The Business Owner’s Guide to a CBP Audit: What to Expect, How to Prepare, and Why It Matters
If your business imports goods into the United States, you could be subject to a Customs and Border Protection (CBP) audit—even if you’ve never had a shipment flagged or goods held at the port. Unlike an IRS audit, a CBP audit is about how your goods entered the country, what you claimed they were, how much you said they cost, and whether you paid the correct duties or tariffs.
For many business owners, a CBP audit feels unexpected and confusing. This guide will walk you through the entire process, without the legal jargon—and help you understand how to prepare, how to respond, and how to protect your business.
What Is a CBP Audit?
A CBP audit is a formal review by U.S. Customs and Border Protection to verify that your company has followed customs laws when importing goods. Specifically, they’re checking to see if:
- You’ve classified your goods correctly (using the correct codes)
- You’ve paid the right amount of duties and tariffs
- You’ve declared the correct country of origin
- You’ve documented your imports accurately
CBP audits are part of the agency’s mission to enforce trade laws, collect import duties, and prevent fraud at U.S. borders.
Why Your Business Might Be Audited
You don’t need to be a large importer to be audited. CBP selects businesses based on a variety of factors, including:
- Random selection
- A pattern of import errors in your past filings
- Red flags raised during a spot check
- A referral from another government agency
- Sudden changes in your volume or value of imports
Key Terms You’ll Hear During a CBP Audit
Let’s break down some of the most common terms you’ll come across during this process:
HTS Code (Harmonized Tariff Schedule Code):
This is a 10-digit number that classifies every type of good being imported. It determines the amount of duty (tax) you owe. Using the wrong code could mean underpaying or overpaying customs duties—and could trigger an audit.
Declared Value:
This is the value you say your product is worth when entering the U.S. CBP uses it to calculate how much duty you owe. If you understate this value, intentionally or not, CBP may investigate further.
Country of Origin:
This refers to the country where the product was made—not just where it shipped from. It affects tariff rates and trade compliance.
Landed Cost:
This is the total cost to get your product to its final destination in the U.S., including the product price, shipping, insurance, customs duties, and other fees.
Reasonable Care:
CBP expects businesses to take “reasonable care” in complying with import laws. That means you must demonstrate that you made a good-faith effort to be accurate, even if you made an honest mistake.
What Happens During a CBP Audit?
Step 1: Notification
You’ll receive a formal letter from CBP letting you know that you’re being audited. This is called a Notice of Audit. It will include a description of what records they want and what time frame is under review (usually 1–3 years).
Step 2: Initial Meeting
CBP may schedule an initial call or meeting to discuss the scope of the audit. You’ll have a chance to ask questions and get clarity on what’s expected.
Step 3: Document Request
You’ll be asked to provide:
- Importer records (commercial invoices, packing lists, bills of lading)
- Customs entry summaries (CBP Form 7501)
- Purchase orders and contracts
- Tariff classification justifications
- Proof of payment for duties
Step 4: Review Period
CBP auditors will review your records. This could take weeks or months, depending on your import volume and complexity.
Step 5: Findings and Report
CBP will issue a Compliance Assessment Report or similar document summarizing their findings. This may include:
- Notices of overpaid or underpaid duties
- Penalties or liquidated damages (financial penalties)
- Required changes to your compliance procedures
Common Mistakes That Trigger Trouble
Even well-meaning businesses run into problems. Here are a few of the most common issues:
- Using the wrong HTS code to reduce tariff costs
- Failing to keep five years of import records (a legal requirement)
- Declaring incorrect product values to save on duties
- Misidentifying the country of origin
- Relying too heavily on customs brokers without reviewing entries
How to Prepare (Even If You Haven’t Been Audited Yet)
If you import goods, you should assume a CBP audit is always possible. Here’s how to prepare:
Keep Clean, Accessible Records
- Store all customs entries, invoices, and import docs for at least five years
- Make sure they’re organized by shipment, product, and vendor
Work With Trusted Experts
- Don’t assume your customs broker has it covered—review every entry
- Consider working with a trade compliance attorney or consultant if you’re importing at scale
Use a Tariff Classification Ruling (If You’re Unsure)
CBP allows you to request an official ruling on which HTS code applies to your product. This can protect you from future audit findings.
Conduct an Internal Compliance Review
Think of it as a dry run: have your team (or a third party) review your past imports and see if you’d pass a CBP audit today.
What to Do If You’re Audited
- Don’t Panic. A CBP audit doesn’t automatically mean you’ve done something wrong.
- Respond Promptly. Missing deadlines can lead to penalties or expanded scrutiny.
- Get Help. Engage your legal counsel or trade compliance advisor immediately.
- Be Transparent. If there are past errors, explain how you plan to correct them.
- Implement Changes. CBP may require policy or procedural changes—do them promptly and document them.
What Are the Penalties?
CBP penalties can include:
- Underpaid duties: You’ll need to pay the difference, possibly with interest.
- Fines: Can range from thousands to hundreds of thousands of dollars.
- Liquidated damages: Financial penalties tied to the value of the goods in violation.
- Seizure of goods: In serious cases, CBP can seize non-compliant shipments.
Final Thoughts: Be Proactive, Not Reactive
A CBP audit doesn’t have to be a disaster—but it can be if you’re unprepared. Most issues come down to documentation, classification, and valuation errors that could have been prevented with better internal processes.
If you import goods, the best time to tighten up your compliance is before the audit letter arrives.
Need help reviewing your customs risk exposure? Contact our team for a risk assessment or CBP audit preparedness consultation.
