Annual Check Up

The start of a new year is a good time for a quick internal review. Here are some thoughts on things to consider. Trust me, this is not an audit plan. It is more like a draft menu for a compliance buffet.

Broker Relations
  • Who has a power of attorney from you?
  • Are there POAs that should be revoked?
  • Are there any that expired and need to be re-executed?
  • Was the service from my brokers satisfactory for the cost?
  • Is there a clear channel for communicating to the broker prior to the first import of new merchandise?

Entry Processing

Grab three random entries from each month of 2006. That's a total of 36 entries. For the first line item of each entry, do the following:

  • Confirm the HS classification. Don't just check your parts database. Instead, get a sample, picture, drawing or spec and look at the classification fresh. Have you properly applied all the relevant General Rules of Interpretation, Section and Chapter notes? Is you conclusion consistent with Customs and Border Protection rulings and the Explanatory Notes?
  • Check the reported value. Does the 7501 value match the commercial invoice and the proof of payment? Again, don't believe your system unless it ties directly into Accounts Payable. Are any non-dutiable charges supported by real documentation (rather than estimates)? Check with your finance people and see whether there were any payments to the supplier that are not reflected on the invoice. These might constitute dutiable assists, royalties, or indirect payments. If the goods were not actually sold to you, how was value determined?
  • Is the duty rate supportable? If you claimed, NAFTA, CAFTA-DR, GSP, AGOA, or any other duty reduction program, can you prove that the merchandise qualifies? Same goes for 9801 and 9802 entries. If your random sample does not include any duty preference programs, go pull some entries that do.
  • If antidumping or countervailing duty deposits were necessary, were they made and correct?
  • Check your inventory records. Does the quantity received match the quantity reported on the 7501?
  • Does the country of origin on the 7501 make sense given the location of the supplier and the shipping documents? Now go look at a sample and see if the item is properly marked. If not, what exception applies?
  • If the merchandise is branded, do you have proof of authorization to import from the trademark holder?

Post-Entry Activity

  • Review any communications you had with CBP last year. Did you respond to all inquiries and notices (e.g., CF28 and CF29)?
  • Do you have liquidation information on entries over 314 days old?
  • Do you have any supplemental information letters or protests outstanding with CBP? What's happening with them?
  • Review the (a)(1)(A) list. Where are your records? Are you confident you can respond to Customs in the event of a request for information?

Cost Savings

Make yourself a corporate hero by looking for duty and other cost savings opportunities.

  • Send a memo to purchasing explaining what countries get duty preferences and under what circumstances.
  • Review your export operations for drawback opportunities.
  • Can you consolidate shipments to reduce the Merchandise Processing Fee?
  • Consider changing product specifications to change classifications to favorable duty rates (i.e., tariff engineering).

Planning

Lastly, go have lunch. Invite your colleagues from purchasing, engineering, receiving, and accounts payable. Explain to them the kind of information you need from them before merchandise shows up at a port. Tell them how grateful you will be if they keep you in the loop on new product development and changes in suppliers, prices, etc. Ask them to copy you on the routine reports they generate, even if they will rarely be of use to you because occassionally they will be very useful. These people need to be your friends. You might consider repeating this lunch quarterly.

Happy new year.

Comments

Anonymous said…
I was reading your blog and was hoping you could help with a little issue I'm having with using the 9802.00.50.60 tariff number. If you feel you could help please feel free to email me at lilbuggygal@aol.
May 1, 2007, 7:19:00 PM
Post a Comment

Popular posts from this blog

CAFC Decision in Double Invoicing Case

The Federal Circuit has issued a decision on the merits in United States v. Inn Foods, Inc.  There had been a previous decision on jurisdiction, which was followed by a trial at the Court of International Trade and then this appeal on the substance. The initial issue is whether Inn Foods' invoicing practice amounts to fraud.  Inn Foods had been receiving an invoice from growers in Mexico that had a relatively low sales prices on it.  Subsequent to entry, Inn Foods created a second invoice at something more similar to market value, retaining the original invoice number, and paid at that higher amount.   Superficially, this looks like a standard-issue double-invoicing scheme.  But, in the age of reconciliation, is it really more like a provisional pricing mechanism?  It might have been possible to make that argument had Inn Foods adjusted its entries accordingly.  It didn't and the loss of revenue was approximately $624,000.  Based on testimony and evidence indicating both knowl
Read more

Ninestar and UFLPA Exhaustion

Image
Exhaustion is a key doctrine in administrative law. When applicable, it requires that a party unhappy with an agency’s determination complete the administrative appeal process before turning to the courts for judicial review. Requiring exhaustion typically promotes judicial efficiency by ensuring that disputes are resolved at the agency and, if they are not, that there is a complete record of the agency process. Exhaustion also ensures that the judiciary respects the executive agencies and their expertise.  There are, on the other hand, times when the courts will find that exhaustion is not necessary or appropriate. Such is the case in  Ninestar Corporation et al. v. United States  et al., a decision of the U.S. Court of International Trade.  Ninestar is also interesting because it is one of the first cases in the CIT involving the Uyghur Forced Labor Prevention Act, known as UFLPA. In my hiatus from active blogging, I missed the rise of UFLPA as a major compliance topic. So, let's
Read more

Precious Tritium

Image
One thing I have learned as a customs lawyer who does a lot of classification work is that there are millions of odd items moving in international trade the existence of which I am completely ignorant. Such is the case of the gaseous tritium light sources used in, among other things, firearm sights. These things use tritium sealed in a glass that has been coated in phosphor. The radioactive tritium decays, releasing beta particles, which interact with the phosphor causing it to emit light. In other words, it creates light with no external power source. Pretty cool.  Tritium is, of course, a real thing. It is an isotope of hydrogen. We know this from the excellent documentary "Spider-Man." This comes up in relation to the Court of International Trade decision in Trijicon, Inc. v. United States  in which the importer challenged the tariff classification of several versions of the gaseous tritium light sources ("GTLS"). The plaintiff uses them to make gun sights. The
Read more