United States Customs has enormous challenges in processing and overseeing the millions of entries of merchandise that are imported into the U.S. on a yearly basis. There are 326 ports of entries and the demand on Customs to assure compliance with the trade laws is a staggering endeavor. Customs focuses resources on designated Priority Trade Issues - high-risk areas that can cause significant revenue loss, hurt the U.S. economy, or threaten the health and safety of individuals. One of those Priority Trade issues is Penalties.
Penalties are used by Customs to promote the facilitation of proper importations, and improve the effectiveness of trade fraud remedies through strict swift punitive actions. Penalties are used in virtually all cases of violations, but in particular Customs focuses their use in conjunction with its other identified Priority Trade issues - antidumping and countervailing duties, import safety, intellectual property rights, revenues, textiles and trade agreements.
In each of these areas Customs is vigilant in searching and looking for things such as fraudulent goods; illegal transshipments; counterfeiting and falsification of documents; evasion of dumping or countervailing duties; attempts to enter previously denied goods through different ports; importers changing names, locations, and identifying information; and numerous other tactics that are used to circumvent the trade laws, fraudulently import goods and deny the government duties to which it is entitled. Customs will often find evidence of violations or potential violations through focused assessment audits, a risk-based approach to assess import compliance with trade laws and regulations. This audit approach includes assessing risks by reviewing corporate controls over trade compliance.
So, what does this all mean to the average importer? First and foremost the average importer who is trying to do things right, must understand that the concept of penalty assessments by Customs is not some illusory "it will not happen to me" idea. Customs has placed penalties as a Priority Trade issue. This speaks volumes about Customs' mindset. Customs stands ready, willing and able to assess penalties against importers with the primary emphasis on "willing". Second Customs is vigilant about what it is doing. This means that the average importer must be just as vigilant about complying with Customs' laws and protecting oneself as is Customs in enforcing trade laws.
The average importer must not take importing lightly. The importer must know the laws and understand their implications. Whether it is classification of merchandise, valuation of merchandise, NAFTA certifications, country of origin marking, dumping or countervailing duties, related party transactions or any of the long list of items central to importing, the importer must know the rules, or in the alternative accept that a penalty action is something which may someday be in the importer's future.
Importers cannot rely only on their customs broker for getting it right. The broker is only the importer's agent. The importer is responsible for the actions of the broker. Those entry documents filed with Customs that list the importer's name as the "importer of record" make the importer responsible for errors and omissions on the entry documents. The importer must work with the customs broker so that they both have knowledge of the transaction and all goes smoothly in the entry process.
The importer should have its own internal compliance program so that mistakes are caught before they go through the system, or if they do slip through the system they are picked-up and are not repeated. Importing records should be maintained and easily accessible so that if an audit should occur, the importer is already close to being ready for it. Formal rulings should be obtained from Customs and importers should rarely simply rely on what a Customs officer says. If it is not in writing, then its value is almost non-existent.
Many innocent importers who are trying to do it right have been caught in the gauntlet of a penalty investigation and even the assessment of a penalty. This can happen where there was in actuality no violation or one of minor significance. Nevertheless, defending against an audit or penalty action can be expensive from both financial and/or human resources perspectives. Customs has announced its intentions to the importing community. Importers should take notice and act accordingly.
