GUIDELINES FOR POST-CLEARANCE AUDIT (PCA) VOLUME 2 WORLD CUSTOMS ORGANIZATION 1

IMPLEMENTATION OF PCA The PCA process as outlined in these guidelines consists of the following steps: 1. Development of audit programs and standardized audit procedures 2. Identification of potential subjects for audit 3. Selection process 4. Planning the audit 5. Conduct of the field audit 6. Conclusion of the audit/Reporting 7. Evaluation and follow-up 2

Selection process (I) 3 Profile of importers / Trade data e.g.  Company structure  Business partners (suppliers, agents, customers etc.)  Method of payment, etc.  Volume of importations  Amount of duties paid  Country of Origin of imported goods  Ports of loading

Selection process (II) 4  Past records of the auditee e.g. Audit records Customs entry errors Offence records Tax, VAT compliance information, if available  Related information/Intelligence

Pre-audit research 5 Pre-audit research is a preliminary examination which serves two main purposes:  to focus on specific risk areas of an auditee's systems and import declarations, through analysis of available data; and  to draft an audit plan that includes the audit objectives, scope, methodologies and assignment of auditor/team members.

Notification of audit 6 The auditee should be advised of the following:  The general procedure for the visit and its objectives  Details of the documentation to be made available (specifying the period to be examined, if known)  Names of personnel who will carry out the audit  Facilities to be made available for the auditor/s (e.g. adequate working area)

Conduct Of The Field Audit 7 Physical inspection/control (if necessary) Third-party audit (if necessary)

Basic guidelines 8  Foster a cooperative relationship  Auditors should positively guide the auditee regarding declaration errors caused by a lack of understanding of laws and regulations  Auditors must refrain from revealing their provisional impressions to the auditee during the course of the audit  Maintain a professional and courteous attitude towards the auditee

Verification of the Customs value 9  Price negotiations and discounts  Terms of Sale  Payment terms  Additional terms  Separate payments

Evaluation and follow-up 10 Customs administrations should develop a mechanism to assess and evaluate the success of the PCA program. This may include:  An improvement of compliance levels  Additional revenue collected  Number of investigation referrals  Cost/benefit analysis

Irregularities etc. 11  Irregularity means the breach of laws and regulations, regardless of its cause, such as deliberate intention (fraud), negligence, or simple mistake (error)  Fraud means the wilful intent of a taxpayer to evade a tax  Negligence means a lack of due care or failure to do what a reasonable and ordinarily prudent person would do under the given circumstances  Error means a mistake in a Customs declaration.