November 19 20, 2013 How to Build an Effective Compliance ... · #USCustoms CBP Priority Trade...

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ACI’s 2nd U.S. Customs Compliance Boot Camp

Jennifer Rodgers

Manager – Customs Compliance

U.S. Steel Logistics

Pittsburgh, PA

How to Build an Effective Compliance Program that Meets CBP Requirements – Core Components and Internal Controls

Kartapurkh Khalsa

Import Compliance Attorney

National Oilwell Varco

Houston, TX

Audrey Garrett

Import Compliance Manager, Americas

Flowserve Corporation

Raleigh, NC

November 19 – 20, 2013

Tweeting about this conference?

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Customs Modernization Act

• Shared Responsibility: Importers and Customs have a mutual responsibility to ensure compliance.

• Informed Compliance: Customs' responsibility is to clearly and completely inform importers of their legal obligations with regard to importing.

• Reasonable Care: Requires importers to use reasonable care when they provide Customs with entry information, including the tariff classification, value, and rate of duty applicable to their merchandise.

• Enforced Compliance: Customs will transition from informed compliance to enforcement measures.

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Reasonable Care • Tariff Classification - - “What is it?”

• Valuation - - “How much is it worth?”

• Country of Origin - - “Where was it made?”

• Special Requirements - - “Are unique reporting or documentary requirements applicable?”

• Preferential Trade Programs - - “Does the imported product qualify for duty-free or reduced duty benefits?”

• Unfavorable Trade Issues - - “Is the imported product subject to punitive duties or action?”

• Recordkeeping - - “Does the importer retain required documentation to substantiate claims made at the time of entry?”

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CBP Priority Trade Issues • Free Trade Agreements – prevent non-compliance.

• Anti Dumping Duties - detect and deter circumvention.

• Textiles - ensure compliance with laws, regulations, quotas, Free Trade

Agreement requirements, and Intellectual Property provisions.

• Revenue – protect duties and taxes (i.e. SOL waiver changes).

• Penalties - ensure penalties are effective in deterring noncompliance .

• Intellectual Property Rights - target and seize imports of counterfeit

and pirated goods, and enforce exclusion orders on patent-infringing

and other IPR violative goods.

• Import Safety - ensure that unsafe products do not enter the US.

• Agriculture Programs - prevent the importation of contaminated,

diseased, infested, or adulterated agricultural and food products that

could harm the American people, plant and animal agricultural

resources.

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Communication is Key

• Without communication among the relevant functional areas within your compay, import compliance is impossible.

• Lines of communication must be open and procedures put in place to capture all relevant information.

• Pieces to the puzzle are held across disciplines including purchasing/planning, legal, engineering, accounting, finance, transportation, and import compliance.

• Import compliance function cannot operate as an island cut-off from the rest of the business.

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Import/Export Compliance

•All businesses whose trade includes imports and/or exports are subject to Custom audits.

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Sustainable Import / Export Compliance Requires Support at All Levels of the

“People Pyramid”

Facility level

export/import compliance coordinator

provides front-line ‘defense’

Middle Management

Corporate Export/Import Compliance Team

Middle management support is critical to successfully implementing effective compliance measures.

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Where to start: Performing an Initial Risk Assessment

• Risk – what can go wrong? • Some risk areas: new suppliers, new products, broker compliance,

control products, changing business environment, etc.

• What is the consequence/effect IF something goes wrong? • Could be from nothing to penalties to revocation of import/export

privilege

Once you have identified “risk”, you can then categorize them and tackle developing a control procedure for those risk.

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Facility Risk Matrix

Tool for Compliance Team & Executives to evaluate facility risk and identify potential areas of concern

Based on several parameters:

• Fixed – Product types (military, nuclear,

dual use), Use of Free trade agreements

and other import programs

• Variable – Procedures, personnel, use of

import tools, audit results, previous

violations

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Create A Risk Matrix

Subject Area Transactions Cost of Noncompliance

Risk

Classification All High High

Valuation All Medium Medium

Origin Few Medium Low

Special Trade None None None

Recordkeeping All Medium Medium

Personnel ALL High High

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Risk Assessment contd.

• Select a Subject (i.e. Class, Value, FTA, etc.) • Where should date come from

• ACE/ITRAC

• Special Broker Reports

• Purchase Orders

• Receiving Records Reports

• Employee interviews

Period of Review

What will be the sample size

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Risk Assessment contd. (example of ACE report)

Entry Nbr Filer Code Filer Name

Entry Line

Nbr Importer Nbr Consignee Number

Entry

Type Entry Dt Create Dt COE Cd COO Cd POE Cd Mfr Cd Manufacturer Name HTS Nbr

23157449772 231 EXPEDITORS INTERNATIONAL1 75-277891800 75-2778918LB 01 1/1/2013 12/28/2012 CA XO 0901 XODURLIM873SCA DURAGEAR LIMITED 8483401000

23149428272 231 EXPEDITORS INTERNATIONAL1 75-277891800 75-2778918CK 01 1/2/2013 12/17/2012 TW TW 2007 TWENGMET1382TAI ENGINEERED METALS CORPORATION8481803070

23149428272 231 EXPEDITORS INTERNATIONAL2 75-277891800 75-2778918CK 01 1/2/2013 12/17/2012 TW TW 2007 TWENGMET1382TAI ENGINEERED METALS CORPORATION8481803025

23149438651 231 EXPEDITORS INTERNATIONAL1 75-277891800 75-2778918HA 01 1/2/2013 1/2/2013 IN IN 3512 INSAMLIN623GUJ SAMEER LINKAGES (EXPORTS) PVT LTD8413919080

