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Customs Compliance Programs – A Must for Importers

11/07/12

All who import goods into the United States know it is a complicated exercise.  Importing can be fraught with peril in the absence of attention to detail.  Mistakes in importing can lead to detained or seized merchandise, forfeitures, Customs and Border Protection investigations, lost time, dissatisfied or lost customers, strain on an importer's human and financial resources, additional duty assessments, and sizable penalties.  Because importing is complicated and there are so many pitfalls, compliance programs should be a must for all importers.  The time and expense in implementing and maintaining a compliance program can easily be de minimis in comparison to the cost of defending against just one penalty action.

The elements of a good compliance program vary among importers depending on the goods imported, the size of an importer's operations, the country of origin of the goods imported, whether an importer is taking advantage of one of the various Free Trade Agreements, and numerous other factors.  For example country of origin marking could be a factor in one compliance program, but not in another; certificates of origin may be an issue; pricing may be an issue particularly when importing from a related party; assists may be at issue if the importer supplies the vendor with items used in the production of the imported goods; classification is always of utmost importance as is valuation of merchandise.  Recordkeeping will always be of significance, and of vital importance is the importer/customs broker relationship.

While a compliance program will have to be structured to meet the needs and requirements of a particular importer, there are certain elements that must be present in every program. 

  • The program must have support from top management of the importer for it to have any chance of success. 
  • There must be written policies and procedures that are followed and there must be a knowledgeable employee designated as the compliance officer. 
  • Employees of the importer must know they are expected to follow the program and interface with the compliance officer, who has a direct superior to whom reports must be made. 
  • There should also be policies in place for actions to be taken when a problem is found to exist.
  • Policies and procedures must be followed and the compliance program must be a living program with periodic internal checks or audits to be certain it is always properly functioning.

Compliance programs require time and effort to implement, but they are worthwhile and can save millions of dollars.  For example, there existed a company where the product it imported had inadvertently been misclassified.  There was no oversight so the error was not caught by the importer until a question was raised by Customs at least two years after the initial error crept into the system, and the error had been repeated hundreds of times.  The error had the potential of costing $2 million in additional duties to the company plus penalties of several million dollars.  In another instance, with another company, there was no oversight so Customs' questions regarding assists were not being timely or fully answered.  This resulted in a full-fledged investigation of potential civil fraud.  In fact there was no fraud, but had there been a compliance program the problem would have never arisen.  In still other instances, with other companies, NAFTA certificates were inaccurate.  These were inadvertent errors, but they resulted in additional duties and the real potential for significant penalties.  Had any of these companies had compliance programs in place, the problems would have been stopped before they started, or at least stopped immediately after first surfacing.  Hundreds of thousands of dollars would have been saved.

Compliance programs can avoid mistakes from being made; offer protection from repeated mistakes; instill in employees the necessity and importance of doing it right the first time; save the importer money in avoiding fines and hopefully finding the least expensive duty rates possible; help avoid serious problems: highlight the importance of having an interactive relationship with one's customs broker, who must be an important member of the program; and help create a culture of not putting profit over compliance, because when profits take priority over compliance that is when problems are most likely to occur.  As companies consider and review importing operations it is of vital importance that, if not already in place, a compliance program be established and implemented.  An investment in a compliance program can often provide large returns.  For a company that imports a compliance program should be a must.

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