CUSTOMS OPERATION

CHAPTER 7: RISK MANAGEMENT ON CUSTOMS OPERATION

Prepared by: Nguyễn Duy Hồng, MBA, L.L.M, Jurist

Date: 16 Jun 2022 Ver: 1.0
CHAPTER OUTLINE

NO CONTENTS

I Basics of risk management in customs operations

II Collect and process customs risk management information

III Measurement and assessment of compliance in customs operations
IV Measuring and assessing risks in customs operations
V Risk records in customs operations
I. BASICS OF RISK MANAGEMENT IN CUSTOMS OPERATIONS
What is Customs Risk?

• Customs risk is defined as “the potential risk of non-compliance with customs legislation”
(the KYOTO Convention, revised 1999).

• In Vietnam, according to the provisions of the law and guiding documents under the Law,
customs risk is understood as "the risk of non-compliance with customs law, tax law in
export and import activities, exit, entry and transit” (Circular No. 175/2013/TT-BTC dated
November 29, 2013 of the Ministry of Finance).

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I. BASICS OF RISK MANAGEMENT IN CUSTOMS OPERATIONS
What is Customs Risk Management?

Customs risk management is understood as “the systematic application of management

procedures and practices that provide Customs with necessary to resolve the carriage of goods
or consignments that pose a risk”.

Applying risk management as a management principle can help Customs not only perform their
responsibilities effectively, but also help Customs organize and improve its entire operations.

(The Handbook of Risk Management,

the World Customs Organization),

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I. BASICS OF RISK MANAGEMENT IN CUSTOMS OPERATIONS
What is Customs Risk Management?

In Vietnam, customs risk management is understood as "the systematic application of legal

provisions, professional processes and measures to identify, evaluate and classify risks that
have negative impacts on the effectiveness and efficiency of customs management and tax
administration, as a basis for customs authorities to properly allocate resources, effectively
apply results of customs management and tax management measures” (Circular No.
175/2013/TT-BTC dated November 29, 2013 of the Ministry of Finance).

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I. BASICS OF RISK MANAGEMENT IN CUSTOMS OPERATIONS
Subject of customs risk management

The subject of customs risk management is the contingent of customs officers and employees
who are assigned for risk management from carrying out risk identification and assessment
activities to provide information on the likelihood and impact of risks, development of action plans,
reduce risks and provide reporting data on risks. (ISO 31000:2009 Risk management standard)

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I. BASICS OF RISK MANAGEMENT IN CUSTOMS OPERATIONS
Subject of customs risk management

Risk management subjects are divided into hierarchical groups: senior, middle and ground
levels. Specifically:

• at the high level, the management entity is responsible for risks at the strategic level, such as
risks in terms of strategic direction, policies, organization, and operating mechanism;

• at the middle level, the management entity is responsible for risks at the tactical level, such
as risks in the implementation of the organization's programs, projects, and plans;

• At the ground level, the regulator is responsible for applying the risk management process at
the operational unit to deal with immediate situations (such as clearance decisions,
interventions, arrests or seizures), using existing processes and procedures along with
intelligence sources, experience, and skills to determine inspection, control, etc.

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I. BASICS OF RISK MANAGEMENT IN CUSTOMS OPERATIONS
Principles of customs risk management

• Professional risk management measures and techniques must be taken to predict the risks of
violations of the customs law in order to actively and effectively apply necessary professional
measures in accordance with regulations on export, import, exit and entry activities.

• The implementation of risk management techniques is based on the application of indexing,

criteria and risk management information available on the information system of the Customs
sector, information violations, signs of risk.

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I. BASICS OF RISK MANAGEMENT IN CUSTOMS OPERATIONS
Principles of customs risk management

• The set of selection criteria (issued by the Ministry of Finance) to decide on customs
inspection, supervision, and post-clearance inspection for import-export and entry-exit
activities on the basis of compliance with the provisions of specialized management law, the
level of compliance with the law by the customs declarant, combined with the consideration of
the risk level of import and export goods, luggage of people on entry and exit, means of
transport for import and export context and other relevant factors.

• The fact that the customs officer has properly, fully and promptly complied with the provisions
of the law, the contents of the Regulations of the industry and the regulations and guidelines
on risk management according to decentralization are exempted. personal responsibility in
accordance with the law.

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II. COLLECT AND PROCESS CUSTOMS RISK MANAGEMENT INFORMATION

Customs risk management intelligence

• Customs risk management intelligence includes all customs information, customs professional
information and other related information, used to serve the application of risk management in
customs operations.
• Specifically, it includes the following information and groups of information:

o Group of information about organizations and individuals performing export, import, exit,
entry; customs clearance agents; and enterprises operating and doing business in related
fields such as transportation, delivery express, port, warehouse, yard, and bonded
warehouse.

o Group of information about exported and imported goods and luggage of people on exit or
entry.

o Group of information about means of transport, transport on exit and entry;

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II. COLLECT AND PROCESS CUSTOMS RISK MANAGEMENT INFORMATION

Customs risk management information

o Group of information from the implementation results of customs procedures and

procedures and other relevant professional measures.
o Group of customs professional information (information provided, generated and processed
in the process of implementation, applying risk management).

