If you are new to importing goods into the U.S., you may find yourself overwhelmed with the many requirements, restrictions and regulations involved. To this end, a baseline understanding of Customs & Border Protection regulations and requirements is paramount for success.
CBP is the nation’s border enforcement agency for controlling, regulating, and facilitating the movement of carriers, people and commodities into the United States.
CBP is also responsible for detecting and investigating fraudulent activities intended to avoid the payment of duties, taxes and fees, or activities meant to evade the legal requirements of international traffic and trade. Such violations often occur even without the importer’s intent or knowledge.
Where Should You Start?
It is the importer’s responsibility to obtain and submit the necessary documentation for customs clearance. For every shipment, US law requires the importer to have researched all the applicable requirements, up to a level described in the law as “reasonable care.”
In addition, as part of the Department of Homeland Security (DHS), CBP requires companies to pay close attention to the physical security of their supply chain and import shipments; these security obligations may add to compliance requirements and exist regardless of whether any import duties are due.
Bringing Cargo into the US
When a shipment arrives at the port of entry in the United States, a customs entry document must be filed. This can be done either directly by the “importer of record”, or through a licensed Customs Broker acting on behalf of the importer.
The goods being imported will not be ready for use or consumption until CBP has approved and released the cargo, and all applicable customs duties and government fees have been paid.
Required Customs Documentation
The minimum required documents for cargo imported into the US, for customs entry include:
- Bill of lading or airway bill
- Commercial invoice
- Certificate of origin (If claiming duties or quota exemption under specific trade agreement)
Often, additional requirements may be necessary, including:
- Customs Bond (to ensure that revenue is adequately protected)
- Importer Security Filing (ISF).
Permits and certifications (such as government certifications) may also be required for customs clearance if such goods must be cleared or are regulated by a partner government agency.
You Just Received a CBP Request for Information, Should You Be Concerned?
Customs may seek information through a CBP Form 28 – Request for Information (See e.g., 19 CFR 151.11, 181.72) for any cargo imported into the US, even after entry.
CBP Form 28 (also known as a “RFI”) is typically used when the electronic information and entry summary package has insufficient information that makes it difficult to determine admissibility, application of antidumping/countervailing duty determinations, appraised value, or classification of imported merchandise. These RFI’s can range from simple requests for samples and invoice clarifications to extensive documentation supporting a trade agreement qualification.
In many cases, the importer should readily have the information requested by CBP and the burden of responding may be minimal. However, there are times when, depending on the information sought, collection and presentation of the information can be arduous. This usually requires the importer to collect detailed production documentation (including detailed cost information) the supplier may not want to share with the importer.
Even once the information is gathered, the presentation of the information to CBP usually requires significant organization (possibly translations) and careful analysis.
Notices of Action
If CBP determines that the entered rate/classification is incorrect, or the entered value of imported merchandise is too low (or other errors were made in the entry), the importer will receive notice via CBP Form 29 (Notice of Action; 19 CFR 152.2). This form normally gives the importer notice regarding liquidation of the entry (final tally of money owed to CBP based on duty rates and imported value).
What Are Your Options?
One available option is Prior Disclosure, often regarded as a “safe harbor” by which importers may report errors to CBP regarding classification or valuation, or other incorrect information associated with the entry of cargo.
When properly prepared and timely filed, a prior disclosure protects the importer, and can significantly reduce the penalties that would have been imposed had CBP initiated an administrative penalty action. In a case involving negligence (or gross negligence), CBP is limited to collecting interest on the liquidated amount to is determined to be owing and outstanding.
The prior disclosure must advise CBP of the circumstances of the violation, including:
- Nature/type of errors or incorrect information submitted
- identity of the entries or period to which the disclosure relates
- correct information that should have been given
- tender of additional amount owing
It’s All About Timing
Timing of prior disclosure is critical and will usually only be valid if it is filed before CBP initiates a formal investigation of the wrongdoing, or knowledge by the importer of a pending investigation. While a properly prepared prior disclosure can shield an importer from significant penalties, an improperly prepared disclosure will result in loss of such protection (and will have notified CBP of an existing problem).
In the case of fraud (but not negligence), if CBP determines that a violation has occurred, CBP has authority to recover duties up to five years from the date of entry or date of discovery, in addition to potential penalties. 19 USC §1592. As a result, the importer should be clear in its prior disclosure that it was (arguably) not guilty of fraud, but only negligence, even if gross negligence.
The importer always has the burden of producing the information to CBP. As a practical matter, the importer therefore has the obligation to turn over information. But if the matter develops into a penalty action and goes to court, the Government then has the burden of proof.
As discussed, navigating import decisions in strict compliance with CBP rules and regulations is critical for success. If anything, importers should error on the side of caution to ensure that their cargo is free from common pitfalls that prove costly and burdensome.
Should you have any queries on this article or in relation to other areas of CBP please do not hesitate to get in touch.