Customs Compliance Manuals
Every company involved in international trade and dealing with the U.S. Customs and Border Patrol should have an explicit, up-to-date Customs Compliance Manual. For both importers and exporters, the cost in both time and money of establishing an individualized Customs Compliance Manual for their company is both a necessary and prudent expense.
Why Have a Customs Compliance Manual?
There are no set rules for who will be the focus of a Customs investigation and thereafter subjected to any subsequent penalties and fines assessed for noncompliance. While experienced importers and exporters may suffer less, there is never a guarantee that they will be any more immune from investigation than the newbie. Having an accurate and up-to-date compliance manual can mean thwarting fines and penalties that might otherwise have been assessed.
Furthermore, customs compliance manuals do provide immediate, tangible benefits. They not only streamline internal procedures, but the written manual itself provides evidence, to the extent it is ever necessary, of the company's commitment to following U.S. customs law. This can be very important in the event of a serious noncompliance situation; for example, under the federal sentencing guidelines, having an established compliance manual can mitigate the amount of criminal penalties assessed against an individual or his company. (United States Federal Sentencing Guidelines §A81.2.).
Why Not Have One?
Some entities may feel they have the money and resources to handle a sudden Customs intrusion. These companies have balanced the cost of establishing and maintaining a compliance manual, and they chosen to risk future fines and penalties rather than spend company revenue on a preventative measure. The problem here, all too often, is that these companies have underestimated the actual cost involved in achieving compliance after the fact. In hindsight, it is often proven wiser and more cost-effective to have a Customs Compliance Manual in place.
In other situations, companies are running lean and mean, and the expense of a Customs Compliance Manual may seem more of a luxury than a necessity. They do not feel that it is an expense that they can afford to make. This is only true, however, in the absence of an actual Customs enforcement proceeding. For the company running close to the edge, noncompliance can be the death knell of their entire operation.
What Is a Customs Compliance Manual?
Simply put, these manuals provide the nuts and bolts of how a company attempts to comply with federal customs law. The Who, What, Where, When, Why, And How of the company’s customs procedures and protocols are identified in the Customs Compliance Manual.
Customs Compliance Manuals need not be complicated; in fact, the best manuals are easy to read, and they’re short. Flowcharts, checklists, and tables are visual compilations of information whose use is encouraged.
Companies do offer Customs Compliance Manual templates for just this purpose. There are several online offerings, with products having a wide range of bells and whistles and all sorts of price ranges. However, these generic prototypes should never substitute for the individualized and customized documents necessary to meet your company's needs.
What Goes Into a Customs Compliance Manual?
First, ongoing and up-to-date address books with contact information should be included in every Customs Compliance Manual. Names, addresses, phone numbers, and personal email addresses for not only key company personnel, but also those of its legal counsel, customs brokers, consultants, along with trade associations and relevant governmental agencies should be listed as part of the compliance manual.
Second, Customs Compliance Manuals should reflect the company’s recognition and implementation of protocols to meet specific governmental concerns. This is especially true for (1) record-keeping (e.g., Sarbanes-Oxley); and (2) security (e.g., Customs Trade Partnership Against Terrorism (C-TPAT)).
Third, an effective Customs Compliance Manual reflects current law. Federal laws regarding import and export are constantly changing, as are those of the various foreign countries involved. Furthermore, the continued appearance of trade agreements, such as NAFTA and DR-CAFTA, along with their corresponding rules and regulations, also impact individual compliance and should be recognized in the Manual, as applicable to the company’s particular enterprise.
Customs Compliance Programs -- Focused Assessment Programs
Finally, every Custom Compliance Manual should be mirrored by a Company Compliance Program. And, every compliance program should have the following at a minimum:
- Acknowledgment of the applicable laws involved and the company’s individualized customs policy;
- Identification of standardized, formal procedures to be implemented internally when any violations are discovered and identification of those responsible for their implementation;
- A detailed description of the company's formal record keeping system regarding customs protocols;
- A description of the training policies and programs internally implemented regarding customs compliance;
- An overview of the company's internal review procedure, where the company itself discovers and corrects any divergence from the established protocols contained within the customs compliance manual; and
- A company-wide notification procedure encouraging (and protecting) employees to voluntarily report any internal noncompliance to either an internal employee or outside corporate legal counsel.
Focused Assessments
An audit by U.S. Customs usually begins with a simple phone call made to an importer, requesting information about its program. That phone call will be followed by a formal questionnaire, modified from a standard form to fit the importer’s circumstances. (U.S. Customs and Border Protection has published both its Audit Process Guidelines and its Standardized Questionnaire online at its website.)
The importer will be requested to complete the questionnaire, as well is providing copies of business records, which will usually include the following:
- the Company Organizational Chart;
- copies of the general ledger and other accounting records;
- its Import Policies And Procedures Manual; and
- specific Customs entries.
Customs will then decide whether or not to formally audit the company based upon the information they receive in response to the questionnaire.
What Should You Do When You Receive the Customs’ Phone Call and Questionnaire?
If your company is faced with a focused assessment, it is best to have a customs attorney involved from the initial phone call. If possible, do not speak to U.S. Customs without having legal counsel involved in the conversation.
Legal assistance is also wise to have in the preparation of the responses to the questionnaire; in the accumulation of its accompanying documentation; and in assessing internal control strategies and how best to present them, as the company's risk of regulatory noncompliance is being evaluated.
If your company has a current Custom Compliance Manual in place, as well as an active Compliance Program, the Focused Assessment should be relatively painless and short-lived. Without either of them, the Focused Assessment can quickly snowball into audits, fines, and penalties.
Can You Avoid Focused Assessments?
Yes and no. Any company can get a call from Customs at any time. However, focused assessments can be avoided by choosing to participate in a customs program known as "importer self-assessment" (ISH). This program essentially involves participating in a continuous audit process, which may be advantageous, depending upon your company’s particular situation.
How Fuerst Ittleman Can Help
Fuerst Ittleman routinely works with companies to create individualized Customs Compliance Manuals for their operations as well as establishing Compliance Programs that help, rather than hinder, daily operations.
By involving Fuerst Ittleman in both these tasks, clients save time and money as Fuerst Ittleman shares its years of experience in the efficiencies involved in both the creation of manuals and the implementation of compliance programs. Fuerst Ittleman also provides its specific legal and customs know-how to the client’s particular situation. Finally, the proactive hiring of experienced legal counsel can serve as evidence of the company’s reasonable care and due diligence in meeting customs compliance should there be a Customs review.
Finally, if and when Customs does make that phone call, Fuerst Ittleman stands ready to advocate for its client with the Customs representative -- and while Fuerst Ittleman’s job in these situations is made much simpler by an established Customs Compliance Manual and Customs Compliance Program, Fuerst Ittleman aggressively advocates for all its clients over every aspect of any focused assessment by the U.S. Customs and Border Patrol.
