Client

A multinational corporation importing consumer goods into the US.

Challenge

The company was notified of an outside audit by customs authorities due to:

1. Discrepancies in import declarations over the past 12 months.
2. Potential misclassification of goods leading to underpaid duties.
3. Gaps in trade compliance processes, including missing documents and valuation inconsistencies.

The audit threatened to result in:

• Heavy penalties and back duties.
• Disruption to supply chain operations.
• Reputational damage with customs authorities.

Solution

The company partnered with J.M. Rodgers trade compliance experts to prepare for and manage the outside audit.

1. Comprehensive Compliance Review
   • Conducted a retroactive audit of all customs documentation, including invoices, bills of lading, and classification records.
   • Reviewed HS code classifications to identify errors and inconsistencies.
   • Cross-verified import valuations and ensured compliance with WTO valuation agreements.
2. Risk Identification and Correction
   • Flagged shipments with incorrect tariff classifications and prepared voluntary disclosures to customs authorities.
   • Identified areas of non-compliance and created a corrective action plan to mitigate risks.
   • Implemented duty reconciliation processes to calculate and prepare for back-duty payments.
3. Documentation and Presentation to Authorities
   • Prepared organized documentation to present a clear case to the customs auditors.
   • Engaged in open communication with customs officials to demonstrate transparency and cooperation.
   • Justified complex valuation discrepancies using trade agreements and supporting records.
4. Ongoing Compliance Improvements
   • Implemented a trade compliance management system (TCMS) to monitor future shipments.
   • Provided training programs for internal teams on accurate declaration, classification, and valuation.
   • Established regular internal audits to ensure ongoing compliance and avoid future discrepancies.

Outcome

1. Audit Resolution:
   • The audit resulted in a 35% reduction in assessed penalties due to the proactive voluntary disclosures and corrective measures.
   • Customs authorities praised the company’s transparency and swift action.
2. Financial Impact:
   • Avoided additional fines and reputational damage.
   • Managed back duties effectively without disrupting the supply chain.
3. Long-term Compliance:
   • Reduced future audit risks by 50% through enhanced processes and internal checks.
   • Improved classification accuracy by 95%, leading to better cost control on import duties.

Key Takeaways

• Proactive preparation and collaboration with trade compliance experts can significantly mitigate risks during customs audits.
• Conducting internal reviews and implementing preemptive corrective measures can reduce penalties and maintain strong relationships with customs authorities.
• Long-term investments in compliance systems and training help prevent recurring issues and ensure smooth import operations.