Compliance Management - an advanced Customs management method

Compliance management is a helpful tool, enhancing efficiency and effectiveness of the e-Customs environment (in the photo are operational activities at Mong Cai Customs Branch under Quang Ninh Customs Departmenr). Photo: Q.H.

Legal framework completion

According to the Department of Risk Management (under the Gerneral Department of Customs – the leading unit in developing the project of management and encouragement of traders’ legislation compliance), since 2014 Customs administration has attained achievements in completing the legal framework in terms of compliance management. Accordingly, regulations and procedures for carrying out compliance management have been published, helping Customs Administration implement compliance management in a more efficient and accurate manner. Based on legal texts, decrees, circulars and decisions by the Ministry of Finance, the sets of criteria for traders’ compliance evaluation have been produced and supplemented. Therefore, trader ranking activities have been more sufficient and matching with the situation of the traders’ import and export. Thanks to more accurate assessment and categorization of traders’ compliance levels, Customs Administration has developed and applied clearer policies between compliant traders and non-compliant ones. Measures and compliance management techniques have been formulated for ensuring both strict control and trade facilitation in the light of the risk management philosophy, including collection of information of import and export organizations and individuals; trader’s compliance assessment, compliant trader management, assessment and categorization of risk levels; evaluation of conditions for applying policies; management of targeted traders’ profiles and the partnership between Customs and Business.

It is the first time Customs has developed and requested the Ministry of Finance to issue the criteria set of risk management and the General Department of Customs has issued the set of indicators in terms of risk management criteria, which are important tools. The tools are of science and efficiency in modern Customs management methods, assisting traders’ compliance assessment in an accurate, transparent and fair manner. Till now, certain Customs officials have used smoothly and efficiently the sets of criteria in terms of compliance assessment, and the set of indicators in terms of risk management criteria to apply Customs and tax management mechanisms. At the same time, the awareness of Customs officials in implementing and applying compliance management has been raised. In addition, a trader database which has been developed and operated stably belongs to the Trader Profiles Component of the Risk management information system (RiskMan2) and VCIS. Of these, Customs has set up a network of collecting information and data of traders from all the operational phases (from declaration registering, clearance, violation settlement, post clearance audit, internal inspection, specialized inspection to tax management and other sources from related ministries and agencies via the National Single Window). Accordingly, Customs officials from the base level (Customs branch) up to higher levels (Provincial Customs Department and the General Department) at all functional units are assigned to update trader data in the system.

Compliant traders would gain benefits

According to the statistics from the General Department of Customs, the total number of traders whose data have been collected, updated and supplemented in trader profiles by the end of the first quarter of the year 2016 is 1,484 traders. Of the figures, there have been 5,226 compliant traders (making up 6.43 %) and 1,251 non-compliant traders. The risk management results show that there have been 2,528 traders of high risk (equivalent to 3.11%); 37,606 traders of medium risk (accounting for 46.26%) and 9,170 traders of low risk (making up 11.28%). Upon settlement, Customs has detected 2,088 traders who made false declarations in the phase of doing Customs procedures; 1,538 traders have been imposed with fines in the field of tax; 2,088 traders have been subjected to penalties due to false declaration without impact on the amount of taxes to be collected….

In reality, Customs administration has applied measures of facilitating compliant traders. In parallel, they have imposed strict management mechanisms on non-compliant traders to proactively prevent and minimize violation acts by non-compliant traders. Thus, clear, transparent and fair Customs management mechanisms have become a motivation for traders. Traders would have better awareness and compliance, shifting gradually the structure of traders from the small number of compliant traders (nearly 10%) to the regional standard rate of 70% - 80% of compliant traders. The first objective is to keep the number of compliant traders or shift them to higher compliance levels (Authorized Economic Operators). At the same time, it is necessary to reduce the number of non-compliant traders or to shift them to better levels of the compliant category.

For instance, based on the legislation system, Customs would apply preferential mechanisms and policies in terms of Customs procedures, tax management and other related regulations to compliant traders. Before going to Customs procedures, compliant traders are identified to belong to the list of compliant traders and categorized into the green channel (free of physical inspection) when undertaking e-Customs procedures. The traders also benefit from pre-inspection of non penetration instead of physical inspection; decreased rate of physical inspection; channeling goods for physical inspection through container scanners; shifting their goods subjected to specialized inspection to the post clearance audit when the quality of previous consignments is determined. Moreover, Customs also apply supervision measures via equipment, reduce direct supervision. At the same time, Customs would conduct tax management formalities such as applying a grace period of tax payment, minimizing examination of tax dossiers and basis for tax assessment, applying guarantees for tax payment; imposing the lowest level penalties for administrative breaches within the punishment frame in the field of Customs. In contrast, Customs administration would focus on strictly managing and controlling non-compliant traders. The measures are as follows: putting the non-compliant traders into the target list of high risk traders; applying strict supervision from the phase of moving goods into the areas managed by Customs, collecting information, establishing high risk profiles to make profiles of traders monitored…