Customs Audits Increasing but Companies Can Take Steps to Mitigate Impact
© , Sandler, Travis & Rosenberg, P.A. Originally published in the [05/30/2019] issue of the Sandler, Travis & Rosenberg Trade Report. Reprinted by permission.
Customs audits and money collected as a result are on the rise, but companies can take a number of steps before and during audits to mitigate their potential impact.
U.S. Customs and Border Protection has for many years utilized the focused assessment as its primary tool to conduct comprehensive audits of importers. The FA process generally encourages importers to take a more active role in identifying and remedying noncompliance and internal control deficiencies and helps CBP decide whether to initiate collection or other enforcement actions.
In recent years, however, CBP has conducted more single issue (quick response) audits, which are designed to address a specific objective within a short time, and audit surveys, which allow CBP to quickly obtain information about a company’s import activities relative to a specific trade area or issue. While these tools can be an opportunity to avoid a more intensive review, they can also result in full-blown audits or other enforcement actions if they are not taken seriously.
CBP recently reported that fiscal year 2018 saw increases in both the number of audits completed (from 418 to 435) and total revenue collected as a result of importer audits (from $41.3 million to $42.2 million). The total number of trade penalties issued rose as well, from 931 to 1,385. However, the number of liquidated damages decreased, from 10,327 to 9,214, as did the total collected from trade-related penalties and liquidated damages, from $27.2 million to $15.5 million.
These statistics highlight CBP’s increasing scrutiny of import compliance and the consequent need for importers to take proactive steps to maximize compliance while preparing for potential audits. Daryl Moore, vice president of customs audits and partnership programs for Sandler, Travis & Rosenberg, states that knowing your import data and characteristics and conducting regular internal reviews and risk assessments are important foundational measures because they can help companies identify problem areas and determine how to respond before the government gets involved. If these processes do reveal actual or potential violations the importer has the opportunity to submit a prior disclosure, which can help reduce any penalties that may ultimately be assessed.
There are also things importers can do during an audit to make the process go more smoothly, Moore states. These include taking the initial contact seriously and engaging experts early to determine what CBP is after, recommend how best to respond, and represent the importer’s interests in dealings with the agency. Perhaps most importantly, Moore adds, importers should have qualified service providers review any information before it is submitted to CBP. This step alone can significantly reduce the time and expense of an audit.
Click here to register for ST&R’s June 20 webinar on CBP audit surveys.