Start with 3 of the most common violations:
Customs is a complex area with ever-changing regulations, entry processes and duty rates that vary from
country to country, and a number of other variables that can make it challenging to trade internationally
and impact business practices and operating costs.
I am often asked about common causes of fines and penalties and what can be done to prevent them. In my experience, the common violations that the U.S. Customs and Border Protection (CBP) acts upon are trade agreements, valuation, and classifications.
- Trade Agreements: Violations can be caused by misinterpretation of special programs and the tariffs associated with those programs, as well as the justification the importer uses to determine the goods qualify.
- Valuation: Declaring the correct value of goods is critical to the customs entry process, and the importer is responsible by law for using reasonable care to value imported merchandise. The basis for appraising values of commodities is typically “transactional value,” the price actually paid or payable for the goods when sold for export, plus additions such as assists, royalty, licensing agreements, selling and buying commissions, packaging, and sales activity. The use of the incorrect basis of valuation can result in increased duties and penalties against the importer.
- Classifications: The incorrect use of trade programs is one example of classification violations. Product classifications and the product’s eligibility are important. These are based on the tariff being applied to the commodities.
Penalties may be assessed at any of these three levels of culpability: negligence (failure to exercise reasonable care), gross negligence (“actual knowledge or wanton disregard”), or fraud, (“voluntarily and intentionally”). When assessing penalties, CBP may take mitigating factors into account, such as the importer’s cooperation with the investigation, immediate remedial action, import experience, prior good record, etc.
There are several things you can do to prevent fines. First, be sure to have knowledgeable, trained internal staff. Second, establish compliance programs and training programs for all levels in your organization. And, of course, be sure to partner with a 3PL who is well-versed in trade regulations and has the experience and tools to help you stay compliant.