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PAEI Brown Bag Event

Whats in a Name?
CBPs New Audit Survey Program

GeorgeTuttle,III
Attorney
LawOfficeofGeorgeR.Tuttle
george.tuttle.iii@tuttlelaw.com

CindydeLen
SeniorTradeAuditor
DeleonTradeLLC
(FormerU.S.CustomsAuditorandAuditSupervisor)
cindy@deleontrade.com

Who is PAEI?

TheProfessionalAssociationofExportersandImportersorPAEIisaBayArea
organizationdevotedtotheeducationandtrainingofthetradecompliance
professional.

Founded1986inresponsetochangingU.S.exportcontrols,PAEIwasincorporated
asanonprofitorganizationin1987.

ObjectivesoftheAssociationincludepromotingandfosteringtheroleofthe
import/exportprofessional,providingongoingeducationonregulatoryissuesand
exchanginginformationoncurrentimport/exportissues.

PAEIhostsquarterlymeetingswithguestspeakers,networkingandjobplacement
opportunities.AffiliationsofferPAEImemberdiscountstoseminars,services,and
products.

Individualmembershipsstartat$50.

FormoreinformationonPAEIgoto:http://www.paei.org/join.htm

Deleon Trade LLC

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Types of CBP Audits and Reviews


Focused Assessments
Quick Response Audits (risk or referral based)
Value, Classification (single issue)
NAFTA, GSP, SFTA, AFTA, Chapter 98, other
Commercial Fraud
Agriculture
IPR
Textile Transshipment
Foreign Trade Zone, Bonded Warehouse, Drawback

Audit Surveys
Broker Compliance Audits
Drawback, etc.
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Whats New in the World


of CBP Regulatory Audit?
FY2015
Implementation of new Pre-assessment program &
Questionnaire
Limited number of new FAs for consistency with new program
Heavy HQ oversight of FAs for risk and preparation of reports
Need to clean-up and close follow-ups
San Francisco Reg Audit no new FAs -- close follow-ups
Seattle Office -- limited FAs under enhanced Pre-assessment
program
Reg Audit Focus -- QRAs and Audit Surveys

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Whats New in the World


of CBP Regulatory Audit?
Audit Surveys

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What is an Audit Survey?

An audit survey is intended to be a quick


assessment of what is going on and allows
the CBP auditor to focus his/her
attention on the areas of greatest risk.

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What is an Audit Survey is NOT!

Not an official audit per 19CFR 163.11


Not a Focused Assessment
Not a Quick Response Audit
Not an assessment of internal controls
No samples (only walk-through
entries)
No formal report.
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Audit Surveys
Previously,AuditSurveyshavefocusedonintellectual
propertyrights &enforcement,butisnowbeingusedfor
otherreviewareas.
Providesimporterswithopportunitytoavoidmoreintensive
FAorQRAreviews,anddemonstratehowyouimplementand
maintainaneffectiveimportcomplianceprogram
Lackofpreparationcanresultinafullblownauditorother
enforcementactions.

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Tuttle Law P.C.

The Audit Survey program


Identifiescompaniesthroughrisksegmentation.
RArequestsinformationaboutspecificimportactivityand
processesinadvanceviaaquestionnaire.
RAgivesinformedcompliancepresentationstoinform
importersoftheirresponsibilities.
RAconductsinterviewsandwalkthroughsofselectedentries
tounderstandhowimporteraddressesspecificareaofrisk.

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The Audit Survey Program


AllowsCBPtoquicklyandefficientlyobtainonsite
informationaboutimportactivitiesrelativetoaspecifictrade
area orissuewithoutcommittingsubstantialtimeand
resourcesrequiredbyafullaudit.
Thoughsimilartoauditriskassessmentprocedures,surveys
donotconstituteanauditinaccordancewithGovernment
AuditingStandards.
AllowsRAtoassignresourcestoonlyrisksegmented
companiesforaudit,increasingefficienciesforbothCBPand
thetradecommunityinfacilitatinglegitimatetrade.

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The Audit Survey Program

Sinceanauditisnotbeingperformed,thesurveysdonot
provideadeterminationofacceptable/unacceptableriskora
levelofcompliance.
Aformalreportisnotissued;rather,importerswillreceivea
closeoutletter.
Resultshelpimportersbyidentifyingweaknessesintarget
arearequiringimprovement.

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DocumentRequests

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DocumentRequest

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Who is Subject to CBP Audits and Surveys?

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Example
Feb 2015
Official CBP Letter sent
to select ISA Members
CBP requested that ISA
members conduct an
ADD/CVD selfassessment to identify
imports of wooden chests
from China under HTS
9403.50 and 9403.60 in
order to collect
ADD/CVD revenue.

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CBP Audit Survey Targeting


AuditSurveyReferralChannels:
CBPPriorityTradeIssues(PTI)(seenextslide)
AuditSurveystargetaspecificindustryorissue(i.e.,AD/CVDor
IPR)andarenotcompanyspecific.
AuditSurveysinvolveareviewofmultipleimporterswithcommon
issuesatthesametime!
Conversely,QuickResponseAuditstendtobeimporterspecificand
relatedtoareferralonaspecificimporter.Intendedtoconfirman
assertion.
CBPCentersofExcellence&Expertise(CEEs)arealsogenerating
referralforauditsurveys
Eallegationreferrals
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Audit Survey (Primary Focus Areas)

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CBP Audit Planning Process

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Who is Subject to CBP Audits and Surveys?

Small, Medium, & Large Importers

Many large importers have already been audited!


Small and medium sized importers should expect audits.
Many large importers are in ISA and exempt from FAs.
Large importers go back into the audit pool after a few years.

