Top 5 mistakes that result in a CF28 or CF29 from CBP

Most importers have had at least one CF-28 or CF-29 scare. Companies that haven’t most likely will at some point, as U.S. Customs and Border Protection (CBP) cracks down on import compliance.

Most importers recognize these notices are possible, especially as the current trade climate heightens the scrutiny of import paperwork. Even so, these same companies may be shocked—and scared—when they receive a CF-28 or CF-29 notice.

With imports, the best defense is a good offense. Importers can protect themselves by providing quality documentation, getting involved in trusted trader programs, auditing their entries, accurately determining valuation, and hiring a professional Customs broker.

What are CF-28s and CF-29s?
Customs issues a CF-28 Request for Information to obtain clarification for possible compliance concerns. This request does not mean an importer has made a mistake. Many CF-28s are routine.

CBP often issues CF-28s to:

Verify North American Free Trade Agreement (NAFTA) claims. CBP examines many assertions of NAFTA eligibility.
Substantiate U.S. Goods Returned (USGR) claims. A USGR is a formal declaration for entering U.S.-manufactured goods that were previously exported and are now returning.
Examine duty-free claims under the Generalized System of Preferences, a U.S. trade program that provides preferential duty-free import of products from designated countries and territories.
Review mill test reports and verify the country of origin. Customs wants to confirm, for example, that imported steel is coming from Canada and not China to skirt duties.
Consider anti-dumping duty, because some products have high anti-dumping rates.
With a CF-29 Notice of Action, CBP is proposing or is acting against a current shipment. CF-29s usually follow a CF-28, where Customs asks for further documentation. If this paperwork review triggers additional questions or concerns, CBP issues a CF-29.

In some cases, Customs issues a straight CF-29 because a review uncovered a definite problem. For instance, an importer improperly classified a product, so CBP issues a CF-29 to assess additional duties. Other times, Customs issues a CF-29 proposal. In this case, Customs proposes additional duties but gives the importer 20 days to respond and dispute the claim.

An importer wants to proceed carefully after a CF-28, because CBP can go back up to five years to look for inconsistencies in other entries. It can then assess additional duties for those entries and possibly penalize a company for negligence.

Companies may file a prior disclosure for past entries if they know of paperwork errors. A prior disclosure offers a penalty-free way to correct previous actions. Companies still must pay duties and taxes, but CBP won’t hit them with penalty actions.

Do Your Homework
Make sure that you get paperwork in order before a CF-28 Request for Information or a CF-29 Notice of Action ever arrives. It’s best to gather appropriate documentation before goods ship out.

Customs requests supporting documents to substantiate claims made on original paperwork. Too often, companies quickly supply additional documentation without reviewing the documents first. For the most part, this is a mistake. Customs will issue a CF-29 if it catches an error on materials supplied with a CF-28. Putting a compliance program in place helps importers avoid CF-28s and reviewing documents before goods are shipped, keeps companies ahead of the game.

Do not ignore or postpone responses to CF-28 requests. Customs gives companies 30 days to respond. This marks an opportunity for importers to state their case. Contact customs immediately if more time is needed. Failure to provide requested information in a timely fashion can lead to a CF-29

Participate in Trusted Trader Programs
Importers reduce their exposure to CF-28s by getting involved in trusted trader programs. The Customs-Trade Partnership Against Terrorism (CTPAT) and the Importers Self-Assessment (ISA) help companies demonstrate their commitment to Customs compliance.

CTPAT is a voluntary partnership between Customs and importers to strengthen the security of international supply chains. The groups work together with other CTPAT partners, including carriers, Customs brokers, port authorities, freight consolidators, and manufacturers, to protect supply chains and implement compliance programs.

ISA is also a voluntary program for CTPAT-certified companies with two years of importing experience. This program aims to improve trade compliance by having importers self-assess their imports and monitor their Customs activities. Partnering with CTPAT and ISA helps importers create a compliance manual for imports and perform routine audits on their shipments. Importers can hire a Customs consultant to navigate the complicated CTPAT and ISA certification process.

Participating in trusted trader programs will not prevent CF-28s, but making these certifications known when responding to a CF-28 can prompt Customs to flag an importer’s accounts differently and thus limit their CF-28 exposure in the future.

Audit Customs Entries in Advance
Many importers count on their Customs brokers to make sure their entries are correct. However, incorrect documentation from an importer is often the primary reason for entry filing mistakes. Brokers can only report the information they receive. If the data is incorrect, a CF-28 will follow. Importers that fail to audit their paperwork are asking for trouble.

There are many ways for importers to check their work. Smaller import operations may rely on Excel spreadsheets with hundreds of listed entries and work their way through the columns, but larger importers may wish to perform electronic audits. Some Customs brokers provide analytic tools to use for this purpose.

Importers can employ this software to sift through their data and look for patterns and potential problems. For example, how many times has a specific tariff classification been used versus another? Are value, classification, and country of origin recorded correctly with every entry? Looking for anomalies may be one good way to identify consistency and accuracy.

Consider Valuation
Customs asks importers to provide a total value for all items in a given shipment. In other words, if a company imports ten pairs of shoes, each valued at $25, the customs value is $250. The provided valuation helps Customs calculate the import duty a company owes.

CBP carefully considers these numbers. They want to ensure that companies assign the correct value to their goods and are not trying to avoid duties by undervaluing the shipment. It is easy to make valuation mistakes, but it is best to avoid them as much as possible. Customs views valuation errors as a red flag warranting further review.

When a shipment contains similar products, list a comparable unit price for the imported commodities. When a unit price is $2 for 500 entries but $5 on ten entries, it is an anomaly for Customs to question. Also, provide valuation data by SKU instead of for the total shipment when it contains numerous product codes or SKUs.

In the past, companies lumped different versions of similar products into the same tariff classification and country of origin and did not report each item by SKU. Doing so makes it impossible to break it out by SKU later. Classifying products by SKU also helps importers determine their landed cost, which includes purchase price, freight, insurance, and other expenses up to the port of destination.

Hire a Qualified Customs Broker
Customs brokers protect companies by ensuring that imported shipments meet Customs regulations, laws, and other requirements. They also file the proper documentation and make sure companies promptly pay taxes and fees. When the CF-28 or dreaded CF-29 comes along, Customs brokers help companies locate and review the documents they need to address Customs’ concerns.

It is impossible to prevent CF-28s or CF-29s completely, but companies can avoid paying unnecessary fees and penalties by implementing best practices for compliance upfront and hiring a Customs broker before a Customs notice ever shows up.