Tax & Trade Blog
CBSA Audit Priorities: January 2024 Update!
The Canada Border Services Agency (“CBSA”) resets its “audit priority areas” twice per year. Essentially, the CBSA designates certain products as priority areas for customs verifications (i.e., “audits”) based on the program areas that the CBSA believes pose a significant risk for import non-compliance in terms of tariff classification, valuation, and/or origin of goods.
The CBSA has now released its January 2024 Trade Compliance Verification priorities, setting the stage for the next six (6) months. While there are no new audit priorities in this round, the CBSA has announced its intention to engage in new rounds of verifications on a number of historic issues, and updated its statistics on existing verifications. As is often the case, most of the focus is on tariff classification!
Tariff Classification Priorities
The CBSA is focusing on tariff classification for fourteen (14) types of goods. We encourage importers to review the list in full, but have picked out the following two items as of particular interest:
- Bags – Heading 42.02 – The CBSA is continuing to audit bags, and conducted a third round of verification for this item in July 2023. Given that the two previous rounds of verification found a 73% level of non-compliance by importers, this tariff item will likely be around for some time to come. Beware!
- Spent Fowl – Heading 02.07, 16.01 and 16.02 – A new round of verification was held for spent fowl as well. The CBSA looks set to keep auditing this area, likely because of the huge duties that apply to Tariff Rate Quota (“TRQ”) controlled items like poultry (which we blogged on here).
The results of further rounds of verification for other existing priority items can be viewed here.
Importers should also note that the 2024 Customs Tariff has been released, which became effective on January 1, 2024.
The CBSA has one origin priority concerning Bedding and Drapery (Headings 63.01, 63.02, and 63.03). In two past rounds of verifications (2012 and 2017) the CBSA determined that nearly half of the US manufacturers targeted were incorrectly declaring goods as “Made in the USA” despite being composed of fabrics not originating in a NAFTA country. Importers should seek legal assistance when they wish to claim their products originate in a CUSMA/USMCA (formerly NAFTA) country.
The CBSA is focusing (again) on auditing apparel imports under Chapters 61 and 62 of the Harmonized System (HS). In the CBSA’s fourth and most recent round of verifications, 45% of the companies targeted were found to have had some form of non-compliance with respect to the valuation provisions of the Customs Act.
Importers of apparel should expect that the CBSA will be looking at the valuation of goods imported under Chapters 61 and 62 very closely!
What Does this Mean for Importers?
While importers should always try to get things like tariff class, valuation and origin correct the first time, the CBSA’s audit priorities are special targets because of the high levels of non-compliance already identified. This can be a confusing area for some importers, so legal advice is recommended!