Customs Check Depositing Procedures Need Improvement

Gao ID: FGMSD-78-58 September 20, 1978

United States Shoe Corporation alleged that it suffered losses because it had to make good on checks issued by its bankrupt import broker, Harlo Air Cargo Brokers, Inc., and contended that the loss occurred because of the U.S. Customs Service's delay in depositing the broker's checks. U.S. Shoe's $80,381 loss included $60,170 of Harlo's duty payment checks that were returned by the bank for insufficient funds. At the same time, Customs was processing import documents with checks attached for $20,211. It could not be ascertained if any of the returned checks would have cleared the bank if Customs had deposited them earlier because extensive analysis of bank records would have been required, and Harlo's insolvency was at least partially caused by the insolvency of another company whose checks to Harlo were returned unpaid. Customs' New York region deposited the checks an average of 7.5 workdays after receipt--substantially less than the several months delay alleged by U.S. Shoe. The delay in depositing Harlo's checks was caused by a regional office procedure requiring that checks accompany import documents during initial processing. The New York office's check depositing procedures are unique within the Customs Service. In Boston, Los Angeles, and Detroit, checks are deposited upon receipt, usually the same or the following workday. The Customs Service has purchased modern processing machines, decreasing the delay at John F. Kennedy Airport, and has prepared instructions requiring the deposit of duties and taxes upon receipt.

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