Wanted: Customs
Compliance Managers THE adoption of the WTO Agreement on Customs Valuation
(ACV) in January 2000 and the Post Entry Audit (PEA) system in June 2001 has brought
about significant changes in how importers deal with customs. Prior to those developments,
the responsibility to determine the correct valuation, classification and quantity
of imported goods rested on customs. These developments have now brought about
a new paradigm where the importer is now responsible for ensuring the completeness
and accuracy of declarations to customs. In addition, importers are now required
to keep import and related business records for customs audit purposes.
Birth
Pains of the PEA. Since last year, customs has been aggressively implementing
the PEA system and to date, there are now at least 50 companies being subject
to compliance audit. These early, the experiences of both customs auditors and
the audited companies have already magnified the birth pains and process gaps
in implementing a new system. The inexperienced customs auditors are for the first
time presented with challenges of the actual audit. These challenges are made
more difficult with insufficient training in compliance sampling and audit techniques,
and the lack of understanding of international trading arrangements, transfer
pricing and the ACV.
On the other hand, companies have been caught off
guard with the issuance of the audit notices and the subsequent conduct of formal
audits. Among the major concerns raised by the audited companies is the lack of
guidelines from customs on how the trading community should address the compliance
requirements and the seeming inexperience and lack of focus of the auditors.
A
New Corporate Need. Amidst all these, a growing consensus among major companies
is that management has to somehow make the company "audit ready" even
in the absence of compliance programs provided by customs to help the trading
community. The emerging need for corporate management and governance in relation
to customs and trade compliance can roughly be classified as follows: a)
Internal Customs Compliance system
b) Record Keeping Compliance system
c)
Customs Brokers Selection and Management
d) Risk Management of Trading Operations
In
countries where the ACV and the PEA have been in place for decades already, companies
have adapted by providing controls to ensure customs compliance and to minimize
the risk of customs audit. In addition, companies have put in places programs
that will ensure the "audit readiness" of the company's trading and
record-keeping operations.
Internal Customs Compliance Programs. An Internal
Customs Compliance system is basically a system of procedures and controls applicable
to concerned units of the company (e.g. import, finance, transport, etc.) as well
as the third-party suppliers (e.g. customs brokers and freight forwarders).
This
system may include annual compliance and risk assessment of the company's import
operations. Record Keeping Compliance system refers to procedures and controls
for maintaining electronic and manual records, and making the same accessible
to customs.
Customs Brokers Selection and Management refer to the program
for selecting and managing external customs brokers not only for addressing logistics
requirements but also to comply with the compliance and information requirements
of the PEA system.
Customs Compliance Manager (CCM). For some of the major
companies operating worldwide, customs compliance units have been established
both on a national and regional level to address the trade and customs compliance
requirements of cross border transactions. It is not uncommon for a multinational
company, particularly the automotive and electronic sectors, to appoint Customs
or Trade Compliance Managers on a regional basis (e.g. Asia Pacific).
Depending on the complexity of the business operations with customs impact (i.e.,
trading, bonded warehousing, manufacturing, free trade zones), some companies
may even assign a customs compliance unit.
Based on practices in developed
countries and those of large multinational companies operating in this part of
Asia and the Pacific, a Customs Compliance Manager is most likely a former customs
official from a developed country with extensive background and experience in
logistics, customs and international trade.
The reason for the requirement
of government customs service in a developed country is simply because the ACV
and PEA, as well as other international rules, have long been practiced in the
developed countries. For most ASEAN countries, the ACV and PEA have just been
implemented in the past 4 years.
Customs Brokers as Customs and Trade Compliance
Managers. In the Philippines, a CCM will likely be a customs broker with extensive
training and experience in international finance, trade, logistics and risk management.
Considering that most customs brokers have been focused more on customs clearance
and local transport logistics, extensive training will be required from customs
brokers for them to be able to manage the corporate need for customs compliance.
In other words, customs brokers have to reinvent themselves to be able to address
these corporate needs.
In the meantime and while companies are building
their internal capabilities to address customs compliance, outsourcing the compliance
requirements to customs and trade consultants will be necessary. Major tax and
audit companies and a few law firms in the country are now offering customs and
trade advisory services. The challenge now for customs brokers is how they will
make themselves relevant to the corporate management of trading operations.
The
author is an international trade and customs consultant, and a licensed customs
broker. He is also a regular lecturer on logistics, customs and international
business. Please contact aouvero@dlugms.com
or (632) 4050021 / 29 for your comments.
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