volume 1

Question 1

An importer, exporter, one who engages in transit or the like,
who has a relationship with Customs

Answer 1

trader

Question 2

A entity selected for an audit, not limited to importers, as it can
include exporters or transportation companies, Customs broker
etc.

Answer 2

Auditee

Question 3

Collective term for commercial or industrial enterprises usually
referred to as the Customs’ counterpart

Answer 3

business sector

Question 4

Group of productive or profit-making enterprises

Answer 4

Industry

Question 5

Commercial enterprise, regardless of any relationship with
Customs

Answer 5

Company

Question 6

One who is involved in or affected by a course of action

Answer 6

Stakeholder

Question 7

A business pattern with particular commercial / physical distribution of an import / export cargo, including the payment conditions

Answer 7

Whole business
transaction / transaction /
transaction pattern

Question 8

Statement of an administration’s overall intentions and
direction regarding PCA

Answer 8

PCA policy

Question 10

Scheme/strategy for audits specifying the objectives, scope,
methodologies and assignment of auditor/team members for the audit

Answer 10

Audit Plan

Question 11

An audit conducted at auditors’ premises usually by calling

Answer 11

Desk audit

Question 12

An audit conducted at the premises of the auditee

Answer 12

on site audit

Question 13

overall objectives of PCA

Answer 13

is to assure that Customs declarations have been completed in compliance with Customs legal requirements

Question 14

Objectives

Answer 14

• To verify that the value, origin and classification of goods is declared correctly and the
  amount of revenue legally due has been identified and collected; - To ensure goods liable to specific import/export controls are properly declared, including
  prohibitions and restrictions, licenses, quota, etc.; - To ensure conditions relating to specific approvals and authorizations are being observed,
  e.g. pre-authenticated transit documents, preferential origin/movement certificates,
  licenses, quota arrangements, Customs and excise warehouses and other simplified
  procedure arrangements; and - To facilitate international trade movements of the compliant traders.

Question 15

means measures by which the Customs satisfy themselves as to the accuracy and authenticity of declarations through the examination of the relevant books, records, business systems and commercial data held by persons concerned.

Answer 15

audit based control

Question 16

Benefits derived from PCA

Answer 16

 Compliant trade is facilitated at the point of Customs clearance and border controls can
be reduced;
 Enables Customs to gain better information on and understanding of traders’ business;
 Risk levels can be more easily assessed and reviewed: a premises visit provides the opportunity to identify risks and weaknesses in traders’ systems;
 Facilitates client education, long-term and comprehensive compliance management
focus;
 Customs administrations’ resources are more effectively deployed;
 Customs can promote the concept of voluntary compliance and self-assessment;
 Suspected fraudulent activities including cases of illicit financial flows (IFF), trade-base
money laundering (TBML) may be identified and referred to competent authorities and/or
enforcement unit for appropriate action;
 Provides a platform for evaluating continued entitlement to Authorized Economic Operator status, where applicable.

Question 16

mechanism to verify and review, either
conducted by a company to review its own internal procedures or by Customs to review Customs’ own
internal rules and procedures.

Answer 16

Internal asudit

take note : PCA is not internal audit

Question 17

Take note

Answer 17

PCA is not one to one with AEO validation/audit but they can complement each other during
the different stages of the process.

If a company is
already an AEO, any PCA should take into account the validations in order to avoid duplication.

Question 18

This type of audit looks at the entire business control environment and the impact this might have on Customs compliance.

This kind of
audit takes place at the premises of the auditee (field audit).

Mostly relevant for administrations with a trader-focused targeting approach2.

Answer 18

Comprehensive audit (Systems-based audit)

Question 19

This type of audit concentrates on one or a few areas of Customs e.g. valuation, country of origin etc.

