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CBSA’s Audit Priorities – January 2022 Update

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Canada Border Services Agency (“CBSA”) resets it “audit priority areas” twice a year. This sees CBSA designate certain tariff classification codes as CBSA’s priority areas for custom verifications (i.e., “audits”), which is based on the program areas that the CBSA believes pose significant risks for non-compliance generally in tariff classification, valuation and origin of goods imported. 

Right on schedule, CBSA has now released its January 2022 Trade Compliance Verifications, setting the stage for this year, and we have summarized some of the notable issue areas here.

 
Tariff Classification Priorities
CBSA has given notice that its 2022 verification will focus on the following tariff classification categories:
  • LED – Heading 85.39 – Once again, CBSA identified imported lights, which are sometimes misclassified as light-emitting diode (LED) lamps under Heading 85.39, instead of Heading 94.05 which has a higher duty rate of 7%.  CBSA found a 100% non-compliance rate when initially auditing in this area!
  • Furniture for Non-Domestic Purposes – CBSA identified domestic furniture (up to 9.5% duty rate) as being potentially misclassified as commercial furniture. CBSA found a 83% non-compliance rate when initially auditing in this area!
  • Footwear ($30 or more per pair) – Heading 64.03 – CBSA again identified risk of certain footwear (up to 18% duty rate) being misclassified under Heading 64.03. CBSA found a 59% non-compliance rate in Round 4 of audit in this area!
  • Bags Heading 42.02 – Once again, CBSA identified misclassification of certain “bags”, within Heading 42.02, which might otherwise be subject to a higher duty rate of 11%. CBSA found a 69% non-compliance rate when initially auditing in this area!
  • Air heaters & Hot Air Distributors – Heading 73.22 – Once again, CBSA identified imported goods which are sometimes classified as Air Heaters and Hot Air Distributors within Heading 73.22, instead of other Headings which have a higher duty rate of 7.5%. CBSA found85% non-compliance rate here.
  • Bicycle and Machinery Parts – Heading 87.14 & 84.31 – CBSA identified Bicycle related goods could be incorrectly classified within Heading 87.14 instead of other Headings which have higher duty rate of 13% and, parts for use with certain machinery of Chapter 84 could be incorrectly classified within Heading 84.31 as machinery parts instead of other Headings which have a higher duty rate of 6.5%. CBSA found92% and 72% non-compliance in these areas respectively!
  • Chemical Products - Heading 38.24 – Once again, CBSA identified a misclassification of chemical products within Heading 38.24, which sometimes ought to be classified in Chapters 15 or 38 and be subject to higher duty rates of up to 11%. CBSA found a 71% non-compliance rate here!
Valuation Priorities
CBSA continues to focus on the following valuation categories:
  • Footwear - Heading 64.03 – Once again, CBSA also highlighted footwear as a “valuation” risk which means that importers of footwear can likely expect verifications focusing on both tariff class and value!
  • Apparel - Chapters 61 and 62 – CBSA again identified a number of valuation issues in this area, including “price paid or payable” and dutiable assists which are subject to duties of 10% to 20%. CBSA found up to 55% non-compliance in this area.
Origin Priorities
CBSA has not expressed its origin priorities at this time.

Commentary

The takeaway point for all importers is that CBSA is getting back to business in its enforcement of the three main customs programs (tariff class, valuation and origin), which means an increase in audits. Importers of goods in any of CBSA’s “audit priority areas” could make corrections or voluntary disclosures to avoid penalties before an audit is initiated. Importers should expect to be audited soon and should already be looking for pre-emptive advice!

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