All companies importing goods into the U.S. are subject to audit - no matter their size, scope of business or resident or non-resident importer. Therefore it?s important to know what U.S. Customs and Border Protection (CBP) looks at when determining who to audit.
CBP utilizes a strategically layered risk management approach based on the potential impact of non-compliance in order to better focus on those areas of importing which may cause significant revenue loss, harm to the U.S. economy, or threaten the health and safety of the American people.
Priority Trade Issues
Customs publicizes a list of Priority Trade Issues (PTIs) which is reviewed and updated periodically. Currently, the following issues are ones that customs considers to be high-risk:
- Anti-dumping duty
- Countervailing duty
- Import Safety
- Intellectual Property Rights
- Trade Agreements
While this list by no means restricts customs from conducting audits on transactions that fall outside of these categories, it does provide a general idea of where their primary focus presently resides.
In determining the likelihood of your firm undergoing a U.S. Customs audit, there are all sorts of other considerations which come to bear and may include:
- Total value and/or volume of your imports
- Variety and chapters of H.S. classification
- Special classes of entry, such as Temporary Importation Bonds (TIB), or U.S. Goods Returned (USGR)
- Related party transactions
- Your firm's internal controls, compliance policies and record keeping practices
- Prior audit history
- Prior penalty history
We consider that there is a clear foundation on which the adequacy and accuracy of your customs declarations stand. These include tariff classification, country of origin, and valuation. Most importers are aware of the importance of ensuring that their tariff classification is declared correctly, and they know that they must declare the proper country of manufacture of the goods, and that those goods are required to be marked with the country of origin prior to import. Valuation, however, can definitely be a trip hazard to unwary or uninformed importers. This article speaks directly to that matter.
As an Importer of Record (IOR), whether a resident of the United States or a non-resident, it is your explicit responsibility to act with reasonable care. CBP's reasonable care standards are clearly defined, and more information can be obtained on that subject referenced in this paper.
Transaction Value (TV) is the most usual valuation methodology, and used appropriately, does fit the most frequent type of transactions. Transaction value or TV can be defined as ?the price paid or payable for the merchandise.? There are a number of possible influences that may prohibit declaring TV on your imports, including:
- Related transactions may not be eligible, depending on a number of factors
- Leased or loaned equipment is not eligible for TV
- Sample or ?no-charge? transactions
- Consignment shipments
- Assists that the buyer provides to the seller must be taken into consideration
- Other additions, such as packing, commissions, royalties, transportation must all be added to the ?price paid or payable? for the merchandise
These are simply a few of the matters that must be considered when you are determining the value declared to customs.
Informed Compliance Publications available on the U.S. Customs and Border Protection website include a number of excellent publications. We suggest the following:
- Reasonable Care
- Bona Fide Sales & Sales for Exportation to the United States
- Customs Value
- Customs Value Encyclopedia
- Determining the Acceptability of Transaction Value for Related Party Transactions
- Proper Deductions for Freight and Other Costs
Customs Audit Assistance Services
If you have reason to believe that your valuation declarations may have the potential to raise flags during a customs audit, please give us a call to discuss this further. We have the expertise to guide your company through the audit process.
Preparing for a Customs Audit
To learn more and gain insight on the customs audit process, consider attending an upcoming seminar. For a session that will guide you through the maze of regulations that determine transaction value attend our upcoming Customs Valuation Seminar. If you are importing and exporting goods into the United States, you will also find our U.S. Trade Compliance Seminar of interest.
If you wish to know more about this important topic or wish to share your experiences please leave your questions or concerns in the comments section below or email us at Ask Your Broker.