Debunking the Myths about Direct-Filing
“Oh, I would never take on that kind of liability,” you say? You already own 100% of the liability! As the official Importer of Record (IOR) with CBP, your company, and your company alone, is responsible for the accuracy of the declarations made with CBP. Employing a customs broker to file your entries does not relieve your company of any liability for compliance with CBP laws and regulations. The obligation for an IOR to undertake “reasonable care” in its customs practices is codified in the Customs Modernization Act (Mod Act) of 1993.
“Oh my gosh, I’d need tons of extra resources to direct file our entries,” you exclaim! Not so fast! If you are already auditing the customs broker’s work product (as you should be) you will be able to utilize those resources for entry filing; unless of course the audit is fully automated. Additionally, I think you’ll be surprised by the efficiencies you actually gain by direct-filing. Also, like any system, as familiarity increases so does productivity. Templates, parts lists and other intuitive functionality help this cause and contribute to a reduction in errors. One well-known direct-filer (a Fortune 100 company) has individuals who file and process more than 100 entries in a single eight (8) hour day.
“Well personally, I’d love to direct-file our entries with CBP, but we don’t have a license or permit,” you explain. All importers have the right to file their own entries on their own behalf without a customs license or permit. While it helps to have a licensed customs broker on staff, it is not mandatory. An importer however cannot file entries for another entity without having a valid Corporate Customs Broker’s License.
“Geez I’d love to direct-file, but who wants to increase our odds of a CBP audit?” you challenge. Direct-entry filers are no more likely, nor less likely to receive a CBP audit. Direct-filing does not increase the probability of a CBP audit; the odds are the same either way.
“Are you kidding me? We have more than 500 suppliers in 32 countries. No way can we handle that kind of volume!” you decry. Direct-filing is not an all or nothing proposition. An importer can gradually migrate into the program in a slow and orderly manner. A filer does not need to engage or turn on all suppliers in all origins at the same time. The transition can be planned and phased-in at a your own pace.
What’s In It for Us?
A lot actually! First and foremost in my mind is your compliance rate; I can almost guarantee you that it will trend higher, in many cases much higher. In my humble and professional opinion, no one will take greater care in the preparation and processing of that customs entry, than your own teammates. And, furthering this opinion, no one knows more about the product being entered, than your own teammates.
But most who have adapted direct-filing programs would argue that the real big win is in the cost savings. Not only are you no longer processing broker invoices and auditing their work, but your company is no longer incurring the expense (usually $75+ per entry) for having a broker process the entry.
Direct-filing programs have also allowed importers to improve velocity by taking 1-2 days out of the supply chain; allowing them to reduce lead times. At the same time direct-filing also improves supply chain visibility.
The Future is Now
While direct-filing may not be for every company or importer, with the right support it can be successfully implemented in just about any company; all it basically takes is a good dose of curiosity and the desire. There is very definitely a trend in this direction as more and more importers in recent years have converted. And, while it’s not always prudent to “run with the herd”, in this instance, having witnessed the positive effects it has on those who have adopted it, it warrants consideration.
Trade Innovations has direct-filing experience dating back to 1985. We have been forefront innovators in this realm since 2005 when our company was founded. If direct-filing is something that you are considering, or have considered in the past and would like to revisit I implore you to reach out to me. I would be happy to discuss and explore the pros and cons with you.
As always, thank you for taking time to read my musings. If something I’ve said strikes a chord with you, you’d like to discuss it further, argue an alternative position or point please contact me directly. I would welcome your input and thoughts. I can be reached by e-mail at firstname.lastname@example.org.