When A Major Tax Exposure Sits Outside Finance Visibility

Most areas of tax have undergone significant digital transformation over the last decade. VAT, payroll, and reporting systems now provide finance leaders with near real-time insight, audit trails and control.

Customs duty has not followed the same path. Despite its material impact on cash flow, provisions and risk, customs compliance in many organisations remains fragmented, retrospective and heavily reliant on third parties.

This article explores why that gap exists, how it places in-house teams at a structural disadvantage, and why customs duty is increasingly a board-level finance concern.

Customs Is Still Stuck in 2006: Here’s Why That’s Now A Board-Level Risk

Over the last decade, most areas of tax have undergone a profound digital transformation. VAT reporting is increasingly automated. Payroll operates in near real time. Management information is readily available, structured and auditable.

Customs, however, have largely been left behind.

Despite often representing one of the most significant indirect tax exposures on the balance sheet, customs compliance in many organisations is still managed through a combination of PDFs, spreadsheets, broker reports and email chains. Not because teams are failing, but because the systems supporting them were never designed to give decision-makers visibility.

This gap has mainly gone unnoticed at C-suite level.

In-house customs and indirect tax teams are typically lean, highly specialised, and positioned several layers below the CFO. They are expected to manage growing volumes of declarations, increasingly complex rules on origin, valuation and classification, and constant regulatory change, often without the same investment or infrastructure afforded to other tax functions.

Unlike VAT or payroll, customs has historically relied on intermediaries to ‘handle’ compliance. Over time, this has created a model where data is dispersed across brokers, freight forwarders and logistics providers, with limited ability for finance teams to interrogate it independently.  The result is not a lack of competence, but a lack of visibility.  In practice, many customs decisions are made well outside finance.

Product classification, origin assumptions, routing choices and valuation inputs are often embedded in procurement and logistics processes. Supply chain teams are rightly focused on continuity, cost and getting goods where they need to be, on time. Compliance is rarely their primary KPI.

That doesn’t mean decisions are wrong, but it does mean that customs risk can crystallise slowly, over time, without ever being visible to the teams ultimately accountable for it.

Why Issues Only Surface Years Later

One of the defining challenges of customs is timing. Risks rarely present immediately. They emerge years later, during audits, assurance reviews or post-clearance checks, when documentation is harder to retrieve, assumptions are more problematic to evidence, and teams or service providers may have changed.

Recent high-profile cases involving businesses such as Morrisons, Frasers Group and Nike are often cited as cautionary tales. But they are rarely about deliberate non-compliance. More often, they highlight systems that were never designed to support long-term evidence, consistency or challenge.

Customs compliance works, until it’s asked to explain itself.

Accountability Without Insight: The CFO Challenge

For CFOs and Finance Directors, this creates an uncomfortable imbalance.

Customs liabilities sit firmly within financial accountability, impacting provisions, contingent liabilities, cash flow and, increasingly, reputational risk. Yet the underlying data is frequently fragmented, retrospective and managed through third parties.

This is particularly concerning for CFOs subject to Senior Accounting Officer (SAO) obligations, where personal accountability may apply.

Most other taxes have benefited from sustained investment in systems, controls and reporting. Customs, by contrast, often remains a blind spot, not because it’s less important, but because it’s less visible.

And visibility usually only arrives when the cost does.

What Investment In Customs Should Actually Mean

Digitalising customs compliance does not mean replacing brokers or automating processes for the sake of it. It means giving in-house teams and finance leaders the same level of control, oversight and confidence they expect elsewhere.

That includes the ability to:

  • Independently interrogate declaration data;
  • Identify trends and inconsistencies early;
  • Evidence positions clearly and consistently;
  • Support governance, rather than react to a challenge.

Customs requires the same standard of infrastructure as any other material tax exposure.

Where Tools Like CAT360 Support Teams, Not Replace Them

Technology is now starting to close this gap.

Analytical tools enable businesses to extract insights from the data they already generate, providing an independent view of customs activity across brokers, suppliers, and time periods. Used properly, they support in-house teams by strengthening governance, highlighting risk areas early, and providing evidence when positions are challenged.

Crucially, technology does not replace judgment. It enables it.

The combination of visibility and expertise enables customs to transition from a reactive to a proactive function.

A team working in an office

A Final Reflection For CFOs

Customs has not stood still, but investment in how it is governed has.  If customs duty now sits firmly under finance accountability, the question for boards is a simple one:

What other tax exposure of this scale would be managed without finance-grade visibility until an audit letter arrives?

Bringing Customs Into Finance View

If customs duty represents a material exposure on your balance sheet, it warrants the same level of visibility, governance and confidence as any other tax line. Understanding where data sits, and where it doesn’t, is often the first step. Get in touch here.