Detailed explanation of customs inspection method system and practical operation

Objects and deadlines for customs inspection

The objects of customs inspection mainly include enterprises and units engaged in foreign trade; enterprises engaged in foreign processing trade; enterprises operating bonded business; enterprises and units using or operating tax-reduced and exempted imported goods; enterprises engaged in customs declaration business; and the customs Other enterprises and units directly related to import and export activities specified by the General Administration.

The customs inspection period is as follows:

• General trade imported goods within 3 years from the date when the customs releases the goods;
• Bonded goods are within the supervision period specified by the customs, or within 3 years from the date of release for re-exportation out of the country, or within 3 years from the date of approval for conversion to general trade import release;
• Imported goods with tax exemption and reduction are within the customs supervision period and within 3 years thereafter;
• Other import and export goods must be processed within 3 years from the date of completing customs procedures.

Introducing professional organizations to assist in audits

The new “Customs Inspection Regulations” allow the customs to entrust professional social institutions to provide professional services to enhance the impartiality and professionalism of inspections. Accounting firms, tax accounting firms or other professional institutions with corresponding qualifications may be entrusted by the customs to conduct inspections. The customs follows the principles of fairness, impartiality and openness when selecting professional institutions, and makes decisions based on the professional institution’s credit information, professional level and audit needs.

Audit implementation process

The Customs shall serve an “Inspection Notice” to the person being audited three days before conducting an audit. In special circumstances, if the person being audited is suspected of committing a major violation of the law or the relevant information may be transferred or destroyed, the audit can be carried out with approval. Auditors need to show their credentials and inform them of their rights and obligations. During the audit, if it is discovered that there is an interest, the person to be audited should voluntarily recuse himself or the person being audited should apply to recuse himself.

Spot check method

Customs inspections use a variety of spot inspection methods, including:

• Random Sampling: Randomly selects a sample, but is not commonly used.
• Judgment Sampling: Samples are selected based on the auditor’s experience and judgment.
• Statistical sampling: Using statistical principles to randomly select samples to evaluate overall characteristics.

Auxiliary audit methods

Auxiliary audit methods include:

• Bank investigation method: Verify the authenticity of foreign exchange receipts and payments.
• On-site verification flow method: Check whether the goods arrive at the designated place.
• Production capacity analysis method: compare actual production capacity with import volume.
• Check the warehouse record method: review the records of goods entering and exiting the warehouse.

Specific methods of customs inspection

Commonly used customs inspection methods include:

• Inspection method: Review account books, vouchers and other materials.
• Investigation method: Collect evidence through observation, questioning, etc.
• Inventory method: counting physical assets.
• Analytical method: Use data analysis techniques to evaluate.

Trade investigation and cross-border e-commerce inspection

Customs can collect industry information through trade investigations for risk analysis. Cross-border e-commerce companies are also subject to customs inspections. Under the bonded online shopping import model, warehousing companies are also within the scope of inspection.

Analysis on cases of suspected false declaration of trade methods

The cases of companies A and B demonstrate how to construct false trade declarations through false information on e-commerce platforms, payment platforms and logistics companies to evade taxes. Customs ultimately investigates and punishes illegal activities through preliminary analysis, investigation and evidence collection, and on-site inspections.