Written By Darrel Pearson
As has become its customary practice at this time of the year, the Canada Border Services Agency (CBSA) has published its trade verification (audit) priorities for the coming year. The audits will cover three programs that impact individually and collectively on the amount of duties and Goods and Services Taxes (GST) importers pay: tariff classification, customs valuation, and origin. The rate of duty applicable to imported goods is derived from their tariff classification, that is the description of the category of goods within which they fall as set out in the applicable schedule of the Customs Tariff, and their origin, that is the tariff preference applicable based on the application of rules of origin. Customs valuation relates to the base of appraisal of their 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. The audits are intended to ensure compliance, which in turn ensures that the correct amount of import tax is collected and that the Canadian government obtains accurate data necessary to best enable its trade negotiations.
From the point of view of Canadian importers, CBSA trade verifications are time-consuming, business disruptive and often result in assessments of duties, GST, interest, and penalties. Having a heads up as to specified priorities offers importers a degree of notice that they should review their customs practices for compliance. However, not all trade verifications are established by priority and are published in advance. Random verifications, undertaken to measure compliance rates and revenue loss are also undertaken by the CBSA, for the purposes of risk assessment, revenue assessment and for the promotion of voluntary compliance. All importers are at risk of random verifications.
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 with the verification. The priorities are established using a "risk-based, evergreen process", involving the continued verification of imported goods covered by previously initiated audits and the addition of new targets throughout the year.
Continuing priorities for tariff classification are: curling irons, spectacle lenses, furniture for non-domestic purposes, seaweed, dextrins and other modified starches, disposable and protective gloves, batteries, footwear with values for duty in excess of $30, hair extensions, special purpose motor vehicles, parts for power trains, geophysical and oceanographic instruments, cereals, articles of clothing and apparel accessories, bicycle parts, articles of plastic, articles of iron or steel, vices and clamps, parts for machinery, tubes/pipes/hoses, parts of lamps, chemical products, pasta, hair dryers and electric smoothing irons, cell phone cases, mountings/fittings/similar articles, stone table and countertops, prepared meat of swine, live plants, interchangeable tools, air brakes and parts thereof, and handkerchiefs/towels/related paper products. New priorities for classification are: olive oil, photographic film, stone blocks and slabs, railway equipment, sausages and similar products, certain sacks and bag.
Continuing priorities for customs valuation are: apparel, and preparations and pastry cook's products. No new valuation priorities have been announced.
Continuing priorities for origin are: T-shirts and jewelry. No new origin priorities have been announced.
As noted, this is a good time for importers to review their customs program compliance as 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.