Canada: CBSA Announces 2018 Trade Verification Priorities

Last Updated: February 6 2018
Article by Darrel Pearson, Jesse Goldman and Jessica L. Roberts

In a New Year's tradition, the Canada Border Services Agency (CBSA) has published its trade verification (audit) priorities for 2018. The audits cover three programs that affect the amount of duties and Goods and Services Taxes (GST) importers pay: tariff classification, customs valuation, origin, as well as customs compliance generally. The audits are intended to ensure that the correct amount of import taxes are collected and that the Canadian government obtains accurate data necessary to best enable its trade negotiations.

As a refresher, the three programs (tariff classification, customs valuation, and origin) operate as follows. The rate of duty applicable to imported goods is derived from their tariff classification, (that is the description of the category of goods they fall in as set out in the Schedule to the Customs Tariff) and their origin (meaning the tariff preference applicable based on the application of rules of origin). Customs valuation relates to the method of appraisal of their import value. Duty amounts are calculated by multiplying the value for duty by the tariff rate. GST applicable at the border is five percent of the duty paid value of the imported goods (the sum of the value for duty and the applicable customs duty).

From a Canadian importer's point of view, CBSA trade verifications are time-consuming, business disruptive and can result in assessments of significant amounts of duties, GST, interest, and penalties. Being alerted to the CBSA's stated priorities for the coming year gives importers an important incentive to review their customs practices.

Not all trade verifications are established by priority or published in advance. The CBSA also conducts random verifications designed to measure compliance rates and revenue loss for the purposes of risk assessment, revenue assessment and to promote voluntary compliance. All importers are at risk of random verifications. Trade verifications may also arise from complaints from competitors.

The CBSA's verification priorities are determined through a risk-based, "evergreen" process, meaning that new targets are added throughout the year. The CBSA targets imported goods for verification of one or more of tariff classification, valuation and origin, and seeks to cover a high percentage of the volume of targeted imports. Verification of certain imported goods covered by previously initiated audits will continue this year, with the addition of some new targets.

Continuing verification priorities for tariff classification are:

  • air brakes and parts thereof;
  • articles of apparel and clothing accessories; 
  • articles of plastic; 
  • batteries;
  • bicycle parts; 
  • cell phone cases; 
  • certain sacks and bags;
  • chemical products;
  • curling irons;
  • dextrins and other modified starches;
  • disposable and protective gloves;
  • footwear (with values for duty in excess of $30);
  • furniture for non-domestic purposes;
  • geophysical and oceanographic instruments;
  • hair dryers and electric smoothing irons;
  • hair extensions;
  • handkerchiefs/towels/related paper products;
  • interchangeable tools;
  • live plants;
  • mountings/fittings/similar articles;
  • olive oil;
  • parts for machinery;
  • parts for power trains;
  • parts of lamps;
  • pasta;
  • photographic film;
  • prepared meat of swine;
  • railway equipment;
  • sausages and similar products;
  • seaweed;
  • special purpose motor vehicles;
  • stone blocks and slabs;
  • stone table and countertops;
  • tubes/pipes/hoses;
  • vices and clamps.

New verification priorities for classification are:

  • bags;
  • castors with mountings of based metal;
  • gloves;
  • mineral waters and aerated waters;
  • nails and similar articles of iron or steel;
  • pebbles and limestone and granules;
  • pickled vegetables;
  • safety headgear;
  • spent fowl;
  • yeasts and other micro-organisms.

Lastly, the CBSA has identified a new verification priority for tariff classification relating to import permit numbers, meaning a subset of tariff classification pertaining to tariff rate quota where import permits impact accessibility to preferred rates of duty.

For customs valuation, apparel is an eternal and continuing priority for the CBSA, and is now in its third round of verifications. The applicable rates of duty are quite high, unless benefiting from tariff preference, and as the following illustrates, importers have been shown to make erroneous classification declarations. The first round (issued in February 2012) resulted in 15 out of 24 targeted companies being found non-compliant. The second round (issued in September 2015) resulted in 36 out of 119 targeted companies being found non-compliant. The current, third round of verifications began in April 2017 and is ongoing.

The non-compliance will have resulted in retroactive duties, GST and administrative monetary penalties for many of these companies.

Importers should note that transfer pricing and related party transactions are very impactful on valuation audits that have been targeted.

For origin, T-shirts are a continuing priority, now in its second round of verifications. The first round (released in June 2013) found 25 out of 51 cases of non-compliance. To date, the continuing second round has resulted in 8 cases of non-compliance out of 33 companies targeted, with 6 verifications still outstanding. The second round of verifications is ongoing.

"There is no time like the present" applies to importers in terms of their review of customs program compliance. Random trade verifications remain an important aspect of CBSA trade verifications. Preparation for audits is particularly important for importers of any of the priority verification items.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Darrel Pearson
Jesse Goldman
Jessica L. Roberts
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions