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Administrative Law

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It's been a pretty busy couple of weeks and will continue to be. Earlier this week, I participated as co-counsel for the plaintiff in a mock trial sponsored by the Customs and International Trade Bar Association. The trial went reasonably well, although I was surprised by a document I created on which I failed to check the math. Note to self: Don't do that in real life.

There have been a couple developments recently that deserve some blog coverage:

Here is video of testimony on the Customs Reauthorization bill.

Customs and Border Protection has published a Federal Register Notice regarding the use of sampling methodologies and offsetting overpayments in audits. This is interesting because statistical sampling in audits and prior disclosure perfections has been somewhat ad hoc. The issue has generally been whether the importer and the auditor could come to an agreement on a reasonable means of calculating the duties owed. Both sides generally understand that it is often not worth the effort and resources to get to an exact number when a reasonable amount of work will get to a number the protects the interests of the United States. Enter statistical sampling, in which both sides agree to a method of selecting a random universe of items for review and to be bound be the results in some way.

Under the proposal:

CBP will have sole discretion of decide whether sampling is to be applied or accepted
CBP will explain the approved sampling methodology
Once accepted, the audited party cannot challenge the methodology [Waive your red flag here.]
CBP always reserve the right to conduct a full entry-by-entry audit

The same proposal covers offsetting overpayments identified by auditors. The problem here is that often in an audit, it will be determined that an importer overpaid on some entries and underpaid on others. Traditionally, Customs did not permit the importer to use the overpayments to offset the amount owed due to underpayments. For dumping lawyers, this is a little like zeroing. Under the Trade Act of 2002, CBP must permit offsetting in an audit situation where:

The overpayments are identified during a CBP audit
The audit was completed after August 6, 2002
The overpayments relate to liquidated entries
The overpayments are within the scope of the audit
The overpayments were not made for illegal purposes

An important note is that CBP will not treat the failure to claim a duty preference at the time of entry as an overpayment. Also, offsetting will not be permitted to result in a net refund.

If you want to comment on this, your deadline is December 21, 2009.

Full post as published by Customs Law on October 22, 2009 (boomark / email).