The Importance of an Ironclad Record Keeping System

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By Aimee Miller, Apr 10, 2014

In today’s compliance driven world, where U.S. Customs is enforcing rules more than ever and issuing penalties, importers are left wondering how to best utilize their resources to remain compliant. One of the most effective ways to ensure doing business in a compliant fashion is to create a solid “ironclad” record keeping system.

Frequently Asked Questions

There are a lot of requirements for record keeping and as a result importers are often left with many questions:

• Who is responsible for keeping records?
• Isn’t my customs broker responsible for keeping my records?
• How long do the records have to be maintained?
• Do the records have to be kept on my premises?
• What are the liabilities for improper record keeping?

Definitions

The term “records” in the language of U.S. Customs and Border Protection (CBP) is defined in the Customs regulations under Part 163.

Part 163 defines the term “records” to mean any information made or normally kept in the ordinary course of business which pertains to the following activities:

• any importation, declaration or entry;
• the transportation or storage of merchandise carried or held under bond into or from the Customs territory of the United States;
• the filing of a drawback claim;
• the completion and signature of a NAFTA export Certificate of Origin pursuant to Part 181;
• the collection and payment of fees and taxes to CPB; and
• any other activity required to be undertaken pursuant to laws or regulations administered by CBP.

“Records” include any information required for the entry; this includes but is not limited to:

• statements, declarations, documents;
• electronically generated or machine readable data;
• electronically stored or transmitted information or data;
• books, papers, correspondence;
• accounts, financial accounting data;
• technical data; and
• computer programs necessary to retrieve information in a usable form.

Who exactly is responsible for record keeping?

Any owner, importer of record, consignee, customs broker or any other party that:

• imports merchandise into the United States;
• files a drawback claim;
• transports or stores product that is transported or held under bond;
• an agent or customs broker of any person referenced above; or
• a person whose activities require the filing of a declaration or entry, or both.

Additional record keeping requirements exist for:

• any party who completes and signs a Certificate of Origin for goods exported to Canada or Mexico pursuant to NAFTA
• customs brokers
• Importer Security Filings

Are there any exceptions to the rules?

Exceptions to record keeping requirements can include:

• Any traveler that makes a baggage or oral declaration upon arrival into the United States is not required to keep records regarding non-commercial merchandise acquired abroad;
• A person that orders merchandise from an importer which knowingly causes the products to be imported , but does not:
  • furnish technical data, molds, equipment; other production assistance, material, components, or parts with knowledge that the goods will be used for further manufacturing of the imported merchandise or;
  • controls the terms and condition of importation.

How long is the responsible party obligated to keep the records?

Records that importers are required to keep under Part 163 must be kept for 5 years from the date of entry. There are of course exceptions to that rule. Below is a list of documents that have a different time limit requirement:

• drawback claim records – 3 years
• packing lists – 60 calendar days
• a consignee who is not the owner and who appoints a U.S. customs broker must keep all records that pertain to the merchandise covered by an informal entry – 2 years
• NAFTA certificate and all supporting documents pertaining to that certificate – 5 years (from the date of signature on the certificate)
• ISF records – 6 years (from the date of export)

Do original documents need to be maintained?  

Yes. Original records must be kept unless the record keeper has adopted an alternative storage method.  The record keeper must maintain the original records whether on paper or electronically. Visit 163.5 Methods for storage of records for more information.

Certain records must be kept in their original format for a limited time or may not be alternatively stored at all even if proper alternative storage methods have been approved:

• with the exception of packing lists, entry records must be maintained in their original format for a period of 120 calendar days from the end of the release or conditional release period.   If re-delivery has been requested for a period of 120 calendar days from the date the goods are re-delivered or from the date specified in the demand as the latest re-delivery date;
• records required by other federal agencies are subject to the same record keeping requirements

Customs records that are kept in original format or under an approved alternative method of storage must be capable of being retrieved upon request by Customs.

What are the liabilities?

Consequences can be severe if the proper records are not retained.

• willful failure to maintain, store or retrieve a demanded record, U.S. Customs can issue an administrative penalty for each release of merchandise, not to exceed $100,000 or an amount equal to 75% of the appraised value of the merchandise, whichever is less; or
• negligent failure to maintain, store or retrieve a demanded record, U.S. Customs may issue an administrative penalty for each release of merchandise, not to exceed $10,000 or an amount equal to 40% of the appraised value of the merchandise, whichever is less.

Record keeping is a shared responsibility between all parties involved in Customs transactions. Just because you hire a third party to process your clearances does not absolve you from record keeping requirements. Reviewing your current record keeping procedures today and making sure you have a strong record retention program in place will save you from potential sanctions and penalties against your organization.

Remember, importing is a privilege you cannot afford to lose.