RANCHO MIRAGE, Calif. — Because Customs and Border Protection performs hundreds of regulatory audits each year, and the agency provides only two or three weeks advance notice of the audit, importers must always have their house in order if they want to pass what can be an excruciating exercise.
An industry expert who addressed the National Customs Brokers and Forwarders Association of America’s annual conference Thursday presented a checklist of measures importers should implement in order to be ready for the audit process, with the most important step being to maintain a system of internal controls.
“The key to compliance is to establish and implement internal controls,” said Adrienne Braumiller, a Dallas attorney who specializes in trade and customs law.
Customs has scheduled about 680 audits this year, with companies that import $10 million or more being more likely than smaller importers to face an audit, Braumiller said.
CBP has maintained a regular system of audits for the past 40 years. Audits ensure that importers are complying with customs commercial requirements, are refraining from fraudulent activities and are paying all of the duties they should be paying.
Some characteristics appear to trigger a higher number of audits. Companies that import from high-risk trade countries, imports that have high duty rates and companies that import from countries with which the U.S. has foreign trade agreements are often targeted. Certain commodities that have rates of violations such as textiles and apparel also attract a large number of audits.
Customs moves quickly once it chooses an importer for an audit. The agency sends a letter to the importer saying the company will be visited by an audit team, and the auditors usually arrive within two weeks. A preliminary conference is held to inform the company what CBP is looking for, and the team follows with interviews of staff involved in the audit process.
Auditors expect access to all records pertinent to imports. “You better know where your records reside, and have a plan to retrieve the documents,” Braumiller said. Customs would like to have the documents in seven to 10 days, but legally, the company can extend the time to 30 days, she said.
CBP will review the records of import transactions, and the auditors will evaluate what is in the documents. They will follow with an exit conference and will conclude with an audit report.
Because little time is available to prepare for an audit, compliance must be part of a company’s culture, and that means a system of controls, compliance manuals, employee training and supervision must be in place and enforced.
“If there are no internal controls in place, you will fail the audit,” Braumiller said.