October 2024 — Question 3

While preparing the entry documents for a shipment on behalf of its client Angel Industries (Angel), Shady CHB (Shady) sees that the insurance value for the shipment is significantly lower than the commercial invoice value. In response to Shady's inquiry concerning the differences, Angel explains that there are two commercial invoices for the shipment. The first commercial invoice is the real invoice from the shipper which shows the lower amount that is used for insurance purposes. The second commercial invoice is created by Angel at a higher amount and is used as the invoice for calculating Customs value and upon which it pays the duties, taxes, and fees. Angel explains that it uses the two invoice system in its accounting records to reduce its reportable profit for income tax purposes. Shady's attorney advises Shady to terminate its relationship with Angel because the “double invoice scheme” is fraudulent. Of the choices below, what is Shady's best next step?

• AShady documents the double invoice scheme and immediately terminates its relationship with Angel and reports to CBP the client's name, date of termination, and the reason for the termination.✓ CBP's answer
• BShady will file the entry using the lower, correct value and will advise Angel that they will only file entry in the future using the actual invoice from the shipper.
• CShady will file the entry at the value requested by Angel and will keep Angel as a client because the potential fraud does not involve CBP.
• DShady will file the entry as requested by Angel because it is not fraud to pay more in duties, taxes, and fees than actually owed.