Welcome to Weise Wednesday! Twice a month we will share a brief Q&A with the former U.S. Commissioner of Customs, Mr. George Weise. If you have questions, we encourage you to send them to This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Q:  What are the potential consequences for an importer if a CBP Focused Assessment does not go well and the importer is determined to pose an “unacceptable” risk of noncompliance with trade laws and regulations?

A:  There are many reasons why CBP may determine through a Focused Assessment that an importer poses “unacceptable” risk from a compliance standpoint.  Generally, such a determination is made if the Focused Assessment uncovers instances of “material” non-compliance, repetitive instances of “immaterial” noncompliance, or identifies significant internal control deficiencies within the organization.

Some of the more common internal control deficiencies found by CBP include:

  • No internal control procedures in place
  • Not monitoring or verifying broker’s work
  • No testing of entries for accuracy
  • Not maintaining or updating classification data bases
  • Other departments within the company not communicating potential Customs-related information (e.g., assists) to the import department

The consequences of “unacceptable” compliance risk

The potential consequences of a company posing an “unacceptable” compliance risk can be severe. There may be significant fines and penalties if CBP determines that the company was negligent, grossly negligent or, in a worse-case scenario, fraudulent in its transactions.  If the situation is particularly bad, CBP could proceed to Assessment Compliance Testing (ACT), which is a more intense audit of past transactions to assess the magnitude of potential revenue loss.

More often than not, however, before launching an ACT, CBP will allow the importer to prepare a Compliance Improvement Program (CIP) to address deficiencies found during the initial phase of the Focused Assessment.  CBP will work closely with the importer in establishing reasonable timeframes for developing and implementing the CIP and will closely monitor progress on its implementation.

A well-prepared CIP that addresses specific corrective actions, identifies responsible individuals, and sets implementation timetables is a key factor in whether CBP decides to move to the ACT phase of audit.  It could also be a factor in mitigating potential penalties if CBP determines that the corrective actions effectively address the problems uncovered in the initial Focused Assessment.