How to Conduct a Customs Self-Audit

Executive Summary

The customs internal audit is systematically evaluated in terms of import and export operations, commercial and financial records and related internal control mechanisms of the company.

An effective self-audit study may occur from the following stages:

1. Determination of audit scope and targets.
2. Creation of customs processing inventory.
3. Risk assessment.
4. Selecting risk-based sample.
5. Review of GTIP, asset, origin and other legislation areas.
6. Comparison of accounting, stock and customs records.
7. Evaluation of the legal and financial effects of the findings.
8. Conducting root cause analysis.
9. Determination of corrective activities.
10. Reporting and monitoring of results to the top management.

Self-audit does not replace the control of the resmî after the customs administration.

However, it can contribute to the evaluation of the company’s compliance level and managing risks at the earlier stage.

1. What is Customs Internal Audit (Self-Audit)?

The customs internal audit is systematically assessment of the company’s own customs transactions and related processes.

As this study can be carried out by the internal audit or compliance unit of the company, the appropriate expertise and independence conditions can also be carried out with the external expert support.

The main purpose of the customs internal control is not to check whether the processes are completed only as the shape.

At the same time;

• accuracy of declarations,
• implementation of relevant legislation,
• reliability of records,
• effectiveness of control mechanisms,
• the way to manage risks

to evaluate.

Therefore, self-audit is a corporate compliance activity beyond document control.

2. Difference Between Check After With Customs Internal Inspection

Customs internal control and then control, similar processing and records are different activities.

The company does not eliminate the audit and control authority of its own audit, customs administration.

In addition, the detection of errors in internal audit may also require the evaluation of legal processes that may apply.

3. Why is Customs Internal Inspection Important?

Some errors in customs transactions may not have any problems that arise in a single declaration.

For example, using the wrong GTIP in a certain group of products can affect a large number of import processes.

Similarly, the evaluation of group royalty payments can form the risks of repetitive customs asset in different periods.

Therefore, one of the main benefits of internal audit is the determination of systematic errors.

Effective operation;

• evaluation of potential financial risks,
• detection of process deficiencies,
• increasing the quality of registration,
• development of coordination between departments,
• prevention of similar errors in future processes

support.

However, self-audit does not mean that the company eliminates all customs risks.

4. How to Determine the Scope of Inspection?

The first stage of customs internal control is to clearly identify the scope.

When the audit scope is determined;

• period to be examined,
• import and export operations,
• product groups,
• suppliers,
• used customs regimes,
• relevant departments,
• priority legislation areas

can be taken into account.

For example, a company that imports high volume can focus on GTIP and customs clearance controls at the first stage.

A manufacturer that uses Processing Rejimi intensively can prioritize production prescriptions, price rates and stock consensus.

It is important to determine the scope according to the real risks of the company.

5. How to Create Customs Trading Inventory?

Firstly relevant processing data should be prepared for the reliable execution of the audit.

Sample data fields are:

• Beyanname number and date.
• Import or export type.
• GTIP.
• Product description.
• Supplier or customer.
• Country of origin and dispatch.
• Customs clearance.
• Applied taxes.
• Related customs regime.
• preferential trade documents.

This inventory helps build audit universe.

However, only the use of the declaration data may not be enough.

Accounting, purchasing, production and inventory data should also be matched with related processes.

6. How To Make Risk Analysis?

Review of all transactions in the same intensity in the customs internal control may not always be necessary or efficient.

Therefore, a risk-based approach can be used.

The following elements may be taken into consideration in risk assessment:

Processing volume

Total financial impact of systematic errors in high volume product or supplier groups can be important.

Taxal effect

Products subject to high tax rates or special financial obligations can be evaluated firstly.

Legislation complexity

Special regimes may require additional control of preferential trade applications and valuable elements.

Past findings

In the previous audits or internal controls, deficiencies detected may be included in the risk assessment.

Control efficiency

It can be prioritized to processes where existing control mechanisms are poor.

As a result of this evaluation, the audit plan can be created.

7. How to Choose Sample in Audit?

The selection of sample in customs internal control is important in terms of the reliability of audit results.

The sample should not only occur from randomly selected declarations.

Risk-based and statistical methods can be used together when necessary.

For example;

• high-value import operations,
• high tax rate products,
• new suppliers,
• related company imports,
• Transactions with royalty payment,
• similar products used in different GTIP,
• transactions under special regime

can be determined as priority review groups.

