A new regulation governing customs and excise audit was issued by the Minister of Finance in December 2024. This regulation, Minister of Finance Regulation No. 114 of 2024 on Customs Audit and Excise Audit (“New Regulation”), revokes the previous Minister of Finance Regulation No. 200 of 2011, as lastly amended by Minister of Finance Regulation No. 258 of 2016 (“Previous Regulation”). This update introduces significant changes to the customs and excise audit process, impacting businesses involved in import and export activities.
The New Regulation not only amends existing provisions but also introduces new ones to enhance the supervision of customs and excise audit mechanisms. These changes provide a more detailed and structured framework for the audit process.
This alert examines the key provisions of the New Regulation.
General Audit Period
The New Regulation amends the audit period for customs declarations from 2 years to 21 months. This amendment is intended to address the potential for customs declarations to fall outside the two-year audit window, which can occur given that the audit process typically takes around three months. The 21-month period begins at the later of:
- The last period of the previous audit; or
- The time when the importer commences activities related to customs or excise.
This “commencement of activities” refers to actions such as importing or exporting goods, warehousing goods under customs supervision, or engaging in other customs-related procedures. The 21-month period ends in the month before the issuance of the audit assignment letter.
For example, if an importer’s last audit covered the period from 1 January 2023 to 31 December 2024, and they received a new audit assignment letter in January 2027, the new 21-month audit period will run from 1 April 2025 to 31 December 2026. This adjusted timeframe ensures that no customs declarations within the potential audit window are excluded solely due to exceeding the previous two-year limit.
Additional Auditor’s Authority
The New Regulation expands the authority of auditors during the customs and excise audit process. Auditors are now explicitly permitted to:
- Request data from institutions other than the Directorate General of Customs and Excise. This may include requesting information from surveyor institutes, suppliers, or other government agencies to obtain a more comprehensive view of the importer’s activities.
- Engage experts for the audit process, if needed. These experts could include industry specialists with knowledge of specific goods or sectors, technical experts to analyse complex transactions or laboratory experts to examine the specifications of imported goods.
These expanded powers are intended to enhance the effectiveness and thoroughness of customs audits. By accessing a wider range of information and expertise, auditors can gain a deeper understanding of importers’ operations and identify potential areas of risk.
Audit Sampling Procedure
The New Regulation clarifies that auditors can use sampling techniques when examining an importer’s data and conducting physical examinations or inventory stocktaking. Sampling involves selecting a representative portion of the importer’s records or goods for examination, rather than reviewing every single transaction or item. This approach can make the audit process more efficient, especially for businesses with high volumes of imports or exports.
The New Regulation specifies that sampling should be conducted using “strategic risk-based” or other auditing techniques. This means that the selection of samples will be based on an assessment of the risk factors associated with the importer’s activities. Factors that might be considered include the type of goods imported or exported, the importer’s compliance history, and the value of the transactions.
Report of Audit Termination
The New Regulation introduces a new report format for audit terminations. Instead of the previous Audit Result Report or Laporan Hasil Audit (“LHA“), terminations will now be documented in an Audit Termination Report or Laporan Penghentian Audit (“LPA“). This change allows the officials to audit periods that were previously terminated. Under the previous regulation, audit periods halted and recorded in the LHA could not be audited again. However, with this update, terminated audit periods can now be re-audited, as they are now governed by the LPA instead of the LHA.
Key Takeaways
The New Regulation introduces several changes aimed at improving the efficiency and effectiveness of customs and excise audits. By shortening the general audit period, expanding auditors’ authority, and clarifying the use of sampling techniques, the regulation streamlines the audit process and provides greater legal certainty.
In light of these changes, importers are advised to proactively review their customs compliance procedures to ensure alignment with the New Regulation. This includes understanding the new audit timeframe and ensuring that their record-keeping practices are robust.
Disclaimer
Rajah & Tann Asia is a network of member firms with local legal practices in Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Our Asian network also includes our regional office in China as well as regional desks focused on Brunei, Japan and South Asia. Member firms are independently constituted and regulated in accordance with relevant local requirements.
The contents of this publication are owned by Rajah & Tann Asia together with each of its member firms and are subject to all relevant protection (including but not limited to copyright protection) under the laws of each of the countries where the member firm operates and, through international treaties, other countries. No part of this publication may be reproduced, licensed, sold, published, transmitted, modified, adapted, publicly displayed, broadcast (including storage in any medium by electronic means whether or not transiently for any purpose save as permitted herein) without the prior written permission of Rajah & Tann Asia or its respective member firms.
Please note also that whilst the information in this publication is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as legal advice or a substitute for specific professional advice for any particular course of action as such information may not suit your specific business and operational requirements. You should seek legal advice for your specific situation. In addition, the information in this publication does not create any relationship, whether legally binding or otherwise. Rajah & Tann Asia and its member firms do not accept, and fully disclaim, responsibility for any loss or damage which may result from accessing or relying on the information in this publication.
