Avoid Customs Exams with these 6 Tips

Customs Exams can have an Impact to Your Bottom Line

As a Licensed Customs Broker for over 30 years, I appreciate the overwhelming job that CBP performs to ensure that the US and its borders remain safe. Yet I am frequently reminded by the objections of our clients that customs exams are costing them money. U.S. Customs and Border Protection (CBP) must inspect cargo in order to enforce US laws and help protect US Citizens. Importers need quick access to their goods to make a profit. As expected, these two things sometimes collide.

Prioritize Customs Compliance First

LOGISTEED America, Inc. is a strong proponent for effective importer compliance programs. Importers must be aware they are liable for every aspect of the import transaction. It is common to outsource some functions such as actual tax return filings (i.e., the customs entry), but information contained within the entry is 100 percent the responsibility of the importer. In terms of compliance, consider some of these questions: Do you have a binding ruling? Are you using the correct tariff number? Did you declare the correct value? Are there any assists? How about meeting the standards of various government agencies such as the FDA, USDA, CPSC, FCC, EPA, DOT? Are the goods legally marked? Making sure all of your goods are compliant before you import them can prevent many problems. Now let’s talk about how to avoid customs exams.

The Two Types of Customs Exams

Keep in mind CBP has its own criteria as to why they want to examine cargo and they do not share these reasons with importers. The underlying basic principal is that all cargo is considered “guilty” and it is up to the importer to prove its innocence. In one instance CBP may conduct a spot check. Other times, they are ensuring that the listed description on the commercial invoice matches the actual cargo. CBP also has the unenviable responsibility to prevent terrorism, drug interdiction and enforce copyright protection among other things. In order to do all of that, sometimes they have to physically examine the cargo.

The Physical Cargo Inspection: If you consider the sheer volume of cargo arriving in the US, very few shipments are actually selected to undergo a physical exam. A physical cargo inspection typically happens when cargo first arrives at the port. CBP selects your cargo and won’t release your cargo without inspecting or X-raying it. This type of exam typically ranges from couple of days up to a week. The cargo is then released and all parties are satisfied.

CBP Form number CF28 is another matter. This type of exam begins with a written “Request for Information” from CBP and represents more potential concern for the importer. The CF28 is actually the point when CBP casts a wider net that reviews more detailed information about the importation. Requested information may include financial data such as how you paid for the goods; how it will be used and marketed; and how the goods were manufactured – even a request to provide more product samples. Sometimes, the CF28 is just simply question-asking. Other times, it leads directly to a CF29

Notice of Action, the less-friendly sibling of CF28. Unfortunately, the CF29 is often a harbinger of bad news telling the importer that their duty rate is going to increase.

Many importers don’t have the resources to retain a dedicated Compliance Manager. We recommend consulting with your customs broker or legal counsel before responding to a CF28. Importers may unwittingly open themselves up to further scrutiny if their response is incomplete or they divulge information in a way that piques more curiosity from CBP.

Six Tips that can Help Avoid Customs Exams

  1. Participate in the CTPAT Program. If CBP is going to inspect your cargo you might as well get to move to the front of the line. Participation in the CTPAT Program will help expedite the process if your cargo gets selected for an exam.
  2. Proper Merchandise Descriptions – You would be surprised at the types of mistakes importers make with descriptions on cargo documentation. When I first started working in this industry, a client put the words “California Raisins” on the bill of lading. The cargo was actually plush dolls in the shapes of singing raisins. Inevitably, the USDA noticed and actually mandated to inspect the container to make sure the contents were not edible raisins. This mistake resulted in a week and a half delay and some hefty exam costs. The same tip goes for descriptions on commercial invoices. Some items need additional detail. If you are unsure, consult first with your broker about necessary merchandise description details before you put them on a commercial invoice.
  3. Valuation – Commodity Specialist Teams (CSTs) at CBP compare your prices to your competitors’ prices. Unless you are an incredibly good negotiator, your FOB prices are going to be similar. If they aren’t, CBP is smart enough to know that you might have some kind of “special deal” which could mean that something regarding the price of your goods is not correctly declared. Consult with your broker about Royalties, Assists, Buying Commissions and the like to make sure you are legally declaring the lowest possible value for duty computation.
  4. Country of Origin – Let’s face it. Some countries are just high risk. Whether due to a global reputation for terrorism, drugs, or all of the above. Moving your production lines to another country is not easy, but if you import from a high-risk country, there are going to be exams. Try to source your goods from low-profile countries.
  5. Know your Factory – Many importers use the same factories. Those importers may even know each other and are familiar with each other’s products. If an importer using a factory you source from has cargo that was targeted for an exam and received a marking notice, odds are you are going to get one as well. There may be no way to avoid this exam since it wasn’t your fault, but awareness of potential delays and planning accordingly can save you a good chunk of time and money.
  6. Meet with CBP – Sometimes, a personal professional relationship might prevent exams before they happen. CBP wants to get to know importers and get a feel for the quality of their import programs; including their concern about compliance. If you are willing to start a relationship with CBP, it is not unheard of for CBP to call and ask you a simple question because now they know whom to ask. In my experience, CBP is mostly pleasant and reasonable – just like most of the people you meet every day. However, it is important to remember CBP has a vital law enforcement role to perform and no matter how nice you are, they can’t overlook that.

Remember, you can never eliminate customs exams! Strive to minimize the potential and mitigate the resources it takes to respond. In the end, attention to customs compliance up front be the best tip of all. If you would like to learn more about our Smart Compliance Solutions contact us here.


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