Planning for a Customs Audit
Silverman, Robert B., The CPA Journal
Customs audits can result from a U.S. Customs Service investigation or random selection. While large importers and importers of import-sensitive merchandise are most likely candidates for a Customs audit, small and medium-size companies are also regularly audited. Sometimes advance warning by way of a letter or phone call informs the company of the plans for audit. Less fortunately, notice of audit can arrive in the form of a pack of Customs Agents with a search warrant (or grand jury subpoena), who will seize and remove company records. If the company was properly prepared, it would have designated an employee to interface with the Customs Service. In the case of a search warrant, access to the premises cannot be denied, and counsel should be contacted immediately. In the case of a less dramatic entry, the company's Customs representative should implement a Customs audit plan.
Reacting to the Customs Audit?
There are many approaches to responding to a Customs audit. Some take a head-in-the-sand approach in the hope the problem will go away. Others attempt to resist, which is often followed by an action in Federal District Court. Neither approach is recommended.
Others say, "if we are nice to our abductors, they will let us go." They have nothing to hide; they have done nothing wrong; their books are wide open. These may be the same people who won't utter a word to the IRS without their CPA at their side. These companies do not appreciate that the Customs auditors are hunting for bear, which translates into whopping duty and penalty assessments. Cordiality is helpful, but only when accompanied by an understanding of the nature of a Customs audit and its implications.
The audit process is rather straightforward. It will begin with an initial interview where the auditor, an audit supervisor, and possibly an import specialist and a Customs agent will elicit information as to the manner in which the importer conducts business. …