A few simple questions will go a long way when determining whether your account has significant potential exposure that may impact profitability or even long term economic viability. On the upside, importers that are willing to undertake routine internal compliance reviews are often able to identify significant potential duty savings opportunities. So the next time you sit down with a potential or current account that sources product overseas, you may want to consider asking some or all of the following questions:

• Has your company ever received a penalty or liquidated damages claim from CBP?
• Has CBP detained or seized any of your shipments in the last five years? If so, what was the outcome?
• Has CBP suspended liquidation of any of your entries in the last five years?
• Do you make any off invoice payments to vendors? If so, are such additional payments communicated to the import department?
• Do you ever receive invoices payable in a foreign currency?
• Do you supply any component materials, equipment, tools or dies, packaging, designs, R&D, etc. directly or indirectly to vendors?
• Do you ever buy from related vendors? If so, do you have a written Customs-based transfer pricing policy?
• Do you pay royalties to a vendor or a third party in connection with imported merchandise?
• Do you purchase merchandise on a Delivered Duty Paid (“DDP”) or Landed Duty Paid (“LDP”) basis where another party acts as the importer of record? If so, what percentage of your total purchases is on such DDP or LDP terms?
• If you claim preferential tariff treatment under a free trade or similar agreement, e.g., G.S.P., NAFTA, etc., have you ever undergone a CPB verification?
• Do you utilize buying agents in connection with any of your foreign purchases? If so do you have a written buying agency agreement? Are resultant commission payments disclosed to CBP?
• Has any of your imported merchandise been subject to an antidumping (“ADD”) or countervailing duty (“CVD”) order in the past five years? Are you aware of any such current cases affecting your industry or trade? (Many ADD duty deposit rates exceed 200%).
• Have you ever applied for a Customs ruling or ADD scope determination?
• Do you use outside legal counsel or obtain expert advice from any third party, e.g., a customs broker, in connection with import related transactions, including tariff classification.
• Do you have written import procedures or a Compliance Manual?
• Are Customs entries prepared by your broker regularly reviewed by import department personnel for accuracy?
• How long do you maintain records needed to support Customs valuation or tariff classification declarations? Do you have a written record retention policy?

Potential Duty Savings Opportunities Questions

• If you had to guess, on average, what percentage of the prices charged by your vendors relate to non-production related activity, e.g., merchandising, quality control, etc.?
• Are you familiar with the first sale appraisement principle, whereby duty on a middleman’s mark-up may be lawfully avoided in certain situations?
• Have you recently reviewed the duty rates being applied to your imported products? Have you explored whether making relatively minor component material or design changes might lower duty rates applicable to your imports?
• Do your sourcing decisions take duty free treatment under the many free trade agreements negotiated by the U.S. into consideration?
• Do you ever receive defective or late shipments that you sell at discounted prices? Do you ever receive discounts or rebates from vendors in such instances?
• Are duty drawback refunds available, e.g., upon exportation of products incorporating imported duty paid components?

Please note that this article is an education tool that is general in nature and is not intended to provide legal advice in any specific circumstances.