Canada Border Services Agency (“CBSA”) resets it “audit priority areas” twice a year. This sees CBSA designate certain tariff classification codes as priority areas for custom verifications (i.e., ‘audits’), based on the CBSA’s belief that those goods pose significant risks for non-compliance in terms of proper tariff classification, valuation, and country of origin.
CBSA has now released its July 2022 Trade Compliance Verifications, announcing a new priority area, as well as providing updates on a number of ongoing projects, which we have summarized below.
Tariff Classification
CBSA has provided updates on its audits of several priority areas:
- *New* Indicator Panels and Light-Emitting Diodes (LED) – Headings 85.31 and 85.41 – The risk identified is that electronic monitors and other furniture lights are misclassified under these Headings instead of under 85.28 or 94.05 (which have higher duty rates of up to 7%).
No results are available yet and importers of goods in these areas should expect forthcoming audits.
- *Ongoing* LED Lamps – Heading 85.39 – The risk identified is that other goods are misclassified under this heading instead of under 95.05 (which has a higher duty rate of 7%).
The latest round of audits indicates a 93% non-compliance rate in this area. Further rounds of verifications appear to be coming.
- *Ongoing* Furniture for Non-domestic Purposes – Headings 94.01 and 94.03 – The risk identified is that furniture for domestic purposes is misclassified under these headings instead of under 94.01 or 94.03 (which have higher duty rates of up to 9.5%).
The latest round of audits indicates an 84% non-compliance rate in this area with a further round of verifications announced in April 2022.
- The remaining verification priorities for Batteries, Footwear, Parts of Lamps, Pasta, Cell Phone Cases, Pickled Vegetables, Gloves, Bags, Other Mountings and Fittings, Air Heaters and Hot Air Distributors, Flashlights and Miners’ Safety Lamps, Parts of Machines and Mechanical Appliances, Other Chemical Products, Bicycle Parts, and Parts for Use with Machinery are technically ‘complete’.
However, we are still waiting for the final penalty and compliance results of the remaining, unfinished verifications.
Valuation
CBSA has announced that its Apparel and Footwear verification priorities (first established in 2012) are now complete with the latest round of verifications, which found nearly 60% non-compliance in these areas.
CBSA reasons that the high rates of duty associated with these industries are responsible for deliberate undervaluation.
As before, we are still waiting for the final penalty and compliance results of the remaining, unfinished verifications.
Origin
CBSA has no active country of origin priorities at this time.
Commentary
The takeaway point is that importers of goods in any of CBSA’s new or ongoing ‘audit priority areas’ should consider making corrections or voluntary disclosures to avoid penalties before an audit is initiated.
While CBSA has begun to resolve some of its longer-standing audit priority areas, importers of those goods should not take this as an excuse to relax their compliance standards — since individual trade verifications can occur at any time. Importers should expect to be audited and should already be looking for pre-emptive advice!
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