Canada: Priorities For Trade Verification Compliance – July 2019

Last Updated: September 19 2019
Article by Paul M. Lalonde, Anca Sattler and Sean Stephenson

The Canadian Border Services Agency (CBSA) conducts verifications to ensure that importers comply with the legislation and regulations administered by the CBSA. The CBSA carries out verifications under the provisions of section 42.01 of the Customs Act. Periodically, the CBSA releases a list of most recent priorities for Trade Verification Compliance, listing the goods that present a risk of non-compliance with tariff classification, valuation for duty, or origin programs.

The CBSA selects the verification method (random or target verifications) to be used for reviewing imported goods based on the specific program needs and the nature of the importer's activities. According to the CBSA, the target verification priorities are determined through a risk-based process throughout the year. This is an ongoing process and new priorities may be added to or removed from the list during the course of the year.

When comparing the Trade Compliance Verification list recently released by the CBSA in July 2019 with the list released by the CBSA in January 2019, there are a number of changes and a few new goods added to the list. The CBSA has also removed from the list certain goods and has signaled the commencement of additional rounds of verifications for other goods, because the risk of misclassifying these goods under the wrong tariff number is still present.

The "Valuation" list remains unchanged when compared to the list released by the CBSA in January 2019. The "Origin" list no longer includes "T-Shirts", but still includes "Bedding and Drapery." The following tables illustrate the changes when the Trade Verification Compliance list of January 2019 is compared to the current priorities recently set by the CBSA in July 2019.

Tariff Classification

What is new in July 2019:

Goods Risks identified
Furniture for Non-Domestic Purpose
(Round 3 – New)*
Headings 94.01 (Seats) and 94.03 (Other furniture and parts thereof) - furniture for domestic purposes or other furniture for non-domestic purposes. The risk identified is that goods may be misclassified as furniture for non-domestic purposes, which is duty-free, instead of furniture for domestic purposes, which attracts a duty rate of up to 9.5%.
Footwear (CA$30 or more per pair)
(Round 4 - new)*
The risk identified is that footwear subject to a duty rate of 18% could be misclassified under other related tariff items, such as women's footwear valued at CA$30 or more per pair, which attracts a duty rate of 11%.
Articles of Plastics
(Round 3 – new)*
The risk identified is that articles of plastics could be incorrectly classified within Heading 39.26, instead of being properly classified elsewhere within the same Heading, and potentially be subject to a duty rate of 6.5%.
Parts of Lamps
(Round 3 – new)*
The risk identified is that imported goods could be incorrectly classified as parts of lamps, within Heading 94.05, instead of being properly classified elsewhere within the same Heading, or under other Chapters, and potentially be subject to various duty rates.
Safety Headgear
(Round 4 - new)*  
The risk identified is that safety headgear could be incorrectly classified under duty-free tariff items, whereas the goods could potentially be properly classified as other safety headgear under tariff item 6506.10.90, which attracts a duty rate of 8.5%.
Import Permit Numbers
(Round 2 – new)*
The risk identified is that imported goods could be classified under "within access commitment" tariff items within Chapter 2 (meat of bovine animals and poultry) and Chapter 4 (dairy products), without the required import permit number on the declaration. Those chapters include goods that are subject to tariff rate quotas (TRQs) under Canada's supply management system.
Parts of Machines and Mechanical Appliances (new) The risk identified is that imported goods could be incorrectly classified as parts of machines and mechanical appliances within Heading 84.79, instead of being properly classified elsewhere within various chapters, such as 39 and 73, and be subject to duty rates up to 6.5%.
Other Chemical Products (new) The risk identified is that imported goods could be incorrectly classified as other chemical products within Heading 38.24, instead of being properly classified elsewhere within various chapters, such as 15 and 38, and be subject to duty rates up to 11%.

*Previous rounds of verification have been completed and the CBSA considers that the risks of misclassifying these goods are still present. Therefore, the CBSA has initiated new rounds of trade compliance verifications for these goods between January 2019 and July 2019.

Still present on the list:

