Customs Compliance in the US

September 7, 1999

7 September 1999

Customs Compliance in the US

The following article is excerpted from "The Journal of Commerce" issue of 7 September 1999.

As giant accounting and consulting firms invade the business of advising companies on customs issues, they're facing a backlash from lawyers.

Lawyers have traditionally helped companies with much of the work that accounting companies are taking over, such as handling customs audits.

The attorneys argue that they're better qualified because most of this work is legal in nature.

They also point out that, unlike the accountants, they enjoy attorney-client privilege — the right to keep company information secret from the government.

Who do you call?

"When any government official comes into a company, and they want to look at your books and records, the first call that should be made is to your lawyer," said Steven Weiser, a customs and international trade attorney with Graham & James in New York.

Accounting firms respond that they're geared to help companies avoid legal problems in the first place, and that even if lawyers are needed, they can work alongside the accountants.

Many customs and international trade lawyers advise companies on how to deal with customs audits, which have become a dreaded but regular feature of major U.S. importers' lives since 1993.

Tough consequences

The audits can have tough legal consequences. Customs can penalize importers or demand back duties if it discovers flawed import paperwork.

Last July Recoton Corp., a major electronics importer in Lake Mary, Fla., agreed to pay $14 million after admitting it had defrauded Customs of $4.1 million in duties and mislabeled goods as "made in U.S.A." Most cases are less serious. But even so, lawyers say they can better protect a company from sometimes-zealous customs prosecutions.

'The hard way'

Leonard Rosenberg, a customs and international trade attorney with Sandler, Travis and Rosenberg in Miami, said one of his clients, a sporting goods importer, found it out the hard way recently.

He recounted the importer contacted its accounting-consulting firm, a national company whom Rosenberg wouldn't name, after learning it had violated customs regulations by undervaluing some imported goods.

The accounting firm made a "prior disclosure" on the importer's behalf. That means it disclosed the mistake to Customs, under rules designed to allow an importer to escape penalties in return for admitting its violations.

"The day afterward, Customs turned around and asked for copies of all correspondence and notes between the importer and the consultants," Rosenberg said. He declined to name the accounting firm.

No requests for records

Charles Crowley, national partner of Ernst & Young's Customs & International Trade Practice in New York, said he'd never heard of such a case. "To my knowledge, nobody has asked anyone at the Big Five accounting firms for any of his or her records," Crowley said.

He added that hiding the truth from the authorities is an unsound approach. He said the better way is to "aggressively serve the client, but do it in a truthful manner."

Lawyers seen best option

George Tuttle Jr., a customs and international trade attorney in San Francisco, asserted that a customs audit is mainly legal analysis, best handled by lawyers.

"If you really get into the nuts and bolts of a customs audit, you will find that it is not accounting that is being done, but legal analysis," Tuttle said.

"Most questions come down to 'Is this payment dutiable or not?' Or, 'Was this good correctly classified or not?' "

Accountants retort that they have staff lawyers who have legal expertise even though they can't practice law while working for the accounting firm.

The accounting firms are also ahead of the law firms in terms of business consulting, said Damon Pike, national director of Deloitte & Touche's Atlanta-based Customs Services group.

"They're trying to get there, but they're not nearly at the level that the Big Five are," he said.


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Canadian Economy & Politics
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