CBP Updates Its Focused Assessment Program

U.S. Customs and Border Protection (CBP) updated the Focused Assessment (FA) program and conducted a webinar on October detailing the update on October 9, 2014.

At this time, the update addresses only the Pre-Assessment Survey (PAS) phase of the FA and is effective for all new PAS engagements that were started on October 1, 2014 or later; updates to other phases will be implemented at a later date. 

CBP anticipates that the update will affect four general areas:

(1) increased emphasis on the consideration of significance/materiality in making audit decisions;

(2) expanded guidance on tailoring the audit approach to suit the specific circumstances of the importer;

(3) replacement of the audit sample size matrices with more general sample size ranges; and

(4) changes to the FA report language.

(1) Increased Emphasis on Significance/Materiality

More specifically as to general area (1), CBP will engage importers earlier in the audit process to obtain certain information to better tailor CBP’s preliminary assessment of risk and the assessment questionnaire. On the FA update call, CBP officials stated that Customs may contact importers mid-Summer to notify they are being considered for an FA. The FA pool now includes not only large, but also mid-size importers (size determined based on the number of entries and/or volume imports). CBP’s risk assessment is aligned with the audit risk model with the level of risk (high, medium, low) no longer assessed at the Preliminary Assessment of Risk (PAR) phase.

The Internal Control Questionnaire (ICQ) has been renamed the Pre-Assessment Survey Questionnaire (PASQ) and has been expanded. On the update call, CBP stressed the importance of providing complete and detailed answers to the PASQ questions, so as to ensure that Customs promptly receives all the required information and the duration of an FA is not prolonged.

More weight will be given to the significance/materiality factor in determining audit areas to be included or excluded from the scope of FA. Certain audit areas that were initially included at the PAR phase may be subsequently eliminated. Even such major audit areas such as value and classification could potentially be eliminated.

(2) Tailoring Audit Approach to Specific Circumstances of the Importer 

The updated FA program emphasizes the size and complexity of the importer as factors in tailoring audit approach. With respect to written policies, Customs stated that lack of formally documented internal controls and written policies and procedures alone is not an automatic indication that risk is unacceptable.  However, CBP may select additional entry line items for walkthroughs to understand variations in procedures used. 

(3) Changes to Audit Sample Size Selection Method

Audit sample size matrices (1-20) have been replaced with more general guidelines. For a population of over 250, the test sample will be 25-40. For an audit population of less than 260, testing guideline will be about 10%. For compliance testing, Stop-and-Go statistical sampling may be used.

(4) Changes in FA Report Language

CBP may report acceptable risk when noncompliance or internal control deficiencies are deemed not significant enough to be reported as a finding. Acceptable risk may be reported with a scope limitation when implementation of internal controls cannot be verified by auditors but no material noncompliance has been detected. Report will be limited to the scope period of the audit and express limitations of internal control and cautioning projection of results to future period. Finally, the report will explain the limited nature of audit procedures performed for Intellectual Property Rights (IPR), Foreign Trade Zones (FTZ), and NAFTA.

The presentation on the FA program and its updates has been posted here.