The U.S. Government Accountability Office (GAO) has published a 41-page report on U.S. Customs and Border Protection (CBP) and their handling of high-risk maritime cargo shipments. According to the Executive Summary in the report titled CBP Needs to Enhance Its Guidance and Oversight of High-Risk Maritime Cargo Shipments, "When determining the disposition of high-risk shipments, CBP’s targeting units are inconsistently applying criteria to make waiver decisions and are incorrectly documenting the reasons for some waivers. CBP policy lacks definitions for standard exception waivers. As a result, targeters are inconsistently applying and recording standard exception waivers. Because of these inconsistencies, some targeting units may be unnecessarily holding shipments for examination, while others may be waiving shipments that should be examined.
The U.S. Government Accountability Office (GAO) has published a 47-page report on U.S. Customs and Border Protection (CBP) enforcement activities as they relate to Intellectual Property Rights (IPR). According to the report highlights, "CBP’s management of its exclusion order enforcement process at the ports contains weaknesses that result in inefficiencies and an increased risk of infringing products entering U.S. commerce. First, CBP does not routinely review ITC’s list of exclusion orders or take other action to ensure that a trade alert has been posted to its intranet for each order. At GAO’s request, CBP reviewed ITC’s list of exclusion orders as of April 30, 2014, and reported that it had posted trade alerts for 83 of the 94 exclusion orders; however, it posted 17 of the 83 trade alerts after GAO’s request for data."
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Time and time again we run into clients, or potential clients, who are not paying the duties and taxes due on their imported merchandise directly to U.S. Customs and Border Protection (CBP). So, if you are one of the many importers who have successfully converted over to paying the government direct via ACH (Automated Clearinghouse) you may wish to consider skipping this article and moving on. However, if you are one of the aforementioned companies who are still paying your customs broker the duties due on your merchandise I implore you to please pay attention and read on.
The ability for U.S. importers to pay the duties due directly to CBP has been around for many years now; yet maybe it’s just me but it seems like only the large and medium-large sized importers are taking advantage of this option. The requirement for a customs broker to notify clients that they have the ability to pay duties due the government direct did not come about by accident. In fact you’ll find that required statement emblazoned on every Power of Attorney your broker asks you to sign. Why is that statement now required by law or regulation? Because over the years there have been a significant number of broker bankruptcies; and if your broker files a bankruptcy action while holding duty you’ve paid directly to them, that sum of money is now tied up in the courts. But more importantly, the fact that you’ve already paid the broker does not relieve your company of the obligation of paying the duty again – so your company or your surety agent will be required to fork over a second duty payment to CBP. The Method of Payment Advisory Statement contained on most Customs Powers of Attorney reads as follows:
In accordance with 19 CFR 111.29, the following paragraph explains your rights regarding method of payment of Customs charges: If you are the importer of record, payment to the broker will not relieve you of liability for Customs charges (duties, taxes, or other debts owed Customs) in the event the charges are not paid by the broker. Therefore, if you pay by check, Customs charges may be paid with a separate check payable to the “U.S. Customs and Border Protection” which shall be delivered to Customs by the broker. If you elect to make payment with a check made payable to the U.S. Customs and Border Protection, the broker must be notified in advance.
As stated above, in addition to direct ACH payments, you also have the right and ability to deliver a check, payable to U.S. Customs and Border Protection directly to your broker. But in this day and age of electronic everything, I would contend that ACH is the only way to go. Checks are costly to process and can sometimes get lost or misplaced. CBP accepts both forms of ACH, debit or credit and getting established as an ACH Payer is rather easy to accomplish. You simply complete a brief application, get it signed by a company officer and submit it to CBP. More details on CBP’s ACH Program, including an application, can be found by following this link: CBP ACH Debit and Credit Programs. Once your ACH Application is processed the CBP Finance Center in Indianapolis, IN will issue your company an ACH Payer Code. You simply provide this code to your customs broker and all future duties will be paid by statement, using the ACH debit or credit option.
But wait, there’s more! In recent years CBP has also rolled out a program called Periodic Monthly Statement (PMS) that allows importers to essentially accrue the duties due and pay once a month, similar to a credit card statement. Exercising this option allows importers to conveniently make one monthly payment and it is a one-time positive hit (up to 45 days) to cash your company’s flow.
The reasons you may not be paying your duties directly to CBP can be many. Your customs broker might be fronting or advancing the funds for you – but if they are, it’s also likely that you may be paying a hefty disbursement fee, or finance or interest charge. Those fees can add up and only add to the overall landed cost of the shipment. What’s that you say? “My broker advances the money and doesn’t charge us a fee for doing so.” Really? What’s that old adage about free lunches? You might be inclined to take a closer look at your invoices or rates because it has to be baked in there somewhere. Either that or your broker might just be one of those who winds up filing bankruptcy because it isn’t very smart or a good business model. Advancing thousands of dollars in freight and/or duty without charging a fee for doing so can quickly eat up a broker’s credit line and costs them all-important margin or profit while doing so.
Another reason you may not have explored the ACH option with CBP is that you don’t believe you annual volume of imports is large enough. There is no minimum required to participate in ACH. If your company has only five shipments a year you can still pay via ACH.
The last reason some companies don’t participate in ACH is because their Chief Financial Officer (CFO) is nervous about granting access to the company’s bank accounts. If this is the case with your company, please give me 15 minutes with your CFO and I believe that I can convince them its right for you. There are ways to set up your ACH program where the company’s primary bank account is 100% secure and protected. With a cooperative bank, it’s easy to do and very safe.
I think it’s also important to point out too that in all of the years ACH has been available to the importing public I’ve never heard one report of errors or mistakes being made where the government draws too much. With that said, mistakes do happen, but if it is does remember, there are legal and administrative remedies for your company to get a refund from CBP; unlike standing in-line at the bankruptcy court if your broker happens to abscond with your duty.
The bottom line is this, if your company is not paying their duties and taxes via CBP’s ACH program you are at risk. It is a risk or burden that you can quickly and very easily eliminate. Pay or remit the funds directly to the government via ACH. If you have questions about ACH please reach out to me by e-mail, my address is Mike.Laden@tradeinnovations.com.
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Michael Laden is a Founder and Principal of the firm. He is a licensed customs broker and has been toiling in the international trade industry for almost 40 years. His full bio can be found on the ABOUT US page.