Customs Health Check: Greater Transparency, Security and Control in Customs Matters

What is it about?

Companies involved in international trade face growing requirements in customs-related operations. In addition to an increasing number of global preferential trade agreements, the EU’s Carbon Border Adjustment Mechanism (CBAM), the EU Deforestation Regulation and many other topics, numerous detailed rules must be observed. In the following, the term “customs” is used as a collective reference for these areas.

Errors in almost any area can lead not only to back payments and penalties, but also to the withdrawal of business-critical authorizations. The Customs Health Check creates transparency, identifies risks at an early stage and provides a clear current-state assessment as a pragmatic entry point into robust and controllable processes.

Customs is no longer a purely logistics-related topic. The multitude of regulations often directly affects finance, tax, procurement, sales and IT. The Customs Health Check supports companies in establishing structure, control and certanty in customs-relevant processes.

The Customs Health Check enables companies to:

• systematically identify opportunities and risks
• make interfaces with adjacent tax types transparent
• reduce costs and liability risks, and
• prepare effectively for audits by the customs authorities. 

What is a Customs Health Check?

The Customs Health Check is a risk-oriented analysis of customs-related transactions, processes and systems, taking into account the actual current state, applicable legal requirements and, where relevant, existing customs authorizations and permits. It provides a solid basis for decision-making and can be combined with other reviews, such as a VAT Health Check.

Typical questions include:

• Are customs tariff numbers and other master data maintained consistently and in a traceable manner?
• Are import and export processes documented and under control?
• Are customs values determined correctly and, where required, documented?
• Are rules of origin and preferential arrangements applied correctly?
• Do the existing authorizations and permits reflect actual business practice?
• Is knowledge effectively safeguarded within the organization?

Why should companies conduct a Customs Health Check?

• Identify risks at an early stage – before liability or authorization issues arise
• Avoid financial consequences – through reduced back payments and penalties
• Stabilize processes – by establishing clearer end-to-end workflows
• Leverage potential – for example through duty-optimized supply chains, the use of preferential agreements or a structured approach to CBAM
• Safeguard supply chains – by reducing delays and shipment stoppages

How does a Customs Health Check work?

The Customs Health Check follows a standardized, interdisciplinary approach consisting of five steps:

1. Data analysis

Using Power BI, we analyze and structure your company’s customs declaration data. This provides an initial overview of customs-relevant activities and allows for a preliminary assessment of risks and (cost-saving) potential. The data is either provided by you or your customs service provider, or obtained from the customs authorities on your behalf.

2. Scope definition

Based on the initial findings, we jointly define the exact scope of the detailed analysis, aligning on relevant countries, goods flows, processes or (customs) systems as required.

3. Review of data and documentation (opportunity- and risk-oriented)

Building on the insights from step 1, we review relevant documents and additional data such as invoices, master data, proofs of preference, transport documents and customs authorizations.

4. Assessment and prioritization

Following the document review, we assess and prioritize the findings and evaluate existing opportunities and risks both qualitatively and quantitatively.

5. Results and recommendations

The results are summarized in a concise report outlining which measures should be implemented and with what priority.

Outcome

The Customs Health Check creates transparency, increases legal certainty and provides a reliable current-state assessment. It is a pragmatic step towards the structured development of customs-related processes.

Combined Health Checks – why interface issues should be included

The Customs Health Check can be conducted as a standalone review or used as a starting point for combined Health Checks with other tax types, as well as for further developing processes, systems or governance structures.

Customs-related processes are often closely linked to VAT issues – particularly in the case of exports and imports, for example when assessing VAT exemptions or input VAT deduction. Combined issues also frequently arise in connection with intercompany transactions, such as transfer pricing, year-end adjustments or royalty payments.

A combined review of different tax types increases legal certainty and covers more risk areas than an isolated analysis of individual topics.

Outlook on upcoming Health Checks

In Part 4, we outline how a Health Check for social security matters is conducted and explicitly address a combined Health Check covering social security, wage tax and VAT.

Read also

Health Check – Part 1
Health Check – Part 2