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Importing Chapter 3

Informed Compliance


6. DEFINITION

Informed compliance is a shared responsibility between Customs and the import community wherein Customs effectively communicates its requirements to the trade, and the people and businesses subject to those requirements conduct their regulated activities in accordance with U.S. laws and regulations. A key component of informed compliance is that the importer is expected to exercise reasonable care in his or her importing operations.

Informed compliance benefits both parties: When voluntary compliance is achieved, Customs resources need not be expended on redundant examinations or entry reviews for the importer's cargo found to be dependably compliant. From the trade perspective, when voluntary compliance is attained, compliant importers are less likely to have their shipments examined or their entries reviewed.

The Customs Service publishes a wealth of information to assist the import community in complying with Customs requirements. We issue rulings and informed compliance publications on a variety of technical subjects and processes. Most of these materials can be found at www.customs.gov.

We urge importers to make sure they are using the latest versions of any printed materials.

7. REASONABLE CARE CHECKLISTS

Reasonable care is an explicit responsibility on the part of the importer. Despite its seemingly simple connotation, the term reasonable care defies easy explanation because the facts and circumstances surrounding every import transaction differ, from the experience of the importer to the nature of the imported articles. Consequently, neither the Customs Service nor the importing community can develop a reasonable care checklist capable of covering every import transaction.

The Customs Service recommends that the import community examine the list of questions below. These questions may suggest methods that importers may find useful in avoiding compliance problems and in meeting the responsibilities of reasonable care.

These questions are intended to promote compliance with Customs laws and regulations, but be aware that the list is advisory, not exhaustive. The checklist is intended as a guide and has no legal, binding or precedential effect on Customs or the importing community.

The questions apply whether the importer of record conducts the transactions(s) himself or herself, or whether the importer hires others to do it.

General Questions for All Transactions:

  1. If you have not retained an expert (e.g., lawyer, customs broker, accountant, or customs consultant) to assist you in complying with Customs requirements, do you have access to the Customs Regulations (Title 19 of the Code of Federal Regulations), the Harmonized Tariff Schedule of the United States, and Customs Bulletin and Decisions? (All three are available from the Superintendent of Documents, Tel. 202-512-1800.) Do you have access to the Customs Web site, or Customs Electronic Bulletin Board (CEBB), or other research service that provides the information to help you establish reliable procedures and facilitate compliance with Customs law and regulations?
  2. Has a responsible, knowledgeable individual within your organization reviewed your customs documentation to assure that it is full, complete and accurate? If the documentation was prepared outside your organization, do you have a reliable method to assure that you receive copies of the information submitted to Customs, that it is reviewed for accuracy, and that Customs is apprised of needed corrections in a timely fashion?
  3. If you use an expert to help you comply with Customs requirements, have you discussed your importations in advance with that person, and have you provided him or her with complete, accurate information about the import transaction(s)?
  4. Are identical transactions or merchandise handled differently at different ports or Customs offices within the same port? If so, have you brought this fact to Customs officials' attention?

Questions by Topic: Merchandise Description & Tariff Classification

Basic Question: Do you know what you ordered, where it was made, and what it is made of?

  1. Have you provided a complete, accurate description of your merchandise to Customs in accordance with 19 U.S.C. 1481? (Also, see 19 CFR 141.87 and 19 CFR 141.89 for special merchandise description requirements.)
  2. Have you provided Customs with the correct tariff classification of your merchandise in accordance with 19 U.S.C. 1484?
  3. Have you obtained a Customs ruling regarding the description of your merchandise or its tariff classification (see 19 CFR Part 177)? If so, have you followed the ruling and apprised appropriate Customs officials of those facts (i.e., of the ruling and your compliance with it)?
  4. Where merchandise description or tariff classification information is not immediately available, have you established a reliable procedure for obtaining it and providing it to Customs?
  5. Have you participated in a Customs preclassification of your merchandise in order to get it properly described and classified?
  6. Have you consulted the tariff schedules, Customs informed compliance publications, court cases or Customs rulings to help you properly describe and classify the merchandise?
  7. Have you consulted with an expert (e.g., lawyer, customs broker, accountant, customs consultant) to assist in the description and/or classification of the merchandise?
  8. If you are claiming a conditionally free or special tariff classification or provision for your merchandise (e.g., GSP, HTS Item 9802, NAFTA), how have you verified that the merchandise qualifies for such status? Do you have the documentation necessary to support the claim? If making a NAFTA preference claim, do you have a NAFTA certificate of origin in your possession?
  9. Is the nature of your merchandise such that a laboratory analysis or other specialized procedure is advised for proper description and classification?
  10. Have you developed reliable procedures to maintain and produce the required entry documentation and supporting information?

Valuation

Basic Questions: Do you know the "price actually paid or payable" for your merchandise? Do you know the terms of sale? Whether there will be rebates, tie-ins, indirect costs, additional payments? Whether "assists" were provided or commissions or royalties paid ? Are amounts actual or estimated? Are you and the supplier "related parties"?

