HTS Classification Audits: What to Expect and How to Prepare

Navigating the labyrinth of Harmonized Tariff Schedule (HTS) classification is no small feat. And when the U.S. Customs and Border Protection (CBP) knocks on your door for an audit, it’s not exactly a friendly visit. 

But before you start hiding under your desk or shredding paperwork (don’t do that), let’s break down what to expect and how you can be thoroughly prepared. After all, an audit doesn’t have to feel like judgment day. It can be just another Tuesday if you know what you’re doing.

Why CBP Audits Happen

CBP conducts audits to ensure importers are adhering to U.S. import laws, accurately classifying goods, and paying the right amount of duties. Think of it as a not-so-gentle reminder that Uncle Sam is still watching. 

Audits typically happen for a few reasons:

Inconsistent Declarations

If you’re bouncing between HTS codes like you’re playing a game of Whack-a-Mole, CBP is going to want a closer look.

High-Risk Products

Importing items like electronics, textiles, or chemicals? These are audit magnets due to their high duty rates and complicated classifications.

Volume and Value

Moving a high volume of goods or high-value shipments? You might as well send CBP an invitation. They’re coming either way.

New product/HTS codes

A shipment of fresh fruit for an importer of automobile parts is a red flag.  Conversely, a shipment of auto parts for a fruit importer is asking…for questions to be asked.

Census Rejection

The US government keeps track of what is imported, and what it should be worth.  If an importer received a Census Rejection, it is because the government thinks one or more of three metrics is incorrect: the HTSUS code, the quantity, or the value.

For example: importing 10 ball point pens at $1000/each? Bam: census rejection will halt the import process. Either there are more than 10 pens, or they are not ballpoint pens, or they are not $1000/each. Unless they’re covered in diamonds. But then they’re not pens: they’re jewelry.  So Census was correct all along: change the HTSUS, apologize, and move on.

The Audit Process – What to Expect

If you’ve never been through a CBP audit before, it can feel like stepping onto a well-oiled conveyor belt; only you’re not entirely sure where it leads. The good news? The process is fairly structured and predictable, even if it isn’t particularly pleasant. 

Knowing what’s coming can help you prepare, dodge common pitfalls, and avoid those dreaded ‘we need more information’ emails that seem to arrive at the most inconvenient times.

A CBP audit generally follows a structured process:

1. Notification: You’ll receive a notice, usually a phone call, followed by a questionnaire. This is not the time to panic. It’s time to get organized.

2. Document Review: CBP will ask for documentation like commercial invoices, entry summaries, product descriptions, and classification records. If your filing system is a pile of sticky notes and wishful thinking, you might want to contact us.

3. Site Visit (Potentially): In some cases, CBP auditors may visit your facility to verify information. This isn’t a surprise party, so be ready.  And good news: no audit is intended to take more “than one year.”  Yay.

4. Findings and Resolution: After the audit, CBP will provide its findings. This is where the real fun begins. If discrepancies are found, you may face penalties, back duties, or worse.

Common Pitfalls That Lead to Headaches

When it comes to CBP audits, even the smallest mistake can feel like a grenade going off in your import operation. The truth is, many importers don’t even realize they’ve stepped on a landmine until it’s too late. Understanding the common pitfalls that send CBP’s alarm bells ringing is the first step in dodging those costly fines and regulatory headaches. 

Here are the big ones to watch out for:

Misclassification

Using the wrong HTS code is the audit equivalent of wearing a fake Rolex. You might get away with it, until you don’t.

Undervaluation

If you’re lowballing the value of your goods, CBP’s going to sniff that out faster than you can say “adjusted entry.”

Lack of Documentation

If you can’t back up your classifications with proper paperwork, you’re playing a dangerous game.

Inconsistent Descriptions

Describing the same product differently across multiple shipments is like waving a red flag at a bull.

How to Prepare for a CBP Audit Like a Pro

An ounce of preparation is worth a pound of painless audits. If the idea of a CBP audit sends chills down your spine, it’s time to get proactive. Knowing how to prepare ahead of time can be the difference between a quick review and a regulatory nightmare. 

Here’s how to make sure you’re ready when CBP comes knocking:

Audit Your Own Entries

Don’t wait for CBP to catch mistakes. Conduct internal audits to catch inconsistencies and misclassifications.

Documentation is King

Keep meticulous records of classification decisions, product descriptions, and value declarations. If it’s not written down, it didn’t happen.

Get Expert Help

A little self-promotion here… O’Meara & Associates knows the HTS inside and out. If you want to sleep better at night, contact us before CBP sends you that lovely notification.

Stay Educated

HTS classifications change. What worked last year might not fly this year. Keep your team educated and your systems updated.

Bringing It All Together

CBP audits aren’t going away, and neither are the complexities of HTS classification. But you don’t have to go it alone. At O’Meara & Associates, we specialize in making sure your classifications are airtight, your documentation is bulletproof, and your audit process is smoother than a customs officer’s coffee. 

Get ahead of the game. Because when it comes to CBP, preparation is your best defense against costly surprises.