One of the enforcement functions of the Canada Border Services Agency is to conduct compliance verifications or “customs audits” to assess an importer’s compliance with, among other things, tariff classification, origin or value for duty rules. A compliance verification could result in assessments of additional customs duties, Goods and Services Tax and other import levies, plus interest and administrative monetary penalties (AMPS). Compliance verifications are also time consuming for the importer’s compliance professional who must assemble all the documentation from sample import transactions selected by the CBSA officer conducting the audit, and potentially file correcting entries should the CBSA determine that errors occurred during the verification period.
Importer best practices
An importer who takes the initiative to conduct their own internal reviews or audits before the CBSA commences an audit, can enjoy certain benefits. For example, such an importer has the opportunity to file a voluntary disclosure and avoid any AMPS penalties. Alternatively, the importer may in certain circumstances benefit from the CBSA’s reassessment policy which permits such an importer to be exempt from having to make correcting entries for past errors, so long as the entries are corrected going forward.
The January 2022 verification targets list
Given the foregoing, it is helpful for importers to know in advance the types of issues the CBSA will be targeting in their customs audits each year. In this regard, the CBSA issues its verification targets twice a year, once in January and again in July. The CBSA recently issued its January 2022 verification targets and as is typical, the audits focus mainly on tariff classification issues, but also a few valuation concerns. Interestingly, the CBSA has not targeted any origin related issues for the first half of 2022.
The chart below summarizes the various verification targets by tariff classification, description, and an indication of how many companies have been selected for audit to date and the number of active cases for each target
A. Tariff Classification Targets
| Tariff Classification |
Description |
Importers Selected |
Active Cases |
|
2.07, 16.01, 16.02
|
Spent Fowl
|
121 (2 rounds)
|
39
|
|
19.02
|
Pasta
|
147 (3 rounds)
|
3
|
|
20.01
|
Pickled Vegetables
|
151 (4 rounds) plus new round 5
|
1 plus new round
|
|
38.24
|
Other chemical products
|
18 (1 round)
|
4
|
|
39.26, 42.02, 85.17
|
Cell phone cases
|
39 (Rounds 1-2) plus new round 3
|
New
|
|
39.26, 42.03
|
Gloves
|
50 (2 rounds)
|
9
|
|
42.02
|
Bags
|
60 (2 rounds)
|
8
|
|
64.03
|
Footwear ($30 or more per pair)
|
195 (4 rounds)
|
3
|
|
73.22
|
Air heaters and hot air distributors
|
43 (2 rounds)
|
4
|
|
83.02
|
Other mountings and fittings, suitable for furniture
|
36 (2 rounds)
|
11
|
|
84.31
|
Parts for use with machinery of Chapter 84
|
25 (2 rounds) plus new round 3
|
New
|
|
85.06
|
Batteries
|
45 (4 rounds)
|
5
|
|
85.13
|
Flashlights and miners’ safety lamps
|
37 (2 rounds)
|
5
|
|
85.39
|
LED Lamps
|
27
|
20
|
|
87.14
|
Bicycle Parts
|
104 (2 rounds) plus new round 3
|
New
|
|
94.01, 94.03
|
Furniture for non-domestic purposes
|
132 (3 rounds)
|
29
|
|
9403.90.00
|
Stone table and counter tops
|
21 (2 rounds)
|
2
|
|
94.05
|
Parts of Lamps
|
253 (4 rounds)
|
42
|
B. Valuation Targets
| Tariff Classification |
Description |
No. of Audits |
Active Cases |
|
Chapters 61, 62
|
Apparel
|
228 (3 rounds) plus new round 4
|
1 plus new round
|
|
Chapter 64
|
Footwear
|
79 (2 rounds)
|
9
|
C. Origin
No active cases.
Greg Kanargelidis is a customs and trade lawyer practicing as KANARGELIDIS Global Trade & Customs Law, and is currently past-Chair of the CBA’s Commodity Tax, Customs and Trade Section.