Informed compliance: Let Customs Form 28 be your guide

By Rodney C Schonland -- Logistics Management, 1/1/1998

By now, virtually everyone involved in importing has heard about U.S. Customs' new standard of "informed compliance." Informed compliance means that both individuals and their employers are required to know the U.S. import regulations, manage imports in compliance with those regulations, and be responsible for any actions that result in non-compliance. It also requires corporations to commit sufficient resources to ensure compliance.

That's a general definition, but how can an import manager exercise informed compliance in the course of his or her daily responsibilities? Customs Form 28 (CF-28 "Request for Information"), which the agency sends to importers when it requires further details on an entry, can serve as a guide to areas Customs considers to be essential to the exercise of informed compliance. Importers should be able to answer the following questions for any shipment:

Are the parties related? Are the buyer and seller related by means of one holding some portion of the other's stock (either 5 percent or sufficient shares to have a vote in the affairs of the corporation); by one's having direct ownership of the other firm; or by means of marriage or blood? A check with the secretary of the corporation is in order to answer this question responsibly.

Was the total value of the goods accurately reflected in the price shown on the commercial invoice at the time of entry? This is where Customs will be looking for assists, commissions, and royalties--stuff that always trips up the unwary (and oftentimes, the wary, too). The import manager usually will not know if the agreement between importer and exporter involves anything more than what is shown on the commercial invoice. To find out, he or she will need to check with the corporate finance department. There also should be a system in place that informs the import manager if the importer is loaning tooling, supplying startup capital, or providing other such dutiable assistance to the exporter.

Were any credits or debits approved after entry was made? This might include something like acceptance of a production-cost overrun, which typically is handled through accounting and therefore may have been "invisible" to the import manager. The only way to know is to consult the corporate accounting department. Note also that the informed-compliance standard requires importers to establish procedures that capture and report this type of information.

In addition to answering such questions, the importer will be asked to provide the following materials:

Additional documentation to prove that the invoice price is all-inclusive. Customs will want proof that the purchase order, sales contract, proof of payment, etc., all agree with the invoice. They also will make sure that the buyer, seller, and price match those on the invoice; that the exporter did not sell to one party and ship to another; that there is not one invoice for customs purposes and a different one for accounting; and that commissions, mark-ups, and similar items have been fully disclosed.

-Product literature. This helps Customs verify that the importer has indeed correctly classified the goods. Please note that informed compliance makes the importer--not the customs broker--responsible for correct tariff classification.

- A breakdown by weight, value, and other characteristics of the imported item. Answering this question requires detailed knowledge about the imported item, including how it was manufactured and cost accounting for its production. The import manager will need to involve accounting, engineering, and purchasing in order to answer this question.

Finally, the importer must sign and certify the CF 28 form. To do so legally, the signer must hold a limited power of attorney for the corporation, have been named in a corporate resolution as empowered to sign documents on the corporation's behalf, or be an officer of the corporation. If the person signing the form is not in one of those three categories, then the importer has not exercised informed compliance.

Under informed compliance, ignorance of the regulations is not a valid defense for omission or misstatement. Clearly, Customs is requiring an importer to manage its imports just as responsibly as it does any other part of its business.

Mr. Schonland is a Boston-based attorney who specializes in international trade, transport, and U.S. Customs law. He also is a licensed customs broker. He may be reached at 79 Milk St., Suite 1109, Boston, MA 02109. Phone: (617) 292-4551.