Customs Audit Preparation

Customs authorities around the world conduct post-importation audits to verify that importers have complied with trade laws, paid the correct amount of duty, and accurately declared the origin, classification, and value of their goods. In the United States, US Customs and Border Protection (CBP) uses a risk-based approach called the Focused Assessment program, which targets importers whose trade activity suggests a higher likelihood of non-compliance. The EU employs post-clearance audits under the Union Customs Code, and UK HMRC runs compliance checks under its own regulatory framework.

Audits can be triggered by a range of factors. Random selection ensures that even low-risk importers are periodically reviewed. Risk profiling algorithms flag importers based on patterns such as unusually low declared values, frequent classification changes, or high volumes from countries subject to anti-dumping or countervailing duties. Tip-offs from competitors or former employees, sudden changes in import volume, and discrepancies between declared data and third-party intelligence all increase the likelihood of an audit.

Sector-wide initiatives also play a role. Customs authorities periodically launch targeted campaigns focused on specific industries — textiles, steel, electronics, and agricultural products are frequent targets. If your industry is under scrutiny, the probability of an audit rises regardless of your individual compliance record. Understanding these triggers is the first step toward building an audit-ready compliance program.

Customs auditors conduct a systematic review of your import operations, focusing on several key areas. Classification accuracy is typically the first area of scrutiny — auditors verify that the HS codes declared on your customs entries correctly describe the goods imported, applying the General Rules of Interpretation (GRI) and any relevant section or chapter notes. Customs valuation is equally important: auditors examine whether the declared transaction value reflects the actual price paid or payable, including any assists, royalties, or related-party adjustments required under the WTO Valuation Agreement.

Origin declarations receive close attention, particularly for goods claiming preferential duty rates under free trade agreements. Auditors will verify that you hold valid certificates of origin, that the goods meet the applicable rules of origin (such as tariff shift, regional value content, or specific processing requirements), and that your supplier certifications are current and complete. Duty payments are reconciled against entry data to identify underpayments, and record-keeping practices are assessed for completeness and accessibility.

The most common audit findings include:

Maintaining a complete and organized set of import records is the foundation of audit readiness. Customs authorities expect importers to produce documentation that supports every element of a customs entry — the classification, value, origin, and duty treatment of each imported product. Missing even a single document category can undermine your ability to defend your entries during an audit.

The following documents should be retained for every import transaction:

• Commercial invoices — showing seller, buyer, description of goods, unit price, total value, currency, and Incoterms
• Packing lists — detailing quantities, weights, dimensions, and packaging type for each line item
• Bills of lading / airway bills — confirming the shipment route, carrier, and consignee
• Customs entry documents — the filed entry summary (CBP Form 7501 in the US, SAD in the EU) and any amendments
• Proof of payment — bank records, wire transfers, or letters of credit confirming payment to the supplier
• Certificates of origin — including FTA certificates (e.g., USMCA Certificate of Origin, EUR.1) and supplier declarations
• Product specifications and technical data sheets — supporting the HS code classification with material composition, function, and intended use
• Purchase orders and contracts — establishing the terms of sale, pricing, and any special conditions
• Correspondence — emails or letters with suppliers, brokers, or customs authorities relating to classification, valuation, or origin

Best practice is to retain records for the longest applicable period across all jurisdictions where you import. Many compliance professionals recommend a minimum of five years as a universal standard, with longer retention for transactions involving FTA claims or goods subject to trade remedy duties.

Audit readiness is not something you achieve the week before an auditor arrives — it is a continuous discipline built into your daily import operations. The goal is to create a documented, repeatable process that captures the reasoning behind every compliance decision, so that any entry can be defended months or years after the fact.

Start by documenting your product descriptions and technical specifications at the point of classification. For each product, record the HS code selected, the General Rules of Interpretation (GRI) applied, any relevant section or chapter notes consulted, and the specific reasoning that led to the classification. Note who performed the classification and when, and track any changes over time with explanations for why the classification was updated.

Link every classification decision to the corresponding customs entries so that auditors can trace from a product to its HS code rationale to the actual entries filed. This traceability is what separates importers who pass audits from those who face penalties. Maintain a classification database or spreadsheet that serves as your single source of truth, and review it periodically to ensure it reflects current product lines and tariff schedule updates.

Global Tariff Rates auto-generates audit trails for every classification, capturing the AI reasoning, GRI references, and supporting data in a format that can be exported for auditor review. This eliminates the manual effort of maintaining classification logs and ensures that no decision goes undocumented.

Customs authorities use data analytics to identify importers whose trade patterns deviate from expected norms. Understanding these red flags allows you to proactively address potential issues before they trigger an audit or escalate into an enforcement action. The following patterns consistently attract scrutiny:

Mitigation starts with consistency. Use the same HS codes for the same products across all entries, ensure your declared values accurately reflect the transaction value with all required adjustments, and maintain complete FTA documentation for every preferential claim. If you discover an error, consider proactive voluntary disclosure — self-reporting compliance issues before an audit is initiated demonstrates good faith and typically results in significantly reduced penalties.

Receiving an audit notice can be stressful, but a measured, professional response is critical. The first rule is simple: don't panic. An audit notice is not an accusation of wrongdoing — it is a routine compliance verification that every importer may face. How you respond in the first days after receiving the notice sets the tone for the entire audit process.

Engage a customs specialist or trade attorney immediately. Even if you have an in-house compliance team, an experienced external advisor brings objectivity and specialized knowledge of the audit process. They can help you understand the scope of the audit, identify potential exposure areas, and develop a response strategy. Begin gathering the requested documentation promptly — delays in producing records create a negative impression and can lead auditors to expand the scope of their review.

Before the audit begins, conduct an internal review of the entries and documents that fall within the audit period. This pre-audit self-assessment allows you to identify any errors or discrepancies proactively. If you discover material non-compliance, consider making a voluntary disclosure before the audit commences. In the United States, a prior disclosure under 19 USC §1592(c)(4) can reduce penalties by up to 100% — from potential maximum penalties of four times the unpaid duties down to interest on the unpaid amount plus a reduced penalty.

Throughout the audit, cooperate fully and transparently. Answer questions honestly, provide requested documents without unnecessary delay, and avoid volunteering information beyond what is asked. If you disagree with an auditor's finding, document your position with supporting evidence and legal references — you have the right to challenge assessments through administrative and judicial review processes. A well-prepared importer who cooperates in good faith will almost always achieve a better outcome than one who is defensive or obstructive.