Mod Act swings into action
By Staff -- Purchasing, 2/11/1999 2:00:00 AM
The Customs Modernization Act or "Mod Act" was implemented in 1993 to better track the rising volume of imports to the U.S. However, due to the complicated nature of the regulations, customs allowed five years for importing companies to become acquainted with the new rules before enforcing them. As of 1999, however, customs is cracking down.
"Customs has allowed a grace period for importers to familiarize themselves with the new regulations, but now they have switched to enforced compliance, which makes it mandatory for importers to know the laws governing their import transactions," says Edward DeSousa, president of Global Drawback, a North Reading, Mass.-based company that offers customs training and procedural manuals. At this point, however, DeSousa estimates that 95% of companies "do not have import procedures. This will have to change."
Purchasing, accounting, and receiving departments are all responsible for communicating with U.S. Customs and, therefore, all should be informed of the new regulations. Says DeSousa, "Purchasing is the first step in making sure the information is declared to customs. There should be a very coordinated and cohesive internal procedure between purchasing and customs. The biggest problem is lack of communication among departments."
Mod Act mandates that importers use "reasonable care" in customs transactions. A company that has not reviewed the new import regulations does not qualify as using reasonable care. Pleading ignorance to the new regulations is no longer a valid excuse for negligence as it was under the old system. In fact, starting this year, mistakes caused by ignorance will be penalized more severely.
Says DeSousa, "Importers are penalized for negligence, gross negligence, and fraud. Mistakes are seen as negligence. But if you make a mistake because you don't know the law, the penalty is raised to gross negligence."
To avoid problems with customs, importers need to learn about the new regulations. Says DeSousa, "To become more informed as a purchasing manager you need to know what the product laws are, and you need to know every classification for every product. Most companies do not have customs managers. Because this is complicated, customs typically recommends that importers obtain third-party assistance either through a customs attorney, broker, or consultant." Purchasing managers also can seek information on the U.S. Customs' Web page: www.customs.ustreas.gov.
By taking these and other precautions, companies will decrease chances of being penalized and may also discover new ways to save money on import taxes. Penalties, depending on the offense, range from 20% to 40% of invoice value, or can be double the amount of lost revenue.
No company large or small should think they are beyond the new regulations. Says DeSousa, "Smaller companies should not feel that customs won't bother with them." Customs concentrates on the larger companies, but if that company is using the same exporter as a smaller company and a problem is discovered, customs will investigate the smaller company as well.
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Great article............what will happen next?
Joe Burton - 9/12/2008 10:11:00 AM EDT
Eric Tritch, Commodity Manager, Graco
03/12/2010
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