U.S. Customs Valuation, Foreign Trade Zones, Duty Drawback & CBP Broker Triennial Audit Defense (19 CFR Part 111)

The fluorescent hum of the conference room at Pacific Rim Electronics & Broker Services (PRES) felt particularly oppressive on January 18, 2024. Sarah Chen, PRES's Licensed Customs Broker Compliance Officer, and David Miller, Trade Audit Counsel, stared at CBP Form 28, 'Request for Information,' Item 3b: 'Provide detailed reconciliation of all intercompany transfer pricing adjustments, specifically addressing the $19,000,000 upward adjustment reported on your IRS Form 1120, Schedule M-3, for the fiscal year ending December 31, 2022, and its impact on declared dutiable values.' This was the opening salvo of a CBP Focused Assessment, triggered by an information exchange with the IRS. The $19M adjustment, a result of an IRC §482 Comparable Profits Method (CPM) study, had been made post-importation to align PRES's U.S. taxable income with arm's-length standards—but crucially, it was never reported to CBP as an increase in dutiable value. The initial import entries, filed by PRES's own brokerage arm, reflected the original, lower transfer prices. Now, CBP was demanding answers, and the potential for significant penalties under 19 U.S.C. §1592 loomed large.