23149444113 231 EXPEDITORS INTERNATIONAL1 75-277891800 75-2778918VC 01 1/2/2013 1/2/2013 FR FR 2704 FRGEENE442CHA GE ENERGY POWER CONVERSION8501538060

23149444543 231 EXPEDITORS INTERNATIONAL1 75-277891800 75-2778918CH 01 1/2/2013 12/28/2012 CN CN 1401 CNWUXLEA9WUX WUXI LEAN MANUFACTURING CO., LTD8413919080

23149444550 231 EXPEDITORS INTERNATIONAL1 75-277891800 75-2778918CH 01 1/2/2013 12/28/2012 CN CN 1401 CNSHAZON501SHA SHANGHAI ZONGXING INTERNATIONAL TRADE CO., LTD8413919080

23149445920 231 EXPEDITORS INTERNATIONAL1 75-277891800 75-2778918CK 01 1/2/2013 1/2/2013 SE SE 1704 SEFLOPMV9SOL FLOWSERVE PMV PALMSTIERNA INTERNATIONAL AB8481909085

23149445920 231 EXPEDITORS INTERNATIONAL2 75-277891800 75-2778918CK 01 1/2/2013 1/2/2013 SE RS 1704 SEFLOPMV9SOL FLOWSERVE PMV PALMSTIERNA INTERNATIONAL AB8536507000






23149447694 231 EXPEDITORS INTERNATIONAL1 75-277891800 75-2778918SP 01 1/2/2013 1/2/2013 CN CN 2720 CNJINSTA4SHI JINGCHENG STAINLESS STEEL PRODUCT 8481909085

23149447884 231 EXPEDITORS INTERNATIONAL1 75-277891800 75-2778918SP 01 1/2/2013 1/2/2013 IN IN 2720 INFLOIND41BAN FLOSERVE INDIA CONTROLS 8481909085

23149448015 231 EXPEDITORS INTERNATIONAL1 75-277891800 75-2778918M0 01 1/2/2013 1/2/2013 ES ES 4701 ESFLOSPA2628COS FLOWSERVE SPAIN, S.A. 8413810040





AM-008 Entry Summary Line Detail Report

Entry Numbers: --ALL--

Importer Numbers: --ALL--

Filer Codes: --ALL--

Entry Date betw een 1/1/2013 and 9/30/2013

Creation Date betw een 1/1/2000 12:00:00 AM and 12/31/2020 12:00:00 AM

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Risk Assessment: Helpful Hints

• The gathering, review and categorizing of all this data can be very overwhelming • Start small

• Don’t try to do everything right away

• Utilize any resource available

• Work with experts who can bring a fresh perspective and/or broader experience

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Risk Assessment contd.

•Once you have completed your first step – the Risk Assessment - you should then focus on the next steps …

•2. Risk Management

•3. Risk Communication

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Ongoing Testing

•Broker Report Card:

- Quarterly Audit of Brokers Performance

- Entries are done accurately and in accordance with Customs laws & regs

- Broker sees their “grade”, signs off on report.

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Items to Collect/ Analyze

•4 items – BOL, Broker’s invoice, Vendor’s invoice & 7501

• Correct Tariff Code /Description is used

• If applicable, was NAFTA or other Special Program, declared?

• Are all documents available?

• 7501-Identify errors in any of the following areas: Entry Type, Surety Number, Bond Type, Port Code, Importing Carrier

Mode of Transport, Country of Origin, Correct Importer # used?

Correct quantity listed? Correct relationship marked? Value ?

Duties/Fees?

Is there a NDC (Non- Dutiable Charge) taken? If so, supporting paper work?

ISF filed? If so, was it done timely

U. S. Goods Return? If so, all necessary paperwork completed

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Example of Broker Report Card

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Example (cont.)

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Ongoing Testing

• Quarterly Post Entry Audit – Random sample of entries

• Gather entry packet(outlined on next page)

• Develop audit checklist

* If during review a compliance issue is discovered, expand the sample size

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Document Retention

• Important for Pre and Post Entry Documents

•Need to retain for 5 years

• Suggest a centralized system with ability to manually upload as well as download documents

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Effective Internal Controls

•Buyers Report

-spend time with Purchasing group

•Communication: • Quarterly Meetings

• Bi-Weekly/Monthly emails

• Intranet Page – Link/Wiki for Compliance

• Manual

• Articles

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Training

• Suggest yearly training/refresher

• Train new employees within a selected allotted time from hire date

•On-line training – no “excuses” for those that are not available for face – to – face training

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Creating a Manual

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Why have a Manual?

• Employees need a good reference • Should include company policy;

• Provide detailed procedures;

• And be kept up to date with changes in the law.

•CBP likes manuals • They show that an importer is exercising control;

• They are easy to review;

• They look great on your desk!

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How to build a Manual

• Figure out what you actually need • The manual your company uses must make sense for your

business

• Engage with your operations employees to see what they are actually doing

• Talk to Logistics

• Review your Import Data!

• Know what you import

• What is it?

• Where does it come from?

• What is it worth?

• Do you use preference programs

• Plan for the future

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•Draft with the help of Operations • It does not matter how nice your manual is if nobody uses it

• Get support and buy-in (make them own it)

• Include audit and testing protocols • Easily explained metrics help show your program’s value

•Update the manual regularly • It must be up to date with the laws, regulations, and policies that

impact your operations

• Use the data from your audits to identify weaknesses and adjust

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•Make the Manual user friendly • Include a table of contents

• Start general, then get specific

• Use appendices to get really specific

•Put it on your intranet site • Easy access is vital

• Printed copies will become outdated

• Invest in custom work • Avoid boilerplates

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Questions?

November 19 20, 2013 How to Build an Effective Compliance ... · #USCustoms CBP Priority Trade...

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