  1. Have you provided Customs with a proper declared value for your merchandise in accordance with 19 U.S.C. 1484 and 19 U.S.C. 1401a?
  2. Have you obtained a Customs ruling regarding valuation of the merchandise (see 19 CFR Part 177)? Can you establish that you followed the ruling reliably? Have you brought those facts to Customs attention?
  3. Have you consulted the Customs valuation laws and regulations, Customs Valuation Encyclopedia, Customs informed compliance publications, court cases and Customs rulings to assist you in valuing merchandise?
  4. If you purchased the merchandise from a "related" seller, have you reported that fact upon entry? Have you assured that the value reported to Customs meets one of the "related party" tests?
  5. Have you assured that all legally required costs or payments associated with the imported merchandise (assists, commissions, indirect payments or rebates, royalties, etc.) have been reported to Customs?
  6. If you are declaring a value based upon a transaction in which you were/are not the buyer, have you substantiated that the transaction is a bona fide "sale at arm's length" and that the merchandise was clearly destined to the United States at the time of sale?
  7. If you are claiming a conditionally free or special tariff classification or provision for your merchandise (GSP, HTS Item 9802, NAFTA), have you reported the required value information and obtained the documentation necessary to support the claim?
  8. Have you produced the required entry documentation and supporting information?

Country of Origin/Marking/Quota

Basic Question: Have you ascertained the correct country of origin for the imported merchandise?

  1. Have you reported the correct country of origin on Customs entry documents?
  2. Have you assured that the merchandise is properly marked upon entry with the correct country of origin (if required) in accordance with 19 U.S.C. 1304 and any other applicable special marking requirements (watches, gold, textile labeling, etc)?
  3. Have you obtained a Customs ruling regarding the proper marking and country of origin of the merchandise (see 19 CFR Part 177)? If so, have you followed the ruling and brought that fact to Customs attention?
  4. Have you consulted with a customs expert regarding the correct country of origin/proper marking of your merchandise?
  5. Have you apprised your foreign supplier of Customs country of origin marking requirements prior to importation of your merchandise?
  6. If you are claiming a change in the origin of the merchandise or claiming that the goods are of U.S. origin, have you taken required measures to substantiate your claim (e.g., do you have U.S. milling certificates or manufacturers' affidavits attesting to production in the United States)?
  7. If importing textiles or apparel, have you ascertained the correct country of origin in accordance with 19 U.S.C. 3592 (Section 334, P.L. 103-465) and assured yourself that no illegal transshipment or false or fraudulent practices were involved?
  8. Do you know how your goods are made, from raw materials to finished goods, by whom and where?
  9. Have you ensured that the quota category is correct?
  10. Have you checked the Status Report on Current Import Quotas (Restraint Levels), issued by Customs, to determine if your goods are subject to a quota category with "part" categories?
  11. Have you obtained correct visas for those goods subject to visa categories?
  12. For textile articles, have you prepared a proper country declaration for each entry, i.e., a single country declaration (if wholly obtained/produced) or a multi-country declaration (if raw materials from one country were transformed into goods in a second)?
  13. Can you produce all entry documentation and supporting information, including certificates of origin, if Customs requires you to do so?

Intellectual Property Rights

Basic Question: Have you determined whether your merchandise or its packaging use any trademarks or copyrighted material or are patented? If so, can you establish that you have a legal right to import those items into and/or use them in the United States?

  1. If you are importing goods or packaging bearing a trademark registered in the United States, have you established that it is genuine and not restricted from importation under the "gray market" or parallel import requirements of United States law (see 198 CFR 133.21), or that you have permission from the trademark holder to import the merchandise?
  2. If you are importing goods or packaging that contain registered copyrighted material, have you established that this material is authorized and genuine? If you are importing sound recordings of live performances, were the recordings authorized?
  3. Is your merchandise subject to an International Trade Commission or court-ordered exclusion order?
  4. Can you produce the required entry documentation and supporting information?

Miscellaneous

  1. Have you assured that your merchandise complies with other agencies' requirements (e.g., FDA, EPA, DOT, CPSC, FTC, Agriculture, etc.) and obtained licenses or permits, if required, from them?
  2. Are your goods subject to a Commerce Department dumping or countervailing duty investigation or determination? If so, have you complied with Customs reporting requirements of this fact (e.g., 19 CFR 141.61)?
  3. Is your merchandise subject to quota/visa requirements? If so, have you provided a correct visa for the goods upon entry?
  4. Have you assured that you have the right to make entry under the Customs Regulations?
  5. Have you filed the correct type of Customs entry (e.g., TIB, T&E, consumption entry, mail entry)? Additional Questions for Textile and Apparel Importers

Section 333 of the Uruguay Round Implementation Act (19 U.S.C. 1592a) authorizes the Secretary of the Treasury to publish a list of foreign producers, manufacturers, suppliers, sellers, exporters, or other foreign persons found to have violated 19 U.S.C. 1592 by using false, fraudulent or counterfeit documentation, labeling, or prohibited transshipment practices in connection with textiles and apparel products. Section 1592a also requires any importer of record who enters or otherwise attempts to introduce into United States commerce textile or apparel products that were directly or indirectly produced, manufactured, supplied, sold, exported, or transported by such named person(s) to show, to the Secretary's satisfaction, that the importer has exercised reasonable care to ensure that the importations are accompanied by accurate documentation, packaging and labeling regarding the products' origin. Under section 1592a, reliance solely upon information from a person named on the list does not constitute the exercise of reasonable care. Textile and apparel importers who have a commercial relationship with any of the listed parties must exercise reasonable care in ensuring that the documentation covering the imported merchandise, its packaging and its labeling accurately identify the importation's country of origin. This demonstration of reasonable care must rely upon more information than that supplied by the named party.

