How to Defend against Cbp Audits under a Tariffs Agreement

Tariff classification assigns a 10-digit Harmonized Tariff Schedule (HTS) code to each product based on its composition, function, and intended use. Incorrect classification triggers duty assessments that CBP may pursue for up to five years after entry. Origin rules under USMCA and other agreements require that a certain percentage of production value occur in member countries for goods to qualify for reduced rates.

Your compliance posture depends on accurate classification documentation and supplier certifications proving origin. When CBP challenges a classification or origin claim, you must present commercial invoices, bills of lading, manufacturing records, and certificates of origin to support your position. Many businesses engage customs brokers or trade counsel to conduct tariff audits and ensure HTS coding reflects current product specifications.

When tariff disputes escalate beyond CBP administrative review, parties may pursue relief in the U.S. Court of International Trade (CIT), a specialized federal tribunal located in New York that hears tariff classification challenges, dumping investigations, and trade remedy cases. A party challenging a CBP decision must file a summons and complaint within 180 days of the contested entry's liquidation, making timely notice preservation essential. Delayed preservation of import entry documents, invoices, or shipping records often undermines CIT litigation because the court relies on the administrative record created during CBP review. Businesses should maintain complete import files for at least five years and notify customs counsel immediately upon receiving a CBP notice of adjustment or liquidation.

CBP requires importers to maintain complete entry documentation for five years, including commercial invoices, packing lists, bills of lading, certificates of origin, and manufacturer or supplier certifications. These records must be available for inspection upon request and must support the HTS classification, origin claim, and declared value used in the entry. Failure to produce required records results in CBP's ability to assess duties based on best information available, which often results in higher rates than claimed. Best practice involves centralizing import documentation in a compliance management system and conducting annual audits to verify accuracy. Many corporations also implement supplier compliance programs that require foreign manufacturers to provide origin certifications and maintain production records accessible to CBP upon audit.

CBP calculates duties based on the transaction value of goods, which is the price actually paid or payable for merchandise when sold for export to the United States. This value includes freight, insurance, and certain assists. Undervaluation is a common audit trigger because importers may attempt to reduce duty by understating invoice prices or omitting freight costs. When CBP questions valuation, it may issue a Notice of Action proposing a higher appraised value and increased duties. You then have an opportunity to submit a response with supporting documentation, including contemporaneous commercial records and comparable sales data. If CBP sustains the higher valuation, you may appeal to the CBP Appeals Office or pursue judicial review in the CIT.

An administrative protest must identify the specific CBP decision being contested, state the legal or factual basis for the challenge, and include supporting documentation, such as rulings or prior CBP decisions. The protest must be filed before or within 90 days after the merchandise is liquidated. If you miss this deadline, the liquidation becomes final and you may only pursue judicial review in the CIT if you can demonstrate extraordinary circumstances. CBP's Appeals Office reviews protests de novo, meaning it reconsiders the entire determination without deference to the port director's initial ruling. This is often the most cost-effective stage to resolve disputes because appeals do not require litigation counsel and CBP may reverse its position based on new legal arguments or evidence.

In CIT litigation, the plaintiff bears the burden of proving CBP's determination is unsupported by substantial evidence or contrary to law. For classification disputes, you must show that the HTS code assigned by CBP does not reflect the merchandise's proper classification. For valuation cases, you must present evidence that the transaction value CBP assigned is inconsistent with the statutory definition or that CBP's methodology was unreasonable. Discovery in CIT cases focuses on the administrative record created during CBP's review, but you may also conduct discovery of CBP's internal guidelines and prior rulings if relevant to your claim.

Many businesses reduce tariff costs through advance planning strategies, such as tariff engineering, sourcing from preferential trade agreement countries, or pursuing temporary duty suspensions or exclusions. Your company may also benefit from free trade agreement utilization by verifying origin compliance and claiming preferential rates under USMCA or other bilateral agreements. Claiming a preferential rate requires submitting an origin declaration with your entry and maintaining supporting documentation to defend the claim in an audit. Failure to claim available preferential rates results in unnecessary duty overpayment, so periodic rate audits are a practical cost-control measure.