CBP Programs and Procedures for
Achieving Higher Levels of Compliance


June 28, 2013

CBP has implemented several programs to verify importers’ compliance with Customs law, regulations and rulings and procedures to limit prior disclosures. Among these programs are Quick Response Audits “QRAs”, Focused Assessment (“FA”) audits, CBP Centers for Excellence and Expertise “CEEs” and “One Face at the Border”. In addition, CBP has placed restraints on making a valid disclosure after the issuance of a form 29 Notice of Action taken.

QRAs are being utilized on a nationwide basis for suspected noncompliance relating to trade priority issues. QRAs are generally single-issue audits intended to substantiate compliance in a relatively short time period. Unlike the lengthy FA audit program that is based on a risk assessment analysis of annually identified risk factors, the QRA generally takes only a few months if compliance is achieved and no other issues are identified. The notice of a QRA, however, utilizes a letter similar to an FA audit so an importer must determine the basis of the audit, an FA or a QRA. Importers who participate in the Importer Self-Assessment (“ISA”) program are potentially subject to QRAs only and not an FA audit.

Specific target areas for a QRA currently include:

  • The GSP, NAFTA, and other free-trade agreements;
  • An importer’s controls over intellectual property rights;
  • Customs valuation issues, including the verification of the prices paid vs. the declared values or the existence of assists;
  • HTSUS misclassifications;
  • Duty reduction programs, such as 9802 claims;
  • The correct deposit of antidumping and countervailing duties; and
  • Transshipments. 

Issues for QRAs may arise from various sources. These include:

  • 7501 classification, particularly known high risk for noncompliance tariffs;
  • CBP entry examinations;
  • National and local CBP sources;
  • The five strategic trade targeting centers;
  • The nine regulatory audit field offices;
  • Import specialists;
  • Entry document reviews;
  • Cargo examinations by CBP inspectors;
  • Special agent investigations;
  • Informants;
  • The past compliance history of an importer, including prior disclosures; and
  • Violation reports by account managers. 

CBP additionally identifies and targets likely problem areas specific to an industry or an importer based on the trade data in the CBP Automated Commercial System (“ACS”) or ACE.  CBP also reviews the importer’s foreign suppliers, the HTSUS product classifications, or preference/exception claims as recorded in the ACS.

Information developed in a QRA may enable CBP to expand the audit. However, the QRA provides importers an opportunity to make prior disclosures to limit any penalties for identified potential violations.

In addition to using QRAs, CBP expects to achieve higher levels of compliance by processing all of an importer’s entries at the Centers for Excellence and Expertise (“CEEs”). CEEs are organized into different trade sectors around the country.  While the CEEs presently limit participants to those importers who are enrolled in CBP’s trusted shipper programs (C-TPAT and ISA members), CBP expects to broaden participation to more importers. Importers who participate in the CEE programs will have all of their entries processed through the CEEs and receive all CBP notices from the CEEs. CEEs are expected to improve the compliance levels of the participating importers due to more focused knowledge of the industry and the importer’s product line by the import specialists. The increased industry specialization by the import specialists may lead to more detailed Form 28 Requests for Information.

CBP is also developing the program of “One Face at the Border,” which seeks to involve other government agency personnel who regulate particular imported products, such as FDA, CPSC, and EPA, in the importation compliance process. One goal of this program is to enable importers to receive prompt advice on meeting other agency regulatory requirements affecting their importations, as well as on implementing compliance procedures.

Finally, the CBP Penalties Branch has adopted a policy to reject prior disclosures where the response to a Form 28 Request for Information evidences a violation, such as a misclassification or the omission of assists. CBP now regards a Form 29 Notice of Action issued to an importer as the initiation of a formal investigation of the violation, which may preclude a subsequent valid prior disclosure. For example, once CBP issues a Form 29 Notice of Action to reclassify a product, the importer is prevented from filing a prior disclosure to protect itself from further penalties or action by CBP.  Companies who are members of ISA, however, are entitled to be notified by CBP of a suspected violation, and allowed to make a prior disclosure within 30 days.

Importers must carefully evaluate how to respond to a Form 28 Request for Information from CBP and should perhaps contact a Customs law specialist before responding to CBP.

We recommend that importers implement procedures to evaluate their potential risks of noncompliance and adopt internal controls over these activities to minimize these risks. This will aid importers in demonstrating the exercise of reasonable care and preparing for any QRA or FA audits.

If you have any questions about these or other Customs matters, please contact George Tuttle, Sr., at (415) 986-8780 or via e‑mail at george.tuttle.sr@tuttlelaw.com or George Tuttle, III, at george.tuttle.iii@tuttlelaw.com.

George R. Tuttle, Sr. and George Tuttle, III, are attorneys with the Law Offices of George R. Tuttle in San Francisco.

 

 

The information in this article is general in nature, and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence, and may not be considered as such.

 

Copyright © 2013 by Tuttle Law Offices. 

All rights reserved.  Information has been obtained from sources believed to be reliable.  However, because of the possibility of human or mechanical error by our offices or by others, we do not guarantee the accuracy, adequacy, or completeness of any information and are not responsible for any errors, omissions, or for the results obtained from the use of such information.

 

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