The responsibility of an importer to exercise reasonable care when importing to the United States has been at the core of customs compliance since the implementation of the Customs Modernization Act (Mod Act) in 1993.
U.S. Customs and Border Protection has the expectation that importers must be knowledgeable and proactive in the conduct of their legal responsibilities. Unfortunately, as members of the trade community, we occasionally hear comments such as “I didn’t know”, or “My broker never told me”. The bottom line is that it remains the importer’s responsibility to have a comprehensive understanding of their obligations to Customs.
While customs law can be quite complex and somewhat bewildering, there are a relatively small number of very specific areas that form an importer’s foundation of compliance. As laid out in the U. S. Customs and Border Protection Informed Compliance Manual entitled Reasonable Care these specific topics are briefly outlined here:
Areas in which importers must exercise reasonable care:
- Use of external or internal experts
- Review of all customs documentation, inclusive of entry declarations, for accuracy
- Consistency in same or similar transactions across ports and modes of transport
- Appropriate adjustments or Prior Disclosures when errors are discovered
Merchandise Description and Harmonized Tariff Classification
- Having procedures in place to ensure that you are fully knowledgeable of the products you are importing – composition, country of origin, etc.
- Properly describing the merchandise to Customs according to regulations
- Ensuring that you are providing the correct tariff classification of the goods
- Verification of whether your goods are eligible for specific duty free status
- Procedures to ensure accuracy of your declared transaction value, per Customs regulations
- Are your transactions between “related” parties, and if so, ensuring that you are declaring the correct values to Customs?
- Assists, commissions, royalties, etc., declared as appropriate
Country of Origin / Marking / Quota
- Reliable procedures in place to ensure that the country of origin is declared correctly on your entry
- All articles imported into the U.S. must be marked with the country of origin/manufacture
- Processes established to determine and ensure that all necessary documentation is provided at time of entry
Intellectual Property Rights
- Ensure that you have the legal right to import merchandise that is protected by trademark or copyright
- Ensure that you are filing the correct type of entry and that all other gov’t agency reporting is attended to
Please bear in mind that this is the “short list”.
The Importer’s Role in Trade Compliance
An efficient and compliant import process starts with everyone involved understanding their role and responsibilities. It is crucial that importers:
- Understand their risks and responsibilities
- Establish processes that ensure that all reasonable care standards are met, and
- Ensure that these standards are monitored and enforced, safeguarding your continued privilege to import
Without having the proper knowledge of the responsibilities of an importer, and ensuring that you are both in compliance and have evidence of your actions, you may be at a higher risk for:
- Liquidated damages
- Various customs audits
- Increased costs of doing international business
- Supply-chain disruptions and delays
- Losing your import privileges
On the other hand, being knowledgeable about the expectations and acting with the expected due diligence, while not guaranteeing that you are not subject to an audit, does provide assurance that you are taking full advantage of allowable reductions in duty. Should Customs come knocking, you are prepared with appropriate responses to their questions.
Why conduct an internal customs compliance audit?
A thorough internal audit will help identify areas of risk and lay the foundation for your customs compliance plan.
Pacific Customs Brokers strongly encourages and advises every importer to conduct regular internal audits on their Customs transactions, and to use the Customs guideline in developing their internal controls and standard operating procedures. The above-mentioned informed compliance publication on Reasonable Care is a great starting point.
How Pacific Customs Brokers Can Help?
Without proper customs training or hands-on instruction a business’ internal auditor will find identifying risks or exposures challenging. Our Trade Advisors stand ready to assist you in conducting an internal audit, and in working with you to develop or recommend improvements to your internal controls.
Stay Informed of Changing Regulations
To help you better understand complex compliance issues and implement effective solutions we offer a comprehensive Trade Compliance Education program. Explore one of our upcoming in-person seminars, online webinars and/or hands-on workshops to learn more. In particular, you might be interested in Part 2 of the next U.S. Trade Compliance Seminar Series that takes a close look at Customs Audits and Importing Inspections. Learn more and register here!
Do you have questions about conducting an internal customs compliance audit? Ask our Trade Advisors. Leaving your comments below or email Ask Your Broker.