Post-Clearance Audit

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M. Fakhrul Alam
Commissioner
Customs, Excise & VAT
 Post Clearance Audit

Post-Clearance Audit (PCA) is an audit-based control

conducted by Customs after the release of goods to
ensure compliance with Customs and other related
laws and regulations.

As per World Customs Organization

(WCO) PCA is structured examination of
a business relevant commercial systems,
sales contracts, financial and non-
financial records, physical stock and other
assets as a means to measure and improve
compliance .
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 Pre-requisite for PCA

▪ Legal background
• Scope of audit.
• Authority, Power and obligations.

▪ Database on trade (importers and exporters);

• Trade related general information.
• Risk based selection of auditees (importers/exporters).
▪ Availability of qualified Auditors
• Develop auditors from Customs officers.
• Hire qualified Auditors.

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 Objectives of PCA

▪ To ensure quick clearance to facilitate trade.

▪To verify the accuracy and authenticity of declarations.
▪ To make control on business records and accounts;
▪ To ensure compliance with national legislation with
regard to import and export.
▪ To ensure terms and conditions relating to specific
approvals and authorizations are being observed;
▪ To verify the amount of revenue legally due has been
identified and realized.

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 Importance of PCA

▪Paradigm shift from physical control-centric

Customs administration to facilitation-centric
Customs administration across the globe;

▪ PCA reduces time and costs of business as traders

can release their goods immediately from port after
import, eliminating the need to pay port and other
charges;

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 Importance of PCA (continued)

▪PCA is used to facilitate trade under WTO-TFA

including implementation of the AEO program.

▪PCA not only facilitate the smooth release of goods

but also assist to improve integrity in Customs and
in the governance of stakeholders.
▪ Risk levels can be easily assessed and reviewed.
▪ Business premise visit provides the opportunity to
identify risk and weakness in a traders system.

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 Importance of PCA (continued)

▪ RKC of the WCO emphasizes maximizing post-

clearance controls and minimizing physical controls to
expedite the customs clearance process.

▪ Information obtained in PCA may be used in judicial

or administrative proceedings (WTO TFA Article 7.5.3).

▪ Customs also benefited through reduction of workload.

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 Auditors Training and Skills (1)

Auditors need general skills including:

• Auditing standards and procedures;
• Accounting techniques and principles;
• Sector wise Customs laws and rules;
• Valuation, H.S.Classification and Origin etc;
• Computer-based accounting systems;
▪ Manufacturing technique and business process;
▪ Specialized trade sector;
▪ Transfer pricing and money laundering;

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 Competence of Auditors

PROFESSIONAL
SKILLS &
KNOWLEDGE

EQUITY
& INTEGRITY
IMPARTIALITY

DUE CARE & CONFIDENTIALITY

DILIGENCE

Source: WCO

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 Process for an effective PCA system

Legal and operational framework

Strategic Planning

Risk Management

Relationship with other departments

(WCO PCA Guidelines, Vol.1)
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 Procedure of PCA

▪ Preparatory Process-Audit program.

▪ Checklists for Audit program.
▪ Audit Notification to the auditee.
▪ Inform the auditee about the period to be examined.
▪ Required list of relevant documents.
▪ Inform the Auditee about the names of audit team.
▪ Ensure working environment for the auditor.

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 Selection of Auditee

▪ The Auditee will be selected on the basis of Risk

Management, intelligence information and other
sources including:

• Profile of importer or exporter (auditee);

• Trade data;
• Past records of the auditee;
• Related information or intelligence;
• Collaboration with other customs units.

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 Amendment of Assessment

▪ An officer of Customs not below the rank of Assistant

Commissioner can make amendment to assessment
[sec-83A(1)].
▪If the amendment imposes any liability to importer,
he be given a demand cum show-cause notice and after
hearing final demand notice [sec-83A(2)].
▪ Due date of payment is 30 days from issuance of
demand notice [sec-83A(3)].
▪ Amendment to assessment has to be made within
3 years of original assessment [sec-83B].
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 Time Limitation for Amendment

▪ The officer of Customs is not entitled to amend the

assessment after expiration of 3 years from the date of
original assessment [sec-83B(1)].

▪ Where any declaration made was fraudulent or

willfully misleading, the officer of Customs may amend
the assessment at any time [sec-83B(2)].

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 Audit or Examination of Records

▪ An officer of Customs may at any time enter any

place where records are kept for audit or examine those
records. [sec-83C(1, 2)].

▪ The officer of Customs may make extracts from or

copies of any records [sec-83C(3)].

▪ An officer of Customs shall not enter any private

dwelling except with the consent of the occupier or
owner of that dwelling or pursuant to a warrant issued
under this Act. [sec-83C(4)].
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 Appointment of Auditor

❑ Board may, by issuance of special order, appoint,

on such terms and conditions as it may deem
appropriate, professional auditor or audit firm for
carrying out audit on any Customs matter.

❑ Such auditor or audit firm shall be deemed to be

an officer of Customs for this purpose [sec-83D].

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 Audit Techniques & Tools

▪ Foster a co-operative relationship.

▪ Critically examine and assess auditee’s records.
▪ Positively guide the auditee regarding errors.
▪ Maintain a professional attitude towards auditee.
▪ Ensure proper documentation of findings.
▪ Ensure safety and security of documents.
▪ Summarize the findings and meeting with auditee.
▪ Report preparation and review.
▪ Report submission.

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 Documents for PCA

▪Purchase and sales order (contract).

▪ Proforma/Commercial invoice, Packing list.
▪ BL or AWB or Truck/Rail receipt.
▪ Receipt for tax payment.
▪ Cost sheet summary.
▪ Certificate, permit, license etc.
▪ Product specification.
▪ Sales report (books of accounts).
▪ Payment record (books of accounts).
▪ Bank account statements.
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 Sections relevant for PCA

❖ Sec-7 : Assistance to the officers of customs.

❖ Sec-25 : Value of goods for assessment purposes.
❖Sec-26 : Requisition to produce documents.
❖Sec-26A: Further powers in relation to documents.
❖Sec-26B: Take possession and retain documents and records.
❖Sec-26C: Copying of documents obtained during search.
❖ Sec-32: Untrue statement, error.
❖Sec-83 : Clearance for home-consumption.
❖Sec-83A: Amendment of assessment.
❖Sec-83B: Limitation of time for amendment of assessments.
❖Sec-83C: Audit or examination of records.
❖Sec-83D: Power to appoint auditor.
❖Sec-166: Summon to give evidence & produce documents.
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Post Clearance Audit
{Order-221(1)/2018}
QA Session
THANKS