Small- and medium-sized businesses that import into the U.S. are under the same obligations to comply with complex laws and regulations as large multinational corporations. Get something wrong and your company could face costly delays and margin-killing penalties. Corporate officers and executives could even be held personally liable for import-related mistakes. Thankfully, implementing compliance measures is easier and less costly than many small business owners and managers realize.

Why Care About Compliance

The Customs Modernization Act of 1993 firmly established the responsibility of all importers, large and small, to exercise reasonable care in filing customs entries for imported goods. There are a number of components to meeting this requirement. Importers must know and follow the applicable customs laws and regulations, which can be a challenge given their volume and complexity as well the proliferation of often inconsistent interpretive rulings from U.S. Customs and Border Protection. Importers must know the proper description, use, composition and origin of the goods they bring in as well as the terms of their transactions.

Reasonable care also means establishing policies and procedures that foster a culture of compliance and ensure the prompt reporting and remedying of violations. While customs brokers and other third parties may be able to offer guidance, it’s still the importer that is ultimately responsible under the law for ensuring compliance.

Failure to meet this responsibility can have consequences ranging from mild to severe.

Failure to meet this responsibility can have consequences ranging from mild to severe. An inadvertent misclassification could result in nothing more than a higher duty bill. If an error is judged to be negligent or fraudulent, however, the importer could find itself hit with civil or criminal penalties, which for a small business could be a major hit to profitability. CBP can also seize a shipment, preventing goods from reaching customers in time, and may exercise heightened scrutiny that could cause major headaches for the importer.

Recent enforcement trends raise the stakes even higher. A federal court recently held that liability for corporate misconduct can be imputed to a wide range of company officers and employees, raising the very real possibility of personal liability for sizeable monetary penalties. An upsurge in False Claims Act cases filed by whistleblowers for customs violations opens importers to additional penalties outside those directly associated with the violations.

Establishing a Compliance Program

The landscape for establishing and maintaining compliance is not as complex or costly as you might think. There are a number of tools and practices that small businesses can use to boost their compliance and avoid or minimize sanctions. The trick is knowing the system and learning to leverage the tools that are available to you.

In The Spotlight

For example, obtaining a binding ruling from CBP can help define a product’s classification, value, origin or eligibility for trade preferences. Once you have a ruling, you can rest assured that the related information you provide to the government is accurate and penalty-proof.

Performing regular internal evaluations of your import operations can help identify problems early so you can remedy them yourself and, in some situations, self-report them to customs as a protection (or limitation) against penalties. Setting internal controls and procedures down in an easy-to-follow manual will demonstrate a commitment to compliance and help guide employees in how to respond to customs and other government agencies inquiries and notices, as well as help the company operate in a more efficient and compliant manner overall.

When necessary, you can take advantage of the provisions of the Small Business Regulatory Enforcement Fairness Act, which requires each federal agency to establish policies to provide for the reduction and (as appropriate) waiver of civil penalties for statutory and regulatory violations by small businesses. Requirements are exacting and rules must be followed, but understanding your rights in seeking relief under the SBREFA so you can act quickly should the need arise can make all the difference to a small business operation.

To learn more about how your small business can meet its compliance obligations without breaking the bank, consider attending ST&R’s webinar, Compliance on a Budget – Reasonable Care for Small Businesses. Click here to register.

Larry T. Ordet
About The Author Larry T. Ordet
Larrry T. Ordet is a member of international trade law firm Sandler, Travis & Rosenberg, P.A. He concentrates on general customs compliance matters, with particular emphasis on tariff classification, NAFTA duty deferral and preference program qualification issues.

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