Post-Cargo Clearance Audit: Do You Know You Can Be Liable to Costly Penalties Many Years After Clearing Your Cargo?
A post-cargo clearance audit is a review process that takes place after goods have been imported into a country and have gone through customs clearance. The audit aims to ensure that the goods have been properly declared and that all applicable taxes and duties have been paid.
During the audit, customs officials or third-party auditors will review the import documentation and inspect the goods to verify their value, quantity, and other characteristics. They may also examine any related financial records, such as invoices and receipts.
A post-cargo clearance audit aims to identify any errors or discrepancies in the import process, such as under- or over-valuation of goods, misclassification of goods, or failure to pay the correct amount of taxes and duties. If any issues are found, the importer may be required to pay additional taxes and duties or may face penalties or fines.
Post-cargo clearance audits are an important tool for customs authorities to ensure that importers are following the rules and that the government is collecting the revenue it is owed. They can also help to prevent fraud and smuggling, which can harm legitimate businesses and undermine the integrity of the trading system.
Research has shown that several organizations in Nigeria are vulnerable to post-cargo clearance audit penalties due to greater emphasis on lower logistics costs than compliance and technical expertise.
A post-clearance audit is used to determine whether an importer or exporter complied with the established requirements for processing cargo clearance or release.
The Nigerian Customs Service usually carries out this exercise to examine if the right duties were paid or whether the correct documents were presented during the clearance process.
Typically, a post-audit process interrogates the accuracy and authenticity of specific cargo clearance transactions, even up to seven years after cargo release, once such transaction is flagged for a possible breach of customs requirements. And since global best practice requires 100% compliance with requirements, 99.9%compliance is a red flag and can attract post-audit sanctions.
That is why shippers are expected to be aware of possible regulatory breaches that could become a serious subject for post-audit:
Possible breaches that can attract post-cargo clearance audit penalties
- Undervaluation
- Wrong Classification
- Wrong description of Goods
- Concealment/Under declaration of Goods
- Use of falsified documents (forgery)
The question, then, is, how can one avoid the trap of audit penalties? The answer is simple. Hire a competent third-party logistics agent/company for the following reasons:
Pre-Shipment Advice: A competent third-party logistics agent or company demonstrates an excellent understanding of the applicable requirements for the importation and exportation of cargo and then provides professional advice to the shipper well ahead of time.
Comprehensive knowledge of end-to-end documentation, the required modes of transportation, and how to process them is key. Importantly, a good Knowledge of cost requirements and the ability to make a well-informed decision on end-to-end transaction cost with very thin or no margin for error is one the most important pre-shipment advice an importer should obtain prior to the importation of the said items. This helps importers to stay compliant and rarely exposed costly post-audit penalties.
Accurate Documentation: Competent agent would always save shippers from costly post-cargo clearance audit penalties because he understands the import and export documentation processes and specific documents required for the clearance of diverse cargo.
Excellent Understanding of HS Code Classifications: Harmonization Systems (HS) Codes contain numbers or codes that provide accurate descriptions and classification of it being imported so that the appropriate duty can be paid based on the designated percentage associated with such items – whether it is 0%, 5%, 10%, 20% or even 50% levy. Read more on Guidelines for Post-Clearance Audit
In conclusion, shippers should pay attention to the potential pitfalls that could lead to post-clearance audit penalties and not prioritize spending less on the cargo clearance process over compliance. While it is important to be cost-conscious, it costs much less to comply with standard requirements than to be non-compliant because, beyond penalties, post-audit clearance can lead to a more damning consequence for either the shipper or the agent(s) or companies involved in it. That is why Fortune Global continually maintains a strong commitment to compliance and is a leading advocate of Global best practices in Nigeria and beyond.
