Thursday, September 23, 2010

CBSA Trade Compliance Verification Priorities

(Baker McKenzie LLP)

The Canada Border Services Agency (CBSA) recently published a list of products that will be the focus of the CBSA’s post-entry compliance verification programs (commonly referred to as audits) for the federal government’s 2010-2011 fiscal year. The areas of increased audit activity for each compliance verification program are as follows:

Tariff classification:
• Furniture parts
• Gloves
• Organic surface-active agents – soap and other than soap
• Stone vs. articles of stone
• Reclaimed rubber

Origin verification:
• Juice products
• Mattress upholstery
• Electric Generators
• Tools, implements, cutlery, spoons, and forks, of base metal; and parts

Valuation verification:
• Light-duty automotive goods

Under the Customs Act, the CBSA may conduct post-entry verification reviews of importers to ensure compliance with respect to the determination and reporting of the proper value, origin, and tariff classification of imported goods.

The CBSA conducts different types of audits for different purposes. The areas identified above were selected due to a perceived risk in an industry or by commodity as determined by the CBSA. Importers of goods in other sectors should not feel complacent, since the CBSA also conducts verification audits to measure compliance rates to determine industry or sectors that will be targeted in the future. Consequently, importers of goods other than those identified above may still be subject to audits in the current government fiscal year.

The CBSA conducts many post-entry verifications by way of a “desk audit”, whereby the importer is asked to supply customs accounting documents for a sample of importation transactions, as chosen by the CBSA, that have occurred during a selected audit period. Under certain circumstances, the CBSA may arrange an on-site visit to the importer’s premises, if needed.

In a typical desk audit where no site visit is required, the CBSA will generally provide the importer with 30 days in which to supply the requisite accounting documents. Once the CBSA officer begins conducting the audit, it is not uncommon for importers to receive additional requests for further information or clarification regarding the transactions chosen for review. Once the audit is complete, the CBSA will typically issue an interim finding letter and provide the importer with an opportunity to respond to the CBSA’s initial findings. The CBSA will then issue a final letter indicating its findings and will also issue formal determinations, known as Detailed Adjustment Statements, for any transactions determined by the CBSA to be in error. Under section 60 of the Customs Act, importers have a legal right to appeal the CBSA’s value, origin, and tariff classification determinations they believe are incorrect.

Source: Baker McKenzie LLP