Audit Surveys focus on industries and/or specific issues such as:

Retailers and Consumer Electronics and Products


IPR compliance
Antidumping and CVD compliance
Furniture Importers
Aluminum Extrusions
Tires
Other emerging compliance issues
Valuation First sale
International Freight Deductions
Computed Value importers not on Reconciliation
FTAs and U.S. Goods
Importers with history of Classification errors

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General CBP Audit Plan Process


A risk based approach is used in selecting audit candidates
15-20 Risk factors, including:
Company size & import activity (value & volume)
Company complexity in import activity (HTS variety)
Priority Trade Issues (PTI) risk
Referrals from CBP and other government agencies
Potential audit candidates are usually contacted by mid-summer
Audit Plan is developed each CBP fiscal year beginning Oct 1st
Approximately 400 Auditors nationwide
Houston Field Office has new Field Director, Danielle Hightower
Potential changes caused by reorganization

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CBP Audits
How to Prepare

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How to Prepare for a CBP Audit Survey / FA / QRA

Getting Started

1. ReviewofyourCustomsACEentrydata.
2. Conductaninternalreviewandriskassessmentofyourimportactivities.
Identifyriskareas,
Conductlimitedselftesting,
Assessinternalcontrolsforeachriskarea,
ConsideraPriorDisclosureifyoudiscoverissuesinordertoreduce
oreliminatepotentialpenaltyexposure.
3. CompletetheFAInternalControlQuestionnaire,
(http://www.cbp.gov/trade/audits/focusedassessment).Thiswillgive
youasenseofhowpreparedyoureallyare.
Aninternalreviewcanhelpyou:
becomeorremainCustomsCompliant,and
discovernewdutysavingsprogramsforyourbusiness.

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TheNewFAQuestionnaire

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TheNewFAQuestionnaire

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How to Prepare for a CBP Audit Survey / FA / QRA


Continued

5. ConsiderapplyingfortheISAprogram
YoumaybeabletoavoidanFAbyapplyingforISAifyouhaveaninternal
controlsysteminplace
YoumustbeaCTPATmembertoapplyforISA
6. Determinethestatusofyouroverallsystemofinternalcontrols
7. VisitCBPswebsiteandreadEVERYTHINGregardingFAsandinternalcontrol
programs(http://www.cbp.gov/trade/audits/focusedassessment)
8. Ifyouarenotcompletelycomfortableconductinganyoftherecommended
tasksabove,considergettingexternalassistance
9. IfyourenotifiedofanFA,QRAorauditSurveykeepthenewsofyour
selectioninternallytoaneedtoknowbasis
10.Timeisoftheessence!!!
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Internal Controls
Are they really needed?

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Customs Modernization Act (December 8, 1993)

SharedResponsibility:ImportersandCustomshaveamutual
responsibilitytoensurecompliance

InformedCompliance: Customs'responsibilityistoclearlyand
completelyinformimportersoftheirlegalobligationswithregardto
importing

ReasonableCare: Requiresimporterstousereasonablecarewhenthey
provideCustomswithentryinformation,includingthetariff
classification,value,andrateofdutyapplicabletotheirmerchandise

EnforcedCompliance: Customswilltransitionfrominformedcompliance
toenforcementmeasures

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Why are Internal Controls Needed?

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How to Prepare for a CBP Audit Survey / FA / QRA


Are you ready?

DoyouhaveasystemofinternalcontrolsthatwouldpassmusterwithCustoms?

Doyouhaveanypotentialissueswhichcouldexposeyourcompanytoduty
liabilityorsevereCustomspenalties?

Haveyouconductedariskassessmentandinternalreviewrecentlyorhaveyou
hadanoutsidefirmassessyourcompliancewithCustomslawsandregulations?

Doyouknowwhichfreetradeagreementsandspecialtariffprovisionsareused
byyourcompany?Aretheclaimscompliant?

HaveyoudeclaredaccuratevaluestoCustomsincludingalltheCRAPP
(Commissions,Royalties,Assists,Packing,andProceeds)

HaveyoureviewedyourGeneralLedgerrecentlyfor
accountsofinterest?

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AbouttheSpeakers
CindyDeleon

GeorgeTuttle

BeforeformingDeleonTrade,Cindyservedfor12
yearsasaSeniorAuditorandAssistantField
DirectorofU.S.CustomsandBorderProtections
RegulatoryAuditDivisioninChicago.
WhileworkingatU.S.Customssheconducted
andsupervisedmultiplefocusedassessment
audits,quickresponseaudits,fraud
investigations,freetradeagreementreviews,
drawbackaudits,NAFTAaudits,andprior
disclosurereviewsofFortune500andmidsize
companies.
Inaddition,shedesignedandledthementoring
andrecruitingprogramsfortheChicagofield
officeandconductedadvancedtrainingsessions
ontechnicalauditissuesandspecialtrade
programaudits.
AdditionalinformationaboutMs.Deleonand
DeleonTradeislocatedathttp://www.deleon
trade.com/

GeorgeTuttleisanattorneywiththeSan
FranciscolawfirmofGeorgeRTuttleLawOffices.
Hehasbeeninpracticeforover30years.His
practiceemphasisisonCustoms,international
traderegulation,andexportcompliancerelated
matters.

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Heassistscompanieswithcomplianceauditsand
todevelopeffectivecomplianceprograms;
determinecorrectcustomsduties,values,
productclassifications,anddutypreference
eligibility;obtainrulings,fileprotests;andresolve
penalty,seizureandenforcementcases.Healso
litigatetradecasesbeforetheUnitedStatesCourt
ofInternationalTradeandtheCAFC.
AdditionalinformationaboutMr.Tuttleandthe
firmcanbefoundatwww.tuttlelaw.com .

Tuttle Law P.C.

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