The Canada Border Services Agency (CBSA) has released its second round of 2021 Trade Compliance Verifications, which includes the CBSA list of verification priorities (also known as the audit priorities list).
If a business imports goods listed as an audit priority, it is likely to be subject to a CBSA trade compliance verification (or audit). If the verification uncovers instances of noncompliance and results in a negative audit finding, the business may:
- Have to pay additional duty,
- Be charged punitive interest, and
- Be assessed penalties under the CBSA’s Administrative Monetary Penalty System (AMPS).
Note: CBSA audits are not limited to the audit priority categories listed in the Trade Compliance Verification document linked above. The CBSA may conduct random audits on any goods imported into Canada.
Importers can avoid these potential customs risks by having appropriate compliance measures in place before they are audited by the CBSA. Planning and implementing appropriate customs compliance measures and knowing what the CBSA often looks for can help a business in seeking to avoid a 6% punitive interest assessment that may apply in cases of noncompliance. As well, correcting import mistakes before the commencement of an audit normally would result in no penalties being assessed.
Importers should consider the following:
- Know what their business actually imports, and
- Determine their level of compliance with the law/regulations on issues such as customs valuation, tariff classification, and origin, among other considerations
These steps should be undertaken to understand current compliance levels. While the current state may not reflect the past, it will help frame the next steps to deal with any potential customs issues. Companies should be aware that a negative audit finding can hurt their business financially and could lead to a reassessment or even supply-chain disruptions due to closer CBSA scrutiny.
Companies should take steps to correct past errors in import declarations before being notified of a CBSA audit. If a company discovers an error before being notified of a CBSA audit, it can:
- Make a simple correction in many cases, or
- File a voluntary disclosure, if needed and eligible.
In either case, both penalties and punitive interest normally would be waived, resulting in significant potential savings. Commencement of an audit may prevent the importer from benefiting from the CBSA’s Voluntary Disclosure Program.
In addition to identifying errors, companies should be mindful of duty overpayments. They should review both current and past transactions to identify savings and other potential opportunities relating to import declarations, including any refund possibilities.
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