Post Clearance Audit and Prior Disclosure Program

On 09 January 2019, the Bureau of Customs (BOC) issued Customs Administrative Order (CAO) No. 1-2019 which provides for the Implementing Rules and Regulations of Sections 1000-1006 of the Customs Modernization and Tariff Act (CMTA).

CAO No. 1-2019 mandated the BOC’s Post Clearance Audit Group (PCAG), within three (3) years from the importer’s date of final payment of duties and taxes or customs clearance, to conduct an audit examination, inspection, verification, and investigation of records pertaining to any goods declaration, which shall include statements, declarations, documents and electronically generated or machine readable data, for the purpose of ascertaining the correctness of the goods declaration and determining the liability of the importer for duties, taxes and other charges, including any fine or penalty.

Pursuant to the foregoing, the importer is required  to give the authorized BOC personnel, full and free access to the premises where the records are kept or provide full and free access to a cloud-based data-room, or a private server or other devices for the latter to be able to conduct audit. This may include access to records showing the Importer’s:

1. Document Flow;
2. Financial Flow;
3. Goods Inventory; and
4. Other necessary or relevant business processes

After being subjected to post clearance audit, any person found to have incurred deficiencies in duties and taxes paid shall be penalized according to two degrees of culpability:

1. Negligence- Deficiency results from offender’s failure to exercise reasonable care and competence. Penalty is a fine equivalent to 125% of the revenue loss, except for inadvertent error amounting to simple negligence which shall be penalized with a fine amounting only to 25% of the revenue loss.
2. Fraud- Material false statement or act was committed or omitted knowingly, voluntarily and intentionally. It is penalized with a fine equivalent to 600% of the revenue loss and/or imprisonment of not less than 2 years but not more than 8 years.

An Audit Notification Letter (ANL) will be issued by the  Commissioner of Customs to the companies identified for audit.

Importers, without waiting for the issuance of an ANL or importers who have received an ANL, within 90 days from the receipt thereof, may avail of the Prior Disclosure Program (PDP). Instead of the previously mentioned penalties, the following penalties will be imposed under the PDP:

1. PDP applicant who has not yet received an ANL – payment of the deficiency in duties and taxes due with interest amounting to 20% per annum from the date of final assessment.
2. PDP applicant who has received an ANL – payment of the deficiency in duties and taxes due with interest amounting to 20% per annum from the date of final assessment, plus a penalty of 10% of the basic deficiency.