How to Build a Customs Compliance Programme

Executive Summary

The customs compliance program is the whole of policy, procedure, control and monitoring mechanisms created to systematically manage the risk of legislation caused by the import and export processes of the company.

The basic elements of an active program are:

1. Top management support and corporate responsibility.
2. Customs risk inventory and risk assessment.
3. Written policy and procedures.
4. Transaction-based and systematic internal controls.
5. coordination between departments.
6. Personnel training and awareness.
7. Internal audit and corrective activities.
8. Management reporting and continuous improvement.

The scope of the customs compliance program should be determined according to the company's operating size, product structure, processing volume and customs regimes used.

The same control model for each company may not be suitable.

1. What is the Customs Compliance Program?

The customs compliance program is a corporate control system that supports the company’s customs and foreign trade activities in accordance with the relevant legislation.

This program aims not only to examine the processes after, but to prevent errors before occurrence and to detect the resulting deficiencies in time.

According to the operating structure of the company;

• GTIP and tariff classification,
• customs clearance,
• origin and preferential trade,
• foreign trade policy measures,
• special customs regimes,
• commercial and financial records,
• customs declarations,
• document management,
• internal control and inspection

areas can be included.

The customs compliance program is a management structure that combines the responsibilities of different departments, being an independent activity carried out by a single department.

2. Why Do Companies Need Customs Compliance Program?

Errors that occur in customs transactions are not always monopoly and common.

Some errors may be caused by systematic deficiencies in the functioning of the company.

For example, the use of the wrong GTIP in the same product group can be caused without adequate control of product main data.

A deficiency on customs asset may be associated with the absence of information sharing between finance and foreign trade departments.

Such problems may not only permanently resolve with the correction of the faulty process.

It is necessary to evaluate the processes caused by the occurrence of the error.

The customs compliance program is important at this point.

The purpose of the program is to create control mechanisms that will prevent the repeat of similar risks, not only to detect existing risks.

3. Why is the Top Management Support Necessary?

The effectiveness of the customs compliance program is directly associated with the support of the upper management.

Because an important part of customs risks can be caused by the activities of different departments.

It may not be authorized to change the purchasing contracts, financial payments or production processes alone of the foreign trade department.

Therefore, it is necessary to have a corporate level of the program.

by upper management;

• the purpose and scope of the program should be determined,
• shall be assigned to the responsible,
• necessary resources should be provided,
• reporting mechanisms for critical risks should be created,
• Completion of corrective activities should be monitored.

However, not expected to check all the customs transactions of the upper management directly.

The main role of management is to establish an effective control and accountability structure.

4. How to Create Customs Risk Inventory?

The first technical stage of the customs compliance program is the determination of the risks facing the company.

For this purpose, the import and export activities of the company must be analyzed.

The following information may be evaluated when creating risk inventory:

• import and export volumes,
• product groups and GTİPs,
• supplier and customer countries,
• used customs regimes,
• preferential trade applications,
• history audit findings,
• properties of precious and origin,
• financial and commercial contracts.

For example, in a product group with high import volume, the classification error can create higher total financial effect than a low volume product group.

However, it is not enough to look at the trading volume only.

A low volume product can carry significant risk due to high tax rates or special regulatory obligations.

Therefore, the probability, effect and current control mechanisms should be discussed together in the risk assessment.

5. How Should Risks Be First?

It may not always be efficient to control all the customs clearance of the companies in the same intensity.

Therefore, a risk-based approach should be adopted.

Three basic elements can be used in risk priorities.

The possibility of realization

The possibility of revealing a certain error or incompatible is assessed.

Possible effect

The risk is analyzed by tax, penalty, operational delay or other results.

Control efficiency

The risk of the existing control mechanisms of the company is examined by the ability to prevent or detect.

High priority risks can be determined as a result of this assessment.

For example, paying regular royalty, but these payments may be a priority for a company that does not evaluate in terms of customs value.

GTIP and origin controls for a company that works with a large number of products and suppliers similarly.

6. Written Customs Policy and Procedures

It is important to define basic processes in writing to ensure that the customs compliance program is sustainable.

Written procedures help prevent transactions from staying connected to information and experience of certain people.