Mostly relevant for administrations with an issue-focused targeting approach

Answer 19

Focused audit (Issue-based audit)

Question 20

administrations that have newly implemented post-importation
controls may consider introducing checks on individual transactions. This can work in two ways:
1) Referrals from the port/border post when an officer has doubts concerning a particular
declaration at the time of clearance. If it is deemed that significant duty may be at stake, an
enquiry is then referred to the appropriate Customs office to further examine the declaration,
normally in consultation with the importer/exporter. The goods in question may be released or
other action may be taken as appropriate.

2) A targeting team scrutinizes individual Customs
declarations after clearance and selects those where doubts arise regarding their accuracy.

Answer 20

Post-importation Transaction-based audit (TBA)

Question 21

Legal framework and essential powers

Answer 21

To facilitate PCA, it is necessary to implement legislation which provides Customs with the legal basis to conduct an audit and also sets out the rights and obligations of the auditee.

Question 22

Customs laws and regulations should provide the following:

Answer 22

 definition of PCA coverage (persons/company subject to PCA)
 authority and powers of Customs officials/auditors conducting PCA
 obligations and rights of auditees
 penalty scheme
 right of appeal

Question 23

The scope and coverage of PCA - namely, which persons may be subject to an audit - should be
clearly defined in Customs laws and regulations.

Answer 23

This may include:
 importers/exporters;
 declarants;
 consignees of the imported goods;
 owners or beneficial owner of the imported goods;
 subsequent acquirers of the imported goods;
 Customs clearing agents of the imported/exported goods;
 storage agents of the imported/exported goods;
 transporters of the imported/exported goods; and
 other persons/companies directly or indirectly involved in the transaction of the imported
or export goods.

Question 24

Authority, powers and obligations of Customs officers

Answer 24

-the right to access auditee’s premises;
 the right to examine business records, business/trading systems and commercial data
relevant to Customs declarations;
 the right to inspect auditee’s premises;
 the right to uplift and retain documents and business records;
 and the right to inspect and take samples of goods.

Question 25

Obligations and rights of auditees

Answer 25

 a requirement to maintain specified documentation, information and records. The duration for
retaining such records should be no less than the maximum period after importation or
exportation when Customs may legally demand underpaid duty and make refunds for
overpaid duty;
 a requirement to make such documentation, information and records available in a timely
manner;
 a right to appeal 4;
 a right to an explanation from Customs concerning determination of Customs value5;
 a right to expect confidential treatment of business documentation;
 a right to clearance of goods at the frontier with provision of security6;
 and a right to amend declarations without penalty in the appropriate circumstances

Question 26

Organizational structure

Answer 26

PCA has an interface with many other areas within the Customs department

PCA programme will be driven by a central team responsible for managing the audit
programme.Depending on the situation of a particular country, an administration will set up one
or more operational PCA units. The need for Customs staff to be able to visit a trader’s premises
means Customs offices should be located accordingly.

Question 27

This structure has established a single PCA unit within the administration.

Answer 27

Centralize audit

• Advantages of Centralized audit includes
   Enhanced communication, coordination and sharing of knowledge;
  -Better supervision and management control; and  More effective risk management. (feedbacks are sent to Risk Management Unit in more coordinated manner)

Disadvantage of Centralized audit includes
 Difficult to physically verify the business premises of trader prior to the start of the
audit; and
 Field audit may be time consuming and costly particularly when auditors have to travel
a long distance to conduct this exercise.

Question 28

This structure seeks to establish several PCA units within the administration.

Answer 28

Decentralized audit

Advantages of Decentralized audit includes
 Easy to locate and contact importer/exporter;
 Cost and time effective – more audits can be performed;
 Auditors of different regions can compete to perform better;
 Knowledge is improved in specific trade sectors; and
 Local risk factors are considered more effectively.
Disadvantage of Decentralized audit includes
 Difficult to coordinate with other units;
 Lack of effective communication with each regional PCA units; and
 May lead to high administrative cost due to recruitment of additional auditors,
managers and cost of training.

Question 29

Segmentation of traders

Answer 29

Type 1 traders are voluntarily compliant;
Type 2 traders try to be compliant but do not necessarily always succeed;
Type 3 traders will avoid complying if possible;
Type 4 traders deliberately do not comply