1. KESRA DIPLOMA IN CUSTOMS ADIMISTRATION
POST CLEARANCE AUDIT
GROUP 1
GROUP MEMBERS
1.RUTH MUNGAI CS302/0026/2024
2.FAITH KYALO CS302/0052/2024
3.CHRISTINE NDANYI CS302/0003/2024
Facilitator: Miriam Wangui
INTRODUCTION
Post-clearance audit (PCA) is a key control measure in customs
administration that ensures compliance with customs laws and
regulations after goods have been released. It involves a
systematic examination of records, financial statements and
other relevant data to verify the accuracy of declarations made at
the time of importation.
Customs authorities use PCA to detect misdeclarations,
undervaluation, tariff misclassification, incorrect quantity
reporting, and improper claims for exemptions. It is a crucial
2. mechanism for revenue protection, trade facilitation, and
ensuring fair competition in international trade.
Objective of Audit Test Practice
Verify the correctness of customs value, quantity, origin,
and classification of imported goods.
Ensure that importers and exporters comply with customs
regulations and tariff policies.
Detect and prevent fraud, tax evasion and trade
irregularities.
Evaluate the effectiveness of customs risk management
strategies.
Ensure proper application of exemptions and other customs
reliefs.
1.Audit Tests for Customs Valuation
Verification of Transaction Value
i)Ensure that the transaction value includes all elements required
by the WTO Valuation Agreement, such as commissions,
royalties, and other payments.
3. ii)Verify that the declared value is supported by purchase orders,
sales contracts, invoices, and bank statements
Freight and Insurance Costs
i)For CIF (Cost, Insurance, and Freight) values, ensure that
freight and insurance costs are properly included in the Customs
value.
ii) For FOB (Free on Board) values, verify that freight and
insurance charges are excluded from the Customs value
Related Parties
i) Determine if the importer is related to the supplier and if this
relationship has influenced the price for Customs purposes
Exchange Rates
i) Check if the correct exchange rate has been applied for
foreign currency transactions
Documentation and Records
i)Verify that all necessary documentation, such as customs
declarations, invoices, and certificates of origin, is accurate and
complete
Comparison with Market Prices
4. i) Compare the declared value with market prices for identical or
similar goods to detect undervaluation.
2.Audit Tests for Tariff Classification
Ensuring accurate tariff classification is essential for customs
compliance, proper duty payments, and benefiting from trade
agreements. This guide outlines key audit tests to help
organizations verify and improve their classification processes.
1. Documentation Review
Verify Commercial Invoices & Packing Lists: Ensure
product descriptions align with those used for
classification.
Examine Bill of Lading & Shipping Documents: Check
declared tariff codes against shipment details.
Review Supplier Declarations & Certificates of Origin:
Confirm product origin documents support the assigned
classification, especially for preferential tariffs under trade
agreements.
2. Classification Validation
Match Product Descriptions to HS Codes: Cross-check
item descriptions with the Harmonized System (HS) code
descriptions.
Use WCO Explanatory Notes & Binding Rulings: Verify
classifications using official guidance, rulings, and local
customs interpretations.
5. Check Similar Products’ Classifications: Ensure
consistent classification across identical or similar
products.
3. Control & Compliance Checks
Review Internal Classification Procedures: Assess
whether written procedures exist for assigning and
verifying tariff codes.
Evaluate System Controls: Test the ERP or trade
management system to verify automatic classification
accuracy and discrepancy alerts.
Audit Staff Training & Expertise: Ensure staff
responsible for classification receive regular training on
tariff rules and system updates.
4. Sampling & Testing
Select Random Shipments for Classification Testing:
Randomly sample recent shipments to check the accuracy
of applied tariff codes.
Reclassify a Sample of Products Independently: Have
auditors or experts independently classify selected items to
compare with declared codes.
5. Risk & Impact Analysis
Identify High-Risk Classifications: Flag items with
complex classifications, high duty rates, or frequent
regulatory changes for extra scrutiny.
Calculate Duty Over/Underpayments: Estimate financial
impacts of misclassifications to assess materiality and
potential penalties.
6. 3.Audit Tests for Origin of Goods.
Verifying the origin of goods is essential for determining duty
rates, eligibility for preferential treatment under trade
agreements, and overall customs compliance. These audit tests
are tailored to Kenya’s regulatory environment, factoring in the
roles of key Partner Government Agencies (PGAs) and relevant
trade agreements like the East African Community Customs
Union (EACCU) and the African Continental Free Trade Area
(AfCFTA).
1. Documentation Review
Supplier Declarations & Certificates of Origin: Verify
that valid, up-to-date certificates (e.g., EAC Certificate of
Origin, COMESA Form) match shipment details and
comply with KRA requirements.
Commercial Invoices & Purchase Orders: Cross-check
product descriptions, manufacturing locations, and supplier
details against declared origin.
Bills of Lading & Transport Documents: Confirm
shipping routes and logistics don’t compromise origin
claims, ensuring compliance with EAC transit rules.
