Background

Customs audits and related penalties are on the rise, but companies can take a number of steps before and during audits to mitigate their potential impact.

U.S. Customs and Border Protection has for many years utilized the focused assessment as its primary tool to conduct comprehensive audits of importers. The FA process generally encourages importers to take a more active role in identifying and remedying noncompliance and internal control deficiencies and helps CBP decide whether to initiate collection or other enforcement actions.

In recent years, however, CBP has conducted more single issue (quick response) audits, which are designed to address a specific objective within a short time, and audit surveys, which allow CBP to quickly obtain information about a company’s import activities relative to a specific trade area or issue. While these tools can be an opportunity to avoid a more intensive review, they can also result in full-blown audits or other enforcement actions if they are not taken seriously. 

CBP recently reported increases in audit-related activity in fiscal years 2020 and 2021, including the following.

- number of audits completed: 391 in FY 2019, 466 in FY 2020, and 442 in FY 2021

- revenue collected from importer audits: $43.1 million in FY 2019, $44.6 million in FY 2020, and $132.2 million in FY 2021

- number of trade penalties issued: 2,108 in FY 2019, 2,309 in FY 2020, and 2,394 in FY 2021

In other areas CBP has seen declines in the last year or two but longer-term increases.

- number of liquidated damages: 9,214 in FY 2018, 21,093 in FY 2019, 19,612 in FY 2020, and 19,834 in FY 2021

- revenue collected from trade-related penalties and liquidated damages: $15.5 million in FY 2018, $30.1 million in FY 2019, $20.0 million in FY 2020, and $21.7 million in FY 2021

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, vice president of customs audits and partnership programs for 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 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 and how to increase your import compliance, please contact Daryl Moore at (202) 730-4976.

Click here to access ST&R’s on-demand webinars on CBP audits.

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