Customs modernization act presents new compliance risks.

• Author: Curran, Dennis J.
• Position: Customs Modernization and Informed Compliance Act

Companies that import goods to the U.S. now face new customs-compliance responsibilities and penalty risks as a result of the Customs Modernization and Informed Compliance Act (Mod Act) passed by Congress in late 1996. The Mod Act was enacted to streamline and automate the commercial operations of the U.S. Customs Service and improve compliance with the customs laws and provide safeguards, uniformity and due process rights for importers.

Importers now have the legal responsibility for determining the correct value, classification and admissibility status applicable to imported merchandise. The responsibility of the importer to maintain and produce records has also increased; U.S. Customs has shifted its focus from transaction review to pre-entry verification through automated screening standards and post-entry verifications. The Mod Act requires importers to use reasonable care when providing U.S. Customs with entry information (including classification, value and duty rate) and in ensuring that all other applicable import requirements have been satisfied.

Under the Mod Act, the failure of a company to exercise reasonable care in discharging this responsibility is tantamount to negligence (or worse) and the importer is subject to the possible imposition of a civil penalty of a minimum of two times the applicable revenue/loss. In addition, new recordkeeping penalties (ranging from $10,000 to $100,000 per entry for missing records/documents) are in effect. Overall, U.S. Customs penalties have been calculated at eight to 16 times IRS penalties.

U.S. Customs' new role is similar to that of an outside audit, i.e., review of Customs' function controls, procedures, policies, etc. The agency is currently devoting its attention to companies among the top 1,000 importers (approximately $75 million minimum import value) and companies that import and/or manufacture products in the following sectors:

[] Advanced displays.

[] Agricultural products.

[] Autos and auto parts.

[] Steel.

[] Production equipment.

[] Critical components (e.g., fasteners, bearings).

[] Telecommunications.

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