All companies importing goods into the U.S. are subject to audit - no matter their size, scope of business, resident or non-resident importer. Therefore it is 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.
CBP 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.
What Are My Chances Of Undergoing A Customs Audit?
In determining the likelihood of your firm undergoing a U.S. Customs audit, there are all sorts of 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
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 U.S. 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 common valuation method, and used appropriately, does fit the most frequent type of transactions. 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.
Preparing For A Customs Audit?
To learn about the Customs audit process and how you can prepare for a Customs audit, visit the PCB Learning Center for in-class seminars and on-demand courses led by experienced Customs Brokers.
Customs Audit Assistance Services
If you have reason to believe your valuation declarations may have the potential to raise flags during a Customs audit, please give us a call to discuss further. When it comes to Customs audits, you want an expert on your side.