Issue 331, February 21, 2002
The U.S. Customs Service has begun using a new audit technique for commercial importers that is expected to be in full swing by early 2002. The new "Focused Assessment" (FA) replaces the Compliance Assessment Team (CAT) method that Customs has been using for the past several years. Unlike the CAT, which started with labor-intensive transaction testing, the FA will use a two-step process to determine the importer's risk of non-compliance.

The FA's first stage, the Pre-Assessment Survey (PAS), is designed to evaluate a company's internal controls over its customs operations. This will examine the company's policies and procedures, its internal compliance monitoring, its employee training, and its management's commitment to customs compliance. The assessment will only proceed to the second phase, the Assessment Compliance Testing (ACT) or transaction testing, in areas where the internal controls are found to be deficient. Customs is likely to pay particular attention to an importer's use of duty reduction techniques such as 9802 entries, GSP, and other tariff preference programs. It is also likely that, in the wake of September 11th, Customs will examine a company's cargo security efforts in evaluating the risk associated with its import activities.

Customs intends the FA process to be less burdensome than a traditional CAT, but the FA's more limited scope will clearly allow Customs to target many more companies than was possible in the past. Customs has reportedly identified over 9000 importers who could potentially be selected for a FA. It will therefore be more important than ever for importers to conduct self-assessments to ensure that their internal controls over customs operations are satisfactory. Good internal controls can stop (or limit) a FA at the first stage, resulting in a shorter and less burdensome audit.

Our contributing writers, Richard H. Abbey and Sarah M. Nappi, work for Miller & Chevalier Chartered in Washington DC and can be reached at rabbey@milchev.com and snappi@milchev.com snappi@milchev.com respectively for further comment.

Please note that due to the complex nature of the subject matter, DHL Danzas Air & Ocean cannot be responsible for actions taken by the reader in reliance on the information contained herein without prior consultation with DHL Danzas Air & Ocean.