By Tony Saranchak, Senior Customs Advisor

Our previous article on Valuation and Statutory Additions to the Price Paid or Payable discussed conducting a regular risk analysis starting with financial statements, general ledgers, and the chart of accounts. Based on recent events and the seemingly never-ending tariff rate fluctuation, it is worthwhile to further discuss the depth and extent of documents that U.S. Customs and Border Protection (CBP) may request from an importer or other interested party.

The Code of Federal Regulations at 19 C.F.R. § 163.6(c) regarding the examination of entry and other records provides:

Customs may initiate an investigation, audit or other inquiry for the purpose of:

(i) ascertaining the correctness of any entry, determining the liability of any person for duties, taxes and fees due or duties, taxes and fees which may be due, or determining the liability of any person for fines, penalties and forfeitures; or

(ii) Ensuring compliance with the laws and regulations administered or enforced by Customs.

This is quite a mouthful as you sip your second cup of morning coffee and try to keep up with customs developments. In plain language, this regulation means that CBP can request any document that would normally be prepared or exchanged for the type of transaction occurring. When dealing with a straightforward unrelated party purchase/sale, the normal set of Entry Documents comes to mind (e.g., CBP Form (CF) 7501, commercial invoice, packing slip, purchase order, etc.). But if the parties are related or coordinate on raw or intermediate materials at all, then the risk of unreported assists and other value additions increases.

It’s important to remember the extent of documents that CBP can request, especially now with the dramatic increase of tariffs, including reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA) and national security tariffs on certain product sectors under Section 232 of the Trade Expansion Act of 1962. It remains to be seen how long the increased tariffs will continue due to Supreme Court challenges and impacts on businesses and consumers, but CBP will be lurking in the shadows armed with a statute of limitations to inquire regarding potential customs violations. Let’s review.

The statute of limitations to review, inquire, audit, or investigate an entry is five years from the date of entry for non-fraud compliance issues, and there are certain types of transactions with longer limitations. For fraud investigations, the statute of limitations is five years from the date of discovery of the potential fraud. So, there are potentially longer review timeframes where one might have to dig deep into the financial archives and cloud storage.

And what would a discussion of review timeframes be without bringing up duty drawback? This context could lead to even longer exposure when considering the original entry date, filing a claim for drawback, a refund, and then a five-year statute of limitations. (It is a little like those car warranty calls one can’t stop; they find you somehow!) You are in for a busy weekend if you receive a CF 28, Request for Information, requiring you to figure out what type of records you need and how long they have been archived to demonstrate two drawback materials are “commercially interchangeable.”

How does one cope and not drown in a sea of accounting records and “in the course of ordinary business” documents? That’s where the experience of an external compliance professional comes in – to know what documents are more critical than others, how much risk assessment should be conducted to be prepared, and how many internal and external transactions it is appropriate to review to balance risk and resources. Notice I didn’t state if a risk assessment should be conducted or if transactions should be reviewed but how much of a risk assessment should be conducted and how many transactions should be reviewed. The answer involves the sample size, nature and type of transactions, the risk involved, and any prior CBP inquiries, among other considerations.

I don’t have any special access to Santa’s naughty or nice list, but I hope there are no CF 28s (Requests for Information) or CF 29s (Notices of Action) in your stocking this holiday season, so you do not have to scramble to look for records and information. If there are, consider reaching out to a customs professional prior to responding. Training, knowledge, “reasonable care,” and a framework of internal controls all take time and effort to ensure compliance with customs laws and regulations.