STRATEGIC PLANNING FOR

POST-CLEARANCE AUDIT (PCA)

(based on WCO PCA Guidelines, Vol.1)

SUMMARY OF SESSION What PCA is/isn’t Objectives & benefits of PCA Process and considerations for

introduction of PCA processLegislationTraining needsStrategic managementResource considerations

Limitations of PCA

“A structured examination of a business’ relevant commercial systems, sales contracts, financial and non-financial records, physical stock and other assets as a means to measure and improve compliance.”

WHAT IS POST CLEARANCE AUDIT (PCA)?

WHAT PCA ISN’T! AN ENFORCEMENT TOOL

NOT A MEANS OF INVESTIGATING POSSIBLE FRAUD

WHERE FRAUD IS SUSPECTED, REFER TO INVESTIGATION SPECIALISTS

A FORM OF INTERNAL AUDITNOT DESIGNED AS A MECHANISM FOR

CHECKING CONTROLS CONDUCTED BY CUSTOMS AT THE FRONTIER

WHAT ARE THE OBJECTIVES OF PCA? To assure that Customs declarations have been

completed in compliance with Customs requirements, via examination of a trader’s systems, accounting records and premises;

To verify that the amount of revenue legally due has been identified and paid;

To facilitate international trade movements of the compliant trade sector;

To ensure goods liable to specific import/export controls are properly declared, including prohibitions and restrictions, licenses, quota, etc.;

To ensure conditions relating to specific approvals and authorizations are being observed

BENEFITS DERIVED FROM PCA Compliant trade facilitated at time of Customs

clearance Customs gain better information and understanding

of clients’ business Risk levels more easily assessed and reviewed Facilitates client education and comprehensive

compliance management focus Customs can promote concept of voluntary

compliance and self-assessment Customs administrations’ resources more effectively

deployed Suspected fraudulent activities may be identified Provides platform for evaluating entitlement to

certain authorisations; e.g. AEO status

TYPES OF POST-IMPORT CONTROLS

Post-importation transaction verificationPort referralsRisk selectionDisputed decisions/ importer requests

Field / on-site auditRisk selection

Office/ desk auditRisk selection

Large business focus – special teams

Transition from border-focused controls to PCA as the prime basis for Customs controls typically evolves over several years

PCA implementation should be embedded in a wider facilitation/modernization context

Infrastructure considerations Consider as a first step, post-

importation transaction-based controls

STEPPING STONES TOWARDS AN EFFECTIVE PCA SYSTEM

PROCESS FOR INTRODUCING AN EFFECTIVE PCA SYSTEM

Legal and operational framework

Strategic Planning

Risk Management

Relationship with other departments

OVERVIEW OF THE PCA PROCESS

REVIEW AND UPDATE

MANAGEMENT DATA

PLAN AUDIT PROGRAMME

SELECT COMPANIES FOR AUDIT

PREPARE FOR AUDIT

CONDUCT FIELD AUDIT

REPORTEVALUATE

FOLLOW UP

List:

1. Legal powers for Customs2. Legal obligations on commercial

operator3. Legal rights of commercial operator

GROUP EXERCISE ON LEGAL POWERS, RIGHTS AND OBLIGATIONS

LEGAL AND OPERATIONAL FRAMEWORK

- AUTHORITY AND POWERS OF CUSTOMS OFFICERS

 Customs laws and regulations should provide the authority to conduct an audit at the premises of the auditee. Necessary powers include the right to:

access auditee’s premises; examine business records, business

systems, commercial data relevant to Customs declarations;

inspect auditee’s premises; uplift and retain documents and business

records; inspect and take samples of goods.

LEGAL AND OPERATIONAL FRAMEWORK

- OBLIGATIONS AND RIGHTS OF AUDITEES (I)

 Customs laws and regulations should set out the rights and obligations of persons & companies involved in international trade. Provisions should include:

 requirement to maintain specified documentation, information and records

The duration for retaining such records (no less than the maximum period after importation for effecting duty adjustments)

LEGAL AND OPERATIONAL FRAMEWORK

- OBLIGATIONS AND RIGHTS OF AUDITEES (II)

requirement to make such documentation, information and records available in a timely manner;

right to appeal ; right to an explanation from Customs

concerning determination of Customs value;

right to expect confidential treatment of business documentation;

right to clearance of goods at the frontier with provision of security.

INTRODUCTION OF STRATEGIC PLANNING FOR PCA

The audit plan should include the following : How importers will be selected/targeted How to improve compliance via self-

assessment How to manage resources for PCA Relationship with other Customs sections:

e.g. border control, risk management, enforcement etc.

TRAINING NEEDS AND PROFESSIONAL SKILLS (I)All auditors need a range of general skills

including: accounting techniques and principles, based on

Generally Accepted Accounting Principles (GAAP);

knowledge of auditing standards and procedures;

familiarity with Customs laws and regulations; general knowledge of Customs procedures

(valuation, classification, origin, etc.); knowledge of computer-based accounting

systems; commercial awareness and knowledge of

business strategies in international trade

TRAINING NEEDS AND PROFESSIONAL SKILLS (II)Additional specialist skills include: Customs Valuation, Rules of Origin, Tariff

Classification (as required) I.T.-based accounting Multi-national corporation accounting,

including transfer pricing specialist trade sector knowledge

COMPETENCIES OF AUDITORS

PROFESSIONAL SKILLS AND

KNOWLEDGE

INTEGRITY

CONFIDENTIALITY

DUE CARE AND DILIGENCE

EQUITY AND IMPARTIALITY

LIMITATIONS OF PCAPCA is the most effective means of ensuring

compliance : thorough verification requires access to importers’ records and accounting system.

Not a practical tool for informal traders : Problems locating the trader Lack of a structured accounting system and supporting

books and records, etc. Cash payments etc.

Customs should encourage all operators to improve compliance, including informal sector

Provide opportunity and incentive to formalize their procedures in line with Customs requirements.