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.
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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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