Demystifying Customs Audits: Proactive Measures

“Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning” – Einstein

We always think about audits as an event or as a one-time activity. However continuous preparation is essential for successfully dealing with audits. Preparing for a Customs Audit, whether it’s a Post-Clearance Audit or any other type, necessitates the implementation of numerous measures within an organization.

1. Compliance with Laws and Regulations

Truth is you should be compliant with Customs Laws, regulations, and other related laws, this can be covered in the following important steps.

Understand Customs Regulations– Stay informed about the customs regulations relevant to your industry and India. Regularly review updates and changes in regulations. After this you need to keep track of new changes customs is planning. In many cases, custom releases draft or changes and or ask for suggestions, keep track, and be part of them as an organization or through a trade body.

Understand Foreign Trade Policy (FTP) – For restriction on imports exports, license requirements, export benefits, and obligations. New requirements like SIMS, PIMS, CHIMS, NFMIMS.

Regulations by Participating Government Agencies (PGA) – This is the most difficult area as more than 40 + agencies/ministries are involved. Expertise and knowledge in these areas are limited.

Bureau of Indian Standards (BIS) – India’s focus on quality is resulting in more and more items getting covered in BIS. It is important to keep tabs on schedules and lists by BIS committee so that you can take proactive steps.

Classification, Valuation, Claiming notification benefits, and origin of goods – These are the most critical areas of Customs where most mistakes happen. Compare classification used in customs and GST and avoid any variation in 6 digits.

2. Risk Assessment

Conduct a risk assessment of import and export processes. Identify potential areas of concern or non-compliance and address them pro-actively.

3. Pro-active Approach to Face Audit

A proactive approach to facing a customs audit involves anticipating and addressing potential issues or concerns before they are raised by the audit. This includes implementing robust internal processes, regularly reviewing and updating compliance measures, and being proactive in identifying areas for improvement. By taking these steps in advance, a company can demonstrate a commitment to compliance and minimize the likelihood of negative findings during a customs audit.

Implement Internal Control Program (ICP)

ICP encompasses several aspects and I have covered this topic in depth in the Logistics Insider Aug 2023 issue. “Internal Control Program (ICP) for Customs – A Necessity for World Class Trade Compliance” However despite repetition following points are most important to handle Customs Audit.

  • Process Standardization/Standard Operating Process (SOP)
  • KPI monitoring and Continuous Improvement
  • Risk Identification and Assessment
  • Documentation Management

Customs Compliance Training

Train staff on customs compliance regulations. Make sure they understand their roles and responsibilities in the import and export processes. This needs to be repeated after periodic interval and after critical changes.

Cross-Training & Job Rotation

Encourage cross-training and job rotation among employees involved in customs compliance. This ensures that there is flexibility in handling tasks and reduces the risk of disruptions. Also many times this brings out deficiencies and new approach.

Establish a Compliance

Culture Install a culture of compliance within the organization. Emphasize the importance of accuracy, transparency, and adherence to regulations. Recognize and reward employees who contribute to the success of compliance efforts.

Feedback Mechanism

Establish a feedback mechanism where employees can report issues or suggest improvements in the customs compliance process. This creates a culture of continuous improvement.

This is an abridged version of the EXIM Vidya segment that was published in the February 2024 issue of Logistics Insider magazine. To read the complete version, please click here.

Leave a Reply

Your email address will not be published. Required fields are marked *