Trade Compliance Audit Checklist for Importers and Exporters
-
Freya Jane
- Director of Customer's Success
Do you ever worry about the difficulties of trade compliance as an importer or exporter?
Ensuring trade compliance can indeed be difficult to understand, but it is crucial for import and export businesses due to HMRC’s particular requirements. HMRC, the United Kingdom’s customs authority, runs customs compliance audits on import and export activities to ensure businesses adhere to the specific trading rules and standards.
Do you think your business can pass a compliance audit?
Your business type will define the particular compliance risks you might face, depending on whether it is export-driven, import-focused, or both. This blog post will help you proactively address all the compliance issues that may arise during an audit.
Data-driven insights: Compliance a top priority for businesses
Have you ever felt uneasy about trade compliance regulations changing? As an importer or exporter, it could be difficult to remain on top of these complex standards.
A study conducted by Navex Global sheds light on this concern; it says,
“83 percent of professionals working in risk and compliance stated that ensuring that their organisation complies with all applicable laws, policies, and regulations was either a very significant or absolutely vital component in the decision-making processes of their organisation.”
Understanding trade compliance audit
A trade compliance audit is a process that reviews your import and export processes, actions, activities, and internal and external communications in international trade to ensure adherence to UK legislation and regulatory measures. These customs audits are set in place to identify your business’ compliance and mitigate any risks, saving you from delays, penalties and other legal actions by HMRC.
Trade compliance audit checklist
With over a decade of customs experience, I am aware of the difficulties importers and exporters encounter during unexpected audits. Act proactively to save yourself the stress!
1. Create a list of trade activities and transactions
Begin by creating a detailed list of trading activities and transactions that require an audit. The importance of this task cannot be denied, as it serves as a foundation for the whole audit process and permits a systematic review of trade compliance.
The list includes:
Parties involved
Dates
Products or service types
2. Identify key parties involved in trading
Are you aware of everyone who is involved in your trading activities? It’s imperative to identify each party involved in the trading to ensure a thorough customs audit. Keeping a record of these parties helps in understanding their roles and ensures their cooperation in the audit.
The parties involved:
- Customs brokers or agents
- Suppliers
- Receivers
3. Gather import and export licences and compliance-related documents
Are all of your necessary documents in one place? It includes collecting licenses and all the necessary compliance documents for review. It is essential to ensure compliance with global trade laws and that all the licenses required are in place.
The documents may include:
- Bills of lading
- Certificates of origin
- Import or export permits
- Customs declaration
- Commercial invoices
- Packing list
- Other relevant documents
4. Review shipping documents, contracts, and trade agreements
Wondering what’s involved in this task? This task includes meticulously examining shipping documents, contracts, and trade agreements to ensure adherence to trade regulations. It also verifies that these documents contain the correct information on pricing, quantities, and product descriptions. Furthermore, checking these documents guarantees that the terms and conditions of trade transactions are accurately reflected.
5. Check for inconsistencies in duties paid and customs declarations
This process entails performing a thorough audit of duties paid and customs declarations to find any discrepancies. Why is it so important? Well, thoroughly reviewing these documents is crucial to ensuring that all relevant data is provided accurately and that the duties paid adhere to any applicable trade regulations. Any anomalies or disparities must be further investigated and addressed.
6. Examine the screening procedure for export control
Evaluation of screening procedures for export control ensures that the appropriate process is followed to avoid any unlegalised export of sensitive technologies or goods. Examine whether screening procedures involve thorough checks for prohibited people, entities, and nations.
7. Ensure compliance with anti-money laundering (AML) rules
Are you curious about how we keep our trades free of money laundering and terrorism financing? It all begins with reviewing our anti-money laundering policies. This step assesses whether anti-money laundering policies and rules are in place in order to prevent trading for terrorism financing or money laundering.
It involves evaluating:
- Transaction monitoring
- Reporting suspicious activities
- Keeping a keen eye on people involved in the whole process
8. Look for the accuracy of the Harmonised system and tariffs
Are you confused about how we ensure the right tariffs for our goods? It begins with double-checking their HS classification. It involves reviewing the accuracy of the HS classification and tariff for the products being traded. Harmonised code classification is important for determining trade restrictions and customs duties, so it must be done with the utmost care. Check out whether your firm has a robust product classification system in place, and to verify the accuracy, do a sample test.
9. Confirm compliance with export destination rules and end-use control
Why does this matter so much? It carries great significance because it prevents the unauthorised use of sensitive goods. By monitoring the company’s procedures, this task ensures the products are intended for good purposes and adhere to particular export destination rules.
It involves examining the following:
- End-user certificates
- Compliance with specific regulations
10. Examine record-keeping practices for trade audit preparation
Have you ever thought about why record-keeping practices are important? It holds great significance because it ensures that all trade- and customs-related documents are easily accessible and appropriately maintained.
These documents include:
- Shipping records
- Purchase orders
- Invoices
11. Establish procedures for reporting violation
Let’s discuss how we uphold our dedication to international trade laws. It depends on having reliable protocols in place for reporting violations. It entails checking whether your firm has rigid and robust reporting procedures for staff members to report violations of international trade regulations.
It also includes reviewing the following:
- Protection policy of the organisation
- Investigation process for violating rules
- Communication channels
12. Implement corrective actions for rule violations
Are you curious about how we adhere to regulations in our trade practices? It all comes down to acting when regulations are broken.
The application of corrective actions for the violation of trade regulations is necessary to ensure that the company has appropriate measures and actions against law violations. This entails checking documented actions and assessing how effective they are in stopping violations.
13. Look for Anti-Dumping and Countervailing Duty measures
Next, let’s discuss how we promote fair trading practices. It involves adopting measures for anti-dumping and countervailing duties. Identify and mitigate the potential effect of these measures on your trade activities, and also ensure that your business complies with the anti-dumping laws.
14. Review internal audit processes
Curious about how we guarantee the accuracy of our trade compliance audits? First things first, let’s review our internal audit procedures.
To ensure the efficacy of trade compliance audit procedures, it is crucial to examine internal audit processes.
This task assesses a company’s:
- Objective
- Compliance with audit standards
Examine the internal audit team’s independence, resource availability, and adherence to a risk-based methodology when performing trade compliance audits.
15. Create a comprehensive audit report
Lastly, it’s time to create a final, detailed audit report.
The trade compliance audit procedure ends with the preparation of an audit report. This entails creating an extensive report that includes:
- All of the audit’s conclusions
- Observations
- Suggestions
The report should provide a detailed description of the non-compliance areas that have been found, any possible hazards, and recommended corrective measures. The report should also include suggestions for enhancing trade compliance measures and any best practices that were noticed.
Check Your Compliance Score
Are you confident about your trade compliance? This short checklist will point out your strengths and possible areas for improvement in your current procedures. Answer the following questions to determine your level of preparedness for customs audit:
Don't let trade compliance stress you out. Take action now and secure your business's future.
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Tired of compliance issues, delays, and fines? Streamline your operations with iCustoms.
Reduce costs, minimise risks, and improve efficiency