If your business imports goods into the United States, you could be subject to a Customs and Border Protection (CBP) audit even if you have never had a shipment flagged or goods held at the port. Unlike an IRS audit, a CBP audit focuses on how your goods entered the country, what you claimed they were, how much you said they cost, and whether you paid the correct duties or tariffs.
For many business owners, a CBP audit feels unexpected and confusing. This guide provides a clear overview of the process, including preparation, documentation requirements, and tips for protecting your business.
What Is a CBP Audit?
A CBP audit is a formal review by U.S. Customs and Border Protection to verify that your company has followed customs laws when importing goods. Auditors primarily check that:
- Goods are classified correctly using the proper HTS codes
- Duties and tariffs have been paid accurately
- The country of origin is declared correctly
- Import documentation is complete and accurate
CBP audits are part of the agency’s mission to enforce trade laws, collect import duties, and prevent fraud at U.S. borders.
Why Your Business Might Be Audited
Any importer can be selected for audit. CBP selects businesses based on factors such as:
- Random selection
- Patterns of past import errors
- Red flags during spot checks
- Referrals from other government agencies
- Sudden changes in import volume or value
Key Terms You Will Hear
- HTS Code (Harmonized Tariff Schedule Code): A 10-digit number classifying imported goods. It determines the amount of duty owed. Using the wrong code can trigger audits or penalties.
- Declared Value: The value assigned to your product entering the U.S. is used to calculate duties. Understating value can lead to further investigation.
- Country of Origin: The country where the product was made. This affects tariff rates and trade compliance.
- Landed Cost: The total cost to bring your product to the U.S., including product price, shipping, insurance, customs duties, and other fees.
- Reasonable Care: CBP expects importers to demonstrate a good-faith effort to comply with laws, even if mistakes are unintentional.
What Happens During a CBP Audit
Step 1: Notification
You will receive a formal Notice of Audit detailing the records requested and the review period, usually 1–3 years.
Step 2: Initial Meeting
CBP may schedule a meeting or call to clarify audit expectations and answer questions.
Step 3: Document Request
You will be asked to provide records, including:
- Importer records (commercial invoices, packing lists, bills of lading)
- Customs entry summaries (CBP Form 7501)
- Purchase orders and contracts
- Tariff classification justifications
- Proof of duty payments
- Bank Statements
Step 4: Review Period
CBP auditors examine your records, which may take weeks or months, depending on the complexity of your imports.
Step 5: Findings and Report
CBP issues a Compliance Assessment Report, which may include:
- Notices of underpaid or overpaid duties
- Financial penalties or liquidated damages
- Recommendations for procedural or compliance changes
Common Mistakes That Trigger Trouble
- Using incorrect HTS codes to reduce tariffs
- Failing to keep five years of import records as required by 19 CFR §163
- Declaring incorrect product values
- Misidentifying the country of origin
- Over-relying on customs brokers without reviewing entries
How to Prepare
Keep Organized Records
- Store all import documentation for at least five years per 19 CFR §163
- Organize by shipment, product, and vendor
- These requirements come from the Customs Modernization Act (‘Mod Act’) and 19 CFR §163, which outline an importer’s obligation to maintain records
Work With Trusted Experts
- Review all entries, even if you use a customs broker
- Consider a trade compliance attorney or consultant for large-scale imports
Use a Tariff Classification Ruling
- Request an official ruling from CBP if unsure about HTS classification to avoid future audit issues
Conduct an Internal Compliance Review
- Perform a dry run of an audit with your team or a third party to identify potential issues
Import Records to Maintain for Five Years
Entry Documents
- CBP Form 7501 (Entry Summary)
- Commercial invoices
- Packing lists
Shipping and Transportation Documents
- Bills of lading or airway bills
- Arrival notices
- Delivery receipts
Financial and Payment Records
- Proof of duty and tax payments
- Purchase orders and sales contracts
- Proof of supplier payments
Supporting Documentation
- HTS classification support (rulings, product specifications, catalogs)
- Country of origin certificates (USMCA, etc.)
- Required licenses, permits, or certificates (FDA, USDA, EPA, FCC)
- Importer Security Filing (ISF) records
- Drawback claims and supporting documentation
Additional Reminders
- Electronic storage is acceptable if the records are accessible and reproducible
- Destroying records before five years can lead to penalties
- Voluntary retention beyond five years is optional for internal compliance or supplier audits
What to Do If You Are Audited
- Stay calm. A CBP audit does not automatically indicate wrongdoing
- Respond promptly to requests to avoid expanded scrutiny or penalties
- Engage legal counsel or a trade compliance advisor immediately
- Be transparent about errors and outline correction plans
- Implement any required procedural changes quickly and document the steps taken
Penalties for Non-Compliance
- Underpaid duties must be repaid, often with interest
- Fines can range from thousands to hundreds of thousands of dollars
- Liquidated damages may be assessed based on the value of non-compliant goods
- In severe cases, CBP can seize shipments
- CBP can pursue penalties up to five years after the date of entry, in line with the statute of limitations
Final Thoughts
Proactive compliance is the best way to avoid surprises during a CBP audit. Ensuring proper documentation, accurate classification, and correct valuation can protect your business and simplify the audit process. Maintaining records for five years in accordance with 19 CFR §163 is not optional and should be part of your standard business practice.
Being prepared before an audit occurs will give your business confidence and reduce risk. A clean, organized approach to customs compliance protects your company and ensures a smooth relationship with U.S. Customs and Border Protection.
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