Best practice for auditing your customs import declaration

Customs declarations have escalated post-Brexit, but is enough attention given to them? Brian McNamara explains the importance of keeping on top of customs compliance risk assessments.

As a result of Brexit, the volume of Irish import declarations increased sharply in 2021. Preliminary statistics just published by Revenue indicate that customs declarations processed in 2021 increased to 25.4 million compared with 1.8 million processed in 2020. Most trading businesses saw their customs exposure increase, while some companies submitted declarations for the first time.

Any business operating in a customs environment must ensure customs compliance. Even if a company outsources the filing of customs declarations to a third party, such as a freight company or clearance agent, the trader remains fully liable for the accuracy of the declarations.

Further, it is essential to be aware that customs risk does not end when goods pass through the port. Even if a shipment has been “green” routed through customs, the information could contain errors. Any incorrect data or under-payments found as part of a customs audit by Revenue could lead to back duties, fines and penalties; so, importers need to retain backup documents for up to four years after the date of import.

Customs Compliance Risk

For many in practice, customs compliance risk will now be on the 2022 audit planning meetings agenda. It is also advisable for companies to carry out spot checks on their import declarations for accuracy.

As part of the customs compliance risk review, the following five ‘boxes’ as per Revenue’s Automated Import System (AIS) should be highlighted as important areas of import declarations to be aware of:

1. Box 22 – agree the value and currency to the purchase invoice. In most cases, it will be a commercial invoice that will back up the import. However, for some transactions (an intercompany movement, for example), it may be another document such as a packing list.
2. Box 33 – check the commodity code (a code used to classify products for import and export) in the declaration against the EU Customs Tariff (TARIC) database for reasonableness. Commodity codes are standard across the 27 members of the EU, and TARIC lists all valid EU commodity codes.
3. Box 36 – if a code of ‘300’ is in this box, it means that the importer has claimed preferential import duty rates, i.e. the importer is trading with a country that has agreed to certain tariff benefits. It is essential to check the validity of this code as an importer should only be claiming preferential duty rates if the imported goods are of preferential origin. They must have the documentation to prove preferential origin at the time of import and retain them for four years.
4. Box 44 – if ‘IEPOSTPONED’ is shown in box 44 of the import declaration, the importer has availed of postponed accounting for import VAT. Postponed accounting for import VAT was introduced in January 2021 to mitigate the cash flow impact of the return of customs on Great Britain to Republic of Ireland trade. All import VAT postponed by a trader must be properly accounted for in their next VAT return.
5. Box 47 – import duty is shown as tax type A, with import VAT being tax type B. Agree the import VAT amount to the VAT return file to ensure that it is correctly accounted for.

Customs declarations are like a tax return and should be treated with the same level of seriousness. Non-compliance can be costly for a business, particularly if an error remains undetected for several years. Regular declaration reviews are essential to get comfort in the accuracy of declarations being filed.

Brian McNamara FCA is Managing Director of SwiftFile.