• Risk management information is centrally managed at the General Department of Customs

to unify the handling, application, and supply to Customs units at all levels.

• The content of risk management information must comply with the professional regime and
the provisions of the law on information security.

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II. COLLECT AND PROCESS CUSTOMS RISK MANAGEMENT INFORMATION

Process of collecting and processing risk management information

• Determining the needs and purposes of information collection and processing:

Information needs are based on a number of bases such as management requirements; require
risk assessment, compliance assessment; results of risk analysis and assessment, etc. On that
basis, continue to clarify the purpose of using risk management information in specific
professional activities. The result of this step is to develop a plan to collect and process
information.

• Information collection: Based on the above plan, Customs officers and Customs units use
appropriate professional measures according to regulations to collect, synthesize, update and
manage risk information.

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II. COLLECT AND PROCESS CUSTOMS RISK MANAGEMENT INFORMATION

Process of collecting and processing risk management information

• Information processing: Evaluate, compare, analyze and synthesize information to ensure

the set objectives according to the above information collection and processing plan. Processed
information become professional information, and is updated and transferred to individuals and
organizations according to regulations.

• Monitoring and evaluating effectiveness: The risk management information provider shall
check and monitor the provided information and coordinate with individuals and organizations
receiving risk management information to adjust needs, ways of collecting, processing and
using information on the basis of updated information, feedback on the results of implementing
professional measures from them.

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II. COLLECT AND PROCESS CUSTOMS RISK MANAGEMENT INFORMATION

Risk management in customs operation

Risks in customs operations are limitations and loopholes in the organization of customs
operations, in customs management policies, tax policies and customs procedures for import and
export, luggage of people on exit and entry, means of transport on entry and exit, thereby leading
to the risk and possibility of abuse and violation.

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II. COLLECT AND PROCESS CUSTOMS RISK MANAGEMENT INFORMATION

Risk management in customs operation

Some fields and professional activities have potential risks and risks of violating customs law as
follows:

• Customs procedures, tax procedures;

• Customs inspection, supervision and control;
• Bonded warehouses, tax-suspension warehouses, retail collection locations (CFS warehouses),
inland customs clearance ports (ICD);
• Import and export of goods on the list of specialized management;
• Classification and origin of goods;
• Counterfeit goods, intellectual property rights;
• Tax evasion, tax fraud in import and export activities;
• Smuggling, illegally transporting goods across borders;
• Drugs, precursors, weapons, radioactive substances.

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II. COLLECT AND PROCESS CUSTOMS RISK MANAGEMENT INFORMATION

Applying risk management in customs operations

The application of risk management to the fields and activities of customs operations is carried
out based on the provisions of law and the results of information collection, processing, analysis
and risk assessment.

• Check the conditions for registration of the customs declaration;

• Support the decision to inspect goods during loading and unloading from the means of
transport on entry to the warehouse, yard, port, or area of ​the border gate of import;

• Support the decision to inspect exported goods after customs clearance, gathered at
locations in the export border gate area;

• Support the decision on inspection during customs clearance for import and export goods;

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II. COLLECT AND PROCESS CUSTOMS RISK MANAGEMENT INFORMATION

Applying risk management in customs operations

• Support in deciding the method of supervision and inspection of imported and exported goods
during the customs supervision process;

• Support the decision on inspection in the management of processing and manufacturing activities
for export;

• Support in deciding to check tax refund and non-collection dossiers for imported and exported
goods;

• Support in deciding to supervise and check key points for people on exit and entry, luggage of
people on exit and entry;

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II. COLLECT AND PROCESS CUSTOMS RISK MANAGEMENT INFORMATION

Applying risk management in customs operations

• Support in deciding on key supervision and inspection of means of transport on entry and exit;

• Coordinating the implementation of measures for inspection, supervision, customs control, post-
customs clearance inspection, inspection and other professional activities according to the risk
control plan in the management of import and export activities, entry and exit;

• Support the decision on post-clearance inspection.

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III. MEASUREMENT AND ASSESSMENT OF COMPLIANCE IN CUSTOMS
OPERATIONS
Measure and evaluate business compliance

• The implementation of compliance measurement and assessment is carried out on the basis
of a set of compliance assessment criteria and indicators and the application of a risk
management information technology system platform.

• The above-mentioned measurement and evaluation results have been classified into the
group of businesses that are compliant or non-compliant or in the group that do not meet the
compliance assessment criteria of the Customs.

• Next, in order to ensure that the compliance assessment of import-export enterprises is

complete and accurate, the Customs units at all levels regularly organize the collection and
update of the information system database on business compliance.

