Don’t Forget to Keep Good Records
By Margaret Lange
If U.S. Customs and Border Protection (CBP) sent you a demand for records related to your import transactions, would you be able to produce the necessary records timely? Do you know what documents are required to substantiate your import declarations? Import Recordkeeping is often overlooked but is particularly crucial as significant fines and penalties can be assessed for failure to comply with import recordkeeping regulations.
Importers are required, by regulation (CFR19 §163), to keep comprehensive records related to import transactions and be able to produce those records upon lawful request or demand from CBP. The Customs Modernization and Tariff Act of 1993 (the Mod Act) allows CBP to require importers to keep, and be able to produce all “entry records”, which are described in the “(a)(1)(A)” list. The list can be found in the CBP Informed Compliance Publication for Recordkeeping or in the Appendix to CFR19 §163. Importers must make themselves familiar with the specific “entry records” in the (a)(1)(A) list and ensure those records are maintained and can be easily produced.
Additionally, CBP is authorized to request production of import related “business records” in order to properly assess and collect duties. Business records are import related records that were not required to be presented with the import entry but are maintained in the ordinary course of business. Those records may include, but are not limited to, books of accounts, statements, declarations, accounting and payment records, technical product data, business and computer systems, and any other commercial data necessary to determine compliance.
Importers must keep the required records for five (5) years from the date of entry. Records must be kept as originals, whether paper or electronic. The ideal would be for all records to be maintained in one file per entry; however, CBP understands that this is not practical for most businesses. Because most records are stored is multiple systems, files or locations, Importers should make an effort to document where all “entry” and “business” records are maintained, and test the ability to produce a full set of import records for a single entry. When CBP makes a demand for records, usually in the form of a Customs Form 28 (CF28), an Importer will have 30 days to produce and deliver the records.
Here is where it can get expensive. You would be surprised how fast 30 days goes by when you are scrambling to assemble the requested documents. An importer’s inability to timely produce the requested entry records can result in significant monetary penalties. If CBP finds “willful” failure to maintain and produce records, the penalty is assessed at no more than $100,000 or 75% of the appraised value; whichever is lower. If CBP finds “negligent” failure to maintain and produce records, the penalty is up to $10,000 or 40% of the appraised value; whichever is lower. Keep in mind, these penalties are assessed per entry, so multiple failures can add up quickly.
In today’s world of trade uncertainties, and increased duty liability due to trade remedies, keeping good records that accurately substantiate any claim you make at entry is critically important. The fines and penalties can be easily mitigated by implementing a recordkeeping policy that allows you to quickly pull records and respond to CBP timely.