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What is Post Clearance Audit (PCA) in customs?

DPU incoterms define exporter and importer roles in global trade for all transport modes, including intermodal freight. Learn more about its process in this blog.

In the world of international trade, it is critical for customs administrations to verify the accuracy and authenticity of declarations made by traders. To ensure compliance and reduce risks, customs authorities have adopted the practice of Post Clearance Audit (PCA). By conducting comprehensive checks, customs administrations can manage risks, improve trade processes, protect border security, safeguard society, and preserve revenue streams.

What is Post clearance audit?

Post clearance audits serve as a mechanism for customs authorities to verify the accuracy and authenticity of declarations made during international trade transactions. These audits examine relevant books, records, business systems, and commercial data held by individuals and companies involved in international trade. Typically, Post Clearance Audits are conducted either at the trader's premises or, when necessary, at the auditor's desk, depending on the nature and scope of the audit¹.

The need for post clearance audit

In today's rapidly changing international trade environment, customs administrations face the challenge of speeding up clearance processes while maintaining the highest standards of accuracy and transparency. Post clearance audit is a vital risk management strategy that ensures that trading parties are compliant with trade laws.

Through these audits, customs authorities can assess the accuracy and authenticity of customs declarations, identify discrepancies, and allocate resources effectively based on risk factors. This enhances trade by allowing customs to concentrate on high-risk declarations with potential risks to border security, society, and revenue. Simultaneously, low-risk declarations can seamlessly move through ports, benefiting traders who comply with customs regulations.

Types of post clearance audits in Indian customs administration

The Central Board of Excise and Customs employs various types of post clearance audits to ensure compliance and risk management³:

Transaction-based audit (TBA):

TBA serves as a monitoring mechanism, reminding businesses and traders that customs authorities are actively overseeing their activities. Transactions are selected for TBA based on specific risk parameters identified at the national and local levels. For selected transactions, necessary checks are conducted, and additional information may be requested from importers or exporters.

Premises-based audit (PBA):

The Central Board of Indirect Taxes and Customs (CBIC) introduced a three-tier Authorized Economic Operator (AEO) program for importers and exporters. As part of this program, on-site PCA is conducted at regular intervals. Auditees are chosen for PBA based on risk parameters. The aim is to assess the overall compliance level of the auditee by examining their internal control systems’ ability to prevent systemic risks to revenue and other compliances.

Theme-based audit (ThBA):

ThBA focuses on conducting focused audits instead of comprehensive ones. This approach uses limited resources that are directed toward verifying compliance in specific issues or sectors. The results obtained from ThBA help policymakers assess the compliance of particular industrial or trade sectors, enabling compliant sectors to receive more facilitation.

By employing these different types of post clearance audit in customs, the Customs authorities can effectively assess compliance levels, manage risks, and allocate resources efficiently.

Check areas involved in post clearance audit

Post clearance audits encompass many areas and entities that may be scrutinized. The following entities may be included in the scope of Post clearance audits:

Importers/exporters:

Businesses responsible for bringing goods into or exporting goods out of a country.

Declarants:

Individuals or entities who prepare and submit customs declarations on behalf of importers or exporters.

Consignees of the imported goods:

The recipients or representatives of recipients who receive the imported goods.

Owners or beneficial owners of the imported goods:

The individuals or entities with legal or beneficial ownership of the imported goods.

Subsequent acquirers of the imported goods:

The exporter covers the charges incurred at the destination terminal, which may include fees for handling and storing the goods until they are unloaded.

Customs clearing agents:

Agents or intermediaries who help in customs clearance on behalf of importers or exporters.

Transporters:

Individuals or companies responsible for transporting imported or exported goods from one location to another.

Storage agents:

Entities involved in storing imported or exported goods, such as warehouses or bonded facilities.

Other persons/companies involved in the transaction:

Any individuals or bodies directly or indirectly involved in the import or export transaction, including intermediaries, suppliers, or subcontractors.

Post clearance audit process

Post clearance audit (PCA) process involves systematically examining relevant books, business systems, records, and commercial data to verify the accuracy and authenticity of declarations made by traders after customs clearance. The following steps outline the typical Post clearance audit process⁵:

Selection of audits:

Customs authorities use risk-based methods to select declarations for audit. They consider various factors including compliance history, transactional value, country of origin, and other risk indicators.

Notification and documentation:

Traders selected for audit receive a notification specifying the audit scope, timeline, and required documentation.

On-site or desk audit:

Depending on the circumstances, audits can be conducted on-site at the trader's premises or remotely at the auditor's desk. During the audit, customs auditors thoroughly examine the provided records, documents, and data to verify compliance and detect any discrepancies.

Findings and recommendations:

Customs authorities communicate the audit findings to the trader after completing the audit. If any non-compliance or discrepancies are identified, appropriate actions may be taken.

Corrective actions and follow-up:

Traders can address any identified issues and rectify non-compliance.

Data analysis and risk management:

The data collected post audit clearance is analyzed to identify patterns, trends, and potential areas of non-compliance.

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Frequently Asked Questions

What is the duration of Post clearance audit?

The duration of a post clearance audit depends on various factors like the complexity of the audit, the volume of transactions being reviewed, and the cooperation of the auditee. Generally, a post clearance audit can take a few weeks or extend up to several months.

How are companies selected for Post clearance audit?

Customs authorities use a risk-based approach to choose companies for post clearance audit. The selection process considers various factors including compliance history, transactional value, country of origin, and other risk indicators⁷.

Published on December 26, 2023.

Sources:
1. https://www.wcoomd.org/-/media/wco/public/global/pdf/topics/key-issues/revenue-package/pca_guidelines_vol1.pdf?la=en
2. https://www.wcoomd.org/en/topics/enforcement-and-compliance/instruments-and-tools/guidelines/pca-guidelines.aspx
3. https://taxguru.in/custom-duty/customs-post-clearance-audit-pca.html
4. https://www.wcoomd.org/-/media/wco/public/global/pdf/topics/enforcement-and-compliance/tools-and-instruments/pca-guidelines-volume-1.PDF?db=web
5. https://tfig.unece.org/contents/post-clearance-audit.htm
6. https://www.wcoomd.org/-/media/wco/public/global/pdf/topics/enforcement-and-compliance/tools-and-instruments/pca-guidelines-volume-1.PDF?db=web
7. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://old.cbic.gov.in/htdocs-cbec/customs/customs-post-clearance-audit-pca-10112023.pdf
8. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.nacin.gov.in/resources/file/downloads/569893dc88232.pdf

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