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III. MEASUREMENT AND ASSESSMENT OF COMPLIANCE IN CUSTOMS
OPERATIONS
Measure and evaluate business compliance
In order to fulfill the requirements of customs management and tax administration, the assessment
of the legal compliance of the customs declarant by the customs authority shall include the
assessment of the following conditions:

Condition for applying the tax payment time limit of 275 days to imported
goods being raw materials and supplies for the production of exports;

Condition for allowing to guarantee the amount of tax payable;

Conditions for allowing imported goods for storage

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III. MEASUREMENT AND ASSESSMENT OF COMPLIANCE IN CUSTOMS
OPERATIONS
Measure and evaluate business compliance

Besides, the Customs authority also carries out activities of collecting, processing information,
analyzing and assessing risks for organizations and individuals in processing and production of
export goods; in tax exemption, tax reduction, tax refund and non-collection activities for
exported and imported goods and other activities based on specific management conditions
and requirements.

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III. MEASUREMENT AND ASSESSMENT OF COMPLIANCE IN CUSTOMS
OPERATIONS
Measuring legal compliance in the fields of import and export activities

For the the General Department of Customs

Based on the objectives and requirements of customs management for each year to develop
and issue a set of indicators and a plan to measure compliance; organize the
implementation and coordinate the implementation according to the approved plan as
mentioned above to ensure the effective arrangement of resources, measures for inspection,
supervision, customs control, post-customs clearance inspection and other professional
measures in the fields of import and export, entry and exit.

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III. MEASUREMENT AND ASSESSMENT OF COMPLIANCE IN CUSTOMS
OPERATIONS
Measuring legal compliance in the fields of import and export activities
For Customs units at all levels

Compliance measurement includes the following specific activities:

• Select test samples, conduct analysis;

• Collecting information and data on test results and handling samples;
• Synthesize, analyze and clearly define the following parameters:
o The rate of violations on the total number of samples;
o Structure, proportion according to the type of risk on compliance with customs law;
o Key groups of subjects and other factors related to violations of the law on customs;
• Compare the above results with the compliance measurement index (which has been
developed and issued) to rank the level of compliance with the law on customs in the field of
import and export activities;
• Report on compliance measurement results, including: graded level of legal compliance,
indicators and risk warnings for each field of import and export activities.
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III. MEASUREMENT AND ASSESSMENT OF COMPLIANCE IN CUSTOMS
OPERATIONS
Business ranking

The classification of import-export enterprises

1 – Priority enterprise;
2 – Very low risk enterprise;
3 – Low risk enterprise;
4 – Medium risk enterprise;
5 – High-risk enterprise;
6 – Very high risk enterprise;
7 – Enterprises having import-export activities for less than 365 days.

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IV. MEASURING AND ASSESSING RISKS IN CUSTOMS OPERATIONS

Measure and assess risk

To review and detect subjects with signs of violations and signs of risks in import-export and
entry-exit activities, the Customs authority uses risk analysis and assessment techniques with
specific contents as follows:

• Determine the scope and field to perform risk analysis and assessment;
• Identify information needs;
• Analyze information, identify risk signs on the basis of information collected on import and
export activities, immigration and other relevant information;
• Identify risk objects/risk signs and related frequency and extent (consequences) on the basis
of results of synthesizing, screening, comparing and verifying information on risk signs ;
• Compare and contrast the above results with relevant regulations and guidance documents,
with the set of risk assessment criteria and control objectives for goods, routes, locations, and
areas of high risk to put in place appropriate risk control

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IV. MEASURING AND ASSESSING RISKS IN CUSTOMS OPERATIONS

Post-arrest analysis

• In order to be able to evaluate the effectiveness and efficiency of the implementation of risk
control according to the programs and plans set out, and to help clarify the causes, methods,
and other related factors, thereby supporting to provide risk warnings, as well as adjust and
orient the application of risk control measures, Customs authorities apply post-arrest
analysis techniques of typical and complex cases at large scale.

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IV. MEASURING AND ASSESSING RISKS IN CUSTOMS OPERATIONS

Post-arrest analysis

• The results of post-arrest analysis highlight the subjects, methods and tricks of the violation,
assess the trend of violations in the next time, and further clarify the signs of criminal behavior
or risks of violations as well as loopholes and omissions in policies and regulations of law,
customs processes and procedures and in the implementation of customs management
measures. From there, it helps to develop specific plans and measures to control risks,
overcome loopholes and shortcomings as mentioned above.

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V. RISK RECORDS IN CUSTOMS OPERATIONS

Customs risk profile management

• Risk profile management is the organization's storage of identified, analyzed and assessed
risk information and data.
• This information and data is in the form of paper records or databases to help systematize
risks as well as provide necessary tools for access, exploitation and use in risk management
process.

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V. RISK RECORDS IN CUSTOMS OPERATIONS

Customs risk profile management

• Customs risk records after approval are updated into the system to manage, share and
provide risk information to professional units at Customs at all levels.
• During the operation, the risk profile must be updated with additional information as soon as
the risk signs or other relevant factors arise as well as the removal of the risk profile for the
business
• dissolution, bankruptcy, decommissioning, or cases where the analysis shows low frequency
and risk consequences.

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THANK FOR YOUR ATTENTION!