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Q:  Recently there have been rumors that CBP’s Office of Regulatory Audit is moving forward with a new approach in auditing importers, with an emphasis on audit surveys and quick response audits, in addition to the traditional Focused Assessment program. This could result in higher penalties for non-compliant importers.  Is this true, and what does it mean to importers?

A:  Based on discussions with senior officials at CBP, it appears that CBP is looking to enhance their use of limited audit resources to better assess risk and optimize importers’ compliance performance.  Since a full-scale audit must follow stringent GAO standards, it usually takes nearly two years to complete and is highly labor intensive.  Under the new approach, CBP is utilizing an internal risk model to identify priority audit candidates.  Importers falling into this category will either be sent an “audit survey” focused on particular areas of concern or a letter containing an “informed compliance package” referring the importer to relevant CBP Informed Compliance publications.


Audit Surveys

Audit surveys have been used by CBP for several years, but are expected to be used much more frequently under the new initiative.  The surveys are most likely to be used when CBP determines that an importer presents a potential compliance risk in a priority trade area (e.g., intellectual property rights, anti-dumping, etc.), but feels more information is needed to assess that risk. 

Based on the importer’s responses to the survey, CBP will be able to make an informed judgment as to whether evidence of non-compliance exists and decide whether a more formal audit process is in order.  Or, if they are satisfied with the importer’s responses to the survey and the steps the importer has taken, they can simply determine that no further action is required.  CBP believes this survey approach will allow them to use their limited resources and available information to better tailor the appropriate course of action in each case.


Informed Compliance Packages

If, rather than an audit survey, an importer receives a letter with an “informed compliance package,” including a DVD of CBP Informed Compliance publications, this is a clear indication that CBP has information, which leads them to believe that problems exist and that a more comprehensive audit may be in order.  CBP’s hope is that such a letter will prompt a serious self-review by the importer, which will result in corrective action and possibly a Prior Disclosure by the importer that could preclude the need for a more formal audit.  The letter states that, because the importer has been provided the background information, “violations that may occur in the future could result in seizure and forfeiture of imported merchandise and/or the assessment of monetary penalties.”


Commitment to the Mod Act

This new approach by CBP has been launched in the spirit of the Customs Modernization Act’s key concepts of “Informed Compliance” and “Reasonable Care.”   CBP believes they have done their part through the publication of many documents, webinars, and conferences to inform the public of what is expected of them.  They have worked with the importing community and been tolerant of mistakes when importers have shown a commitment to improve their processes and procedures to get their transactions right in the future. Now they expect importers to clearly demonstrate a commitment to the exercise of reasonable care to get their transactions right, particularly in those instances when CBP has made a concerted effort to inform them.  Failure to do so is likely to result in increased fines and penalties and even seizures and forfeitures.

It is important to recognize the daunting task of the Office of Regulatory Audit. They are one of the smallest organizations in all of CBP, with only 350 auditors in an organization of over 60,000 people.  This initiative looks to use those resources in a much more efficient manner on a risk-based basis to optimize overall compliance.  The expectation is that the importing community will respond well to this initiative by doing their part to ensure their processes and systems are in place to achieve the highest level of compliance.


Takeaways for Importers

Clearly, importers should take very seriously the receipt of either an audit survey or a letter containing the “informed compliance package.”  They should ensure that all levels of senior management are aware of the receipt of either and that steps are taken to address the issues raised by CBP.  In the case of receipt of the letter, a serious self-review or self-audit should be launched involving all key stakeholders within the organization.

 If errors are found, importers should consult with their attorneys and seriously consider filing a Prior Disclosure to minimize the risk of penalties.  Most importantly, all importers should renew their commitment to the spirit of the Mod Act and exercise reasonable care in implementing processes and systems, including the incorporation of automation, where appropriate, to increase their compliance performance.  Self-audit mechanisms should also be put in place to maintain continuing high levels of compliance in the future.