STRATEGIC PLANNING FOR Post-Clearance Audit (PCA)

1. STRATEGIC PLANNING FOR Post-Clearance Audit (PCA) (based on WCO PCA Guidelines, Vol.1)

2. SUMMARY OF SESSION • What PCA is/isn’t • Objectives & benefits of PCA • Process and considerations for introduction of PCA process • Legislation • Training needs • Strategic management • Resource considerations • Limitations of PCA

3. WHAT IS POST CLEARANCE AUDIT (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.”

4. What pcaisn’t! • AN ENFORCEMENT TOOL • NOT A MEANS OF INVESTIGATING POSSIBLE FRAUD • WHERE FRAUD IS SUSPECTED, REFER TO INVESTIGATION SPECIALISTS • A FORM OF INTERNAL AUDIT • NOT DESIGNED AS A MECHANISM FOR CHECKING CONTROLS CONDUCTED BY CUSTOMS AT THE FRONTIER

5. 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

6. 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

7. Types of post-import controls • Post-importation transaction verification • Port referrals • Risk selection • Disputed decisions/ importer requests • Field / on-site audit • Risk selection • Office/ desk audit • Risk selection • Large business focus – special teams

8. STEPPING STONES TOWARDS AN EFFECTIVE PCA SYSTEM • 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

9. Process for introducing an effective PCA system Legal and operational framework Strategic Planning Risk Management Relationship with other departments

10. Overview of the PCA process

11. GROUP EXERCISE ON LEGAL POWERS, RIGHTS AND OBLIGATIONS List: • Legal powers for Customs • Legal obligations on commercial operator • Legal rights of commercial operator

12. 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.

13. 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)

14. 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.

15. 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.

16. 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

17. 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

18. Competencies of auditors

19. Limitations of PCA PCA 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.