We’ve all been suffering with the effects of COVID-19 – working from home, virtual conference calls, trying to meet customer requirements and moving parts, components, and supplies into your shuttered facility to keep the supply chain and the manufacturing processes moving forward.
On top of everything else, with imports coming in very slowly, Customs and Border Protection (CBP) has a lot of time on their hands, which translates into more scrutiny of those entries and more questions about what you thought was an easy transaction.
Increased Scrutiny by CBP
Recent developments within CBP indicate they are upping their game to review transactions to determine if your company is in that high-risk zone that may indicate violations. Here are several areas that CBP is currently focusing on during their compliance reviews and are worthy of importers taking note:
- CBP has invested heavily in data mining tools to help them track down customs violations.
- Pandemic aside, there are many companies who are importing for the first time; or have increased the range of their imports.
- And China- it does not matter where the imports from China are coming from, they are drawing increased scrutiny. This includes increased reviews of 301 & 232 imports and the associated tariffs.
The result? There are more red flags being identified by CBP and then the follow-on- the dreaded CF-28 or CF-29. As previously suggested in an earlier blog, if you receive one of these notices, STOP! These requests are not to be taken lightly and require additional assistance to answer the response.
Five Areas to Focus On
As a compliance professional these are five areas you should focus your efforts on to ensure you have all of your compliance records in order:
1. Missing documentation for Free Trade Agreement Qualification: While you can enjoy the benefits of reduced or no duties under a Free Trade Agreement, you must be able to document, on demand, the items that qualify under the relevant rules of origin. This becomes more important as we move forward under the new USMCA qualifications for certifications to meet the Free Trade Agreement.
2. Missed Antidumping and Countervailing Duties: Pay attention to these situations via the following website: ADD/CVD. If your item falls within the scope of any order, make sure you have deposited the appropriate suggested tariff, as well as the required reimbursement statement.
3. Incorrect Valuation of Imports: Many times, the invoice price does not express the true value of an import at the time of entry. The transaction value of imported goods is the price paid or payable when sold for exportation to the U.S., and may include packing costs, selling commissions, royalty payments, engineering costs, and assists. Underpayments of duties can accrue faster than an importer may realize. It is extremely important for any importer (newbie or seasoned professional) to monitor any additional add-ons to what you thought was a simple purchase order.
4. Misidentifying Country of Origin: The difference in the country of origin could mean a difference in the duty owed. Understand from your vendor/supplier the exact country of origin of all products you are ordering so you, as a company, understand what is owed to the U.S. government.
5. Misclassification of items imported into the U.S. Customs territory of the U.S.: This is an important aspect of the Customs review. Importers are legally responsible for the misclassification of items and we suggest that you do not leave this important aspect to your Customs Broker or the foreign supplier.
Do not forget that once CBP believes there is a violation, they can go back five (5) years to review suspected entries. Should they find a business is in default, CBP has the authority to collect lost import duty revenue, plus interest. The bigger threat to an importer is that potential penalties may be imposed over and above the stated duties. Depending on what CBP believes the importer’s alleged culpability was, there could be penalties imposed of up to 100% of the value of the imported merchandise.
Compliance professionals must be on top of their import reviews by ensuring there is training within the supply chain on what valuation must consist of, reviewing the HTS classifications to confirm accuracy, and rechecking Free Trade Agreements to determine if they are still applicable or if something has changed – especially with the shift from NAFTA to USMCA.
If you find what you believe to be compliance issues, contact a compliance professional, such as Export Solutions, to help you review the documentation in order to determine how you should proceed.
Beverly Demma is a Sr. Consultant for Export Solutions -- a full-service consulting firm specializing in U.S. import and export regulations.