First time importers may not be able to enjoy goods clearance facility through green and blue channels of the customs stations or land-ports with a view to countering tax evasion. Such importers often appear as 'ghost or missing traders' and evade payment of import taxes.
A policy paper on Post-Clearance Audit (PCA), recently adopted by the National Board of Revenue (NBR), suggested some steps along with excluding such traders from the PCA process.
The Asian Development Bank (ADB) prepared the paper - 'Policy document for post-clearance audit in Bangladesh'.
NBR Chairman Abu Hena Rahmatul Muneem approved the policy paper last month.
A senior customs official, however, said implementation of the measures, suggested in the policy paper, would require issuance of Statutory Regulatory Order (SRO) from the NBR.
The official said the Customs Wing would have to frame audit manual for finalising the PCA process.
The ADB paper said several countries suffer from activities of the 'ghost traders or missing traders'.
"These businesses are usually new traders, who import goods using false business names and addresses, and when customs officials try to contact them to validate the customs declaration, they found those non-existent or uncountable."
Although these businesses have business identification number (BIN) or VAT registration number, the customs authority could not ensure regular supervision or strong monitoring system due to insufficient manpower to prevent criminal elements importing or exporting goods by evading taxes or other purposes, it also noted.
"In order to protect revenue, first time importers are to be excluded from the green and blue channels in the selectivity system of the customs computer system (Asycuda), ensuring that the import consignments are not released until they have been inspected and the correct taxes and duties are paid."
These importers may also be subject to transaction-based audit instead of system audit, it opined.
The policy paper also suggested excluding businesses, which are under investigation and which have low number of imports, from PCA. It preferred transaction-based audit instead of system audit for these types of traders.
Transaction audit is usually carried out in the customs office and checks import declaration; whether system-based audit is conducted on the importers' premises and checks account system of importers, including entire supply chain, to ensure accurate completion of customs declarations.
System-based audit, although not initiated yet, includes thematic (issue-based) audits, such as - tax evasion, checking regulatory compliances, commercial frauds, anti-money laundering, transfer pricing, and other non-fiscal issues like health and safety, narcotics, drugs, tobacco, arms and wild life etc.
As per definition of the United Nations Conference on Trade and Development (UNCTAD) and the World Customs Organisation (WCO), the purpose of PCA is to verify the accuracy and authenticity of declarations; and it covers the control of traders' commercial data, business systems, records and books.
The ADB paper found the overall results of PCA are not satisfactory for some reasons, including inadequate skills of PCA auditors, lack of proper and ample documentation, and lack of application of risk management in indentifying consignments for PCA checks.
It also identified several challenges in the way of implementing an effective PCA system, including lack of overall guidance on an audit system, covering both transaction-based and system-based audits, and not initiating system audit yet.
The paper also found lack of skills and training for PCA auditors, and difficulty in accessing records of certain traders once their goods leave customs control.
Full benefits of PCA are not being realised by either businesses or customs, it mentioned.
ASYCUDA uses basic risk management techniques to determine in which of the four channels - red, yellow, blue and green - import consignments are to be placed.
Red and yellow require customs interventions before clearance, green requires no customs intervention, and blue channel consignments are selected for PCA.
"An integrated audit system, covering all customs houses and land customs stations that carry out audits, is necessary to ensure that there are no gaps or overlappings," it added.
Talking to the FE, Dr Zaidi Sattar, Chairman of the Policy Research Institute (PRI), said PCA is one significant and positive step in Bangladesh's journey towards expediting import-export clearance; while fulfilling its commitments is necessary under the WTO's Trade Facilitation Agreement (TFA), to which Bangladesh is a signatory.
"Once implemented by all the signatories, the TFA is expected to increase world trade by up to US$ 1.0 trillion per year and boost global GDP by 0.5 per cent per annum."
PCA is a critical instrument of "risk management" in customs clearance process, one that significantly minimises time taken for clearance of goods, thus facilitating Bangladesh's international trade, he added.
Bangladesh import-export trade has reached $100 billion in FY 2021 from about $10 billion in FY 2000.
Time management in customs clearance is vital to further augmentation of trade, which is the strongest driver of economic growth, according to Dr Sattar.
The practice of too much inspection (often near 100 per cent) penalises the large community of bonafide importers-exporters for the malfeasance committed by a few, he opined.
Customs modernisation and trade facilitation require systemic handling and digitisation of clearance processes, and one such widely used instrument across the world is PCA.
The NBR and customs authority should be commended for this bold initiative that would contribute to reducing trade costs and further augmenting trade volume through speedy clearance of goods, he concluded.
