem, it may not be too long before a full-blown audit has been triggered. Executive management should therefore be aware of the customs compliance situation on the ground, be working to avoid problems from arising in the first place and in the event of finding any actual or potential violations, should be forthright in submitting a prior disclosure to CBP in order to hopefully mitigate any penalty ultimately assessed.

4. Never Stop Training

Policies and procedures can only go so far in ensuring compliance, which ultimately must depend on well-trained personnel applying best practices in their operations. Providing updated guidance, access to technical resources and reference materials, ongoing skills improvement programs and opportunities for employees to develop their expertise will pay dividends in the long term and count towards meeting the Reasonable Care standard the government expects of all importers.

5. Measure Twice, Cut Once (i.e. Question & Review Everything)

A sensible precaution that alone can eliminate much of the risk associated with an audit is to always ensure that you consult in advance with a qualified trade expert to ensure that you are aware of all of the compliance obligations associated with the goods prior to importation. Always engage your customs broker or other service provider early into the process of sourcing products from new vendors outside of your normal supply chain or when matters of classification, origin, or valuation may be unclear or in dispute. Also be sure to have them carefully review  documentation when necessary and help you determine how best to respond when CBP officials may be seeking information about your import activities.

More Questions...

If you have additional concerns or questions about what you need to do to be better prepared in the event of a customs audit or if you want to know more about how we can be of help to you in this regard, don’t hesitate to contact our Consulting Department | 204-947-6700 ext. 209.

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