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15 August 2019 Canada Border Services Agency updates trade compliance verification list The Canada Border Services Agency (CBSA) released its semi-annual list of trade compliance verification (audit) priorities in July 2019. The list is designed to update the importing community on ongoing verification priorities and set the stage for new priorities for the upcoming calendar year. The CBSA continues to focus on tariff classification as a priority audit area, with the introduction of eight new rounds to the list of tariff classification priorities. The CBSA uses trade compliance verifications to ensure that importers comply with customs legal requirements and programs. The objectives of conducting verifications are to:
The CBSA manages trade compliance within three program categories — tariff classification, valuation and origin — using two verification processes: random statistical-based verifications and targeted verification priorities. Verifications, which are selected using a statistical model, are designed to measure compliance rates and revenue loss. The results are used by the CBSA for many purposes, including risk assessment (which may lead to targeted verification priorities — see below), revenue assessment and the promotion of voluntary compliance. Targeted verification priorities are established using a risk-based, evergreen process. New targets are added throughout the year. Verification priorities may also be carried over from previous years. Importers that deal in products or industries that are outside the targeted verification priorities should not presume they will avoid a verification this year. Through the random statistical-based verifications, the CBSA continues to verify importers in sectors and industries not included in the list of verification targets. The second release of verification priorities for 2019 encompasses 25 tariff classification verification priorities, two valuation verification priorities and one origin verification priority. The continued focus on tariff classification may be due to the relative ease of verifying that goods have been classified correctly for customs purposes. Increased audit activity in this program may also lead to higher revenues for the CBSA.
The CBSA has added two new product types to the list of tariff classification verification priorities — parts of machines and mechanical appliances, and other chemical products. Current CBSA valuation priority targets are focused on two types of goods: apparel and footwear. Importers of these types of goods should assess whether they are prepared for a valuation verification audit. CBSA valuation audits targeting these imports have revealed that importers are omitting additions to the price paid or payable of goods mandated by statute such as design “assists,” not taking into account transfer price adjustments made for tax purposes, or not putting proper documentation in place to account for non-dutiable agent commissions, where applicable. In addition, importers that purchase goods from related parties and use transfer pricing as the basis for customs values should consider their record-keeping obligations and whether the documentary support on record is sufficient to defend the use of a transfer price as the basis for customs value. A single origin verification priority listed by the CBSA that remains ongoing since the last listing of verification priorities relates to the North American Free Trade Agreement (NAFTA): bedding and drapery. The purpose of a NAFTA origin verification is to determine whether goods imported into Canada are entitled to the NAFTA preferential rate of duty according to the NAFTA rules of origin. The full listing of CBSA trade compliance verification priorities can be found on the CBSA’s website: https://www.cbsa-asfc.gc.ca/import/verification/menu-eng.html. CBSA verifications can be time-consuming and costly for importers. Companies must be proactive and adopt an informed compliance mindset. Best practices for companies include implementing programs, frameworks and methodologies to help maintain and continuously improve their customs and trade compliance profile. Ernst & Young LLP (Canada), Canadian Leader – Global Trade, Toronto
Ernst & Young LLP (Canada), Toronto
Ernst & Young LLP (Canada), Quebec and Atlantic Canada
Ernst & Young LLP (Canada), Calgary
Document ID: 2019-6028 | ||||||||||||||||||||||||||||||
