Why hire a customs compliance specialist?

If your company does not deal with the import process responsibly, ... then it is simply gambling.

By Rodney C. Schonland -- Logistics Management, 4/1/2000

Why hire a customs compliance specialist? That question is on the minds of many corporate managers today. For a business like Ford Motor Co., the answer is obvious. Ford is a huge company with large import volumes, so running afoul of the U.S. Customs Service could cost big money, delay the arrival of freight, and otherwise make the import process more painful than it already is. By hiring a customs expert, not only could Ford avoid such problems, but it probably also could reduce duties, taxes, and fees; import merchandise in a timely fashion; and in general, simplify international logistics. A less obvious but equally compelling reason is that Ford's stockholders would consider its board of directors to be personally negligent if compliance were not adequately and professionally managed.

That may be true for a big, publicly traded company. For everyone else, though, it comes down to weighing the economic tradeoffs between complying with the Customs Modernization Act and risking fines or audits. To borrow a line from Clint Eastwood, "Do you feel lucky?"

It's a cute analogy, but sadly true. If your company does not deal responsibly with the import process as described in the Customs Modernization Act and interpreted by U.S. Customs, then it is simply gambling.

If this is a gamble, then what are the stakes?

The most frequently used club in the Customs Service's bag of motivational tools is the merchandise inspection. Run afoul of customs for any number of reasons and the importer will find itself in a category of companies that have higher "profiles" for inspections. In a customs inspection, freight must be brought to a central exam facility prior to release, the container may have to be unpacked, and one can be certain that the imported goods will not be available for a couple of days. These extra steps can be very costly. For a single ocean freight container, the process probably costs the importer about $500.

Inspections are not the only tool the Customs Service uses to elicit "informed compliance" from importers. On the high end of the scale is the Compliance Assessment Team (read "customs audit"). The good news is that a CAT audit does not happen often. The bad news is that if an importer has not already undergone a CAT audit, then it should anticipate having one in the next two to three years. The worse news is that every company that has already had one is in for another fairly soon.

CATs are akin to medical exams and surgical procedures best left unmentioned in mixed company. The audits last about a year but can run longer. Imagine having to provide cancelled checks for a year's worth of import invoices, a year's worth of warehouse receipts, and a year's worth of overseas purchase orders. Imagine having your company's general ledger examined and then having to prove that no foreign purchasers were hidden in the various payments to domestic vendors. And of course your company has kept all of those records from 1997 and can explain anything that does not exactly balance out!

Here's some free legal advice: Hire a customs compliance specialist. You will recover his or her salary in savings on duties, taxes, and fees. Another benefit of hiring someone who knows this business is that it can provide corporate peace of mind. The alternative is something like asking your traffic manager to do the corporate taxes as a secondary responsibility.

"Well, do you feel lucky?"

Rodney C. 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 One Broadway, Suite 600, Cambridge, MA 02142. Phone: (617) 621-1560.