Customs Audit Preparation: 9 Steps to Pass With Success

At times, the U.S. Customs and Border Protection (CBP) might want to take a closer look at a business’s records to make sure it’s following all regulations. When CBP initiates an audit, it largely wants to make sure your business is keeping accurate records, complying with regulations, and, perhaps most importantly, paying the right amount of money on your imports.

Of course, no one wants to get audited by CBP or any other government agency. If it does happen, though, customs audit preparation can make the process much easier and help ensure that you don’t face any penalties.

What Is a Customs Audit?

CBP most commonly performs two types of customs audits: Focused Assessments (FAs) and Quick Response Audits (QRAs). 

A Focused Assessment is the more extensive audit. An FA can consist of up to three phases: 

• Pre-Assessment Survey (PAS), where you answer survey questions to give the CBP a good idea of what to expect during their review.
• Assessment Compliance Testing (ACT), where CBP reviews your documents to determine whether your business is out of compliance in any area.
• Follow-up Audit, where CBP returns six to eight months later to determine whether you have closed any compliance gaps. 

Quick Response Audits usually focus on a specific area of compliance. For example, CPB might use a QRA to determine whether you follow Harmonized Tariff Schedule (HTS) classification guidelines correctly. Because they’re so targeted, QRAs usually require less time and effort than FAs. 

Why Audits Happen & What’s at Stake

Customs audits can happen for a variety of reasons. Some of the most common triggers for an audit include:

• Classification errors that draw attention to your business
• Forgetting to update Reconciliation information with CPB
• Failing to follow the terms of free trade agreements
• Valuing imported items incorrectly
• Submitting customs documents later than required
• Submitting inaccurate customs documents
• Shipping goods through intermediary countries to avoid tariffs

You can take steps to avoid these triggers. At times, though, CPB conducts randomized audits. Even if you follow laws and guidelines perfectly, you never know when you’ll get audited. That’s why it’s important for every business that imports goods to take advantage of customs audit preparation.

What happens if an audit shows you’ve made mistakes? More often than not, you will need to pay a fine and any tariffs you missed. That can get quite expensive, especially since it’s usually a cost you don’t expect for your business. 

The 9 Critical Steps for Audit Success

Customs audit preparation can help you prepare for unexpected visits from CBP. While reviewing your process, you might also find that you qualify for import duty refund programs. 

The following nine steps will help you prepare for a customs audit.

Step 1 – Review Entry Documentation

Review all of your entry documentation, including:

• Entry summaries
• Invoices
• Packing lists
• Bills of lading
• Certificates of origin

Pay careful attention to consistency and accuracy. You want to make it as easy as possible for CBP authorities to review and check your information. Anything that looks erratic will draw closer scrutiny.

CBP will expect documentation from the last five years, so it’s essential to have these items ready before the audit.

Step 2 – Confirm HTS Classification Accuracy

Compare all of your classifications with the latest Harmonized Tariff Schedule (HTS). It’s easy for businesses to make mistakes when classifying imports, especially since the HTS can change. If you’ve been using the same codes for several years, now is the right time to check your documents against the most recent HTS.

Step 3 – Validate Declared Values & Duties

Double-check the values of every product you import so you don’t pay higher or lower tariffs than required. Unfortunately, this isn’t as easy as it might sound. You’ll need to consider the influence of factors like packing costs, royalties, and commissions. 

Step 4 – Check Duty Drawback Claims and Timing

Import duty refund programs could help your business save a lot of money. You will, however, need to follow specific duty drawback process steps. You’ll also need to follow the USA duty drawback timeline closely.

Duty drawback will give you a refund on imported products that you later export, modify, or destroy. It’s especially important to take advantage of refund programs during this time of high tariffs.

Keep all documentation related to duty drawbacks. That way, CBP can easily verify that you followed the right timeline and reported the correct amounts.

Step 5 – Ensure Bond & Licensing Compliance

Take time to review your import bond, surety coverage, and permits and licenses. Depending on your industry, you might need to provide permits and licenses from agencies like the FDA, EPA, DOT, or ATF.

Ensure that you have an up-to-date bond with sufficient coverage. Otherwise, you run a higher risk of getting audited and fined.

A U.S. Customs continuous bond usually covers you for one year, so renew it before it expires.

Step 6 – Review Continuous Improvement Programs (e.g., ISO 9001, Six Sigma)

Ideally, you should already have structured compliance systems in place. If you don’t, now is a good time to explore options that will work for your business. 

Six Sigma and ISO 9001 are compliance systems that tend to work well in this area. Alternatively, you could rely on any internal continuous-improvement process that will help you ensure accurate, streamlined reporting.

Step 7 – Prepare Internal Teams for Audit Interviews

During your customs audit, CBP agents might want to interview some of your team members, especially those who work in areas like logistics, purchasing, finance, and compliance. 

Holding mock interviews will help prepare your employees for the real interviews they’ll face during a customs audit. Ask your teams to answer questions about topics like valuation methodologies, document retention, and entry processes. 

If you find room for improvement, give them information that will help them perform better during the real interviews.

Step 8 – Organize Supporting Documentation and Records

Giving CBP access to organized documentation and records makes the customs auditing process easier on everyone. 

Digital tools make this much easier. When choosing digital tools for organizing documentation and records, look for options that offer secure portals, EDI (electronic data interchange) integrations, and document repositories.

Step 9 – Engage Your Customs Brokerage for Expert Support

Reach out to your customs brokerage to get expert support before you get audited. Your brokerage should know how to ensure that you follow all guidelines correctly. This will lower your risk of getting audited and prepare for the day CBP decides to audit your business.

Common Audit Pitfalls & How to Avoid Them

While CBP performs random customs audits, agents also look for common pitfalls that alert them to problems. Common issues include:

• Missing and inconsistent entry documentation
• Incorrect or outdated HTS classifications
• Inaccurately declared values
• Duty drawback claims without proper documentation
• Poor internal controls
• Outdated recordkeeping that doesn’t conform to today’s digital expectations

If you can address these topics, you can significantly lower the chance that you’ll get audited by  CBP.

How J.M. Rodgers Can Guide You Through the Audit Process

Customs audit preparation can put your business in a good position to get through CBP reviews as seamlessly and quickly as possible. 

J.M. Rodgers has more than seven decades of experience in logistics, duty drawback, and customs brokerage. We’ve evolved over the years to keep up with CBP’s latest expectations to help you benefit from duty drawbacks, pass customs audits, and maintain control over all customs processes.

How can we help your business? By providing individualized attention that addresses your unique needs.

Learn more by contacting J.M. Rodgers today.