CEO's and CFO's are often unaware of the importance of customs law

Generally, companies do not pay that much of attention to customs law as they should. In most cases this lack of focus is the result of what can be called "selective management", i.e. the management only addresses the issues they consider interesting or they are able to handle. Customs duty matters are often considered "not fit" for the floors where the management resides. However, the days that lower ranked staff can be held responsible for flaws in the compliance with customs regulations belong to the past. From the perspective of company law, managers who do not have established an effective customs duties policy in their company can be held responsible for irregular customs compliance. Given the wide range of regulations that apply at import or export a company can be easily caught in a web of liabilities, criminal charges included. The current international situation and the risen attention of the authorities for compliance in general cause that a steady growing number of companies are become painfully aware of the legal character and consequences of customs law.

The commitment of the management to customs law issues

Companies involved in cross-border transactions with goods shall demonstrate their commitment to compliance with customs law. In that respect the management of such companies must be able to show their corporate policy concerning issues in the field of import or export of goods. However, merely proclaimed statements will not suffice: the lived practice within the company will be decisive. An important indication about the seriousness of the management with customs law compliance can be found in the competencies and responsibilities that are attributed to persons within the company that are responsible for customs duties matters.

Does the company know the risks?

Customs law is a dynamic legal area. Consequently, a company shall know in what way what risks are or might be relevant and shall be dealt with. Riskmanagement in the field of customs law demands predefined internal goals for handling customs duties processes and their respective risk areas. Additionally, the riskmanagement policy shall be structured in such a way that its effectiveness or weakness can be determined.

Customs law policy

Compliance with customs regulations heavily depends on the procedures for customs management that the company has established. Flaws in these procedures will directly effect the level of liability of the company. In order to be effective and efficient the customs law policy of a company needs to be integrated in the organisational structure of the company.

Positioning of customs law affairs

In a substantial number of cases, companies are fundamental deficient when it comes to the resources that are reserved for customs duties matters. The delegation of customs issues to persons without decision competencies, the lacking active involvement of such persons in business processes, or the level of visibility of such persons to the management and generally within the company clearly indicate the inappropriate level of importance assigned by the management to customs law compliance.

Customs process

Compliance presupposes that import and export issues are fully integrated in the internal and external business processes of the company. The interaction between the company and its suppliers or customers shall be reflected by the administrative organisational scheme of the company, as well as by contract conditions, review of regulations in general or in individual cases, or assessment policies for running procedures or transactions.

Train the right people

A key to successfull compliance is a training program that enables all relevant players within the company to acquire and to develop their skills and awareness that is necessary for an effecient and effective discharge of their tasks. Training also requires a policy for access to and funneling of news and other relevant information (e.g. legislation, administrative notices, case law).

Task force

Enforcement of customs law in a business setting takes more than person -this is even the case for small enterprises. Customs law addresses various departments of the company (e.g. legal/tax, purchase, sales, logistics, financial bookkeeping, client maintenance services). The extent to which a company is able to mobilize the key persons for customs compliance and to establish an effective communication structure between this persons and other persons within the company, will determine whether a company will be capable of managing customs duties matters at all.

Internal customs controling

Internal controls are an essential part of the customs process model. Important is to establish the appropriate level of controling -in order to avoid contra-productive effects. Methods, frequency and focus should be chosen according the effects that are intended with riskmanagement policy. Experience shows that an effective policy for internal customs controling can save a company a lot of money and trouble.

Documentation

In the scope of customs process management a company needs to establish a policy for record keeping, which according to current technological standards will comprise of a combination of a paper and an electronical audit trail. Depending the local requirements, companies are allowed to enjoy the full benefits of tools like electronical archiving. The design of the documentation system of a company reveals to what extent that company has established or has been able to establish an effective customs compliance policy. Like the other elements of the customs process management, the documentation policy needs to be in balance with the other policies, i.e. deficiencies in one or more policy elements will effect the overall picture.

A valuable partnership

Without the backing of professional expertise in the field of customs law a company will not be able establish an effective customs compliance policy. Generally, companies are not critical enough when it comes to verifying which legal areas are covered by engagements they enter with accountancy firms or tax consultants. For as far as Europe is concerned, the majority of the legal experts in the field of customs law are currently to be found in smaller or specialised legal firms or tax consultancy firms.

VAT plus GmbH offers companies the possibility to have access to specialised knowledge in the field of -amongst other- customs law, and to develop and enhance a professional level of customs compliance. We are an independent provider of legal consultancy services in the field of VAT, customs law and international trade law. Based on our experience VAT plus GmbH can assist companies developing internal expertise in the field of customs law. VAT plus GmbH has a strong international focus, and has entered cooperation with several business partners.