Customs Compliance for the Captain of the Ship -- You

By Jea Gackowski, Encompass Group

If you're the CCO, CEO or CFO of an apparel company, this article is for you!

Customs compliance = money in your pocket. True or false? Read on and find out.

Have you had some of your direct reports tell you they had a need related to customs compliance? Odds are, you haven't heard much. Most people seem to avoid the situation until the guys with the gun and the badge are on the doorstep -- or you have containers in demurrage.

What are the results of this head-in-the-sand approach?

Here is the fast math:
1. Pulling one focused assessment audit request for information = $96,000*
2. Pulling one focused assessment audit request at the last minute = $760,000*
*Neither figures include legal services.

Myths about customs compliance:
1. The brokers will keep us compliant! That is their job.
a. Right! You are paying $75 to $150 per entry and they are going to do your compliance for that?
b. According to the customs regulations the most a broker can be fined is $30,000.
c. According to the customs regulations the most you can be fined is four times the value of the cargo, interest, penalties and the loss of the privilege to import.
2. We are not the importer of record.
a. Let me know how that works for you. Under "Informed Compliance," get your import people to tell you who pays the duty, penalty and fines.
b. Then ask them about 'Enforce Compliance."
3. Importing is our right. We would close with out it. Customs would not stop us from importing.
a. Really? Customs would not stop you but your company's bad recordkeeping will.
b. Customs is not here for your bottom line. It is here to make sure the law is enforced. It also has to cover the enforcement of the rest of the alphabet soup. FTC, FDA, CPSA, etc.

Customs compliance is serious. But if you are prepared, and have a system set up, in advance of being audited, with well-trained and competent employees, you can easily save a lot of money. (It might even end in "illions.") Alternatively, you can do nothing, and wait for the gun and the badges to show up. In this case, you might also encounter an "illions" check, but you'll be the one writing it.

Here is your customs prep check list:
1. Does my company import more than $15 million? If yes, proceed to question #2 as you are in the Focused Assessment Pool. Your number will be drawn sooner or later for an audit. The shortest audit we know of is two years of onsite work.
2. Can the country of origin be traced back on all my goods?
3. Do I have a binding ruling on my inbound goods from Customs? I don't employ anyone that would pick a lower-duty rate on purpose to impress me with their cost savings capabilities, do I? (We had an experience with an individual who declared pumps as an article for the handicapped at zero duty.)
4. Do I have clear values, so that when the "big brother" computer analysis compares me to others in my industry, mine will be logical and I will be able to prove where and how the costs are derived quickly? Pick an entry summary and ask for the details.
5. Does my accounting system allow for audits on cost and value, and tie to the actual price paid?
6. Do you have a lawyer that audits you yearly and helps with compliance training? Some times the expert from outside the company can drive the point home. Lynne Wendt, Esq., in Atlanta, and Jonathan Fee, Esq., with Jason Waite Esq., out of Washington, DC, have played a major role in our training. Is training free? No, but in the long run it has been a profit center.
7. Do you train with your broker? Do you know what they believe is their responsibility? I have enlisted Myra Reynolds of John S. James in Savannah and Crispin Flores of C J Logistical Services on the Mexican boarder as my partners. We crosstrain and know how much money compliance has made my company.
8. Simply put, you need to know:
a. Who (manufactured)?
b. What (is it made of)?
c. When (was the vendor paid)?
d. Where (is the documentation to support the value)?
e. How (are you describing or classifying it)?
f. Can (someone on my staff prove it quickly)?

I realize customs compliance is about as entertaining as watching paint dry. Still, you need to have a tiger in the think tank running the compliance activities. Ask yourself the following: Are you ready to loose your privilege to import? Are you sure that you are sure you won't have to write a multi-million dollar check to Customs? Does Customs have a solid manufacturing and engineering background on your product so the proper systems can be in place to check before entry into the U.S. commercial market? You are the one that the buck starts and stops with.

Where is the "easy button?" You make it appear. Insist that it happens. Set up the training, make sure all employees show up, and give them your full support so they are confident and ready to do what needs to be done.

Jea Gackowski is the corporate compliance officer, customs house broker, and vice president of manufacturing at the Encompass Group (, a company that develops, manufactures and markets woven and non-woven products for the healthcare and hospitality industries.
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