The following procedures can be created according to the company’s operating structure:

1. GTIP determination and change management.
2. Customs clearance control.
3. Determination and document verification of origin.
4. Tracking of foreign trade policy measures.
5. Control of customs declaration.
6. Management of special customs regimes.
7. Document and record storage.
8. Monitoring of regulatory changes.
9. Error and unmatched notification processes.
10. Internal audit and corrective operation management.

However, the preparation of procedures is not enough alone.

It is necessary to be understood by applicable, current and relevant personnel.

7. How to Install GTIP Control Mechanism?

GTİP is one of the basic control areas of customs compliance program.

It is important that companies do not rely on product classifications only to the codes used in supplier statements or past transactions.

In an effective GTIP control process;

• technical specifications of the product should be determined,
• the relevant tariff legislation should be evaluated and classification,
• the basis of classification should be documented,
• new products should be checked,
• technical changes should be followed,
• risky product groups should be reviewed regularly.

It can especially contribute to the central management of product main data, the prevention of systematic classification errors.

8. customs value Control Mechanism

Customs clearance controls should not only be limited to the control of the commercial invoice price.

in accordance with the relevant legislation;

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

You may need to evaluate topics such as.

Therefore, regular information sharing should be provided between finance, accounting, purchasing and foreign trade departments.

For example, when a new license contract is signed, the possible effect of the contract on the customs value should be evaluated.

No need to be included in the customs value of each payment.

However, it is important to determine the payouts required to be evaluated in terms of value and document it with the basis of the decisions taken.

9. Origin and preferential trade Controls

Controls of origin are especially important in companies working with international supply chains.

Companies;

• origin of goods,
• shipped country,
• the relevant preferential trade arrangement,
• proof of origin documents,
• Product-based rules of origin

together, you need assessment.

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

Similarly, the regulated document of EUR.1 does not eliminate the need for assessment on which the rules of the related origin are met.

Therefore, the control of origin should not only consist of document supply.

10. Mutabakir of Customs and Accounting Records

One of the important components of the customs compliance program is the comparison of financial records with customs clearance.

Thanks to this control;

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

detectable.

However, each accounting differance does not mean a violation of the customs legislation.

It is important to determine the causes of differences and to evaluate in terms of legislation when necessary.

It should be determined according to the processing volume and risk profile of the company.

11. Does Working with Customs Brokers Eliminate Compliance Officer?

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

However, the company does not mean that all liability arising from the relevant legislation are eliminated.

The information about technical specifications, commercial contracts, payments and production processes of the product is often included in the company.

Therefore, it is important to provide accurate and complete information of the company's customs clearance.

In an effective compliance program, tasks between the company and the customs clearance should be clearly defined in information sharing and control points.

Somut legal responsibilities should be assessed according to representation relationship and related legislation provisions.

12. How to Provide Coordination between Departments?

The success of the customs compliance program depends on the establishment of regular information flow between different departments.

Sample task distribution can be created in the following way.

This table is an example. The tasks can vary according to the size and organization structure of the company.

The important thing is that the critical customs risks do not have.

13. Personnel Training and Compliance Awareness

Information level of staff in the customs compliance program is an important element.

However, all employees may not need to take the same technical customs training.

Trainings should be planned according to tasks and risk areas.

For example;

• GTIP to foreign trade personnel, precious and origin,
• contract and supplier information to purchasing staff,
• royalty and additional payments to financial staff,
• technical data accuracy to product management staff,
• customs risks and reporting to the upper management

Training can be given on issues.

The effectiveness of the training can be evaluated not only with participation records, but also with the control results in the processes.

14. Internal Audit and Self-Audit Applications

Regular internal control and internal audit activities are important to evaluate the effectiveness of the customs compliance program.

In this context, past import and export operations can be viewed as risk-based.

Audits;

• declaration accuracy,
• GTIP classification,
• customs clearance,
• origin,
• foreign trade policy measures,
• special regimes,
• Registration consistency

areas can be evaluated.

The purpose of internal audit is not only to detect errors.

It is also important to determine the causes of detected errors and to create corrective activities that will prevent repetition.

15. How to Manage Corrective Activities?

It is necessary to register the findings detected as a result of internal control or audit.

