Customs Compliance

Customs Risk Management through Compliance

The main objective of a business involved in international business transactions is to ensure a seamless and uninterrupted supply chain at a reasonable cost while minimizing business risks. Managing your Customs compliance responsibilities is the key element in reaching this objective and goes beyond properly filing an entry summary. Your Customs compliance program should include, and should not be limited to, tariff classification, valuation, country of origin and marking, product admissibility, product safety compliance, product labelling compliance, internal reviews of your Customs entries, proper recordkeeping, compliance improvement plans, and staff compliance training.

 

The more time consuming your import-export transactions are, the more your transaction costs increase. Compliance makes good business sense because it decreases non compliance costs and it makes your staff more productive by keeping them focused on your core activities instead of on "fixing" non-compliance administrative issues. An "effective compliance program" is one that incorporates compliance best practices. McNeese can provide and support your staff with compliance best practice skills.

 

Where is Customs coming from and where are they taking me? To know where the road leads, you have to know where the road begins...

 

Section 13 of the U.S. Judiciary Act of July 31, 1789 required the owner or consignee of imported goods to file an entry for his merchandise and provide Customs officers with original invoices and bills of lading along with an oath stating that the price and quantity information contained in those documents was accurate to the best of his knowledge. If a person filing an entry later became aware that the information was incorrect, he had the legal liability to file a corrected entry. Only after these formalities were satisfied, and duties paid or guaranteed with a surety bond, was a permit to unlade the goods issued.

 

The accuracy of import-export information is consequential because it affects Customs revenue and trade statistics which are needed to enforce trade agreements. Accuracy was so important to the U.S. legislator, that in 1818 invoices covering goods subject to ad valorem duties had to be certified under oath before a revenue collector or a U.S. Consul abroad.

 

As merchandise descriptions and transactions became more complex, classification and valuation laws changed and it became necessary for Customs officers to review additional documents beyond just the commercial invoice to determine the correct customs classification and value. The earliest laws allowing Customs officers to demand post-entry compulsory production of documents were primarily concerned with valuation issues.

 

In 1890, the Customs laws were amended to permit Customs officers to order the compulsory production and examination of records related to classification and valuation.
From 1890 and until 1978, the Customs laws (including sections 509-511 of the Tariff Act of 1930, 19 U.S.C. §§1509-1511) authorized Customs officers to inspect an importer's "books, papers, records, accounts documents, or correspondence pertaining to the value or classification" of his imported merchandise. If the importer failed to permit the inspection, his importations could be prohibited and delivery withheld.

 

In 1862 the U.S. Internal Revenue Service was created by President Lincoln and Congress to pay for Civil War expenses. As you can see U.S. Customs has almost a century more experience than the IRS, so you would be well informed to take note that U.S. Customs has more experience than the IRS and Customs can be tough as nails. Just as you would hire a professional tax advisor to prepare your IRS returns, you may want to hire a Customs advisor to ensure that your Customs compliance efforts are truly effective and protect you from unwelcome surprises, while ensuring that you pay the legally minimum amount of Customs duties and related taxes and fees you may owe, no more and no less.

McNeese Customs & Commerce srl can assist you with your areas in the following fields of Customs Compliance:

 

Customs Tariff Classification:

  • Proper classification
  • Tariff planning & engineering - this involves tariff planning at the article design level by evaluating which components and compositions are more tariff-friendly.
  • Classification reviews including Entry Summary and Customs Declaration audits
    of your service providers' performance - based on Customs and tax law you are ultimately responsible for your service provider's declarations on your behalf.
  • Classification database creation
  • Harmonizing international tariffs - the EU (TARIC), Swiss (TARES), U.S. and Canadian tariff classifications are not always perfectly synchronized due to local differences in interpretation of the "harmonized system". McNeese helps exporters and importers find solutions which respect Customs rules and regulations.

 

Valuation:

  • Customs valuation
  • Transfer pricing
  • Aligning IRS and Customs Pricing (IRS Section 1059A) : A Customs ruling and Section 1059A of the IRS Code create a paradox for importers because Section 1059A assumes the underpayment of Customs duties in order to adjust the import value, but the Customs Service has held that 19 U.S.C. Section 1520(c)(1) does not apply in an underpayment situation. Due to Section 1592 of Title 19 of the Code of Federal Regulations taxpayers for five years are subject to underpayment penalties and even if they make a voluntary disclosure, such a disclosure, does not constitute a "reliquidation" which is required by Treasury Regulations, Sections 1.1059A-1(d). This is a delicate situation which must be carefully evaluated to minimize your business risks.
  • "First Sale" versus "Last Sale" Customs Valuation.
  • Preferential trade programs (QIZ, FTA, TPA, NAFTA, Free Trade Zones)
  • Anti-dumping and counterveiling duties

 

Customs Risk Management:

  • Fines and penalty mitigation based on a Restorative Justice approach
  • ACE application, and implementation to increase your cash flow up to 90 days
  • Customs Audits, Customs Focused Assessments, and Voluntary Tenders
  • Customs prior disclosure assistance / proactive disclosure
  • Binding Ruling assistance to reduce classification errors, uncertainties, and risks

USA: Customs & Other Trade Barriers (pdf)

 

Source of U.S. Customs History: CBP