How To Survive A Customs Audit (page 3)
-- Logistics Management, 10/1/2005
Page 3 of 4
Another important preparatory step is to assess how all company departments affect import activities. For example, accounting decisions related to taxation may have a significant impact on customs valuation. Ideally, importers should identify any problems and take corrective action before the audit begins. The objective is to take action on their own terms, rather than ignore the issues and wind up negotiating the terms of a compliance-improvement program with CBP while the government holds all the proverbial cards in its hand.
There's no question that a Focused Assessment will require a great deal of time and effort on the part of the importer. Audits can take anywhere from a few weeks to several months. One of the first things the auditors and the importer do is to establish a mutually agreed-upon timeline for completion, with target dates for accomplishing the various tasks required for the audit. How much time will be necessary depends on the size of the company's import operations, how well it prepared for the assessment, and how well it fares in the PAS.
After the initial conference, CBP will provide the importer with a detailed questionnaire to complete. The questionnaire will require input not only from the company's compliance personnel but also from all of the functions that bear on the proper classification and valuation of imported goods. For example, accounting personnel may need to provide information about tax decisions that affect valuation; legal may need to provide information about the ownership of foreign subsidiaries. The CBP auditors will not remain on site but will stay in contact with the firm and request additional information as needed during the Focused Assessment.
At the beginning of this article, we suggested that importers could benefit from undergoing complex regulatory audits—an idea that at first glance may have seemed preposterous. Nevertheless, we think the Focused Assessment and ISA audit processes provide companies with the opportunity to manage their businesses more effectively.
That's because regulatory compliance is an integral part of a company's international supply chain, but few importers look at that function in such a broad context. A Focused Assessment, however, provides an opportunity to review import operations from the perspective of an integrated business process. It's also an opportunity to bring processes, people, and information together and to optimize the way they connect with each other.
Importers that have undergone Focused Assessment audits can also benefit by thinking of CBP as an integral part of their extended supply chains. The reason: It's said that a chain is only as strong as its weakest link, and in our view, the weakest link in an international supply chain often is the trip across the border and into the United States, where goods literally are in CBP's custody until they have been formally released.
Companies that operate effective and efficient supply chains know that each segment of those chains needs to be managed—even those over which they have no direct control. Yet few companies have considered what it takes to manage a relationship with federal regulatory agencies such as CBP. Yes, it can be risky to take an active posture toward the government, but the alternative is for importers to risk losing control of their goods to CBP for indeterminate periods. Continued...
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