cbp new audit survey program

PAEI Brown Bag EventWhat’s in a Name?

CBP’s New “Audit Survey Program”

George Tuttle, IIIAttorneyLaw Office of George R. [email protected]

Cindy de LeónSenior Trade AuditorDeleon Trade LLC(Former U.S. Customs Auditor and Audit Supervisor)[email protected]

Deleon Trade LLC Tuttle Law P.C.

Who is PAEI?

The “Professional Association of Exporters and Importers” or PAEI is a Bay Area organization devoted to the education and training of the trade compliance professional.

Founded 1986 in response to changing U.S. export controls, PAEI was incorporated as a non‐profit organization in 1987.

Objectives of the Association include promoting and fostering the role of the import/export professional, providing ongoing education on regulatory issues and exchanging information on current import/export issues.

PAEI hosts quarterly meetings with guest speakers, networking and job placement opportunities. Affiliations offer PAEI member discounts to seminars, services, and products.

Individual memberships start at $50.

For more information on PAEI go to: http://www.paei.org/join.htm


Types of CBP Audits and Reviews

• Focused Assessments• Quick Response Audits (risk or referral based)

–Value, Classification (single issue)

–NAFTA, GSP, SFTA, AFTA, Chapter 98, other

–Commercial Fraud

–Agriculture

–IPR

–Textile Transshipment

–Foreign Trade Zone, Bonded Warehouse, Drawback

• Audit Surveys• Broker Compliance Audits• Drawback, etc.

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What’s New in the World of CBP Regulatory Audit?

FY 2015 ‐‐

– Implementation of new Pre-assessment program & Questionnaire

– Limited number of new FAs – for consistency with new program

– Heavy HQ oversight of FAs for risk and preparation of reports

– Need to clean-up and close follow-ups

– San Francisco Reg Audit – no new FAs -- close follow-ups

– Seattle Office -- limited FAs under enhanced Pre-assessment program

– Reg Audit Focus -- QRAs and Audit Surveys

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Deleon Trade LLC Tuttle Law P.C. 5

What’s New in the World of CBP Regulatory Audit?

Audit Surveys


What is an Audit Survey?

An audit survey is intended to be a quick assessment of what is going on and allows

the CBP auditor to focus his/her attention on the areas of greatest risk.

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What is an Audit Survey is NOT!

Not an official audit per 19CFR 163.11Not a Focused Assessment

Not a Quick Response AuditNot an assessment of internal controls

No samples (only walk-through entries)

No formal report.

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Audit Surveys

Previously, Audit Surveys have focused on intellectual property rights & enforcement, but is now being used for other review areas.

Provides importers with opportunity to avoid more intensive FA or QRA reviews, and demonstrate how you implement and maintain an effective import compliance program

Lack of preparation can result in a full‐blown audit or other enforcement actions.

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The Audit Survey program

Identifies companies through risk segmentation.

RA requests information about specific import activity and processes in advance via a questionnaire.

RA gives informed compliance presentations to inform importers of their responsibilities.

RA conducts interviews and walkthroughs of selected entries to understand how importer addresses specific area of risk.

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The Audit Survey Program

Allows CBP to quickly and efficiently obtain onsite information about import activities relative to a specific trade area or issue without committing substantial time and resources required by a full audit.

Though similar to audit risk assessment procedures, surveys do not constitute an “audit” in accordance with Government Auditing Standards.

Allows RA to assign resources to only risk segmented companies for audit, increasing efficiencies for both CBP and the trade community in facilitating legitimate trade.

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The Audit Survey Program

Since an audit is not being performed, the surveys do not provide a determination of acceptable/unacceptable risk or a level of compliance.

A formal report is not issued; rather, importers will receive a close out letter.

Results help importers by identifying weaknesses in target area requiring improvement.

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Document Requests

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Document Request

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Who is Subject to CBP Audits and Surveys?

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Example• Feb 2015• Official CBP Letter sent

to select ISA Members• CBP requested that ISA

members conduct an ADD/CVD self-assessment to identify imports of wooden chests from China under HTS 9403.50 and 9403.60 in order to collect ADD/CVD revenue.


CBP Audit Survey Targeting

Audit Survey Referral Channels:

CBP Priority Trade Issues (PTI) (see next slide)

Audit Surveys target a specific industry or issue (i.e., AD/CVD or IPR) and are not company specific.

Audit Surveys involve a review of multiple importers with common issues at the same time!

Conversely, Quick Response Audits tend to be importer specific and related to a referral on a specific importer. Intended to confirm an assertion.

CBP Centers of Excellence & Expertise (CEE’s) are also generating referral for audit surveys

E‐allegation referrals


Audit Survey (Primary Focus Areas)


CBP Audit Planning Process


Who is Subject to CBP Audits and Surveys?

