Compliance Requirements Analysis

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Compliance RequirementsAnalysis

• Part of Compliance Management
• Environment

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Compliance Requirements Analysis

• There are two broad categories of compliance
  requirements in import and export transactions
• Revenue duties/ taxes and fees to be paidn by
  the importer/exporter
• Non-Revenue licenses/ quotas and other
  requirements in respect of an import/export
  transaction.
• All compliance requirements are determined at the
  level of the invoice item

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Why Compliance Requirements Analysis?

• Compliance is the core objective customs
• Total compliance means total effectiveness.
• Compliance management requires compliance
  measurement
• Compliance cannot be measured until the
  compliance requirements are determined reliably
  and validly
• Only when we study compliance requirements can we
  find out how easy or difficult it is to comply.
• The client has to know upfront his/her compliance
  related responsibilities
• If there is a logical basis for determining
  compliance requirements, it can be automated.
• The logic must be captured and explained to the
  client and customs officers alike

4
Compliance Requirements Analysis Data to
determine compliance requirements

• There are two broad categories of compliance
  requirements in import and export transactions
• Revenue duties/ taxes and fees to be paidn by
  the importer/exporter
• Non-Revenue licenses/ quotas and other
  requirements in respect of an import/export
  transaction.
• All compliance requirements are determined
  invoice item-wise

5
Compliance Requirements Analysis Data to
determine compliance requirements

• There are significant transaction dates which
  impact revenue and non revenue requirements
• Date of presentation of document the relevant
  date for the determination of the rate of duty
  and exchange rate.
• Data of entry inwards the relevant date for
  determining the date of presentation when the
  presentation of bill of entry has been made prior
  to the date of entry inward of the conveyance.
• Date of assessment the date on which goods were
  assessed to duty. Interest on duty payable is
  computed from this date
• Date of Bill of lading/AWB the date for
  determining the validity of an import license
• Date of SVB registration In the case of related
  party transaction, it determines the date from
  which the valuation enhancement is enforced.

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Compliance Requirements Analysis Data to
determine compliance requirements

• Revenue and non- revenue compliance requirements
  are determined at the level of invoice item by
• CTH- Customs tariff classification (to determine
  duties of customs)
• CETH- Central Excise Tariff classification(to
  determine additional duties of customs)
• ITC HS classification( to determine restrictions
  on import and export and the nature of such
  restrictions)
• Other commodity classifications/ categories such
  as cess schedules
• While CTH, CETH and ITC HS are HS based, the
  other schedules of commodity classification are
  not on HS based system.
• IT is a policy decision of the Government to
  converge all the above systems of commodity
  classifications into an 8-digit HS based system
• The above schemes of commodity classification
  would help the system determine rate of duty or
  tariff value (for quantity based duties)
• In addition to classification, the
  importer/exporter can claim a notification that
  alters compliance requirements determined above.

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Compliance Requirements Analysis Data to
determine compliance requirements

• The role of Notifications
• Notification The term notification implies a
  publication by the Central Government in the
  Gazette that there shall be a special
  dispensation in respect of certain category of
  imports/exports. Such dispensation could be by
  way of reductions in the rate of duty/ and easing
  of import restrictions etc.
• Such special dispensation may be conditional or
  unconditional
• Conditional Notifications often carry complex
  compliance requirements that are not easy to
  determine and are therefore offer the biggest
  challenge.
• Compliance to notification often implies
  fulfillment of export obligations and would
  entail fulfillment of export obligations for
  claiming duty concessions.
• Codification of notifications requires a proper
  review

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Non revenue/ documentary - requirements

• Could be any of the following
• Certificate of origin
• Import licenses /export quotas
• Certificates of No Objection(NOC) from certain
  regulatory agencies
• End-use certificates
• Test reports
• Bond/ bank guarantees
• May not be required on all cases/ invoice items
• Could be received/ registered transaction-wise or
  could be maintained in the form of ledgers after
  its registration

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Schemes for determination of compliance
requirements
begin

• Tariff classification
• CTH
• CETH
• Other schedules
• Notification

Effective Tariff regime A Effective rate of
duty B Effective Tariff value
Revenue Data requirements
Importer/ exporter/ CHA Files Bell of Entry

• valuation
• Unit price - invoice item
• Currency exchange rate
• Freight code
• Freight/ insurance/landing
• Quantity UQC

Effective valuation C Computed Assessable
value D Computed tariff quantity
Not valid
Validation
Total duty A Effective rate of duty
X Computed assessable value B Effective Tariff
value X Computed tariff quantity (computed
separately for each types of duty and added)

• valuation regime
• Valuation rule claimed
• Relationship(SVB)
• NIDB recommendation
• Administrative decisions

compliance requirements analysis
Total quantity/ and or value of license/bond
BG/Quota/certificate _ (called ledgers)

• Tariff classification
• ITC-HS
• Other schedules
• Notification(s)

Non- Revenue Data requirements
Item level declared data element
Item-wise type of duty and computed duty
Item-wise ledger type -wise debit quantity/ debit
value
Non-revenue compliance requirements
Revenue compliance requirements
end