U.S. Customs and Border Protection continues to utilize audit resources as part of its enforcement arsenal, but companies can take a number of steps before and during audits to mitigate their potential impact.
CBP’s audit group, now called Trade Regulatory Audit, uses a risk-based approach to assess importer compliance with trade laws and regulations. Audit efforts, which are often based on a referral to TRA, usually include collaboration with other CBP components, U.S. Immigration and Customs Enforcement/Homeland Security Investigations, and partner government agencies, as appropriate. TRA audits generally have targeted objectives and are compliance-driven, and depending on the objective may or may not include an assessment of the importer’s internal customs compliance controls.
In addition to these full-blown audits, TRA performs a number of non-audit services, such as risk analysis and survey assessments. RASAs are intended to allow CBP to quickly obtain information about a company’s import activities relative to a specific trade area or issue, and CBP’s perception of risk appears to be a determinative factor in whether an audit or RASA is performed. While RASAs can therefore be an opportunity to avoid a more intensive review, they can also turn into audits or other enforcement actions if they are not taken seriously. And, CBP intentions aside, RASAs are often not quick and feel like a full-blown audit, regardless of the result.
CBP statistics show that most audit-related activity has increased over the last five years.
- number of audits completed: from 435 in FY 2018 to 430 in FY 2022 (-1.1 percent)
- revenue collected from importer audits: from $42.2 million in FY 2018 to $77.7 million in FY 2022 (+84.1 percent)
- number of trade penalties issued: from 1,385 in FY 2018 to 2,121 in FY 2022 (+53.1 percent)
- total trade liquidated damages: from 9,214 in FY 2018 to 18,667 in FY 2022 (+102.6 percent)
- revenue collected from trade-related penalties and liquidated damages: from $15.5 million in FY 2018 to $19.3 million in FY 2022 (+24.5 percent)
These statistics highlight CBP’s increasing scrutiny of import compliance and the consequent need for importers to take proactive steps to maximize compliance while preparing for potential audits. Daryl Moore, customs audits and partnership programs leader with Sandler, Travis & Rosenberg, states that knowing your import data and characteristics and conducting regular internal reviews and risk assessments are important foundational measures because they can help companies identify problem areas and determine how to respond before the government gets involved. If these processes do reveal actual or potential violations the importer has the opportunity to submit a prior disclosure, which can help reduce any penalties that may ultimately be assessed.
There are also things importers can do during an audit/RASA to make the process go more smoothly, Moore states. These include taking the initial contact seriously and engaging experts early to determine what CBP is after, recommend how best to respond, and represent the importer’s interests in dealings with the agency. Perhaps most importantly, Moore adds, importers should have qualified service providers review any information before it is submitted to CBP. This step alone can significantly reduce the time and expense of an audit.
For more information on CBP audits/non-audit services and how to increase your import compliance, please contact Daryl Moore at (202) 730-4976 or via email.
Copyright © 2024 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.