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CBSA AUDITING STRUCTURAL STEEL

CBSA'S ONGOING SCRUTINY IN STEEL PRODUCTS CLASSIFICATION SIGNALS RISING COMPLIANCE RISK

As we have blogged here and here, the Canada Border Services Agency (the “CBSA”) sets out its priority areas for compliance audits and verifications in its Trade Compliance Verification Priorities publication.  Steel and metal products have long been among the CBSA’s primary focuses for compliance review.

Recently, the CBSA has intensified its challenges to the classification of steel containers, interpreting tariff headings in ways that go beyond prevailing industry practice.  This shift reflects a broader trend toward more aggressive enforcement in the steel sector.

For importers, this trend heightens compliance risk.  The best approach is to seek legal advice early in the audit process and resolve classification issues before they escalate into formal assessments.

Tariff Classification of Storage Containers – CBSA “Offside”?

A recent example of the CBSA’s intensified audit can be seen in its treatment of unassembled steel containers.  The CBSA has taken the position that such storage units, previously classified under Heading 73.08 (Structures and parts of structures, of iron or steel), should instead be classified under Heading 94.06 (Prefabricated Buildings), despite prevailing industry practice to the contrary.

This reclassification can effectively result in an unexpected 6% most-favoured-nation tariff rate for importers who had previously claimed duty-free treatment under Heading 73.08.

On a preliminary view, the CBSA’s view appears problematic and potentially incorrect. 

The problem facing importers in this area, however, is that appealing these sorts of assessment positions is often a time sensitive and costly exercise.  Duties have to be prepaid, or appeal bonds purchased, usually well before the 90-day deadline for the appeal itself, as required under section 60 of the Customs Act.

This puts added stress on the appeal process, usually at the same time as importers may be rushing to evaluate the merits of an appeal. 

Best practices are therefore to obtain proper advice during the audit process and engage with CBSA verification officers on an advanced basis.  Turning an assessment around before it becomes an assessment is usually the best possible result!

Relying solely on broker assistance may also not be optimal, as customs verifications can quickly become legal matters, often with large exposures.

What Does this Mean for Importers?

Importers should be aware that tariff classification remains one of the most technical and complex areas of customs compliance.  Even minor differences in product design or intended use can significantly affect the applicable heading and duty rate.

With the CBSA’s ongoing audits of steel containers, long-standing tariff classifications, even those previously accepted by suppliers, brokers, or the CBSA itself, can no longer be assumed correct.  Seeking legal advice early in the audit process remains the most effective way to minimize the risk of costly assessments.

Takeaways

The CBSA’s current verifications on the proper tariff classification of steel containers are a good example of its aggressive enforcement approach in the steel sector.

Importers should recognize that once an assessment is issued, options for challenge can be costly.  The most effective strategy is to seek professional advice early in the audit process!

For help with Tariff Classification, please click here.

Download a PDF copy of this Blog here.