CBP Increases Enforcement on HTS Misclassification
U.S. Customs and Border Protection has ramped up its use of Focused Assessment audits targeting importers with high-volume entries across Section 301 and 232 tariff categories. Companies with annual import values above $50 million are now receiving audit notices at a significantly higher rate.
CBP's Office of Trade released its FY2026 Enforcement Priorities in December 2025, placing HTS misclassification in tariff-sensitive categories at the top of the list. The agency has deployed additional Customs and Trade Attorneys and Import Specialists to conduct Focused Assessments (FAs) targeting importers who may be using lower-duty classifications to avoid Section 301 or Section 232 tariffs. The initiative focuses specifically on the "tariff engineering" question — whether importers are making pre-import modifications to products that lack a legitimate commercial purpose beyond changing the applicable HTS code.
Common patterns CBP is scrutinizing include: (1) imports of Chinese-origin goods through third countries with minimal processing, (2) partial assembly operations designed to shift classification from higher-duty HTS codes to lower-duty alternatives, and (3) country-of-origin claims based on "substantial transformation" in countries like Vietnam, Malaysia, or Mexico where the transformation is minimal. The agency has specifically called out the electronics and apparel sectors as high-risk for evasion.
Importers should conduct an internal classification review before a CBP audit arrives. The agency typically provides 60 days' notice before an FA, but Prior Disclosure — voluntary disclosure of errors before CBP initiates contact — can reduce penalties to 50% of unpaid duties compared to the standard penalty range of 100-400% for fraudulent or grossly negligent misclassification. Companies should also review their broker's classification instructions to ensure they reflect current tariff schedules, as many brokers are still working from pre-2025 tariff matrices.