1. Challenge UsCUSTOMS SELFASSESSMENT AND ONSITEPOST CLEARANCE AUDITJanuary 31, 2012All rights reserved | Preliminary & TentativeK Sivarajan l DirectorBMR Advisors1

2. CONTENTSSelf AssessmentOn-site Post Clearance AuditAuthorized EconomicOperator All rights reserved | Preliminary & TentativeSELF ASSESSMENT All rights reserved | Preliminary & Tentative 2 3. SELF ASSESSMENT TRADE FACILITATION Trust based Customs Trade Partnership Assured facilitation for compliant importers/exportersTradeFacilitation Control the interdiction in RMS and comprehensively rationalize various interventions, targets, rules Reducing pre-clearance checks based on risk parameters in case of self assessed documents Facilitation target of 80% for Air Cargo Complexes, 70% for Seaports and 60% for ICDs to be achieved in short span Faster Clearance of goods Reducing dwell time of goods at customs portAll rights reserved | Preliminary & Tentative Reducing transaction costs of import/export Self Assessment Manual Standard Operating Procedures Compulsory compliance requirements Key aspects of customs (Classification, valuation, exemption etc) India Customs Update | 5SELF ASSESSMENT KEY ELEMENTS COMPLETION OF SELF ASSESSMENTBill of Entry / Shipping Bill shall be deemed to have been filed andSelfself-assessment of duty completed when, after entry of the Assessmentelectronic declaration in the Indian Customs Electronic DataInterchange System either through ICEGATE or by way of dataentry through the service centre, a bill of entry number/shipping billnumber is generated by the Indian Customs Electronic DataInterchange System for the said declarationAll rights reserved | Preliminary & Tentative India Customs Update | 63 4. SELF ASSESSMENT KEY ELEMENTS KEY ELEMENTSDescription of goods brand, grade, specifications etc SelfAssessmentClassification of goods HSN (amendment from Jan 1, 2012)Levy of duty/cess Applicable duties, exemption notifications(conditional), project imports etcValuation of goodsLicensing for imports/exports Foreign Trade PolicyBenefits under Export Promotion SchemesBenefits of Free Trade Agreement and country of origin normsAll rights reserved | Preliminary & TentativeOnline filingsGATT Declaration INTERNAL PROCESSESCHA capabilities and coordinationCustoms / logistic team capabilitiesSystems, processes, records maintenance India Customs Update | 7SELF ASSESSMENT - PROCESS FLOWSelf assessed BOE Computerized risk profiling & Risk based intervention / verificationRisks observed by RMSRMS Facilitated BOERe-Assessment by Customs Assessment acceptedOn site Post ClearancePayment of duty Audit/ No O-in-O AssessmentAll rights reserved | Preliminary & Tentativeis challengedAudit Para / ShowInvestigation by Speaking orderCause NoticeSIIBReview / Appeal India Customs Update | 84 5. ON-SITE POST CLEARANCE AUDITAll rights reserved | Preliminary & TentativeON-SITE POST CLEARANCE AUDIT (OSPCA) To verify completeness and accuracy of assessment claims based on:BackgroundFinancial data, Commercial dataLogistics and inventory data etcStatistical analysis of the data trend, outliers, averageetc Document based audit for the entity at importers location Operational for ACP clients from October 1, 2011 Audit to be conducted by:All rights reserved | Preliminary & TentativeAudit wing of LTU If registered with LTUCentral Excise Commissionerate Other UnitsOSPCA to be done simultaneously with Central Excise/Service Tax Audit Current audit procedure (Excise Audit 2000) to applyIndia Customs Update | 105 6. KEY DEFINITIONS UNDER PCA REGULATIONSAuditAudit means examination of bills of entry, shipping bills, invoices, packing lists, importlicences, books of account, and other records of transaction relating to imported andexport goods, and may include inspection of goods at the premises, if available andwhere necessary, drawal of samplesBooks of accountBooks of account includes ledgers, day-books, cash books, account-books and otheraccounts whether kept in the written or printed form and data stored on a floppy, disc,tape or any other form in electro-magnetic data storage deviceAll rights reserved | Preliminary & TentativePremisesPremises includes the place at which imported or export goods and connected books ofaccount, records of transaction and other documents are ordinarily kept by an importer orexporter, as the case may be, and his registered office or the premises indicated in hisImporter Exporter Code (IEC) issued by the Ministry of Commerce and Industry and theplaces wherever the imported or export goods, as the case may be, are ordinarily keptIndia Customs Update | 11CHANGE AUDIT INFORMATION WINDOW On site Audit Expanded Information windowImport information Financials, book of accounts, Foreign currency remittanceImport information Production / Inventory / End Use Invoice, Packing listInsurance, Freight, Product information Commercial, Transfer PricingAll rights reserved | Preliminary & Tentative Other regulatory filings, MIS,Management books etcElectronic data mails, ERP etcCUSTOMS ASSESSMENT / AUDIT ONSITE AUDIT Pre April 2011Post April 2011India Customs Update | 126 7. AUDIT PROCESS Key ElementsOSPCA at the premises of Importers and Exporters AUDITMinimum 15 days notice for auditObtain prior information if requiredVisit the premises to gather information, if necessaryConduct the audit in the premises of the importer/exporterInspect the goods if available during AuditTake samples of goods and copies of relevant documents to verifycorrectness of assessment of dutyAll rights reserved | Preliminary & TentativeAudit objections and opportunityDraft Audit ReportVoluntary payment basis draft audit findingsIndia Customs Update | 13AUDIT OBLIGATIONS Obligations of Importers/exporters for the purpose of AuditMake available in a timely manner the books of account, records of Obligationstransaction and other relevant documents maintained relating to theimported or export goods as required by the proper officerFor a period of five years from the date of import/exportProvide true and correct information to the proper officerRender assistance to the proper officer in the discharge of hisofficial duty and shall in no case refuse or obstruct the proper officerin discharge of official dutyFailure to comply with these regulations Penalty up to INR 50,000All rights reserved | Preliminary & TentativeIndia Customs Update | 147 8. AUDIT CAPABILITIES AUDIT CAPABILITIESAbility to capture and document classification / valuation and otherCapabilitiesimport related positions taken by the importer at the time of selfassessmentAbility to quickly produce relevant documents at the time of auditAbility to represent and articulate the tax positions and defend theself assessment before the audit team. This would mean change inskill set of importers employee responsible for customs auditBetter understanding of the rights and obligations of the importerand the Customs audit partyBetter understanding of customs laws and procedures and ability toAll rights reserved | Preliminary & Tentativerepresent the case before the Audit partyAbility to take decisions on accepting or challenging contrary viewsof the Customs Audit partyIndia Customs Update | 15All rights reserved | Preliminary & Tentative Challenge Us8