Customs and Compliance Regulations

If customs walks in today, are you ready? Most aren’t and the penalties prove it. What triggers a customs audit ? 1. Random Selection Part of risk-based targeting systems to keep audits fair.  2. Red Flags Errors or inconsistencies in import declarations can raise alarms.  3. Industry Targeting   Customs focuses on industries with high fraud risks like electronics and pharma.  4. Prior Non-Compliance Past penalties or lack of response can trigger scrutiny.  5. **Related Party Transactions**   Intra-company deals face extra checks for pricing issues.  6. FTA Claims   Large claims for Free Trade Agreements may lead to reviews.  Common Mistakes That Trigger Penalties  - Misclassification  Customs uses data analytics to find errors. This can lead to a duty shortfall of up to three times.  - Undervaluation Transfer pricing reports can expose undervalued goods, resulting in fines and interest.  - FTA Misuse  Lack of origin support during claims can mean repayment of duties plus penalties.  - Poor Recordkeeping Random audits can catch missing documents, leading to fines.  - Misdeclared Dual-use Goods   These can lead to serious legal issues.  - Inconsistent Broker Instructions   Discrepancies can cause loss of benefits.  Preparation Best Practices - Assemble a Compliance Task Force    Include Trade Compliance, Finance, Logistics, and Legal teams.  - Review Historical Import Data Analyze reports from brokers and customs tools for the last 12 to 36 months.  - Validate HS Classifications  Cross-check with product specs and rulings.  - Review Valuation Methodology   Ensure all dutiable elements are included in declared values.  - Confirm Origin Documentation  Match each FTA claim with valid supplier declarations.  - Check Recordkeeping Protocol   Keep all documents accessible.  - Audit FTA Claims  Randomly select entries to trace back to source.  - Examine Related Party Transactions  Ensure customs values are based on fair market pricing.  - Spot Audit Broker Instructions  Pull recent declarations to check accuracy.  - Prepare a Compliance Report   Summarize risks and actions taken.  **Do's**  ✅ Designate a single point of contact for customs.   ✅ Be transparent but only provide requested information.   ✅ Keep an audit log of all communications.   ✅ Prepare an intro presentation outlining import processes.   ✅ Provide documents promptly and in order.  **Don'ts**  ❌ Don’t argue or blame other departments.   ❌ Don’t offer unsolicited documents.   ❌ Don’t allow unscheduled interviews with untrained staff.   ❌ Don’t say “we’ve always done it that way.”  **Post-Audit Actions**  Review findings with your broker or legal team.   Respond within the deadline to correct inaccuracies.   Implement corrective actions and document them.   Schedule a follow-up audit within six months.   Update SOPs and training based on findings.  

It’s not going to be business as usual for U.S. importers. The Criminal Division of the Department of Justice recently announced that its enforcement activities will focus on trade and customs fraud as well as tariff evasion. The current high tariff environment certainly could create incentives to find ways around paying high duties on imports – even illegal ways. Three factors determine the duty on imported goods: ✔️ Tariff classification (determines the duty rate) ✔️ Goods value ✔️ Country of origin (for additional tariffs on China, Mexico, and Canada) What does this mean for importers, especially pharma and biotech companies? Reviewing tariff classifications for accuracy. 🔹 Ensures the right duty rate is applied (not too little or too much). 🔹 Determines whether the drug/API is exempt from the reciprocal tariffs. Declaring accurate and defensible goods values. 🔹 No more assigning random values to R&D materials. 🔹 Clinical drugs paid by milestone need to be properly costed. 🔹 Be sure to include the value of any starting materials or APIs provided free of charge to manufacturers. Correctly applying country of origin rules. 🔹 Understand the origin rules for drugs/APIs/intermediates. 🔹 Origin of finished drugs usually follows the API in the U.S. Not understanding the valuation and country of origin rules or how to correctly classify your goods could expose your company to risks. ➡️ Additional U.S. Customs scrutiny. ➡️ DOJ enforcement. ➡️ Fines and penalties. How can pharma and biotechs mitigate these risks? ✅ Join trade organizations to keep up on the latest tariff changes and exemptions. ✅ Develop standardized processes around tariff classification, valuation and country of origin that all groups can follow – commercial, clinical and R&D. ✅ Build internal trade compliance knowledge through courses, seminars and webinars. ✅ Reach out to a trade compliance expert. What concerns you most about increased DOJ enforcement of trade rules? _________________________________________ I am Elizabeth Lomax, import/export compliance expert helping pharma and biotech companies create more efficient international supply chains. DM me or visit my LinkedIn profile to learn more. To stay updated, click the notification bell on my profile. 🔔

Importers: Are You Unknowingly Violating CBP Regulations? Many importers aren’t aware that a Power of Attorney (POA) for customs clearance must be executed directly with the licensed customs broker — not through a freight forwarder (unless they are a broker) or any third party. This is a strict requirement under 19 CFR § 111.36(c)(3). IF YOU ARE BUYING LDP, DO NOT PROVIDE A POWER OF ATTORNEY TO THE SELLER'S THIRD PARTY OR HAVE SHIPMENTS CLEARED IN YOUR NAME SINCE YOU WILL BE RESPONSIBLE FOR ALL DECLARATIONS TO CBP AS IMPORTER OF RECORD. Let’s break this down: 📌 What the Regulation Says: Customs brokers are prohibited from accepting a POA that was obtained by a third party, such as a non-customs broker licensed freight forwarder. The customs broker must have a direct POA with the importer of record. 📌 Why This Matters: If a freight forwarder (that is not a licensed broker) — let’s say “Rain Forest Forwarder” — presents you with a POA for their in-house broker, such as “SOSO Brokers,” and you sign it, you are not in compliance with CBP regulations. The POA must be directly between you and the broker. Often, importers assume the forwarder is the customs broker, leading to confusion and lack of reasonable care in CBP’s eyes. If CBP pulls your entry and asks who your broker is — and you reply “Rain Forest” — but SOSO Brokers filed the entry, that could demonstrate a compliance failure on your part. ⚠️ The Risk to You: Violating 19 CFR § 111.36(c)(3) Failure to exercise “reasonable care” as required under 19 U.S.C. § 1484 Potential audits, penalties, or delays in cargo clearance Being misled into authorizing a broker relationship you never intended 💡 Best Practice: Always execute a POA directly with your licensed customs broker. Ask them to confirm their license and maintain open communication. No third party should interfere with or act as a conduit for that relationship. At the end of the day, compliance is your responsibility as the importer. Make sure you’re protected — and adequately aligned with CBP regulations. #LDP #importer #Duty #customs #CBP #powerofattorney #customscompliance #importcompliance #reasonablecare.