However, the entire process of the selected sample represents the universe, it should not only be placed on the basis of the risk-based selection.

Sample method and scope limitations should be clearly specified in the inspection report.

8. How to Make GTIP Inspection?

GTIP audit aims to evaluate whether products are classified in the correct tariff positions.

In this context;

1. The technical specifications of the product are determined.
2. GTIP used is detected.
3. The relevant tariff legislation is evaluated.
4. The legal basis of the classification is examined.
5. Product changes are checked.
6. GTİPs used in similar products are compared.

For example, the statement of products with different GTIPs with the same technical specifications can create a difference that requires review.

However, the reasons for different classification should not be concluded directly without research.

9. customs value Inspection

Customs clearance audit aims to evaluate whether imported goods are determined and determined in accordance with the relevant legislation.

Between control areas;

• commercial bill bills,
• freight and fuse elements,
• royalty and license payments,
• certain commissions,
• die and similar additives,
• related company operations,
• After import price corrections

You can take place.

Each of these elements should be evaluated in the framework of the relevant customs asset provisions.

It should not be excluded if each payment or cost element should be included in the customs value automatically.

The correct determination of the legal nature of the important transaction and the connection with the imported goods.

10. Inspection of Origin

The control of origin is aimed at reviewing whether the origin of the imported goods and the related preferential trade practices are evaluated correctly.

In this context;

• country of origin,
• country of dispatch,
• related trade agreements,
• proof of origin documents,
• product-based rules of origin,
• preferred tariff applications

can be controlled.

For example, the presence of A.TR document does not display the goods alone, which is derived from the European Union.

Similarly, the presence of EUR.1 document does not eliminate the need for assessment regarding the fact that the rules of the related origin are met.

Therefore, the analysis of legal origin should be carried out together with the document control.

11. Audit of Foreign Trade Policy Measures

GTIP in import operations can play an important role in the implementation of origin and trading date, various trading policy measures.

In this context;

• anti-damping measures,
• protection measures,
• additional customs tax,
• surveillance applications,
• import permissions,
• other relevant regulations

can be assessed.

It is important to take the basis of the regulations in effect on the date of processing, especially when examining past transactions.

Automatic implementation of the current legislation to the past period operations may not result correctly.

12. Inspection of special customs procedures

The special customs regimes used by the company can create an important part of the internal audit.

For example, within the scope of Processing Rejimi in Included;

• permission and document conditions,
• import and export quantities,
• production prescriptions,
• cash rates,
• stock movements,
• closing operations

can be examined.

In other regimes such as temporary import or antrepo, the corresponding regimen must be evaluated.

Since the conditions of each regime are different, a standard checklist may not be enough for all transactions.

13. Mutabakir of Accounting and Customs Records

One of the important stages of customs internal control is the comparison of accounting records with customs declarations.

Thanks to this comparison;

• additional payments after import,
• price corrections,
• unexplained commercial differences,
• accounting records that may be linked to asset

can be determined.

For example, the total payments to a supplier may require a statement that there are different from the relevant import bills.

However, this difference does not mean the customs value error in any case.

The nature of the payment should be evaluated together with contract conditions and relevant legislation.

14. How to Describe Customs Brokerage Transactions?

Customs clearances are undertaken important tasks in the execution of the customs transactions of the companies.

However, the companies work with customs clearance does not eliminate the need for their internal control.

In internal audit;

• accuracy of the information transmitted by dimavire,
• declaration control processes,
• document sharing,
• transaction confirmation mechanisms,
• error notification processes

can be assessed.

The purpose of this study is not only to determine the shortcomings in the implementation of contraindication.

The reliability of the information flow between the company and the consignment is also examined.

15. How to Classify Audit Results?

The findings determined as a result of internal audit may be classified according to the nature of the risk.

An example approach can be as follows.

This classification is a recommended model for in-house management.

There is no mandatory resmî risk rating system for all companies in the legislation.

16. Why is Root Why Analysis Important?

Fixing the bug detected in internal audit may not be enough to avoid the repeat of the same error.

If for example, if the wrong GTIP is detected, it should not only be enough to correct the classification of the corresponding product.

The cause of the error should also be assessed.

Among the probable causes;

• lack of technical product information,
• uncertainty of duties and responsibilities,
• absence of control procedure,
• insufficiency of personnel training,
• systemic data errors

You can take place.

Root cause analysis helps to design corrective activities.

