In past posts, we’ve suggested that the responsible importer-exporter create, maintain and adhere to an internal trade compliance calendar. See (The Annual (Pain) of Free Trade Agreement Solicitations and Analyses, The Annual (Less Painful) Harmonized Tariff Schedule Classification Review, C-TPAT (Customs-Trade Partnership Against Terrorism) : What Records Do You Need, Shipper Import-Export Declarations & The Ides of March: Check Your Brokers & Forwarders). This helps document the importer-exporter’s efforts toward complying with all applicable laws and regulations under the reasonable care/due diligence standards with supporting documentary evidence, as well as identifying potential errors or omissions early on, with the opportunity to make corrections to transactions and processes before material violations occur.
Many importers-exporters relying on various factors when making transactional declarations that might lead to certain material variances in the essential data elements of those declarations. If undetected and uncorrected, these can be construed to be violations of law or regulation and lead to fairly hefty potential penalties. In a lot of cases, there is a misperception that if there is no loss of revenue to the government, for example where there are imported goods that are statutorily free of duty, then reporting corrections to underlying transactions isn’t necessary, In the U.S., nothing could be farther from the truth: penalties for non-revenue loss violations are GREATER than those for revenue loss violations on the theory that the government requires accurate trade statistics along with an correct collection of customs duties and any other associated indirect taxes. See 19 CFR §162.73(a) et seq http://www.law.cornell.edu/cfr/text/19/162.73
And generally speaking, these duties (and potential taxes) are collected on an ad valorem (a percent of the underlying VALUE) of the imported goods so ensuring that the value is accurate is of utmost importance.
Typically, at the time of importation, the importer relies upon, and makes declaration to the government on any values listed on the foreign exporter/suppliers documents, primarily a commercial invoice.
Without a full-blown discussion on the various customs appraisement methodologies, let’s simply agree here that the above practice is typical and lawful for sales from a foreign party to a (US or other jurisdiction) importer; and that there are plenty of other scenarios that give rise to an import; that in all cases, there must be a value for customs purposes that needs to be declared to make entry and release; that the value(s) presented are, among other elements, the basis for the assessment of the duties and taxes collected.
As such, the government is very interested in assuring that the values presented are accurate and complete. And, of course, it’s the importer’s responsibility to assure that the values presented are, in fact, accurate and complete. So….How to?
One best practice is to compare the values presented at the time of entry to those that can be verified, post-importation, from the importer’s internal ERP/systems. We recommend a quarterly review of this kind, such that any identified material variances can be presented to (US) Customs via the quarterly Post-Entry Amendment (“PEA”) process [See https://help.cbp.gov/app/answers/detail/a_id/1271/~/import—protest%2Fpost-entry-amendment ]; OR, if the importer is under a value reconciliation program, consolidated for an annual or periodic cost submission [See http://www.cbp.gov/trade/entry-summary/reconciliation ]
Working closely with your Customs Broker, you should be able to get data feeds for entry data PLUS additional data elements required to tie the import data to the internal ERP/System data, notably (a) unique part number(s); (b) Supplier Invoice Number and (c) your Purchase Order (“PO”) number. For the referent time period, for example the previous quarter, extract receiving and corresponding actual payment data and match to the import entry data. Identify any variances between values declared and quantities/funds received/paid. Add in any non-reported statutory additions, such as Assists [See 19 CFR §152.101 et seq http://www.law.cornell.edu/cfr/text/19/part-152/subpart-E ]. Then report, under the appropriate method, any material variances.
Operating within standardized operating procedures that identify, capture, and properly process any potential violations keeps your company safe from penalties.
Let Livingston GTM trade consulting help you set up your procedures today!
© Randi S. Waltuck, 2014 All Rights Reserved.
Global Trade Management (“GTM”)
Randi Waltuck (Barnett)
GTM Solutions Consultant