Customs Compliance Audits Overview

Implementing Post-clearance Audits

• Develop audit programs and standardized procedures to ensure consistent evaluation of customs compliance.
• Identify potential subjects for audits based on risk factors and indicators, including past compliance history, industry trends, and specific trade patterns.
• Select audit subjects using a risk-based approach to prioritize those posing the highest risk for non-compliance.

Preparatory Process

• Conduct pre-audit research to gather information about the auditee, their business activities, and relevant trade data.
• Use preparatory checklists to ensure all necessary documentation and information is obtained before commencing the audit.
• Issue a notification letter informing the auditee about the upcoming audit, specifying scope, dates, and required documentation.

Conducting a Field Audit

• The initial audit meeting helps establish a formal relationship with the auditee and outline the audit process.
• The meeting should involve a senior representative from the audited company, who has authority to facilitate the audit and ensure cooperation.
• Auditors should introduce themselves, clarify the audit's purpose, provide an estimated duration, and request a company representative to be present throughout the audit.

Terms of Sale

• Auditors should verify terms of sale to determine if additional costs are included or excluded from the declared value.
• Additional conditions in sales contracts that impact the customs value should be examined, such as agreements to offset debts with reduced prices on imported goods.
• Separate payments not reflected in the invoice price should be investigated to determine if they are part of the transaction value.

Examining Accounting Records

• Contradictions or discrepancies between figures and descriptions in accounting records could indicate potential compliance issues or fraud.
• Accounting records should be reviewed for consistency with generally accepted accounting principles.
• The double-entry bookkeeping system should be used to verify that information related to a transaction is recorded in at least two account titles.

Determining the Operator's Declaration Practices

• Verify if the operator correctly declares parts with varying duty measures, restrictions, or other regulations when assembling, completing, or finishing products.
• Confirm whether the operator declares products incorporating parts with differing duty measures, restrictions, or regulations.
• If a sample is taken during the audit, document the outcome of the investigation, including any results from laboratory testing performed by customs or the operator.

Verifying End-Use Authorizations

• Confirm the existence and validity of end-use authorization for imported goods.
• Ensure that all requirements for granting the authorization have been fulfilled.
• Review the operator's internal control system, including the record-keeping practices and their adherence to end-use authorization.

Analyzing the Transaction Chain

• Examine the transaction chain, including contracts, raw material orders, confirmations, invoices, payments, receipt of goods, stock entries, and customs declarations.
• Evaluate whether the production process adheres to the authorization, including the rate of yield, results, and waste or loss.

Case Studies

• Case 1 highlights misclassification of imported goods, leading to incorrect duty calculation.
• Case 2 describes duty-free shop fraud involving the unauthorized removal of goods and violating warehousing procedures.
• Case 3 involves a company receiving unwarranted exemptions from import VAT by misrepresenting the end-use of imported raw materials.

Explore the essential procedures and best practices for implementing post-clearance audits within customs compliance. This quiz covers audit program development, risk-based subject selection, and the preparatory and field audit processes. Brush up on your knowledge and ensure effective customs compliance evaluation.