Origin is origin. It doesn’t matter if your shipment is routed through Canada, Mexico, or any other country. If the product was manufactured in China, it remains ineligible for de minimis (Section 321 / T86). The country of origin is determined by where the goods were made, not where they were shipped from. And here’s the kicker: If even one product in the shipment has Chinese origin, the entire shipment loses its de minimis eligibility. So, what does this mean for your duties and taxes on Chinese-origin goods? It means they just got expensive. When you file through Entry Type 11 or 01, here’s the breakdown of what you could be facing: - Normal Tariff - Section 301 Tariff (if applicable) - Additional 10% Tariff (always applicable) - Merchandise Processing Fee (MPF) (min/max varies based on entry type & value, $2-$600+) - & potentially other fee's based on product and mode (think HMF, AD, etc.) The costs can add up quickly, but staying compliant is the only way to avoid penalties and delays. Tips to Stay Compliant: - Know and validate the country of origin. Don’t rely on where the shipment is coming from. - Provide detailed descriptions and ensure accurate HTS classifications. The landscape is complex and the game has changed. Have questions about de minimis or duties? THere's a wicked smart community here and my DM's are always open. Stay safe out there and remember, compliance matters.

97% of EU customs import declarations may contain products that do not comply with EU legislation. Who says this? The European Commission. A few hours ago. In the e-Commerce Communication published today, the Commission raises alarms about the challenges posed by e-commerce imports from outside the EU: "These imports present risks to health and safety, are unsustainable from an environmental and climate perspective, and create unfair competition for compliant businesses in the EU, including SMEs". And the truth is, when it comes to e-commerce, EU trade borders are in a catastrophic state. National Customs Administrations are on the verge of collapse. And the controls are almost nonexistent given the volume. The situation is catastrophic. In terms of action, the Commission urgently calls on EU co-legislators to swiftly implement the Customs Reform Package, notably by removing the €150 duty exemption and introducing a simplified tariff treatment for low-value consignments. It urges also a non-discriminatory handling fee for retailers or platforms to cover rising compliance costs and calls for coordinated customs and market surveillance controls on e-commerce imports. Elements of the EU Customs Reform were initially set to be gradually deployed from 2028 (best case scenario), with changes specifically affecting e-commerce movements. Through this alarming communication, the Commission is putting pressure on other institutions to accelerate the process. It also proposes other non-customs actions to be jointly carried out by all Member States and announces it will evaluate the announced actions and publish a report on the findings of the increased controls. In one year. #eucustomsreform #customscompliance #customs #eucustoms

Sellers and marketplaces dealing with E-Commerce imports from China into the US need to adapt to the evolving landscape of import duties and taxes. Avoiding trade loopholes and shortcuts is crucial as goods from China now incur duties and taxes upon entry into the US. These additional costs are likely to impact US consumers directly. In light of recent changes to section 321 de minimis and the introduction of new tariffs, sellers should carefully consider all cost factors when setting prices. Import compliance will play a pivotal role for sellers importing goods into the US by 2025. This entails proper HS Classification, accurate commodity descriptions, correct value declaration, country of origin details, and material composition transparency. Adhering to these guidelines is essential for navigating the shifting import regulations effectively. #ECommerce #ImportRegulations #USChinaTrade

Big Change Coming for Importers & Logistics Teams A reminder: as of August 29, 2025, the U.S. de minimis exemption will be eliminated. What does this mean? Today, shipments under $800 (with the exception of goods from China) typically enter duty-free and are filed informally. Starting 8/29/25, all shipments under $800 will: • Require formal filing in ACE (the Automated Commercial Environment). • Be subject to all applicable duties and tariffs (301, 232, IEEPA, etc.). • Face potential processing delays at the border. International mail shipments will have specific rates, but all other low-value shipments will now need to be filed like formal entries , creating a surge in work for customs brokers, customs agents, and FDA agents. This makes one thing absolutely critical: Your Commercial Invoice (CI) must be 100% accurate. Errors will cause costly delays and compliance risks. At Dawa Medical, we help manufacturers and distributors: ✔️ Ensure CI and shipping documents are compliance-ready ✔️ Navigate customs filings and FDA entry requirements ✔️ Reduce clearance delays and duty surprises This shift reinforces why regulatory precision isn’t optional, it’s essential. 🔗 Read more here: Avalara Blog on De Minimis Changes If you’re unsure how this will impact your U.S. operations, let’s connect. We’re here to help you prepare before the deadline. #Customs #Logistics #SupplyChain #ImportExport #TradeCompliance #FDA #CustomsBroker #ImporterOfRecord #Tariffs #USMarket #GlobalTrade #MedicalDevices #InternationalBusiness #ACE #Duties #TradeRegulations #Warehousing #Distribution #DawaMedical