From large to small corporations, at some point in their history, companies will decide if a situation warrants the intervention of outside counsel. Outside counsel can range from a second opinion from a trade advisor or the representation of an international trade lawyer. So what warrants the involvement of each? In this blog, we will discuss the various factors that come into play when making this decision and a few situations in which we recommend getting experienced help.
Many factors should be taken into account when trying to determine if your company would benefit from outside counsel.
The Level Of In-house Expertise And Experience
What is the expertise level of your in-house logistics team? Are they trained in regulatory compliance? Do they hold certifications such as a Certified Customs Specialist (CCS) or a Certified Trade Compliance Specialist (CTCS)? What is their experience with Customs, and other Partner/Participating Government Agencies (PGAs)? What is their experience level with the commodities you are importing and those you hope to import in the future? What is their accuracy rate? Has their work been audited?
These are just some of the questions you must ask to determine if your team is capable of accurately interpreting rules of origin, valuation and classification (the 3 building blocks of compliance) therefore protecting your importing privileges.
A CCS level of certification understands the import process, parties involved, and the data elements required to submit a declaration to Customs, including utilization of Free Trade Agreements and discounts.
A CTCS has been trained to look at the more complex areas or trade compliance such as classification, rules of origin, valuation and transfer pricing, refunds, remissions, and duty deferrals, export controls, and general customs compliance, verification and audit.
A team with the above certifications is very capable of classifying, valuing, and determining the origin of non-complex commodities with which they have prior experience. For matters outside of these basics, we recommend they either enroll in additional training or get a second opinion from a trade advisor on the determinations your team has derived from their interpretation of Customs regulations.
The Level Of Liability
What are the ramifications if you are found to have made a mistake in your declarations to Customs? Have you established Reason to Believe (RTB) that your company made an error in the information they provided to Customs on certain imports? Will your company be on the hook for financial penalty or is there a possibility of stakeholder accountability (loss of importing privileges, grand jury testimony, jail time)? Is your company privately held or publicly traded? Did you import $100 worth of goods or did you import $100 million?
It’s important to understand that with reporting, a mountain can be made out of a molehill quickly. Due care and attention must be paid by not only your logistics team but most importantly, your C-Suite Executives, Directors, and Owners.
If you do not conduct regular in-house compliance audits - comparing the actual import paperwork against what was reported to Customs - you're playing with fire.
For example, Customs conducts a review of their HS Tariff Classification every 7 years, resulting in classification shifts. If this is not reviewed, your company could be using a now inaccurate classification. This one small error can snowball with every entry, resulting in inaccurate classification over a multitude of imports and therefore, an inaccurate rate of duty paid.
If your company imports a moderate to high volume of goods each year, we recommend that you conduct an annual Sample Compliance Audit of your import declarations as part of your due diligence in compliance. If errors have been found, work with your Customs Broker and Logistics Team to determine the significance of the errors. Consult with a Trade Advisor if you require assistance in this investigation.
Most errors can be corrected with an amendment or prior/voluntary disclosure entry with Customs if fairly insignificant. However, if the errors are significant, a Trade Advisory can advise you on how to proceed with rectification with Customs.
It’s important to note that once an error has been found, Reason To Believe, has been established. Under Reason To Believe, an importer has 90 days to amend/disclose the error and make the correction with Customs. If the corrections are not made within this time period it is advisable to contact a Trade Lawyer to help navigate the correction with Customs.
Level Of Confidence
Given the experience level of your team, the service provided to you by your customs broker, and the variety, value, and complexity of the goods you import, how confident are you that these goods were declared correctly?
If there is any question in your mind about your level of compliance, take further steps to investigate.
Here are several steps that can be taken to ensure compliance with Customs regulations including:
Binding/Advance Rulings: Appeal to Customs for a Binding/Advance Ruling on the HS Tariff Classification for your commodities. This takes the guesswork out of classification. Rulings are ideal for complex commodities with a variety of components, where they are originating from one or more countries.
Sample Compliance Audits: Take a sample of your imports (actual paperwork) and compare this to what was reported to Customs. This audit should be conducted by an experienced compliance professional with a certification of CTCS or higher.
Compliance with Customs regulations is a vital part of your company's long-term success that is often overlooked. We audit our accounting for accuracy, review our employee’s performance, and watch our balance sheets closely. Establishing this same level of review of your declarations will be sure to keep you out of a Trade Lawyers office.