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Post-entry audit
A FEW years ago, the post-entry audit system was introduced in the Philippines with
revenue collection as one of its objectives. Under this system, the Bureau of Customs (BOC)
is authorized to conduct compliance audit on importers and other stakeholders relative to
import, export and other trading activities. The Post Entry Audit Group (PEAG) of the BOC,
which was created via Executive Order 160, is the group tasked to implement the PEA laws,
rules and regulations.
To implement the audit process, usually a group under PEAG called Trade Information and
Risk Analysis [TIRAO] gathers information and relevant data to be used as a basis for the
audit selection process. When an auditee is selected, the responsibility for conducting the
audit proper rests with the Compliance Assessment Office (CAO).
The audit, however, should be preceded by the issuance of an Audit Notification Letter
(ANL) approved by the commissioner of Customs. This ANL specifies the period, scope,
relevant dates of the audit proper and the audit team. Without this ANL, the conduct of the
audit is unauthorized. The audit team has to ensure that the ANL is served and properly
received by the auditee. Failure to do so may divest them of their authority to audit. On the
part of the auditee, it is important that he verifies that all the necessary and relevant details
are indicated in the ANL. If some information is missing, the same may be wanting in
authority that may be used as a basis in invalidating the authority granted.
During the audit, the auditee should ensure that the audit team is not inspecting documents
beyond what is required of the audit. The auditee must familiarize himself of the documents
and records needed and required to be kept and presented to the audit team.
After the audit proper, the audit team shall set a schedule for the exit conference. The
purpose of the exit conference is to discuss the issues and findings of the audit team with
the auditee. At this stage of post entry audit, the auditee is given the opportunity to
comment and challenge the conduct and result of the audit.

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Whatever the result after the exit conference shall be summarized in a Final Audit Report
and Recommendations (FARR) and submitted to the commissioner of Customs for review. If
approved, a demand letter indicating the amount of tax deficiency and penalty shall be
served to the auditee. The auditee in turn may opt to pay the deficiency in duties and
taxes or if he is not satisfied with the same, he may appeal to the Office of the
Commissioner. If he is dissatisfied with the decision of the commissioner of Customs, he
may appeal the same to the Court of Tax Appeals.
While the post-audit entry system had already been part of the official customs practices in
the country for years, it is still new to some especially those who have not yet been
subjected to post audit. And so compliance with the record keeping requirements has not
also been a priority. Unfortunately, one of the usual findings in a post audit is the lack of
proper documentation or record keeping. This may have negative consequences if the
declarations made cannot be properly supported.
It is worth emphasizing that in relation to the recordkeeping, Section 3514 of Republic Act
9135 mandates all importers as well as brokers to keep, at their principal place of business
for a period of three years from the date of importation, all the records of their importations
and/or books of accounts, business and computer systems and all customs commercial
data. Aside from the criminal liabilities that may be imposed, assessments may also be
issued for improperly or undocumented transactions.
As the post-entry audit intensifies, it is important for importers and brokers to be aware of
these record-keeping responsibilities to avoid unnecessary audit findings resulting from
failure to produce or supply information and documents. But they should also be aware that
they have rights and remedies available upon audit and upon the issuance of assessments.
****
The author is a senior associate of Du-Baladad and Associates Law Offices (BDB Law), a
member-firm of World Tax Services (WTS) Alliance. The article is for general information
only and is not intended, nor should be construed as a substitute for tax, legal or financial
advice on any specific matter. Applicability of this article to any actual or particular tax or
legal issue should be supported, therefore, by a professional study or advice. If you have
any comments or questions concerning the article, you can e-mail the author at
anthony.prestoza@bdblaw.com.ph or call 403-2001 local 370.

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