Recently, the Canada Border Services Agency (the “CBSA”) released its Trade Compliance Verification priorities for 2018. The CBSA manages trade compliance with the (i) Tariff Classification, (ii) Customs Valuation, and (iii) Origin programs. This is done by way of random verifications or verification priorities. Broadly speaking, the goals of the CBSA’s verification priorities are to ensure overall compliance with customs requirements, and that the correct amount of import duties are collected on the importation of goods into Canada.
The rate of duty applicable to imported goods is based on the following factors:
- Tariff Classification: The description of the category of goods within which they fall as set out in the applicable schedule of the Customs Tariff.
- Origin: The tariff preference applicable based on the rules of origin.
- Customs Valuation: The base of appraisal of the good’s value.
Duties are calculated by multiplying the tariff rate by the value for duty. GST applicable at the border is based on the duty paid value of the imported goods, that is the sum of the value for duty and the applicable customs duty.
A CBSA verification audit can be administered in one or more of the following ways: a verification letter, a questionnaire, a verification visit, or a review of any other information the importer provides the CBSA (such as commercial invoices). These audits are often time consuming, disruptive to the importer’s business and can, in some instances, result in a reassessment of duties, GST, interest and administrative monetary penalties.
The CBSA’s targeted verification priorities are determined through a risk-based, “evergreen” process, meaning that new targets can be regularly added throughout the year. Verification priorities may also be carried over from the previous year.
This Year’s Priorities
The CBSA’s compliance verification priorities list is a helpful tool for importers. It gives the industry insight as to which products are on the CBSA’s radar and allows importers to review their customs practices in advance to ensure compliance. However, it is important to keep in mind that while the CBSA’s trade verification priorities cover a limited number of goods, the CBSA still conducts random verifications that can affect an importer operating in any product sector.
This year, the CBSA added several goods to its priority list, including, import permit numbers for tariff classification. Import permit numbers are required for imported dairy, meat and poultry products. They allow importers to take advantage of a lower rate of duty, known as the “within access commitment rate.” To receive an import permit importers need a tariff-rate quota (“TRQ”) from Global Affairs Canada. The process of obtaining such quota is complex and often limited to previous TRQ holders. Without the TRQ and the import permit the goods are subject to much higher duty rates since poultry, meat and dairy are highly protected industries in Canada.
Further, from a customs valuation perspective, apparel is now in the third round of verifications. The second round results showed that 119 companies were targeted (36 of which were found non-compliant) and Self-Adjustment by Importers were issued in the amount of $10,294,816. By way of background, Self-Adjustment refers to the corrections importers have to make to their value for duty or tariff classification originially declared to the CBSA; in some circumstances, this could result in duties owed.
We provide the following table to give a synopsis of the goods on the CBSA’s priority list for 2018 divided by category.
Click here to view the table.