There is often confusion about the rules for electronic recordkeeping. Trade professionals often ask questions like:
- Who is responsible for keeping records?
- If you have an electronic recordkeeping process do you still keep paper
- How long to records have to be maintained?
The rules regarding recordkeeping span across several government agencies, but there are some guidelines that every trade professional should know.
1) What are records?
The term "records" is easily understood by anyone in business, but if you want the official CBP definition, you should look to 19 CFR Part 163. Part 163 defines the term "records" to mean any information made or normally kept in the ordinary course of business which pertains to the following activities:
- any importation, declaration or entry;
- the transportation or storage of merchandise carried or held under bond into or from the customs territory of the United States;
- the filing of a drawback claim;
- the completion and signature of a NAFTA export Certificate of Origin pursuant to Part 181;
- the collection and payment of fees and taxes to CPB; and
- any other activity required to be undertaken pursuant to laws or regulations administered by CBP.
Records include, but are not limited to:
- Statements, declarations, documents;
- electronically generated or machine readable data;
- electronically stored or transmitted information or data;
- books, papers, correspondence;
- accounts, financial accounting data;
- technical data; and
- computer programs necessary to retrieve information in a usable form
Looking at the previous list, it is apparent that all forms of business communication are included in record keeping requirements. Be careful not to delete emails regarding the first list's activities.
2) The Mod Act
Previous to the Customs Modernization Act (Mod Act) of 1993, Records were either attached to paper entry packages, or electronically transmitted to the CBP as part of the entry process. The CBP sometimes elected to waive the requirement to present these records. This resulted in the mistaken belief among International Trade Professionals that if their entry records presentation was waived, that they didn't need to maintain records of the entry for post-entry audits.
The purpose of the Mod Act was to maximize voluntary compliance with laws and regulations of US Customs and Border Protection by clearly informing the trade community of its legal obligations. Included in the Mod Act was a list of all records required by law or regulation for the entry of merchandise . This list is given the catchy title of the "(a)(1)(A) list". It rolls off the tongue only slightly better than "19 U.S.C. §1509(a)(1)(A) list". The (a)(1)(A) list doesn't create any new requirements, it merely lists existing requirements.
3) Who is required to maintain the records?
The following International Trade Professionals are subject to recordkeeping requirements:
- an owner, importer, cosignee, importer of record, entry filer or any other person who:
- imports merchandise into the customs territory of the United Stated;
- files a drawback claim;
- transports or stores merchandise carried or held under bond; or
- knowingly cause the importation or transportation or storage of merchandise carried or held under bond into or from the customs territory of the United States;
- an agent of any person described above; or
- a person whose activities require the filing of a declaration or entry, or both.
Some exceptions would be:
- international travelers who makes a baggage or oral declaration upon arrival at the United States is not required to maintain records regarding non-commercial merchandise acquired abroad;
- A person that orders merchandise to be imported , but doesn't
- furnish technical data, molds, equipment; or
- controls the terms and condition of importation.
Additional recordkeeping requirements exist for:
- any person who completes and signs a Certificate of Origin for goods exported to Canada or Mexico pursuant to NAFTA (they must also maintain records in accordance with Part 181); and
- customs brokers must also comply with additional requirements of Part 111
4) How long the records should be kept?
As a general rule, any record required under Part 163 must be kept for 5 years. If that seems too easy, you'll be glad to know that there are exceptions:
- records relating to drawback claims must be retained for 3 years;
- packing lists must be retained for a period of 60 calendar days;
- a consignee who is not the owner or purchaser and who appoints a customs broker shall keep records pertaining to merchandise covered by an informal entry for 2 years;
- records pertaining to articles that are admitted free of duty and tax pursuant to 19 U.S.C. §1321(a)(2) and 19 CFR 10.151-10.153 and carriers’ records pertaining to manifested cargo that is exempt from entry under the provisions of 19 CFR shall be kept for 2 years; or
- if another provision of the CBP Regulations sets forth a different retention period for a specific type of record, the other provision controls. For example:
- 10.137 sets forth a retention period of 3 years from liquidation for records of use or disposition for certain goods whose rate of duty is dependent upon actual use; and
- 181.12 requires that all supporting records relating to NAFTA Certificates of Origin for exports be maintained for 5 years from the date the certificate was signed.
5) Should the original records be kept?
Short answer: yes.
The long answer is that unless a recordkeeper has adopted alternative storage methods pursuant to section 163.5, of the CBP Regulations, the recordkeeper must maintain the original records, whether paper or electronic. Even if proper alternative storage methods have been adopted, certain records must be kept in their original format for 120 days, or may not be alternatively stored at all.
Records required by Federal agencies other than the CBP are subject to their record keeping requirements.
Whether records are kept in their original format or under an alternative method of storage, they must be capable of being retrieved upon lawful request or demand by CBP.
6) The requirements for alternative methods of storage
International Trade Professionals may use an alternative storage method by providing advance written notification to the Director, Regulatory Audit Division, U.S. Customs and Border Protection, 2001 Cross Beam Drive, Charlotte, North Carolina 28217-2856.
The notice must specify the storage method to be used and state that it complies with the standards set forth in section 163.5. Methods that are in compliance with generally accepted business standards will generally satisfy CBP requirements, provided that the method allows for retrieval of requested records within a reasonable time after the request and adequate safeguards are in place to prevent alteration, destruction or deterioration of the records.
Common alternative methods include, but are not limited to, machine readable data, CD-ROM, and microfiche.
In order to use an alternative storage method, a recordkeeper must meet the following standards:
- operational and written procedures are in place to ensure that the imaging and/or other media storage process preserves the integrity, readability, and security of the information contained in the original records;
- the procedures must include a standardized retrieval process;
- vendor specifications/documentation and benchmark data must be available for CBP review;
- there must be an effective indexing system;
- internal testing of the system must be performed on a yearly basis;
- the recordkeeper must have the capability to make hard-copy reproductions;
- the recordkeeper must keep one working copy and one back-up copy of the records in a secure location for the required record retention period;
- entry records must be maintained in their original formats for a period of 120 calendar days; and
- CBP must be notified in writing at least 30 calendar days before implementing any change to the alternative storage procedures
A failure to meet the requirements may result in the recordkeeper being notified by CBP that alternative storage is not permitted.
CBP’s recently published Trade Strategy for Fiscal Years 2009‐2013 makes clear just how important revenue collection has become to the U.S. Government. Shockingly, CBP’s report lists “Enforce US Trade Laws and Collect Accurate Revenue” as its number two strategic goal ahead of “Advance National and Economic Security.”
International Trade Professionals need to keep apprised of the different record keeping requirements of the CBP. It is the shared responsibility of all parties involved in international trade to keep and maintain accurate records of every transaction. Don't be lax about your record keeping procedures, or it will come back to bite you.
For help in keeping your organization compliant to CBP recordkeeping procedures, feel free to contact us to see how Customs Info can help you.
Leave your Comments
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Short and crisp article; the essence is "maintain the original records, whether paper or electronic" and the lesson is to receive all documents from vendors and brokers electronically to move away from maintaing and storing paper records.
In frase " •Who is reponsible for keeping records?" word reponsible states for responsible, or for something else?
It's fixed now. It was a typo, thanks for pointing it out Alex.
Does CBP still require advanced written notice of an alternative method of storage for document retention? I have been hearing from various sources that the rule was recently changed.
Are the documents supposed to be kept in a certain order and, if so, what is that order?