This article was written by Michael Anderson, Area Customs Director for DB Schenker USA.
Today, global trade comes with compliance risks. Import and export compliance violations can result in sanctions, fines, and the interruption or loss of privileges due to neglect or oversight. Government regulations have never been more complex, and the penalties have never been higher. This is particularly true when importing various goods from different countries of origins as there may be different filing requirements for each country. Having a proactive and comprehensive import (and export) trade compliance program is not only prudent, but necessary. In fact, U.S. Customs and Border Protection (CBP) encourages importers to work with licensed customs brokers to ensure full import compliance.
Requirements for Importing Goods and Materials to the U.S.
The responsibility for importing goods into the United States lies solely on the importer and the potential for error is great. Goods being imported need to have the right valuation and need to be classified accurately with the correct marking and country of origin. They also need to meet the ever-changing requirements of several U.S. government agencies. Here’s why having an expert team who can analyze your import compliance needs and put an actionable plan together for you is important.
Upon arrival to the U.S., the importer of record must file the required entry documents, pay appropriate duties on the merchandise, and receive authorization from CBP before their goods can be released from the port of entry. Entry filings essentially require thorough and accurate information encompassing the following:
- Description & Tariff Classification – all goods entering the US must be adequately described and include a properly assigned tariff classification which determines the amount of duties to be paid.
- Valuation – price actually paid or payable for merchandise when sold for exportation. Declared value includes all payments, whether direct or indirect, as part of the transaction. For instance, rebates, commissions, and packing costs are to be included.
- Country of Origin – all goods must include markings with the correct country where the merchandise originated. Origin plays a role inadmissibility, quota, applied duty rates, antidumping cases and other possible trade agreements or sanctions.
- Intellectual Property Rights – goods and packaging must not infringe or bear unsubstantiated trademarked or copyrighted markings.
- If accurate, timely, and compliant, CBP uses the information provided to assess duties and grant entry authorization. Here’s another way to look at the process.
Simplified Process Map of U.S.-bound Shipment
What Are the Risks of Noncompliance?
It’s very important companies importing to the U.S. understand their compliance responsibilities, associated risks and how to manage these risks effectively. Non-compliance with import (and export) regulations can carry serious penalties, the harshest of which is loss of importing and/or exporting privileges. It’s also important that other persons associated with the imported goods understand they also may be held responsible for meeting import compliance standards. In the past, if importing requirements were not met, the importer would be liable. However, a recent U.S. Court of Appeals decision has changed that to now, individuals associated with the importation even though not the importer of record, may also be liable for any trade or customs requirements not met. The table below explains some of the risks of non-compliance in terms of cost, downtime and reputation.
Noncompliance Can Be Expensive
CBP and the importer cooperatively operate under what’s referred to as “Informed Compliance,” whereby it is assumed and expected that importers both stay apprised of existing and changing U.S. regulations and laws, as well as practice good faith and reasonable care to ensure compliance. Severe penalties can be assessed for companies who are found non-compliant with U.S. laws and regulations. Whether intentional or not, entry filings reflecting omitted or inaccurate descriptions & classifications, valuations, country of origin, or other information can result in significant and costly headaches.
There are three key impacts non-compliant operations or supply chains with assessed penalties experience: costs, delays, and reputation degradation. Each influences the ease and efficiency of navigating the process of proper U.S. import compliance.
Increased Costs
• Regulatory penalties and fines
• Increased landed costs including corrective action and labor costs; opportunity and time-to-market cost; expedited and rush costs
• Missed duty recovery, reconciliation, leverage of FTA classification savings
• Liquidation or forfeiture of goods
Time-to-Market Delays
• Impacted time-to-market• Clearance delays and delivery disruptions
• Inefficient processes (e.g. not preparing import requirements at export)
• Repeat offender inspections and quarantine
• Poor reliability
Reputation Impact
• Inefficiency due to inaccurate declarations & filings
• Security vulnerabilities
• Poor reputation with CBP leading to increased scrutiny & inspections
• Non-compliance with CTPAT/AEO, FCPA/UK Bribery Act, etc.
• Sanctions & criminal proceedings (fraud, evasion, etc.)
What You Can Do to Manage Your Import Compliance Risks
Companies importing thousands of shipments a year must be vigilant in their recordkeeping and be prepared for a knock on the door inquiry about clearance on any specific shipment years prior. Best-in-class companies cultivate and instill an over-arching compliance culture, allocate dedicated personnel to the department, partner with companies with focused expertise, develop regular training or certification programs, and establish SOPs, audit, & reporting protocol for end-to-end alignment.
While the potential for violating import compliance regulations may be growing, companies importing goods and materials to the U.S. should look to this as an opportunity to better manage these risks. One of the most effective ways to reduce risk and liability is to partner with a company that understands the nuances of import trade compliance and can work with you and your organization to navigate the challenging U.S. import regulations. DB Schenker is that company and together we will review your import compliance procedures and put together a plan that will identify any pitfalls and ensure import compliance with U.S. CBP regulations.
