Having a system for voluntary disclosure of customs non-compliance that rewards those who use them by providing reduced penalties is part of many western customs processes.
Last year the General Administration of Customs (GAC) of the People's Republic of China established a research team to study the feasibility of introducing a customs voluntary disclosure programme, and the current pilot is one trial resulting from this study.
Since July this year, the GAC has progressively been implementing a pilot "Enterprise Self-discipline" programme at selected regional/port customs offices. The programme is a direct result of the study and is similar to the voluntary disclosure programmes available in various other developed countries. It provides for more lenient treatment by customs for voluntarily reported non-compliance activities. Currently this programme is available at customs offices in Tianjin, Wuhan, Nanjing, Suzhou, Xiamen, and Shanghai Pilot FTZ.
What You Can Do to Benefit from this Opportunity
You can take the following steps in order to benefit:
- Conduct your own internal compliance review to identify any non-compliance trade issues.
- Investigate the reasons for the non-compliance and estimate the value of the potential exposure.
- Compile documentation to support your case and submit a voluntarily report of the non-compliance to customs via a self-audit report.
Customs will verify your self-audit report and may decide to randomly select items to test the accuracy of your voluntary disclosure.
Scope of Voluntary Disclosure
The scope of your voluntary disclosure should include:
- Any customs non-compliance issues in daily import/export operations; and
- Any customs non-compliance issues, during the process of a customs audit, beyond the listed scope of the audit notification.
Some customs offices have listed certain out-of-scope scenarios, such as in the case where a Customs Price Enquiry Letter has been issued.
Lenient treatment may include:
- Lenient, mitigated or no administrative penalties;
- Reduced or exempted late-payment surcharge for duty/VAT drawback;
- Flexible treatment when considering possible downgrading of an entities customs compliance rating;
- Exemption of formal customs audit this/next year.
We suggest you take this opportunity to:
- Identify your key customs risk areas, such as tariff classification, valuation, origin, processing trade, bonded storage, duty exempted equipment, etc.;
- Conduct the self-review, quantify exposures and assess the level of intent;
- Formulate a strategy of immediate mitigation actions, voluntary disclosure, and further correction plans.
Although some customs offices announced that the current pilot programme is only valid till end of this year, we believe that this pilot will lead to changes in legislation that will formalise the programme. It has also been proposed within customs to add voluntary disclosure when revising the Regulation on Customs Audit. We expect that a formal regulation on voluntary disclosure will be put on the GAC agenda sooner rather than later.
Originally published September 30, 2014
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