Our answer is always the same “conduct your compliance as if the when is now.” A focus on the core areas of internal controls will assist you with audit preparedness:
Control Environment – A formally established and maintained environment that supports CBP compliance. This often has as much to do with company culture as it does with the efforts of the import compliance team. Although compliance has a very limited influence over the company’s culture, make sure that some basic steps are covered:
- A letter from the President or CEO affirming the company’s commitment to compliance and enforcing the implementation of the compliance procedures
- A written company compliance policy statement also signed by the President or CEO
- Ensuring that key process owners have access to current laws and regulations that affect the company’s business
Risk Assessment – Implement a formal process that identifies and analyzes risk. This includes a thorough understanding of what internal and external forces influence risk. Because there are so many parties involved in the import transaction it is important to understand how these parties can assist in identifying and affecting the risk of non-compliance. Externally, risk can come from sources like changes to regulations, etc. Internal decisions can also impact risk, such as participation in free trade agreements or changes to sourcing patterns.
Control Activity – A system of documented policies, procedures and controls that ensure complete and accurate reporting to CBP. It is highly unlikely that an importer will pass a focused assessment audit without formal written policies and procedures. These policies and procedures should be customized to accommodate the company and its business practices and should outline preventative and detective measures that are employed by the company to ensure compliance.
Information and Communication – A system for identifying and reporting relevant and accurate information internally, as well as to service providers and to CBP.
Monitoring – Policies and procedures are good but the proof is in the testing. Many times we run into importers that say “we do a 100% audit.” When we begin review of their audit process, we uncover a 100% audit of broker accuracy. This is a very important part of the audit. However, it is equally important to test whether the information presented to the broker is accurate. This type of audit should test all areas of compliance, the main areas being: Recordkeeping, Valuation, Classification, Country of Origin, SPIs, ADD/CVD, and Quantity. When a comprehensive audit is being conducted, most often it is impractical to audit 100%, so we recommend risk-based sampling. This means developing an audit plan that takes into consideration the company’s risk exposure in its importing activities.
Not only are Internal Controls paramount to import compliance, but from a practical standpoint, they facilitate the speed of delivery of imported goods to the intended destination by addressing stumbling blocks that impede the clearance of merchandise.
Are you ready for your company’s audit? If not, reach out to our team of experts at Tradewin. We can help!