Indirect Tax Conference Developing your Function · Conference Developing your Customs Function 14 November 2014 ... Why Effective Customs Management Matters International Trade Challenges

Indirect Tax

Conference

Developing your

Customs

Function

14 November 2014

Caroline Barraclough

Riya Rajan

© 2014 Deloitte LLP. All rights reserved.

Session Overview

1. Setting the scene - why is customs management important?

2. What is an Internal Compliance Programme for Customs and why is it important?

3. Customs Management in your ICP?

• People

• Process

• Technology

4. Enhancing your ICP / Benchmarking

2


Why is it important?

3

© 2014 Deloitte LLP. Private and confidential.

Why Effective Customs Management Matters

4

Who is Affected by Customs Issues?

All companies engaging in any import activities across almost every industry.

Legal, Financial and Reputational Risk

ReputationalFinancialLegal

Threat of legal action based on lack of

compliance, undeveloped processes

and limited management oversight

Due to customs &excise

levels, the financial impact

in ‘getting it wrong’ can be

significant’ (loss of

authorisations, change in

guarantee levels, fines etc..

What is the impact from a

reputational perspective

and how can this be

managed? Focus on

‘responsible tax’


Why Effective Customs Management MattersInternational Trade Challenges

5

• Revenue growth through new products and markets

• Reduce landed costs

• Just-in-time inventory management

Global Sourcing / Supply Chain

• Manage complex compliance operations

• Manage warehousing / distribution structuresTax and Trade-Aligned

Supply Chain

• Control flow of funds

• Reduce settlement times

• Enhanced reporting requirements

Trade Finance

• Adapt to continually changing environments (e.g. Union Customs Code)

• Increased risks, penalties, reputational damage

Trade Regulatory Compliance

• Economic downturn

• Pressure to reduce costs

• Short turnaround for customer satisfaction

Economic Pressure & Customer Demands

© 2014 Deloitte LLP. Private and confidential.

Impacts end-to-end Supply Chain

Trade

Compliance

Supply Chain & Logistics• Physical and container security

• Prevention of shipping delays

• Final point check

• Management of forwarders/brokers

• Supplier accountability

• Documentation and recordkeeping

• Export licence verification

HR• Employee screening

• Trade compliance induction training

R&D / Operations• New product classification and

licence determination

• Compliance with export

licensing when transferring

data/source code/technology

and software deployment

• Import/export of samples,

prototypes (inc. assists) and

equipment

Legal• Contractual obligations

• Government communication

• Violations, penalties and disclosures

• M&A Due Diligence

• Escalation point

Finance & Tax• Customs valuation

• Financial/economic sanctions

and embargoes screening

• Payment of, and accounting for,

import/export related costs

• Internal audit

Procurement• Customs impact built into sourcing

decisions and strategy across the

business (i.e. goods/freight/promotional

items)

• Supplier contracts include trade terms

• Vendor screening

• Secure supply chain partners

Sales & Marketing• Import/export considerations when

preparing for marketing events

• Export licensing impact of product

information exchange

• Embargoes & sanctions screening

• Know your customer screening

• Incorporating trade impact into pricing

strategy (e.g. duty and Incoterms)

• Anti-boycott screening of contracts

Risk/Security• Physical and IT security

• Travel/Hand carry policy

• Supply chain security

audit

IT• Data integrity

• IT security

• Automated compliance in ERP Systems

• Access rights

• Trade compliance intranet pages and

databases

• Compliance with export licensing

requirements for software deployment

• Server locations

© 2014 Deloitte LLP. Private and confidential.6

Why Effective Customs Management Matters


What is an Internal Compliance Programme

7


What is an Internal Compliance Programme?

8

An ICP is a comprehensive framework that establishes the relevant internal controls to

support a company’s compliance with all applicable customs obligations.

An effective ICP:

• Minimises the risk of non-compliance;

• Establishes effective control over the movement of goods, people, software and

technologies;

• Provides consistent written instructions to employees, enabling them to blend customs

requirements into their daily responsibilities;

• Protects employees through training and awareness programmes;

• Provides safeguards throughout a company’s supply chain;

• Demonstrates to authorities a commitment to compliance and acts as a mitigating factor

against potential penalties; and

• Helps you meet requirements of business partners and customers.


Essential Elements of an ICP

Trade Compliance Programme

An effective Trade Compliance

Programme should include

documented policies and

procedures, a training programme,

accountable roles, and the use of

technology to support the

establishment of robust internal

controls throughout each of the

business areas.

9

PEOPLE

Trade Management

Management

commitment to

Trade

compliance

Management

scorecard

Comprehensive

training

programme

Communication

and Escalation

Plan

IT systems to

manage

processes

ERP configured

to support data

requirements

PROCESSES

TECHNOLOGY

Global policies

and standards

Monitoring and

Corrective

Actions

Comprehensive,

documented,

integrated

procedures

Site-level

operating

procedures

Effectively

structured and

resourced

compliance

organisation


What should an ICP Include?

10


Customs Management in your ICP

11


Enhancing Customs Management

Sales

Purchasing

Logistics

Manufacturing

Finance

Legal

Trade Compliance

Key Considerations - PeopleCustoms is not a stand-alone responsibility, it requires co-operation between

various departments at all levels.

Q. What are your thoughts on where this function should belong and why?



Key Considerations - PeopleModels Considerations

13

In-house Dedicated

Resource

Temporary/ Secondee

Cross Functional

Management

Outsourced to 3rd Party

Availability in the market, where in the

business, involvement in key areas

Manage a discrete project or task

or provide temporary coverage

Ultimate responsibility, clear division of

tasks, conflicting priorities

Internal responsibility, processes and

controls, contractual coverage



Key Considerations - People

Management of 3rd Parties

14

Checks and controlsHMRC Audits

Written InstructionsKPIs and Management

Checks

Contractual

arrangements / Nature

of representation

Responsibility for the

declaration made



Key Considerations - Processes

15

• Defining policies that allow business units to meet their

own specific compliance challenges and legal

requirements

• Create or purchase technical guides for all countries of

operation to determine all applicable requirements and

identify any conflicting laws

• Clear, documented SOPs that are integrated into day-

to-day operations and link across compliance functions

• All CCNs should be kept in a central database and

kept up to date

• Proactive compliance, not reactive – No fire-

fighting!

• Easy access to documents and tools via intranet

• Establish an environment where personnel feel

comfortable raising concerns and issues

• Train internal audit personnel to conduct internal ICP

assessments regularly or conduct external ICP

assessments as required



Key Considerations - Technology

16

Benefits of

Automation

Expedite customs clearanceManagement of customs

regimes

Achieve trade and duty

data visibilityMitigate penalty risks

Maintain complete and

accurate documentation

Full audit trail Manage export controls

Trade preference

management

Create single, centralised platform

for trade compliance

Manage security

requirements


Enhancing your ICP

17


Enhancing your ICP

Compliance Roadmap

18


Enhancing your ICP / Benchmarking

Maturity Model

© 2014 Deloitte LLP. All rights reserved.20

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Documents

Indirect Tax Conference Developing your Function · Conference Developing your Customs Function 14 November 2014 ... Why Effective Customs Management Matters International Trade Challenges