Issue 439, May 4, 2004
For the past few years, importers have had to ponder whether it is better to take the risks that accompany being selected for a customs audit, called a Focused Assessment ("FA"), or to eliminate those risks by enrolling in the Importer Self-Assessment Program ("ISA"), a self-audit program introduced by Customs and Border Protection ("Customs"). Companies that have been hesitant to apply for the ISA have been able to defer that decision because Customs has been allowing companies to apply for ISA even after being tapped for an audit. But importers that have chosen this "wait and see" approach may need to rethink this strategy because Customs is planning to revise this policy.

Under the new policy, to be announced shortly on the Customs website, Customs will continue to permit some companies selected for an FA to avoid the audit by enrolling in ISA, but this option will be available only to those companies that have already applied to participate in the Customs-Trade Partnership Against Terrorism ("C-TPAT"). If a company has not applied for C-TPAT before Customs notifies that company that it has been selected for an FA, it will not be allowed to enroll in ISA. With this in mind, importers may need to reassess whether to await an FA or sign up for ISA.

Preparing for and undergoing an FA can be time consuming and costly. However, not every importer will be selected. Thus, there is no way to know for certain how long it may take for Customs to select a particular company. But when a company is selected, it will need to review its processes and controls quickly. Then, under time pressure, it will need to identify any weaknesses, and disclose any violations it discovers to Customs before the FA begins. Further, the FA audit process consumes large amounts of the company's scarce compliance resources simply in meetings with the auditors, sampling and other audit-related activities. These resources could be better devoted to actual compliance activities under the ISA. Of course, once the FA is completed, it is likely that the importer will be audit-free for many years, unless Customs detects areas requiring follow up, in which case the importer may be subject to return visits.

The ISA, on the other hand, is voluntary, and enables importers to avoid many of the unpleasant surprises often discovered during an FA. Participation in ISA automatically removes a company from Customs' audit pool, but requires an importer to make an upfront investment in documenting processes and controls and identifying and remedying deficiencies. Thereafter, an ISA participant must also conduct annual self-testing based on a plan approved by Customs. In other words, an importer is entering into a continuing relationship with Customs. Of course, this investment provides several benefits outside of a strong working relationship with Customs, such as lower penalties and the opportunity to save money by streamlining the supply chain.

We expect that increasing numbers of importers will recognize the benefits of ISA and will apply for the program. Until now, companies have been able to defer their choice between FA and ISA until Customs tapped them for an FA. To maintain this option, however, Customs' new policy will require companies to at least enroll in C-TPAT. Those who are hesitant to apply for ISA, but who wish to preserve its full spectrum of choices, are well advised to do so.

Our contributing writers Joel W. Rogers and Daniel P. Wendt are attorneys for Miller & Chevalier Chartered in Washington, D.C. and can be reached at jrogers@milchev.com or dwendt@milchev.com.

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.