How Does CBP Review Value? · How does CBP Request Value Support? •ACE/ABI Request for Documents...

transcript

How Does CBP Review Value?

Speakers:Cindy Deleon | Deleon Trade LLCJohn Metrich | Deleon Trade LLCKristin Simonson | Deleon Trade LLC

Audience Questions:

How many of you……

• Are importers? Brokers? Service Providers? Government Employees?

• Consider yourself well-versed in Customs valuation?

• Have undergone a CBP Audit?

Overview

1. Why does CBP care about value?

2. Who at CBP reviews value?

3. How does CBP target for value?

4. How does CBP request value information?

5. How does CBP review and audit value?

6. What does CBP do with the results?

Why Does CBP Care About Value?

• Section 201, 232, and 301 duties

– More to come? (List 4 for China, Autos and Auto parts, Mexico, European Union)

• Antidumping and Countervailing Duties

• Regular Ad Valorem duties

• Merchandise Processing and Harbor Maintenance Fees

• Trade Statistics (e.g., negotiating trade agreements)

Who is Looking at Your Values?

• Import Specialists

• Regulatory Audit

• National Targeting & Analysis Group (NTAG)

• Centers for Excellence and Expertise (CEE)

• Commercial Enforcement Analysis & Response Teams (CEAR)

• Enforcement Analysts

• Homeland Security Investigations

How Does CBP Target for Value?

• Analysis of ACE Import Data

– Total Value and Volume

– High Value Duty Rates – ADD/CVD, 301, etc.

– Related Party Transactions

– Maquiladora Activity

• Specific Industries or Types of Products

• Census Warnings

Census Warnings• Occur when something is out of the normal range for a

specific HTS

– Commodity Price Ranges

– Origin Countries

– Quantity-to-Quantity Ratios

– Maximum Value (exceeds $100 million)

• ES-012 – Entry Summary Census Warning and Override

How does CBP Request Value Support?

• ACE/ABI Request for Documents submitted through Document Imaging System (DIS)

• CBP Form -28 Request for Information

• Audits – Surveys (RASA), Referrals, FA’s, Follow-Ups

– Walkthrough Transactions

– Questionnaire

– Requests for Information

Document Request Example

CBP Request for Information – CF 28• Basic Request

• CF 28 & Audit Combined

Audit Engagement Letter

Audit Walkthrough Entry Request

Audit Questionnaire

Informed Compliance Letter

Tips for Responding to CBP Requests?

• Respond timely or request extensions if necessary

• Review all documents/data before submitting to CBP (look

at all risk areas not just value)

• Be careful NOT to offer up more info and documents than

requested

• Do not say YES to all CBP requests, make sure they are

reasonable and within the scope of the engagement, and in

writing

• Consider obtaining assistance from legal counsel,

consultant, or other expert

How does CBP Review & Audit Value?

• Verification of Basis of Appraisement

• Review for obvious errors & red flags

– Unconverted Currency

– Undeclared Invoice Value - Free of Charge, Packing, etc.

• Verification of proof of payment

• Review of all deductions

• General ledger review & testing

• Other testing – macro test, first sale, related party value, cost submissions, reconciliations, etc.

Customs Valuation Hierarchy

1. Transaction Value – price actually paid or payable (PAPP) plus

certain additions;

2. Transaction Value of Identical or Similar Merchandise - based on

the transaction value of previously imported merchandise

3. Deductive Value - selling price in the US less certain post-

importation costs

4. Computed Value - Foreign supplier cost information for

materials, processing, profit, general expenses, and U.S. assists

and packing costs

5. Value if Other Values Cannot Be Determined or Used (Fallback

Method) - methodology derived from one of the first four

methods with the rules being reasonably adjusted

Basis of Appraisement Questions

Transaction Value –

Related Party

Computed Value

Fallback Value

Transaction Value – 19 CFR 152.103

• Price actually paid or payable for the merchandise when sold for exportation to the United States, plus certain statutory additions to the price.

• Price actually paid or payable

– The total payment (whether direct or indirect) for the imported merchandise from the buyer to the seller.

– General presumption that all payments from the buyer to the seller are dutiable – Generra Sportswear Case

– Often the invoice price, but certain upward and downward adjustments may be made.

Obvious Errors - Currency

Obvious Errors – Undeclared Invoice Value

Entered Value $213,703

Obvious Errors – Undeclared Invoice Value

Invoice Value $213,865.36

Packaging Charge - 162.54

Entered Value $213,702.82

Invoice Value $213,865.36

Free Charge + 541.00

Correct Value $214,406.36

Proof of Payment – Double Invoices

Invoice w/ Shipment$20,486.40

Invoice for Payment$25,382.40

Proof of Payment Example

Proof of Payment Example – Invoice

Proof of Payment Example – Wire Detail

Proof of Payment Example – Bank Stmt

Deductions from Transaction Value

• You can only exclude/deduct a few costs under the rules for transaction value and they all carry certain requirements:

– International Freight

– Post-Importation Charges

– Transportation of Merchandise after Importation

– Duties and Taxes Payable after Importation

• CBP will review documentation to verify all deductions taken!

Freight Deductions

• Requirements to take a freight deduction:– Estimated freight deductions are not allowed; only the actual freight

charges can be deducted

– A costed bill of lading or other documents from the 3rd party freight company corroborating the charges MUST be obtained to support the deduction. Commercial documents to and from the service provider such as an invoice or written contract separately listing freight/insurance costs, a freight/insurance bill, a through bill of lading or proof of payment of the freight/insurance charges (i.e., letters of credit, checks, bank statements) are examples of some documents which may serve as proof of such actual costs.

– Actual freight charges need to be separately identified on the invoice used to clear Customs

Freight Example

$2,016 Deducted

Invoice Freight = $5,869.82

Freight Example – Freight Invoice

Actual Freight $2,016

G/L Review & TestingFocus is on:

• Value Additions–Commissions (Selling)

–Royalties

–Assists

–Packing Costs

–Proceeds

• Additional Payments

Additional Vendor Payments

• Types of supplemental vendor payments that are considered part of the price actually paid or payable:

– Tooling, Die, Mold, or Equipment Charges

– Deposits and milestone payments

– Material acquisition charges

• Spot buy charges

• Metal surcharges (e.g., Steel, Copper, and precious metals)

– Rework charges

– Testing charges

– Packing charges

– Royalties/Proceeds

– Design or development charges

– Transfer pricing true-ups

– Management Fees

G/L Review & Testing

• Request & Review G/L Trial Balance

• Identify Accounts of Interest

• Select Sample Transactions for Testing

Step 1

Step 2

Step 3

What does CBP Do With The Results?

• Acceptable Audit Report

What does CBP Do With The Results?

• Unacceptable Audit Report

What should you do Now?

• Get Educated – Read Focused Assessment Technical Guide - Value

• Conduct a Risk Assessment

• Conduct Targeted Sampling of Identified Risks

• Evaluate Your Internal Control Program

• Consider Prior Disclosure if Errors are Identified

• Develop and Implement Corrective Actions

• DON’T WAIT UNTIL YOU HEAR FROM CBP!

Cindy Deleon

Founder

Deleon Trade LLC

Former U.S. Customs Auditor

& Assistant Field Director

Office (281) 466-2026

Mobile (708) 533-5224

cindy@deleontrade.com

QUESTIONS?

John Metrich

Senior Trade Auditor

Deleon Trade LLC

Office (281) 466-2026

Mobile (219) 781-8973

john@deleontrade.com

Kristin Simonson

Senior Trade Auditor

Deleon Trade LLC

Office (281) 466-2026

Mobile (612) 987-6163

kristin@deleontrade.com