Risk Management System in Indian Customs - CBEC's Customs Manual 2023 - Customs

11. Risk Management System in Indian Customs: 11.1 Risk Management System (RMS) is one of the most significant steps in the ongoing Business Process Re-engineering of the Customs Department. RMS is based on the realization that ever-increasing volumes and complexity of international supply chain and the deteriorating global security scenario present formidable challenges to Customs. Besides, the traditional gatekeeper approach of scrutinizing every document and examining every consignment will simply not work. Also, there is a need to reduce the dwell time of cargo at ports/airports, as well as the transaction costs in order to enhance the competitiveness of Indian businesses, by expediting the release of cargo where compliance level is high. Thus, an effective RMS strikes an optimal balance between facilitation and enforcement and promotes a culture of compliance. RMS is also expected to improve the management of the Department s resources by enhancing efficiency and effectiveness in meeting stakeholder expectations and bringing the Customs processes at par with best international practices. [Refer Circular No. 43/2005-Cus., dated 24-11-2005 ] 11.2 Facilitation of legitimate trade is one of the key motivating forces for simplification of procedures and reduction of barriers to the trade. Indian Customs has been at the forefront of taking initiatives aimed at catalysing economic development through transparency, harmonization, predictability and automation in trade. Risk management has been one of the key vehicles for Indian Customs to better meet the demands of the operating environment of the Trade facilitation. The risk management in its new avatar-an intelligence data driven risk management framework embedded with compliance culture-has enabled more effective decision-making at all levels. The past 15 years have produced many changes in implementation of risk management capabilities since its introduction in the year 2005 in imports. The technology stack, which is based on Oracle database remained the same, but the original port-wise distributed architecture was replaced by centralized architecture in the year 2010. Now, RMS for cargo clearance is functional for all the locations, which have the facility of electronic cargo clearance. 11.3 Indian Customs Risk Management System has already made forays into post-clearance audit, exports, container selection, IPR, integrated declaration and integrated risk management involving partner government agencies (single window), courier cargo, and e-sealing. With the insertion of proviso to Section 17 (2) of the Customs Act 1962 (vide Finance Act 2018 ), the selection for verification of self-assessed declarations (Bills of Entry or Shipping Bills) by the Assessing Officer shall primarily be on the basis of risk evaluation through appropriate selection criteria. Besides, provisos to Section 47 (1) and Section 51(1), the orders of clearance of imported goods for home consumption and goods for exportation respectively, in addition to the proper officer, may also be given electronically through the Customs Automation System on the basis of risk evaluation through appropriate selection criteria. This in turn paved way for machine release of goods through customs automation system in the case of imported and export goods. 11.4 Risk Management processes in Imports: Bills of Entry and IGMs filed electronically in ICES through the Service Centre or the ICEGATE are transmitted by ICES to the RMS. RMS processes the data through a series of steps and produces an electronic output for the ICES. This output determines whether a particular Bill of Entry will be taken-up for appraisement or examination or both or be cleared after payment of duty without assessment and examination. As a part of decision support, where necessary, RMS provides instructions for Appraising Officer, Examining Officer or the Out-of-Charge Officer. It needs to be noted that the appraising and examination instructions communicated by the RMS have to be necessarily followed by the proper officer. It is, however, possible that in a few cases the proper officer might decide to apply a particular treatment to the Bill of Entry which is at variance with the instruction received from the RMS. This may happen due to risks which are not factored in RMS. Such a course of action shall, however, be taken only with the prior approval of the jurisdictional Pr. Commissioner/Commissioner of Customs or an officer not below the rank of Additional / Joint Commissioner of Customs, authorized by him for this purpose, after recording the reasons for the same. A brief remark on the reasons and the particulars of Commissioner s authorization should be made by the officer examining the goods in the departmental comments section of the electronic Bill of Entry in the EDI system. 11.5 Automated clearances of Bills of Entry : A further trade facilitation initiative in the Customs clearance process is the Customs Compliance Verification (CCV) which operates after an importer registers the imported goods even while duty has not been paid or its payment is in process. Once the goods are registered, the proper officer carries out all necessary verifications as per Sections 17 / 18 and Section 47(1) of the Customs Act, 1962 . On satisfaction that the goods are ready for clearance, but for the payment of duties, the proper officer confirms the completion of the CCV for the particular Bill of Entry in the System. Thereafter, on payment of duty by the importer, the Customs Automated System electronically gives clearance to the Bill of Entry, as provided for in the 1st proviso to Section 47(1) of the Customs Act, 1962 . This facility of automated clearance of Bills of Entry has been introduced on a pilot basis in Chennai Customs House and Jawaharlal Nehru Customs House w.e.f. 06.02.2020. The said facility was introduced at an all India level w.e.f. 05.03.2020. [Refer Circular No.09/2019-Customs dated 28-02-2019 , Circular No.05/2020-Customs dated 27-01-2020 , Circular No.15/2020-Customs dated 28-02 2020 ] 11.6 Post-Clearance Audit (PCA): Based on a set of criteria, bills of entry are selected for PCA under the Risk Management System for audit/verification of the correctness of the declaration/assessment of the bill of entry. The objective of PCA is to monitor, maintain and enhance compliance levels, while reducing the dwell time of cargo. The RMS selects the Bills of Entry for audit, after clearance of the goods, and these selected Bills of Entry are directed to audit officers for scrutiny. 11.7 As per the new scheme introduced in the Customs Act, 1962 (vide Finance Act, 2018 ), the endeavour is to audit the assessment and also to verify compliance of an auditee with the various provisions of the Customs Act and other allied laws in respect of imported or export or dutiable goods, as a means to measure and improve compliance. A new Section 99A (under Chapter XIIA ) has been introduced in the Customs Act 1962 , to provide a statutory framework for the procedure for conducting post clearance audit. The Customs Audit Regulations (CAR), 2018 framed under Section 99A of the Act are notified vide Notification No.45/2018-Customs (NT) dated 24.05.2018 in supersession of the On-site Post Clearance Audit regulations consequent to omission of Section 17(6) of the Act. Regulation (4) of the said CAR, 2018 stipulates that the selection of auditee or the selection of import declarations or export declarations, as the case may be, for the purposes of audit shall primarily be based on risk evaluation through appropriate selectivity criteria.