Focused Assessments and Compliance Improvement Plans

Importers are chosen for a Focused Assessment (FA) audit by US Customs for any number of factors related to, inter alia (i.e., “among other things” in everyday language), the type of products imported, the gross dollar value of annual imports, or the way in which entry summary declarations have been prepared.

Where Customs finds that an “unacceptable risk” exists following the completion of the first part of an FA, known as the “Pre Assessment Survey” (PAS), it is not uncommon that it will recommend that the importer prepare a Compliance Improvement Plan (CIP). This plan is prepared by the importer and is supposed to address what types of corrective action the company will take in order to correct the deficiencies identified by Customs, as well as to ensure future compliance.

Examples of deficiencies that could be dubbed an “unacceptable risk,” include that of an incorrect classification, and hence, the issue regarding the payment of the correct amount of duties arises, the lack of inclusion in the dutiable value of something known as an “assist,” which could be the additional cost of a hanger provided to the foreign vendor by the importer, or a failure to have the requisite approvals in the entry packet for the usage of another company’s logo on a product.

The rule is that where an importer elects to implement a CIP, it has a conditional period of six months from the date of the audit report to implement the CIP. Be aware that although this is the rule, a CIP may be asked of an importer where only the draft conclusions to the PAS exists, and the importer is still awaiting the final results from the PAS.

Since Customs does not consider that unacceptable risks are necessarily eliminated until the CIP has been implemented and shown to be effective, preparing the CIP once deficiencies have been identified officially in the draft PAS, and more importantly, implementing internal control procedures once a “risk” area has been identified so as to resolve it, are both areas to promptly take action on.

For more information on customs audits generally, click here.

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