For each finding;

• definition of risk,
• related process or process,
• probable effect,
• root cause,
• responsible person or department,
• corrective activity,
• target completion date

can be determined.

After the corrective activity is completed, the effectiveness of the application should also be checked.

For example, if the product caused by the use of the wrong GTIP has been modified, the new products should be classified correctly and classified as well as monitored.

The closure of a auditing bougus should mean not only correcting the error, the creation of control that prevents the repeat of the same error.

C-INSPEC Perspective

Customs Compliance Should Be Started Before Auditing

Studies on customs compliance in companies are often concentrated after an audit notice, administrative examination or fault detected in past operations.

This approach may be necessary in terms of evaluation of existing problems.

However, only after the problem arises, the company’s risk management converts reagent structure.

Yet an important part of customs risks can be detected with regular controls before or after the procedure.

For example, the evaluation of the GTIP classification before a new product is imported, it can reduce the risk of faulty declaration.

Review of a new royalty contract in terms of customs value can help prevent systematic asset risks that may arise during the next period.

Regularization of accounting records with similar customs declarations can ensure the determination of differences at the early stage.

Therefore, the customs compliance program in the C-INSPEC approach does not only be seen as a control mechanism that examines past operations.

An effective customs compliance program should be a corporate assurance system that prevents the occurrence of risks and early detection after managing risks.

The success of this system should be measured not only with the presence of written procedures, with the regular implementation of controls and monitoring of the results by the upper management.

16. Sample 90 Daily Road Map For Customs Compliance Program

The following plan is a sample application calendar that companies can adapt to their own operating features. It is not a legally predicted period or mandatory program.

First 30 Days — Current Status and Risk Analysis

• Import and export process inventory is created.
• Products, GTİPs and suppliers are analyzed.
• Procedures and responsibilities are evaluated.
• Critical risk areas are determined.
• The primary control deficiencies are reported.

31–60. Days — Control Design

• Customs compliance policy is prepared.
• The duties and responsibilities are defined.
• GTIP is created in precious and origin control procedures.
• The flow of information between departments is arranged.
• Risk-based internal control plan is prepared.

61–90. Days — Application and Monitoring

• Priority controls are started to be applied.
• Sample based trading reviews are performed.
• Results and corrective activities are recorded.
• The relevant staff trainings are completed.
• The first management risk report is prepared.

This calendar is an example frame for the establishment of the basic structure of the program. The comprehensive application and ripening process can last longer than the company’s size.

17. How to Measure the Success of the Customs Compliance Program?

The effectiveness of the integration program should not be measured only with the number of audits performed.

What is important is how effective the risks of controls are prevented and detected deficiencies are eliminated.

Sample performance indicators can be determined in the following way.

These indicators are recommended as in-house management and control tools, not legally required.

18. Frequent Errors in Customs Compliance Programs

The main approaches that companies need to avoid when creating a harmony program are:

1. Only leave the program to the responsibility of the foreign trade department.
2. Prepare standard procedures without risk analysis.
3. Perform GTIP and precious controls only in the declaration phase.
4. Not to include financial and accounting records to customs controls.
5. Do not verify written procedures with application results.
6. Evaluate the root causes of detected findings.
7. Not to monitor the completion of corrective activities.
8. We do not systematically follow the regulatory changes.
9. Limit management reporting only with transaction numbers.
10. Evaluate compliance program as a one-time project.

Removal of these shortcomings can strengthen the sustainability of the company’s customs compliance system.

Frequently Asked Questions

Conclusion

The customs compliance program is an important enterprise tool that supports companies to manage import and export transactions not only operationally, but also in terms of financial and legal risks.

In order to create an active program, the determination of risks, identification of liability, preparation of written procedures and the establishment of regular control mechanisms.

However, the success of the program can not only be measured with the presence of documents and procedures.

Implementation of controls, evaluation of findings, monitoring of corrective activities and regular reporting to the upper management is also important.

Sustainable customs compliance is a continuous risk management discipline integrated into the daily functioning of the company, which is not limited to prepare for audits.

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 — Customs clearances, risk management and official explanations on ⁇ responsible applications.
6. World Customs Organization — Guidelines for risk management, compliance and reliable trading applications.