Secondary Customs Controls and Post-Clearance Audits

Executive Summary

Secondary control is a control activity for re-review of past customs declarations and related transaction information in customs administration.

post-clearance audit is a control mechanism where commercial activities, records and processes associated with the customs clearance of the company within the framework of the relevant legislation can be examined in wider scope.

In two applications, such as tariff classification, customs asset, origin, taxation and foreign trade policy measures can take importance.

However, in any case of secondary control, it can not be said that only one declaration is limited, or then the control is necessarily covered by the whole process of the company. The coverage is determined according to the nature of the review and the relevant legislation.

The most effective method of preparation for companies is to establish risk-based internal control mechanisms without waiting for audit notice.

1. What is Secondary Control?

Secondary control is the control activity for re-evaluation of relevant declarations and related information after the customs clearance is completed.

The accuracy of the information contained in the customs declaration in these reviews may be evaluated, taxation elements and related documents.

For example under secondary control;

• GTIP classification of goods,
• customs clearance,
• information of origin,
• tax rates and calculations,
• foreign trade policy measures,
• consistency of declaration and additional documents

can be examined.

The purpose of secondary control is to evaluate whether there is a violation or missing taxation in the past transactions.

These control activities are carried out in the framework of the relevant administrative structure and legislation.

2. What Is post-clearance audit?

post-clearance audit is the inspection activity for the inspection of the past customs transactions and commercial records associated with these operations in the scope of the authorities recognized by the customs legislation.

The Control Regulation of Control and Risk Operations is one of the basic regulations in this field.

Within the scope of the post-clearance audit, not only customs declarations, commercial documents, contracts, accounting records, payment information and company processes may also be evaluated.

For example, if there is no royalty payment that is not included in the import declaration, it can be examined via financial records and contracts.

Similarly, the company can be researched whether there are systematic differences between GTIP classifications in product main data and past import processes.

Then the scope of control is determined in the framework of the corresponding audit plan and legislation.

3. Differences Between post-clearance audit with Secondary Control

The main differences between two types of audits can be summarized in the following way.

This table compares the general features of applications. It does not create certain limits in terms of the authority of the urinary and the scope of concrete examination.

Secondary control can be assessed as a audit approach that focuses on the company’s related registration and processes along with operations.

4. What Transactions Can Secondary Control Cover?

Secondary control can be performed in accordance with risk assessments and related administrative applications.

Among the areas that may be subject to the review, GTIP stands out valuable, origin and taxation elements.

For example, it can be reviewed whether the tariff code used in a specific group of products is correct.

Financial obligations that must be applied in import operations performed from certain countries in another case may be evaluated.

It is possible to examine multiple declarations or processing groups in such controls.

Therefore, it is important that companies can analyze their past transactions not only in the form of single declarations, but also on the basis of product, supplier, origin and period.

5. What Fields Are Reviewed After Checking?

After checking, various documents and processes relating to the subject of review may be evaluated.

Tariff classification

The compliance of GTIPs used with the technical specifications of the products can be examined.

Customs clearance

Commercial bills, contracts, payments, royalty and other valuable elements can be evaluated.

Origin

The documents of origin can be examined whether the preferential trade applications and the relevant rules are applied correctly.

Special customs regimes

It can be controlled whether the obligations are met within the scope of processing and other related regimes.

Accounting and financial records

With customs declarations, the company can be assessed whether there is consistency between commercial and financial records.

Corporate processes

Information flow, document management and internal control mechanisms according to the scope of the inspection can also be paid attention.

6. How to Start Secondary Control?

Secondary control activities can be performed within the scope of control and risk assessment processes carried out in the relevant legislation of the customs administration.

Companies should not be informed in the same way and at the same time before each secondary control review.

Information or document may be requested by the administration according to the nature of the review; the process may be performed within the scope of the legislation related to the identified considerations.

It is important that companies respond to such demands and provide documents that constitute the basis of the process in a complete and consistent manner.

7. How to Run Control Process Afterwards?

Then the control process is carried out within the framework of the procedures and principles arranged in the relevant regulations.

Generally, the process may occur from the following stages:

1. Planning of inspection

The scope and related operations of the audit are determined.

2. Company Information

Notifications and procedures prescribed in the legislation are applied. Current editing should be essential in terms of the time and exceptions of the notification.

3. Information and document review

The relevant customs declarations, commercial documents, accounting records and other information are evaluated.

4. Evaluation of Results

The detected considerations are examined in the framework of the relevant legislation and inspection procedures.

5. Resulting

As a result of audit, the necessary operations are carried out under the legislation.

