## Developing a Risk-based Compliance Improvement Plan for Customs Administrations

## Source details

**Canonical URL:** [Developing a Risk-based Compliance Improvement Plan for Customs Administrations](https://www.imf.org/-/media/files/topics/fiscal/revenue-portal/developing-a-risk-based-compliance-improvement-plan-for-customs-administrations.pdf)

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### What is customs compliance?
- Customs administrations play an important role in tax collection, national security, and the facilitation of legitimate trade.
- Increasing compliance levels means international trade operators will voluntarily fulfill all applicable legal provisions and customs formalities.

### What is a compliance improvement plan (CIP) based on Integrated Risk Management (IRM)?
- Purpose:
  - Identify the main causes contributing to non-compliance.
  - Specify associated corrective measures.
- Typical non-compliance risks:
  - (1) under valuation
  - (2) misclassification of goods
  - (3) falsification of origin
  - (4) trafficking counterfeit and prohibited products
  - (5) smuggling
- A CIP specifies:
  - (1) what risk mitigating measures should be implemented
  - (2) how and when such measures must be implemented
  - (3) who should be responsible for their implementation and monitoring
- Segmentation and targeting:
  - Break down or segment the total population of operators based on their relative importance in terms of the value of their operations and their associated risk level.
  - Use segmentation information to determine the most appropriate risk treatment for each segment.

### Why is a CIP based on IRM important?
- Transactional risk management (typical practice):
  - Fundamental to facilitate legitimate trade, deter customs fraud, and expedite supply chain trade flows.
  - Analyzes variables such as value, type of goods, origin, and the compliance records of the parties involved in each transaction.
  - Produces a risk profile used to determine if a shipment should be subject to a physical, document, or non-intrusive examination at the port of entry (known as red, yellow, and green channels).
- Added value of a CIP based on IRM:
  - Takes a more holistic approach, identifying root causes of risks or potential risks arising not only during the clearance process at the port of entry, but also prior to or after goods are released.
  - Implements preventive and mitigation measures such as:
    - updating customs regulations
    - enhancing the identification and authentication of operators
    - reducing staff discretionary decisions
    - improving data cross-checking
    - adopting new technologies
    - strengthening end-to-end cargo traceability
    - conducting effective post-clearance audits
  - IRM and transactional risk management are complementary and both are vital for customs administrations to fulfill strategic goals.

### Main elements in the development of a CIP based on IRM
- A strategic vision, clearly linked to IRM, is necessary and should be supported by specific projects to mitigate weaknesses within each process. Key elements to analyze and strengthen include:
  - Alignment to the Strategic Plan
  - Strengthening governance and accountability
  - Adoption of a preventive approach
  - Automation of all processes and procedures
  - Optimization of the use of data and information
  - Legal framework and procedures
  - Quantity, quality, and timeliness of data
  - Capacity of their IT systems
  - Customs infrastructure and equipment
  - Human resources

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_Source: https://www.imf.org/-/media/files/topics/fiscal/revenue-portal/developing-a-risk-based-compliance-improvement-plan-for-customs-administrations.pdf_