C-INSPEC Perspective

The Purpose of the Customs Internal Audit is Not to Find Error, It Is To Install Errors

Internal audit work in companies focus on detection of errors in time past operations.

However, not only lists errors, the company may permanently improve the customs compliance level.

For example, the detection of incorrect GTIP is an important finding in a specific group of products.

But when this error appears caused, a similar problem can repeat in different products.

In the same way, a non-value payment linked to customs asset may require not only the past transactions, but also the study of the information sharing process between finance and foreign trade.

For this reason, the customs internal control in the C-INSPEC approach is addressed in three basic sizes:

Process accuracy: The past customs clearance is evaluated in terms of legislation.

Control efficiency: The mechanisms that are expected to prevent or detect errors are examined.

Corporate sustainability: The process improvements are created to prevent repeated detection deficiencies.

This approach converts the customs internal audit into a forward-looking risk management tool by only being a retrospective control activity.

The success of an effective self-audit work should be assessed by how many errors are found, but what extent the possibility of repeating the same errors of the company is reduced.

17. Sample 30 Daily Application Plan For Customs Internal Inspection

The following calendar is a sample study plan that companies can adapt according to their own operating structure.

1–5. Days — Scope and Data Preparation

• Audit scope is determined.
• The relevant processing data is prepared.
• Responsible departments are determined.
• Data and document access are planned.

6–10 days — Risk Analysis

• Trading volumes are analyzed.
• Critical product groups are determined.
• Risky suppliers and transactions are evaluated.
• The control sample is created.

11–20. Days — Detailed Audit

• GTIP controls are performed.
• Customs clearance is evaluated.
• The documents of origin are reviewed.
• Accounting and customs records are compared.
• Special regime operations are evaluated.

21–25. Days — Evaluation of Results

• Results are classified.
• Legal and financial effects are evaluated.
• Root cause analyses are performed.
• The description of the relevant departments is taken.

26–30. Days — Reporting and Action Plan

• Audit report is prepared.
• Corrective activities are determined.
• Responsibles and target dates are assigned.
• Top management results are presented.

This calendar is an example. According to the company’s trading volume, audit scope and risk level, the working time may vary.

18. How to Prepare the Customs Internal Audit Report?

A well-structured internal audit report should not only sort out detected deficiencies.

The report needs to support decision-making processes.

Sample report structure can be created as follows:

1. Executive summary.
2. The purpose and scope of the audit.
3. Method and sample used.
4. General risk assessment.
5. GTIP findings.
6. Customs asset findings.
7. The findings of origin and trade policy.
8. Special regime findings.
9. Accounting and registration agreements.
10. Root cause analyses.
11. Corrective activity plan.
12. Priority recommendations for management.

The scope limitations of the report and unaffirmed considerations should be clearly indicated.

19. Customs Inspection Indicators For Upper Management

These indicators are recommended for in-house management purposes; should not be evaluated as a mandatory obligation of resmî reporting.

20. Frequent Errors in Customs Internal Inspection

The main approaches to avoid companies in self-audit work are:

1. Limit control only with declaration control.
2. Identify sample without risk analysis.
3. To evaluate the technical specifications of the products.
4. not to include accounting and financial records to control.
5. Check out the transfer pricing and royalty payments.
6. To accept the presence of the certificates of origin adequately.
7. Not to review production and inventory records in special regimes.
8. To achieve exact results without evaluating the legal effects of the findings.
9. Do not do root cause analysis.
10. Not to monitor the implementation of corrective activities.

Removal of these deficiencies can increase the actual risk of the company of internal audit.

Frequently Asked Questions

Conclusion

Customs internal audit is an important corporate control tool that helps companies systematically assess their risks arising from import and export processes.

An effective self-audit study should not only be limited to the examination of past declarations.

GTİP should be evaluated with customs asset, origin, trade policy measures, special regimes and accounting records.

The reasons for the detected findings should be analyzed and the control mechanisms to prevent the repeat should be created.

Therefore, customs internal inspection should be addressed as part of the company's continuous compliance and risk management system, not as a one-time review.

The actual value of the customs internal control is to create a reliable control structure that prevents future errors from detecting errors in the past.

Legislation and Official Sources

1. Customs Law No. 4458.
2. Customs Regulation.
3. Then Control Regulation of Control and Risk Procedures.
4. Ease Regulation of Customs Operations.
5. Ministry of Commerce — the official explanations on customs transactions, risk management and audit applications.
6. World Customs Organization — Guidelines for risk management and customs compliance.