After the launch of control, the company alone does not mean that it is illegal to the legislation.

8. Common Risk Areas in Two Audit Types

The secondary control and then the control can focus on similar technical risk areas if carried out by different methods.

The main common risk areas are:

1. Use of the wrong GTIP.
2. Deficiective or incorrect determination of the customs asset.
3. Wrong implementation of the rules of origin and preferential trade.
4. Review of foreign trade policy measures.
5. Incompatible with the obligations of the customs regime.
6. Inconsistencies between Beyanname and commercial documents.
7. Differences between accounting records and customs data.

All of these risk areas are not necessarily examined in each audit. The subject and scope of the audit is decisive.

9. What Are the Possible Outcomes of a Secondary Customs Control?

Different results may occur depending on the evaluations made as a result of secondary control.

The conclusion of the reviewed processes are compliant with the legislation.

In addition to this, additional compensation may occur within the framework of the legislation related to the detection of missing charged taxes.

According to the nature of the error, administrative fines or other administrative transactions may be subject.

However, each review may not necessarily be said to be resulted with tax difference or penalties.

The administrative and judicial reference ways, which may also be used against the operations of the administration, should be assessed according to the characteristics of the relevant legislation and concrete decision.

10. How to Prepare Companies to Secondary Control?

Transaction-based data accuracy and document integrity are important in preparation for secondary control.

The following controls of the companies may be useful to perform regularly:

• Store the technical bases of GTIP classifications.
• To check consistency between Beyanname and commercial invoices.
• Matching the documents of origin with related transactions.
• Evaluate criminal elements and additional payments.
• Monitor regulatory changes.
• Make sample controls in high-risk trading groups.

These studies support quicker and reliable access to the information needed during the audit.

11. How to prepare for Control from Companies After?

Then, the preparation for control may require a wider assessment beyond the control of the processing documents.

Coordination should be provided especially between foreign trade, finance, accounting, purchasing and law units.

Contracts, payment records, product information and other commercial documents relating to the processing of the audit scope should be evaluated together.

Risk-based internal control before auditing companies can help them detect existing registry deficiencies and potential incompatibles.

It is important to provide information and documents in the correct, complete and traceable way during the inspection.

C-INSPEC Perspective

Audit Type Can Be Changed, Corporate Compliance Need Not Changed

The secondary control of companies and then the control is often evaluated as two administrative processes independent from each other.

Yet there is the accuracy of past customs transactions on the basis of both types of audits.

When examining the tariff classification of a declaration in secondary control, then how to determine the same classification in the company's product management processes in the control can also take care.

As a result of the fact that a similar asset is not declared incomplete, this deficiency can also be examined whether the company is sourced from the information flow between finance and foreign trade units.

For this reason, it is not enough to prepare companies only for a specific type of audit.

An effective customs compliance system should aim to ensure the accuracy of both individual transactions and the reliability of enterprise processes that produce these operations.

The audit preparation in the C-INSPEC approach does not only be evaluated as a temporary study launched after the audit notice.

A continuous harmony structure, where the risks are detected in advance, where the records are regularly controlled, and the related units work in coordination.

12. Five Stage Audit Preparation Program for Companies

Step 1 — History trading inventory

Import and export operations are classified on term, product, GTIP, origin, supplier and customs regimen basis.

Step 2 — Risk assessment

Priority risk areas are determined in terms of tariff, asset, origin and other obligations.

Step 3 — Document and registration consensus

Commercial, financial and operational records are compared with customs declarations.

Phase 4 — Evaluation of Results

The technical, legal and possible financial effects of identified differences are analyzed.

Step 5 — Continuous control and reporting

Corrective activities are planned, responsible and regular internal control mechanisms are created.

The purpose of this program is to strengthen the overall customs compliance capacity of the company, not only facilitate the audit process.

Frequently Asked Questions

Conclusion

Secondary control and then control are important control mechanisms used in evaluation of the accuracy of past customs transactions.

Secondary control may include more declarations and more extensive investigation of trade records and company processes related to control, while more concentrated on transaction information and transaction information.

However, the common point of both applications in terms of companies is the need for reliable information and documents that support the accuracy of past transactions.

The most effective way to prepare for customs audits is to create an internal control and harmony system that continuously works without waiting for the start of the audit.

Legislation and Official Sources

1. 4458 No Customs Law — Customs audit, declaration control and related provisions.
2. Customs Regulation — Regulations on the control of customs transactions.
3. Then Control Regulation of Control and Risk Procedures.
4. Ministry of Commerce — The official explanations on the post-clearance audit and secondary control activities.
5. Ministry of Commerce — Customs audits and risk management information.