order to meet the reasonable care standard when importing textile or apparel products and when dealing with a party named on this list, an importer should consider the following questions to ensure that the documentation, packaging and labeling are accurate regarding country of origin considerations. This list is illustrative, not exhaustive:

  1. Has the importer had a prior relationship with the named party?
  2. Has the importer had any seizures or detentions of textile or apparel products that were directly or indirectly produced, supplied, or transported by the named party?
  3. Has the importer visited the company's premises to ascertain that the company actually has the capacity to produce the merchandise?
  4. Where a claim of an origin-conferring process is made in accordance with 19 CFR 102.21, has the importer ascertained that the named party actually performed that process?
  5. Is the named party really operating from the country that he or she claims on the documentation, packaging or labeling?
  6. Have quotas for the imported merchandise closed, or are they near closing, from the main producer countries for this commodity?
  7. Does the country have a dubious or questionable history regarding this commodity?
  8. Have you questioned your supplier about the product's origin?
  9. If the importation is accompanied by a visa, permit or license, has the importer verified with the supplier or manufacturer that the document is of valid, legitimate origin? Has the importer examined that document for any irregularities that would call its authenticity into question?

8. COMPLIANCE ASSESSMENT/COMPLIANCE MEASUREMENT

Of primary interest to the trade community is the compliance assessment, which is the systematic evaluation of an importer's systems supporting his or her Customs-related operations. The assessment includes testing import and financial transactions, reviewing the adequacy of the importer's internal controls, and determining the importer's compliance levels in key areas. Compliance assessments are conducted in accordance with 19 U.S.C. 1509.

The assessment is conducted by an interdisciplinary team composed of a Customs auditor, import specialist, account manager, industry expert (highly knowledgeable of the electronics or auto parts or surgical equipment industries, for example), and possibly other Customs specialists (attorney, inspector, scientist). The compliance assessment utilizes professionally accepted statistical sampling and auditing techniques to review selected import transactions from the company's previous fiscal year.

Compliance assessments will evaluate the company's applicable customs operations such as:

  • Record keeping
  • Merchandise classification/trade statistics
  • Merchandise quantities
  • Antidumping/countervailing duty operations
  • Quota conformity
  • Merchandise value
  • Warehouse or foreign trade zone operations
  • Merchandise transshipment
  • Special trade programs (GSP, CBI, others).

Companies found in compliance with Customs laws and regulations will get a report stating that fact. Companies whose systems are determined to be noncompliant will also get a report and will be asked to formulate, in cooperation with Customs advisors, a compliance improvement plan specifying corrective actions the company will take to increase compliance levels. Serious violations of law or regulation may result in Customs referring the company for a formal investigation or other enforcement actions.

By law, Customs is required to provide the importer with advance notice of an intended assessment and an estimate of its duration. Importers are entitled to an entry conference, during which the assessment's purpose will be explained and its duration provided. Using information from Customs databases about the company or the importer's industry, the compliance assessment team may have prepared questionnaires seeking specific information about the importer's internal procedures; these questionnaires will also be distributed at the entry conference.

Upon completion of the assessment, Customs will schedule a closing conference, at which its preliminary findings will be explained. A closing conference may not be scheduled for companies found to have serious enforcement issues. If no enforcement action is taken, Customs will provide the company with a written report of the assessment's results.

The Importer Audit/Compliance Assessment Team Kit (also called the CAT Kit), which provides extensive details of the assessment procedure, can be found at Customs Web site, or by calling the Customs Regulatory Audit Division office nearest you.

Compliance Measurement is the primary tool Customs uses to assess the accuracy of port-of-entry transactions and to determine the compliance rate for all commercial importations. By using statistical sampling methods, a valid compliance level for all commercial importations can be obtained. One of the Customs Service's goals is to assure that at least 99 percent of the import revenues legally owed the United States government are collected. Cargo is sampled for compliance with international trade laws at the port of entry, at the time of entry into the United States. Importers should be aware that misclassification of merchandise, among other violations, will be detected through the compliance measurement process.

9. A NOTICE TO SMALL-BUSINESS IMPORTERS

The Small Business Regulatory Enforcement Fairness Act was designed to create a more cooperative regulatory environment between federal agencies and small businesses.

Your comments are important. The Small Business and Regulatory Enforcement Ombudsman and 10 regional Fairness Boards were established to receive comments from small businesses about federal agency enforcement activities and to rate each agency's responsiveness to small business. If you wish to comment on the enforcement actions of the U.S. Customs Service, call 1.888.REG.FAIR (1.888.734.3247).

 
 
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