KEBS & KEPHIS Certifications: Review product quality
and phytosanitary certificates to confirm local value-
addition or compliance with regional production standards.
2. Origin Determination Validation
Apply Rules of Origin (ROO): Validate origin claims
against trade agreements like AfCFTA, EACCU, and
7. COMESA, checking value-added thresholds and tariff
shifts.
Product-Specific Rules (PSRs): Check if the goods meet
product-specific origin requirements, such as regional value
content (RVC) or substantial transformation criteria.
Manufacturing Records & Production Data: Review
production logs, bills of materials, and input sources to
ensure compliance with origin requirements, especially for
goods partially processed in multiple EAC countries.
3. Control & Compliance Checks
Review Internal Origin Determination Procedures:
Assess whether the company has documented processes
aligned with KRA’s customs guidelines.
Evaluate System Controls: Test the ERP or trade
management system for correct origin calculations and
automatic alerts for non-compliant products.
Audit Supplier Audits & Vetting: Verify that suppliers
undergo periodic audits, with special attention to regional
producers relying on local content thresholds.
4. Sampling & Testing
Select Random Shipments for Origin Testing: Sample
recent imports/exports to validate whether the declared
origin matches supporting documents.
Recalculate Regional Value Content (if applicable):
Independently verify RVC calculations for a subset of
products, using KRA’s official formulas.
5. Risk & Impact Analysis
8. Identify High-Risk Goods & Trade Lanes: Flag products
with complex origin rules or routes involving multiple
countries, especially high-value or sensitive goods.
Quantify Duty Savings & Exposure: Calculate potential
duty impacts, both for preferential savings and
underpayment risks, factoring in trade incentives and tariff
suspensions.
6. Scoring Criteria
Documentation Accuracy: (0-10 points) – Completeness
and correctness of certificates and transport documents.
Compliance with ROO: (0-10 points) – Alignment with
trade agreement rules.
System & Process Reliability: (0-10 points) – Strength of
internal systems and controls.
Supplier Reliability: (0-10 points) – Trustworthiness and
audit results of suppliers.
4.Audit Tests for Quantities
Material
Determine the ratio of imported materials between
manufacturer and customs administration
Check records and accounts of raw materials imported and
duties and taxes maintained for production of exported
goods or locally consumed
9. Records and accounts of raw materials imported and duties
and taxes paid need maintained together with details of
materials stored, materials used for production and
accounts for final goods produced, exported and sold to
local market
Documentation
Verify dutiable goods and excisable goods whose duty not
paid are seized recorded and warehoused
Monitor manufacturing companies approved under the
same system
Imports and Exports
Match export documents with import documents in a given
period
Check minimum percentage of export on manufacturing to
give duty relief through drawback, bonded warehouses,
duty free zones and goods subject to restrictions are
confirmed to be traded by only approved manufacturers
Check all goods under drawback are of same quantity,
weight and value
10. Monitor temporary entry of goods to enforce payment of
duty and taxes when offence takes place
Check quantities imported by manufacturer used for
intended purpose
Conduct physical check of re imports to be imported are of
same quantity exported
5.Audit Tests for Exemptions
Compliance Checks
Verify eligibility of exemption
Verify tariff and description correspond with authorization
Check all duty and tax exempt imports for foreign projects
or investments must authorized and VAT verifications done
because of revenue eroding effects
Inspect enterprises receiving exemptions to confirm
compliance on usage of exemption
Duties and Taxes
All exemption requests and government purchases should
state amount of custom duty and taxes payable
11. Follow up duty free access granted for certain goods used
to manufacture OTHER GOODS for export
Check duration of goods purchased by diplomats from
arrival and resale of assets on lapse of 2 years
Arrival of donor agency staff from a partner state to qualify
timeframe in partner state and justify exemption within
period under review.
Monitor exemption program based on CIF import value and
revenue forgone
CONCLUSION
Audit findings should be documented, and non-compliance
should be addressed through assessments, penalties, or
corrective actions. Conducting thorough audit tests in customs
valuation, tariff classification, origin of goods, quantities, and
exemption claims is crucial for ensuring compliance with
customs regulations and preventing potential penalties or losses
Reference
12. International Monetary Fund 2003. Changing Customs.
Challenges and Strategies for the Reforms of Customs
Administration.
EACCMA 2004
East African Community Common External Tariff (EAC CET)
Outlines tariff classification, duty rates, and exemption
schedules for imports into the EAC region.
World Trade Organization (WTO) Agreement on Customs
Valuation Establishes the principles and methods for
determining the customs value of imported goods
Rules of Origin under Preferential Trade Agreements – Includes
EAC Rules of Origin, COMESA, AfCFTA, and other bilateral
agreements determining eligibility for preferential tariffs.
East African Community. Customs Post Clearance Audit
Manual: EAC Sescretariat Arusha, Tanzania May, 2013.
