[TIPS] What Are Some Scary Trade Compliance Stories

Machine Operated Script:

Renee Chuichiarelli  

Welcome back to simply trade tips with Renee cucarelli. Julie Parks, how you doing? Jules, I am great. How are you? Renee, just wonderful. We’re having a special episode today for Halloween. It’s not our regular, regularly scheduled episode. So this is exciting for Julie and I, and so we’re still going to leave you with an FiO, and we’re still going to do this in a very short period of time, less than 10 minutes. So Jules, what are we going to talk about? We know we’re going to talk about Halloween, but what exactly should we talk about? We

Speaker 1 

should tell scary compliance stories. Renee, you want me to go first?

Renee Chuichiarelli  

Yes, please. I know you have scary All right?

Speaker 2 

So we’ll talk first about skeletons in the supply chain closets. So the theme here is, I was at a company that purchased tooling from overseas, imported that material and then shipped it to Canada for use in a production line, the order was placed with a domestic supplier, and that domestic supplier then placed their order with the foreign company that then shipped the material to the United States, where the problem occurred was this company I was working for, was the importer record, and they didn’t really have right to Make entry. And they were making entry on a lower cost of the stamping, because they were using the transfer products between the related parties, as opposed to the price that they paid to the US supplier. So very large court case, I then hired into this amazing company, and this is one of the first problems that they wanted me to solve pretty scary the way that there had been many meetings that had occurred. And bottom line, I ended up looking at this and going, I think it’s an importer record issue, because you’re not we’re using for sale, and don’t really want to use for sale. It’s an importer record issue. And then we had to roll out a practice where this company would not be the importer of record if we were not on the order, on the international order. So this goes back to some of the CT Pat stuff, but it was a very simple, you know, solution, but it was scary in that, like, folks in the supply chain were ready to kind of pull out their pitchforks and, like, let the air out of my tire, because I had joined at a time where they’ve been working on this for quite a while to try to resolve in the company. So we did roll things out. It was very painful for the buying department, because it was a very big shift in how they were buying material. I think for the better. Renee, I know you’ve had such a such an interesting past with regard to many different things, customs. I’ve learned a lot from you. What’s your scary story?

Renee Chuichiarelli  

Well, one specifically, I’m going to call it nightmare on audit street, and I was working for an Importer Exporter. Actually, they were both Importer Exporter. And what happened was, is we got a letter from customs that we were going to be under a focused assessment, and we’re like, okay, fortunately, we had submitted a prior disclosure prior to receiving that letter. So if our audience knows this, when you submit a prior disclosure, you protect yourself from penalties, not necessarily duties, taxes and interest and fees, but you can protect yourself from penalties. So we had kind of an idea that we were going to be under a focused assessment, so we submitted a disclosure. Well, that good for us. We were able to protect ourselves in some of the compliance areas. However, customs came in and, I mean, I’ll there’s so many scary stories in this, but the audit lasted like seven years. But here’s the scariest story, when they came back to us and they said, We’re going to audit, basically your audit. And they audited our prior disclosure, which is not completely accurate. And so the takeaway from this is, if you’re in a situation, and you know, this could be happening with all this tariff stacking and things that are going on, I suspect there’s going to be a lot of errors, you know, coming in the future, not necessarily because the importer wasn’t taking reasonable care, but it’s just a crazy environment, right? And you do do post summary corrections, or maybe you do submit a prior disclosure, you know, take the time to make sure that your disclosure is 100% accurate, right? So we were in the middle of two audits. We had the original focused assessment, you know. So we’re being audited by customs with all our areas because you with a focused assessment, it’s the compliance program audit. And then we were also being audited with our prior disclosure. So it was like double audit nightmare, right? Maybe that’s what I should have called it. And double audit nightmare. So anyway, just take away that you want to make sure any thing that you submit to customs, and especially a prior disclosure being is accurate. So that’s my scary one of my scary stories.

