What is a Customs Audit?
A Customs audit is an evaluation of company practices and records. The audit assists in judging the integrity of information supplied under self-assessment and the level of compliance with legislative requirements.
As an importer or exporter, you are legally responsible for the accuracy of information supplied to Customs, even though you must use a Customs Broker to prepare and lodge your declarations. For your own benefit, ensure you examine and retain all documents supplied to Customs, check them for accuracy, and advise your broker of any errors.
The legal framework for PCA operations are covered within the Customs Act No. 7 of 2013. Specific articles relating to the authority of PCA in carrying out audits are covered under the following articles:
Article 143 – Power for Auditors to carry out duties, to enter premises and places where records are kept, have access to information in records both manual and digital
Article 144, 145, 131– Power to obtain information and/or records when requested to importers, customs agents, shipping companies & agents, financial institutions
Article 146 – Offences in relation to failure to provide records when requested
Article 124 &126 – Powers to question persons working for or owners of importers, customs agents, shipping companies and agents
Article 80, 81, 82 – Keeping of records & access for customs to access records
Article 88, 89 & 90 –Recovery of duty and refunds
Article 28 – Requirement to answer questions
Article 169, 170, 171, 172, 173 & 174 – Offences in relations to documents, statements and declarations
Article 166 – Offences in relation to a person failing to answer questions by a customs officer/auditor.
Do note that all offences listed above mean that a person or entity can be prosecuted if committing an offences in the above Act.
How we work?
To help business move goods quickly, Customs cannot scrutinize every transaction. Instead audits are used to confirm the integrity of information supplied to us. Customs principal objective is to maximize voluntary compliance and eliminate future errors.
We want to help you achieve and sustain compliance over time – not just improve compliance on “hit-and-miss” basis. This means you need to look carefully at all your customs-related business systems, processes, and procedures.
A likely audit follows these steps:
- Customs will arrange an entrance interview to discuss the proposed audit, including which transactions are to be examined and what documentation is required to be produced to the audit team.
- You are encouraged to examine their transactions prior to audit, as errors reported to Customs voluntarily will be viewed favorably.
- Customs will conduct an exit interview with you to discuss the assessment made about the client’s level of compliance, and what if any further action is required by you.
Customs has identified some of the more common reasons for reduced compliance.
Failure to retain adequate records
All relevant commercial documents must be retained for five years from the date of the transaction with Customs.
Imports incorrectly entered
- All imported goods must be declared to Customs in accordance with the approved form, be accurately described and correctly classified using the Harmonized Tariff, and any surplus goods reported. Items not ordered, samples and promotional merchandise must also be entered.
- If merchandise is received but not included in the Customs entry, an application to lodge an amending entry should be made immediately. Voluntary payments of additional duty will not be penalized. In a self-assessment environment, importers could be subject to penalties if errors are detected during an audit.
- If duty has been paid on merchandise that is not received, you may be eligible to apply for a refund of duty.
Customs value does not include all associated costs
- All costs associated with the goods are legally required to be considered when determining the Customs value. These may include costs relating to advertising, assists, commissions, credits, escalation charges, indirect payments, rebates, research and development or royalties.
Origin incorrectly identified
Confirmation of country of origin is required in order to claim preferential rates of duty.i.e MSG Free Trade Agreement.
Failure to disclose related transactions
The value of goods can be influenced by related party transactions. An adjustment for the value may be needed.
Incomplete information passed to Customs Agent
Errors may occur if all relevant information is not passed on to the person selected to assist in clearing your goods.
Misuse of Importers Code
The importer’s Code number must be used on all import entries for that entity.
Remember, every person dealing with Customs has a chance of being audited. If you make false or misleading statements to Customs you will face the prospect of the imposition of sanctions, up to and including prosecution in a Court of law.