The Canada Border Services Agency (CBSA) has recently released its 23 "target" national audit priorities for the coming year. In addition to the national audit priorities listed below, the CBSA is also conducting audits of large file importers and other strategic targets. Importers who do not plan for a potential customs audit do so at their own peril.
The following information will highlight some of the current CBSA audit priorities and give some insight into how to prepare for a CBSA audit and manage potential risk from customs duty, punitive interest and penalty assessments that could arise in the event of a negative CBSA audit finding. Proper planning and the implementation of appropriate compliance measures will assist importers in avoiding these potential customs risks.
The Current CBSA Specific Target Audit Priorities
2. Cotton yarn
3. Furniture parts
4. Organic surface‐active agents – soap and other than soap
5. Copper and articles thereof
6. Stone vs. articles of stone
7. Tools, implements, cutlery, spoons and forks, of base metal; and parts
8. Juice products
9. Textile bags
10. Ski apparel industry
11. Parts of gas turbines industry
12. Light‐duty automotive goods
13. Bulk shipments of ore
14. Plastic household goods
15. Motor car, bus and lorry tire industry
16. Video recording apparatus
17. Pumps for liquids
18. Articles of jewellery and parts thereof
19. Mattress upholstery
20. Electronic generators
21. Vegetable fats and oils
22. Pumps for liquids
23. Cocoa powder
Are you a "Listed Importer" in the Government of Canada's importer database of significant importers, an importer of goods considered national priority audit targets or other strategic CBSA audit target?
Listed and targeted importers are those businesses that import goods into Canada of significant value levels or are a priority from an audit perspective. Large‐volume or high‐value imports of goods present a greater risk from both a revenue and compliance perspective to the CBSA. In addition to their mandate to protect the borders, the CBSA also has a mandate to "protect the revenue."
What is the risk of being a "Listed Importer" or an importer of goods considered national priority audit targets?
Importers should be aware that Canadian customs law requires importers to be compliant with the tariff classification, declared value for duty and origin declared on imports into Canada, amongst other things. Compliance failures could cost businesses additional duties and taxes not to mention penalties and a disrupted supply chain. Being a "Listed Importer" or importer of national priority goods increases the likelihood of a customs audit, and in some cases the audit is more of a certainty as opposed to a likelihood.
Will your business undergo a CBSA Customs Audit?
The CBSA has stated over the years that its goal is to review the compliance levels of its largest "clients" and specific priority targets.
What are the consequences of a CBSA Customs Audit?
Many importers are not prepared for a CBSA audit and may not be currently meeting their customs compliance requirements. In addition to their compliance objectives, many importers are also paying too much duty. A CBSA audit may result in a finding of non‐compliance with customs rules and a negative audit finding, which may result in:
- Assessments for additional duty & interest
- A requirement to correct up to four years of previous import declarations
- Assessments for punitive interest
- Assessments for the Goods and Services Tax with punitive interest
- Increased examinations
- Supply chain disruptions resulting in additional operating costs and perhaps lost business
What can importers do?
1. Know your risk level: Importers should review the Government of Canada's listing of large file importers to determine if they are included and review if their imports fall within the current national priority audit targets. An importer that is a "Listed Importer" or imports targeted goods has an increased likelihood of being audited by the CBSA. We can assist importers in determining whether they fall under either of these categories.
2. An ounce of prevention is worth a pound of cure: It is important to take steps to correct past or ongoing errors in import declarations before receiving notification of a CBSA audit. We can assist importers in performing import compliance assessments to determine if errors have been made in their import declarations. If an error is discovered before the notification of a CBSA audit, the importer can consider making a voluntary disclosure with the CBSA. The filing of a valid voluntary disclosure will normally eliminate both penalties and punitive interest, resulting in significant savings. The commencement of an audit, however, may preclude the use of the voluntary disclosure procedure. We can work with importers to determine if a voluntary disclosure is permitted in the circumstances and if so, to file and complete voluntary disclosures on their behalf.
3. Look for refund opportunities: In addition to identifying errors, importers should be mindful of duty overpayments. We can assist importers in performing a review to determine if opportunities are present in their import declarations, including the filing of refunds.
4. Handle CBSA audits with care: It is important to address a CBSA audit properly and with the right level of attention. To this end, we can assist importers undergoing audits to work towards an efficient and resolution of their file with the CBSA.
5. Design and implement best practices: Either before (preferably) or after an audit, we can work with importers to identify and implement best practices, which will reduce the overall cost of customs compliance going forward.
About Fraser Milner Casgrain LLP (FMC)
FMC is one of Canada's leading business and litigation law firms with more than 500 lawyers in six full-service offices located in the country's key business centres. We focus on providing outstanding service and value to our clients, and we strive to excel as a workplace of choice for our people. Regardless of where you choose to do business in Canada, our strong team of professionals possess knowledge and expertise on regional, national and cross-border matters. FMC's well-earned reputation for consistently delivering the highest quality legal services and counsel to our clients is complemented by an ongoing commitment to diversity and inclusion to broaden our insight and perspective on our clients' needs. Visit: www.fmc-law.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.