Speaker 2 

Yeah, and that’s a good point, even if the disclosure might have been written on the outside. Right? Yes, you know, you have the responsibility internally to kind of review that so quality check the work. Hey, so Renee, why don’t we move into like a lightning round? It’s it’s Halloween. Let’s have some fun. Let’s do some trick or treating. All right? So I’m thinking that we do trick or treat Fact or Fiction, and we kind of list the common beliefs from a compliance perspective, and ask the audience, and you know ourselves, really, if it’s true or a myth or a trick or a treat. So we’ll go with the aspect it, where the fact, if it’s a fact, then it’s a treat, and if it’s fiction, then it’s a trick, right? Exactly. So maybe let’s start with Renee. I’ll pepper you with so can CBP review your General Ledger in a focused assessment environment? Like it seems kind of kind of strange, right? Would they go back to your gym? Is that a trick? Seems like

Renee Chuichiarelli  

I’m gonna say that’s a treat.

Speaker 2 

So it’s true, that it’s true. I feel like you’ve had some experience with that,

Renee Chuichiarelli  

huh? I’ve had some experience with that in that same audit, you know. So you think that customs might be limited to certain documents or data, not necessarily. It’s pretty broad. So I was in a situation where we actually just sat in a room and looked at our general ledger with them. It was very exciting, very scary. So, yeah, that’s a treat, and not in a good treat way.

Yeah, do you want me to take Okay?

Renee Chuichiarelli  

Jules, yeah, let me okay. I got one for you. How about this? If your quantities vary upon receipt, you do not need to reconcile your quantity with custom, with your customs documents or customs entry. So

Speaker 2 

I’d say that’s a trick, because quantity is kind of, you know, they kind of say like quantity is a statistical item, but generally quantity is related to value. So generally it’s a trick, especially when you find that money changes hands because of those quantity differences. If you find that the quantity in your company might not money doesn’t change hands on, if it’s under a certain amount, or something like that, you want to consider that. But you really want to true up against the true accounting value, because that ends up being amortized, you know, with whatever your piece price is or was on your import.

Renee Chuichiarelli  

So yeah, and don’t forget, if you have overages you want, or short, you know, definitely overages and shortages, you need to report that to CBP. You need to do a post summary correction.

Speaker 2 

That’s correct, all right. Winnie, your turn Rick or tree as an importer, my broker is responsible for my record keeping exclusively,

Renee Chuichiarelli  

simply, I’m going to say a trick. That’s a trick. So those of you, some of some of our listeners, know, but there are separate record keeping penalty statutes, so it’s customs takes this very seriously, and so the importer does have a responsibility to maintain their records for how long?

Speaker 2 

Jewel for the importer routines records for five years. Yeah, all right, sometimes it’s ITAR and there’s an Oga involved, there’s all these extra record keeping requirements that an Oga might add.

Renee Chuichiarelli  

That’s true. Thank you. Thanks for adding that good point. Okay, you’re up jewel Trick or treat. A parts database sent by the importer to the broker is a strong component of any compliance program.

Speaker 2 

I think this is a treat. I think this is true. I think it’s it’s really nice to have your parts on file with a broker. They can actually overview a document that might come in. So for example, if the document has an outdated tariff number on it. If their parts database is updated, they can use the tariff number that’s on file. They can use that parts database in a number of different ways too. We found like so if other government agency data needs to be submitted, it could reside in that database. It’s a good over check. It’s a good kind of a cross reference at the time of entry, which does save you some time on the back end, if the broker is kind of referring to you, hey, there’s an anomaly. The documents say x and the database says Y. Which one do you want me to use? So they can either refer you or you can rule in place. But we like that, and so do brokers

Renee Chuichiarelli  

and your broker, yeah, like you said. I mean, your broker can upload it and there’s no typographical errors. So we recommend that. So let’s go into our fi o,

Speaker 2 

so I think we’re at the era Renee, where trade is terrifying, right? I think we kind of want to have some fun with Halloween. So I think we want our listeners to figure out what your costume is going to be, and just take some time, because I know Halloween sometimes comes up and it creeps up upon us, especially if it’s on the weekdays, but take an opportunity to kind of figure out what you’re going to be. I know Jeremy and I are going to a couple’s Halloween party, and not to give things away, but he’s going to be Colonel Sanders, and I’m going to be. Guess what I’m going to be? This is. And this is Daphne.

Renee Chuichiarelli  

I love it. Have a great Happy Halloween, everybody.

Your dog needs to be Scooby Doo.

Renee Chuichiarelli  

Good point. Vinnie will be Scooby Doo, all right. Have Thank you for listening. Get on to our community, and thanks jewel. Awesome. Happy Halloween. You.