4 Considerations Which May Influence the Likelihood of Customs Audits

Posted on: 21 May 2018


The customs authorities may select your firm and subject it to a customs audit in order to confirm that you have been complying with all the requirements. Such audits can be random or targeted. This article discusses some of the factors which may be considered as the customs authorities are selecting the importers who will be subjected to customs audits.

The Value or Volume of Imports

The total value and the volume of the products which you import can play a role as entities are selected to undergo customs audits. For example, a company which receives hundreds of import shipments each year may be more likely to be selected to undergo a customs audit when compared to another company which only imports one shipment each year. Similarly, the total value of the imports can also be a criterion as firms are selected to undergo customs audits. Higher value products may be more likely to undergo audits when compared to lower value imports.

Complications of Classification

Products which may fall in different sections of the guidelines used when classifying them for tariff purposes may be more likely to be selected for customs audits. Such audits may be intended to establish what difficulties importers face when classifying their imports. Customs authorities may also wish to know whether the importers aren't deliberately avoiding classifications which would compel them to pay higher tariffs.

Related Party Transactions

Importers who have links to the companies which ship products to them may also be selected to undergo customs audits. The authorities will want to confirm that such entities aren't using their relationship to pay lower import tariffs. For example, the customs authorities may want to verify why the declared value of your imports differs from what is expected. The customs audit gives you an opportunity to explain the factors, such as providing technical support to the company sending the products, which cause the value to be lower than it would be under normal conditions.

Prior Audit History

Firms which have undergone customs audits and been penalised for violations may be more likely to be selected for additional audits in order to ascertain that those entities are now complying with all the customs requirements. This is especially possible in case the internal policies of that company, such as the record keeping tradition and internal controls were found wanting during the audit which was conducted earlier.

You should always notify your customs broker as soon as you receive any notification about a customs audit. That broker will work with you to ensure that the exercise proceeds smoothly without affecting any shipments which may be in transit.