DHS Expects to Audit CBP on Penalties, Textile Enforcement, C-TPAT, Etc.

The plan also includes OIG audits that are in progress, such as those for CBP bond amounts, C-TPAT security practices, and the Permit to Transfer program.

Plan is Subject to Change due to Congressional Action, Resource Issues, Etc.

According to the OIG, this plan describes more projects than may be completed in FY 2011, and tries to take into account future developments and requests from DHS management and Congress that may occur as the year progresses, which may necessitate some projects in this plan being deferred or canceled. Resource issues, too, may require changes to the plan.

Highlights of OIG’s FY 2011 Plans for CBP

The following are highlights of the OIG’s plans for auditing and inspecting U.S. Customs and Border Protection in FY 2011:

New Projects

Consistent and effective use of penalties. CBP considers the penalty process a Priority Trade Issue (PTI) that it uses to deter trade noncompliance. Despite the importance given to the penalty process, concerns have been expressed about its timeliness, as well as differences in the amount of penalties assessed and collected.

OIG plans to examine whether CBP’s use of penalties to enforce and ensure compliance with U.S. trade laws is administered in a consistent manner and is an effective deterrent.

Enforcement of FTAs, preferences for textiles. According to OIG, the numerous requirements placed on textile products entering the U.S. under various free trade agreements and legislative preference programs on textile transshipment make them problematic to administer. Owing to the high-risk nature of imports of textile and apparel products and a history of noncompliance, CBP designated the industry as a PTI. Although textiles and apparel represent only 8% of U.S. imports, these two sectors account for 42% of all duties collected by CBP.

OIG plans to examine whether CBP effectively enforces the laws governing the importation of textiles and apparel into the U.S.

Regulatory Audit’s risk-based audit approach. OIG was notified of concerns with CBP’s revenue collection programs, including issues regarding the implementation of audit recommendations. CBP’s Office of Regulatory Audit uses a two-phased risk-based audit management approach to identify revenue risk in various program areas to determine the extent of its auditing procedures.

OIG plans to examine the efficacy of CBP’s Office of Regulatory Audit’s risk-based audit management approach.

Control processes for FAST membership. OIG notes recent media coverage has emphasized the vulnerability of Free and Secure Trade (FAST) drivers to the influence of drug cartels encouraging participation in transporting illicit narcotics. It is critical that CBP implement adequate continued eligibility control processes to ensure that CBP’s border security mission is not compromised by Free and Secure Trade (FAST) drivers who should no longer remain in the program.

OIG will examine whether CBP’s FAST program continued eligibility process ensures that only eligible drivers and carriers remain in the program.

Projects in Progress

Validity and amount of bonds. OIG notes that with the continual increase in volume and number of importers, free trade agreements, preferential trade agreements, and antidumping/countervailing violations, it is critical that CBP ensure its bond amounts are commensurate with the revenue exposure. Furthermore, CBP should also have controls to ensure validity and the amounts of the bonds. Failure to do so may result in revenue loss to CBP through its inability to collect lawfully owed duties.

OIG plans to examine the efficacy of CBP’s process for determining and applying bonds in sufficient amounts to cover importer duties, fees, and taxes should importers fail to pay revenues as required on goods brought into the U.S.

Verification of C-TPAT member security practices. The goal of the Customs-Trade Partnership Against Terrorism (C-TPAT) is to shift responsibility for cargo security onto stakeholders in the supply chain. C-TPAT companies commit to meeting security standards in order to use their leverage to prevent terrorist organizations from exploiting their supply chains, thereby reducing the risk that terrorist weapons will be introduced into, or concealed within, their shipments.

OIG plans to determine the efficacy of CBP’s process for verifying C-TPAT members’ security practices.

Adequacy of PTT program’s controls. The purpose of CBP’s Permit to Transfer (PTT) containerized cargo program is to facilitate trade by allowing the advance movement of a shipment from a port to a container station where the cargo container is unloaded, examined, or stored. OIG says the PTT program raises concerns because CBP does not have adequate policies, procedures, and controls to monitor the security and movement of potentially high-risk cargo within the port area.

OIG plans to examine whether CBP’s Permit to Transfer containerized cargo program has adequate controls and processes in place to ensure that all identified high-risk containers are secured and inspected.

(See ITT’s Online Archives or 10/05/10 news, 10100535, for BP summary announcing posting of the annual performance plan.)

OIG annual performance plan for FY 2011 available here.