Goods Risks identified
Batteries
(Round 3)
The risk identified is that batteries may be misclassified under duty-free tariff items within Heading 85.06, whereas they should be properly classified under other tariff items within the same heading, and be subject to a duty rate of 7%.
Articles of Apparel and Clothing Accessories
(Round 3)
The risk identified is that goods could be incorrectly classified within Heading 39.26, which attracts lower duty rates, instead of being properly classified under tariff item 6210.40.90 (other men's or boys' garments), or 6210.50.90 (other women's or girls' garments), which are subject to the significantly higher duty rate of 18%.
Vices and Clamps
(Round 2)  
The risk identified is that vices and clamps could be incorrectly classified within Heading 82.05, instead of being properly classified elsewhere within the same Heading, and potentially be subject to a duty rate of 6.5%.
Parts for Use with Machinery of Chapter 84
(Round 2)  
The risk identified is that parts for use with certain machinery of Chapter 84 could be incorrectly classified within Heading 84.31, instead of being properly classified under various tariff items, and potentially be subject to a duty rate of 6.5%.
Pasta
(Round 2)
The risk identified is that pasta could be incorrectly classified within Heading 19.02, which is subject to various duty rates, instead of being properly classified elsewhere within the same Heading, and potentially be subject to higher duty rates.
Cell Cases
(Round 2)
The risk identified is that cell phone cases could be incorrectly classified under various tariff items within Headings 39.26, 42.02 and 85.17, whereas the goods could potentially be properly classified under tariff item 4202.32.90 (articles of a kind normally carried in the pocket or in the handbag; with outer surface of sheeting of plastics or of textile materials; other), and be subject to a duty rate of 8%.
Olive Oil
(Round 2)  
The risk identified is that imported goods could be incorrectly classified as olive oil (under Heading 15.09), or others oils obtained solely from olives (under Heading 15.10), which are duty free, instead of being properly classified elsewhere within Chapter 15, and be subject to duty rates up to 11%.
Castors with Mountings of Base Metal The risk identified is that imported goods could be incorrectly classified as castors with mountings of base metal under Heading 83.02, which is duty free, whereas the goods could potentially be properly classified under dutiable tariff items, such as 8716.90.99 (parts of not mechanically propelled vehicles), and be subject to a duty rate up to 6.5%.
Pickled Vegetables
(Round 4)  
The risk identified is that dill pickles or baby dill pickles may be misclassified within Heading 20.01. Misclassification results in an avoidance of the 8% duty payable for subheading 2001.10, which would be the appropriate classification for pickles.
Gloves   The risk identified is that imported goods could be incorrectly classified as gloves within Headings 39.26 and 42.03, instead of being properly classified within Chapter 61 or 62, and potentially be subject to higher duty rates up to 18%.
Spent Fowl The risk identified is that imported goods could be incorrectly classified as spent fowl within Headings 02.07, 16.01 and 16.02, instead of being properly classified under tariff items subject to TRQs within the same chapters, and potentially be subject to very high duty rates.
Bags The risk identified is that imported goods could be incorrectly classified as bags within Heading 42.02, instead of being properly classified elsewhere within the same heading, and potentially be subject to duty rates up to 11%.
Mountings and Fittings, Suitable for Furniture The risk identified is that imported goods could be incorrectly classified as mountings and fittings, suitable for furniture, within Heading 83.02, instead of being properly classified elsewhere within various chapters, and be subject to duty rates up to 6.5%.
Air Heaters and Hot Air Distributors   The risk identified is that imported goods could be incorrectly classified as air heaters and hot air distributors within Heading 73.22, instead of being properly classified elsewhere within the same chapter, and be subject to duty rates up to 7.5%.
Flashlights and Miners' Safety Lamps The risk identified is that imported goods could be incorrectly classified as flashlights and miners' safety lamps within Heading 85.13, instead of being properly classified elsewhere within the same heading, and be subject to a duty rate of 7%.
Stone Table and Counter Tops
(Round 2)
The risk identified is that stone table and counter tops could be incorrectly classified under tariff item 9403.90.00, which is duty-free, instead of being properly classified under various tariff items within Heading 68.02, which attract duty rates up to 6.5%
Disposable and Protective Gloves
(Round 4)
The risk identified is that disposable and protective gloves, which are duty-free if the gloves qualify for specific end-uses, may be properly classified under tariff items 3926.20.91 or 4015.19.90, which attract a duty rate of 6.5% and 15.5%, respectively.

Removed from the Tariff Classification list in July 2019:

  1. Curling Irons (Round 3)
  2. Seaweed (Round 4)
  3. Dextrins and Other Modified Starches (Round 4)
  4. Hair Extensions (Round 3)
  5. Parts for Power Trains (Round 2)
  6. Tubes, Pipes and Hoses (Round 2)
  7. Hair Dryers and Electric Smoothing Irons
  8. Mountings, Fittings and Similar Articles
  9. Stone Blocks and Slabs (Round 2)
  10. Nails and Similar Articles of Iron or Steel
  11. Mineral Waters and Aerated Waters

Valuation List

No changes in July 2019. The following goods remain on the list:

Goods Risks identified
Apparel
(Round 3)
The risk identified is that, given the high rates of duty associated with the apparel industry (Chapters 61 and 62), importers of apparel may not be in compliance with the valuation provisions of the Customs Act. The duty rates vary from 10% to 18%.
Footwear
(Round 2)
Given the high rates of duty associated with footwear (Chapter 64), there is a risk that importers of footwear may not be in compliance with the valuation provisions of the Customs Act. The duty rates vary from 10% to 20%.

Origin list

One item was removed from the list:

  1. T-Shirts

The following good remains on the list:

Goods Risks identified
Bedding and Drapery
(Round 2)
The risk identified is that manufacturers in the United States of America were using fabrics not produced in the NAFTA territories as an input for bedding and drapery (under Headings 63.01, 63.02 and 63.03), but were declaring the goods as "Made in USA" in order to qualify for NAFTA.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com

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