Increased Coordination, Targeting Seen From CBP Audits, Requests for Information, Customs Consultants Say

CBP’s use of audits and other enforcement tools has grown increasingly coordinated and targeted in the years since passage of the Trade Facilitation and Trade Enforcement Act of 2015, customs consultants from KPMG said during a webinar on Feb. 13. The passage of TFTEA marked the beginning of a “different era” than that launched by the Customs Modernization Act in 1993, with the pendulum “completely swung” from informed compliance to enforcement around priority trade issues identified in the new law, they said.

The Centers of Excellence and Expertise played a major role in that transition, KPMG's Andy Siciliano said during the webinar. The validation and compliance division, one of three divisions in each CEE, is now driving requests for information and audit referrals based on the industry-specific information that they’ve learned. CBP personnel at the CEEs are making phone calls to auditors on a daily basis and sending out requests for information on Customs Form 28 relying on risk segmentation and data analytics, he said.

As a result, any CF28s received from the CEEs is either being driven by data, industry knowledge or something wrong with an entry, Siciliano said. The days of CBP officers having quotas on the number of requests for information they must issue and issuing them randomly to meet those quotas “are behind us,” said Doug Zuvich of KPMG, formerly of CBP Regulatory Audit. CF28s are now coordinated requests that could be going out to an entire industry, essentially being used as a desk audit, that could turn into a single issue audit if CBP finds the response inadequate, Siciliano said.

Those single issue audits, also called quick response audits, can also be referred by ICE or be the result of an allegation, possibly stemming from CBP’s e-allegations system, Zuvich said. More and more, CBP will know of a particular issue within an industry, or have a hypothesis of one, and go out to several companies within that industry to perform single issue audits. Auditors are now “emboldened” to go beyond the importer of record to look at consignees or others that caused importation, and will even issue administrative summonses if a company doesn’t respond in time, Zuvich said. “They feel like they have the power of the government and [TFTEA] behind them,” he said.

Meanwhile, informed compliance letters continue to be an important tool in CBP’s enforcement arsenal. They’re a win-win for CBP because oftentimes the letters prompt companies to look into their own compliance programs and come forward with voluntary disclosures, Zuvich said. If not, the letters lay the groundwork for a finding of negligence by the importer by showing the importer was informed of a potential issue in the event the importer subsequently did nothing about it, he said.

Companies need to adapt to the new enforcement environment to match some of the changes at CBP, Zuvich said. Companies should enhance their processes and scrutiny around the priority trade issues outlined in TFTEA, including agriculture, antidumping and countervailing duties, import safety, intellectual property rights, revenue, textiles and apparel, and trade agreements. Companies and import compliance professionals should also collaborate more and combine different compliance functions, including areas like forced labor and intellectual property rights, in their roles, Zuvich said.

Companies should also match CBP’s use of data analytics tools so they can find compliance issues before CBP shows up at their doorsteps, and collaborate with industry counterparts and participate in trade associations to stay abreast of CBP’s priorities for enforcement, Zuvich said. Internal guidelines for responding to CBP requests for information should be enhanced to avoid audits due to incomplete or wrong responses, he said. Companies should also fully incorporate the use of voluntary disclosures as an integral part of their compliance programs to the point that they are “proud to do a disclosure,” Zuvich said.