Importers Should Expect Suspicion From CBP Over Country of Origin Changes Away From China, KPMG's Zuvich Says

Importers need to be ready to defend to CBP any changes in country of origin that moves a product outside the Section 301 tariffs on goods from China, said Doug Zuvich, a partner in KPMG's Trade and Customs Services group. Zuvich, a former customs auditor, and others at KPMG discussed rules of origin during a Nov. 30 webinar. "It's really important to know the mindset from Customs, that they're going to come at this most likely thinking the worst," Zuvich said.

CBP is taking advantage of its Centers of Excellence and Expertise to scrutinize changes to importing practices, Zuvich said. "As they see issues, as they see one company have an issue, let's say it's around bicycles or whatever, they take that issue and they apply it and they test to others in the same industry to see if people are having the same situation," he said. "So, for example, if there's an origin issue for a manufacturer of a bicycle, they are going to look in their data who else is importing from that manufacturer of bicycles and they are going to go out and they are going to target it. So they are getting very sophisticated." Expect CBP to "come strong" and with the five-year statute of limitations, the agency may pursue issues long after the tariffs are gone, he said.

A company should make a point of having "well-documented origin analysis" for any country of origin changes, he said. That should include information on "exactly what's being done where," what rulings were relied on and potentially an opinion report from an independent party, Zuvich said.

Importers also need to be careful about relying on information from suppliers, Zuvich said. "It is the importer's responsibility to be able to prove about what the origin is," he said. The supplier is "not the one that is going to pay the duties," he said. Having evidence showing reasonable care should mean there won't be penalties, even if CBP doesn't agree with the positions, he said.