Court of Auditors Report criticising the policing of simplified procedures

05 July 2010

The European Court of Auditors recently published a report criticising the policing of Customs Simplified Procedures (CSP) throughout the EU.

CSP are an important trade facilitation measure that enables authorised traders to benefit from accelerated customs clearance. 2008 figures show that 70% of all EU Customs declarations were made using simplified procedures. The study concentrated on samples from 9 Member States and particularly focussed on those samples where imports had been made under preferential rates of duty. This article will focus mostly on how the UK fared in the report but will make reference to other countries if and when required.

What was the aim of the report?

The report assesses whether:

• Whether the 2 main simplified customs procedures are effectively controlled in order to provide reasonable assurance for the correct collection of customs duty and that traders comply with their customs obligations.
• the EC Commission had taken into account international best practice for the development of sound controls and whether it monitored the correct application of the rules
• Member States carried out effective controls based on such an approach.

The scope of the report

The auditors randomly selected declarations where a preferential duty rate was claimed or where import documents were required to comply with the Common Trade Policy.

What were the conclusions?

European Commission

The court concluded that the European Commission has put into place an appropriate regulatory framework for simplified procedures and has developed an EU-wide automated risk-management system. However, whilst the system does allow for an automatic exchange of risk information (RIF), it does not yet include risk profiles covering customs duties or the common trade policy. The biggest criticism was reserved for the fact that a standardised approach for post-audits had not yet been applied throughout the EU.

Member States

The report was scathing about Member States approaches to controlling customs simplified procedures, saying:

• There were generally poor or poorly documented audits prior to authorising a trader to use simplified procedures
• There was little use of data processing techniques for carrying out checks during the processing of simplified procedures,
• There was excessive use of simplification practices, namely the notification waiver under the local clearance procedure (LCP) which prevented risk-based checks before goods were released into the EU market and;
• Post-authorisation audits of traders’ commercial documents were of poor quality, insufficiently frequent and not adequately targeting transactions.

How did the UK authorities perform?

The UK fared badly in the report as did most of the Member States sampled. It has been a difficult couple of years for HMRC. Firstly, they were criticised by a National Audit Office report and then subjected to a very difficult House of Commons Public Accounts Committee hearing and now the European Court of Auditors has also added to the criticism of the UK’s control and management of simplified procedures.

What were the UK’s key failings?

The UK was deemed to have “unsatisfactory” standards in the following areas:

• Administrative organisation/internal controls
• Checking for existence of serious offences
• Financial solvency checked
• Trader risk-assessments
• Control recommendations
• Substantive document checks
• Automated TOR risk profiles
• Automated random checks
• Automated reconciliation
• Sufficient frequency of audits
• Follow-up of audit reports
• Over-use of “notification waivers”

There are also many areas that the UK was only deemed to have “partly satisfactory” standards but these will not be included in this article.

What does this mean for authorised traders in the UK?

HMRC will certainly take on board the criticisms that it has had to take in the past couple of years and will raise its game (particularly with regard to Simplified Procedures). The criteria and conditions for simplified procedures have already been tightened with the deadline for submission for (re)application 30 June( although this deadline has been extended in certain circumstances). HMRC will certainly increase its focus on areas where it has been deemed to have “unsatisfactory standards”. If you are operating or reapplying for Customs Simplified Procedures then it is highly advisable that you conduct a review of your procedures because HMRC, once it has had a chance to review and reflect on these findings, will come back reinvigorated and refocused.

How can ITS help?

ITS is working with a number of clients in reviewing and amending their processes to meet the Simplified Procedures deadline. Our project work and discussion with HMRC are highlighting a number of areas of concern and a clear understanding of what is expected of importers using CSP.
We have extensive experience in this field and our success rate and client satisfaction levels are excellent. If you would like to arrange a free first consultation or would like to discuss any of the issues covered by this article then call us on (01905) 619229 or email us at and our team of specialist consultants will be happy to answer your queries.

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