In This Age Of Russia Sanctions, U.S. Importers Can't Ignore The Risks Of Customs Compliance

Torres Trade Law, PLLC


Torres Law, PLLC is an international trade and national security law firm that assists clients with the import and export of goods, technology, services, and foreign investment matters. We have extensive experience with the various regimes and agencies governing trade such as U.S. Customs and Border Protection (CBP), the Department of Commerce Bureau of Industry and Security (BIS), the Department of State Directorate of Defense Trade Controls (DDTC), the Department of Treasury Office of Foreign Assets Control (OFAC), the Department of Defense Security Service (DSS), the Committee on Foreign Investment in the United States (CFIUS), and others.
In response to Russia's invasion of Ukraine, countries around the world – including historically neutral states like Switzerland – have imposed restrictive sanctions on doing business with Russia.
United States International Law
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In response to Russia's invasion of Ukraine, countries around the world – including historically neutral states like Switzerland – have imposed restrictive sanctions on doing business with Russia. Importers and exporters still reeling from global supply chain challenges brought on by the COVID-19 pandemic are especially hard hit by these sanctions, which target trade and trade finance, banking, and transport activities, among other areas.

Should Russia continue its military action in Ukraine, the coming days and weeks could see current restrictions expanded to cover other countries that may be aiding Russia, either willingly or by force.

And that's not the only challenge facing importers and exporters: an increasing number of cyberattacks (some of which may be sponsored by the Russian government) have generally raised the threat level for businesses around the world, including companies based in the United States.

Despite the increasingly fraught global environment, companies involved in the import of goods into the U.S. – manufacturers, suppliers, agents, middle parties, shipping entities, and brokers – must not lose track of U.S. customs compliance.

At this time of rapid change when developments in one part of the supply chain reverberate across the entire interconnected chain, due diligence, planning, and oversight are more critical than ever to ensure customs compliance. Companies must take steps to ensure that they apply the normal due diligence and necessary procedures for vetting new third parties and business transactions flows. They must assume that brokers, warehouses, and logistical transportation entities – all of which operate on high volumes and provide services not just to one importer but to many and in some cases thousands – may not have the resources or capacity to complete full due diligence.

And they must proactively take responsibility for their own U.S. customs compliance to avoid third-party violations like these, all of which have been identified in the past by U.S. Customs and Border Protection (CBP) auditors:

  • Record keeping requirements not met or documents not readily available
  • Special Trade Programs claimed on entry only based on country of export rather than specific requirements
  • Fees and non-dutiable charges not calculated properly
  • Documentation not signed or reviewed by date of import for Special Trade Programs
  • Failure to properly identify and assess impact of related party transactions
  • Failure to fully utilize and comply with Special Trade Programs/Free Trade Agreements, Special Duty Programs (9801, 9802)
  • Import record keeping not sufficient to meet drawback program requirements
  • Classification determined based on supplier invoice rather than importer specifications

It's important to note that conducting additional due diligence is not overreacting or being overly cautious. In many cases, it involves making small changes to everyday procedures, like daily assessments of supply chain risks and new threats. Equally important, no importer should feel they are 100% risk free and immune from errors – inventories and cycle times from product design to manufacture to consumer are already strained and will only become more sensitive as global trade restrictions become more uncertain.

As world events change seemingly by the hour, the more prepared an importer is – the greater their due diligence, identification of fraud factors, assessment of supply chain disruptions, and understanding of customs compliance – the quicker alternate product and supply chain contingencies can be identified and implemented.

Finally, it is critical to avoid falling into the trap of assuming that, due to the current global environment, CBP is not currently focused on import trade compliance, if only because CBP inquiries and audits can be initiated years after transactions are completed.

The final word? Don't ignore U.S. customs compliance as you balance trade sanctions, cybersecurity, and other risks.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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