Small, Medium, & Large Importers– Many large importers have already been audited!– Small and medium sized importers should expect audits.– Many large importers are in ISA and exempt from FAs.– Large importers go back into the audit pool after a few years.

Audit Surveys focus on industries and/or specific issues such as:

– Retailers and Consumer Electronics and Products• IPR compliance

– Antidumping and CVD compliance• Furniture Importers• Aluminum Extrusions• Tires

– Other emerging compliance issues• Valuation – First sale• International Freight Deductions• Computed Value importers not on Reconciliation• FTAs and U.S. Goods• Importers with history of Classification errors

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General CBP Audit Plan Process A risk based approach is used in selecting audit candidates

15-20 Risk factors, including: – Company size & import activity (value & volume)– Company complexity in import activity (HTS variety)– Priority Trade Issues (PTI) risk– Referrals from CBP and other government agencies

Potential audit candidates are usually contacted by mid-summer

Audit Plan is developed each CBP fiscal year beginning Oct 1st

Approximately 400 Auditors nationwide

Houston Field Office has new Field Director, Danielle Hightower

Potential changes caused by reorganization

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CBP Audits

How to Prepare


How to Prepare for a CBP Audit Survey / FA / QRA Getting Started…

1. Review of your Customs ACE entry data.

2. Conduct an internal review and risk assessment of your import activities. • Identify risk areas, • Conduct limited self‐testing, • Assess internal controls for each risk area,• Consider a Prior Disclosure if you discover issues in order to reduce

or eliminate potential penalty exposure.

3. Complete the FA Internal Control Questionnaire, (http://www.cbp.gov/trade/audits/focused‐assessment). This will give you a sense of how prepared you really are.

An internal review can help you:• become or remain “Customs Compliant,” and • discover new duty savings programs for your business.

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The New FA Questionnaire

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The New FA Questionnaire

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How to Prepare for a CBP Audit Survey / FA / QRAContinued…

5. Consider applying for the ISA program You may be able to avoid an FA by applying for ISA if you have an internal

control system in place You must be a C‐TPAT member to apply for ISA

6. Determine the status of your overall system of internal controls

7. Visit CBP’s website and read EVERYTHING regarding FA’s and internal control programs (http://www.cbp.gov/trade/audits/focused‐assessment)

8. If you are not completely comfortable conducting any of the recommended tasks above, consider getting external assistance

9. If you’re notified of an FA, QRA or audit Survey keep the news of your selection internally to a “need to know basis”

10.Time is of the essence!!!

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Internal ControlsAre they really needed?


Customs Modernization Act (December 8, 1993)

• Shared Responsibility: Importers and Customs have a mutual responsibility to ensure compliance

• Informed Compliance: Customs' responsibility is to clearly and completely inform importers of their legal obligations with regard to importing

• Reasonable Care: Requires importers to use reasonable care when they provide Customs with entry information, including the tariff classification, value, and rate of duty applicable to their merchandise

• Enforced Compliance: Customs will transition from informed compliance to enforcement measures

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Why are Internal Controls Needed?

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How to Prepare for a CBP Audit Survey / FA / QRA Are you ready?

• Do you have a system of internal controls that would pass muster with Customs?

• Do you have any potential issues which could expose your company to duty liability or severe Customs penalties?

• Have you conducted a risk assessment and internal review recently or have you had an outside firm assess your compliance with Customs laws and regulations?

• Do you know which free trade agreements and special tariff provisions are used by your company? Are the claims compliant?

• Have you declared accurate values to Customs including all the CRAPP (Commissions, Royalties, Assists, Packing, and Proceeds)

• Have you reviewed your General Ledger recently for“accounts of interest”?

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About the SpeakersCindy DeleonBefore forming Deleon Trade, Cindy served for 12 years as a Senior Auditor and Assistant Field Director of U.S. Customs and Border Protection’s Regulatory Audit Division in Chicago. While working at U.S. Customs she conducted and supervised multiple focused assessment audits, quick response audits, fraud investigations, free trade agreement reviews, drawback audits, NAFTA audits, and prior disclosure reviews of Fortune 500 and midsize companies. In addition, she designed and led the mentoring and recruiting programs for the Chicago field office and conducted advanced training sessions on technical audit issues and special trade program audits.Additional information about Ms. Deleon and Deleon Trade is located at http://www.deleon‐trade.com/

George TuttleGeorge Tuttle is an attorney with the San Francisco law firm of George R Tuttle Law Offices. He has been in practice for over 30 years. His practice emphasis is on Customs, international trade regulation, and export compliance related matters.

He assists companies with compliance audits and to develop effective compliance programs; determine correct customs duties, values, product classifications, and duty preference eligibility; obtain rulings, file protests; and resolve penalty, seizure and enforcement cases. He also litigate trade cases before the United States Court of International Trade and the CAFC.

Additional information about Mr. Tuttle and the firm can be found at www.tuttlelaw.com .

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