In a typical Canada or US Customs audit, federal auditors set up an appointment to come to your premises to interview your personnel and gather information in the Purchasing, Receiving, Customs, and General Accounting areas, as a starting point in determining if proper linkages are in place to track your company’s import activities.

They will ask questions of your staff to determine if and where there are gaps in your import tracking and information management processes, request specific records, and forensically review each one to validate that accurate information has been used to report your foreign purchases.

Do your records distinguish between domestic and foreign purchases?t

Do your purchase orders match what was actually shipped by your foreign supplier?

Are quantities received the same as those reported at time of entry into Canada?

Can you track an import to a specific purchase order and receiving report?

Were shortages and overages flagged and reported to Customs after the fact?

Do the amounts actually paid for the goods match up with the values on the import documents?

Does the price paid to your foreign supplier reflect any royalties, commissions, assists, or tooling considerations?

Do your receiving and accounts payable documents match up with the Customs entries submitted?

Are your NAFTA certificates of origin accurate and valid—do they match the products you actually import?

Are the descriptions on the Customs invoices from suppliers an accurate reflection of the products you import?

What is your record keeping process for imports, where do you retain your import records, and for how long?

As with any CBSA or IRS audit for Corporate Tax, it is important to be transparent and forthcoming in providing information and documents that may be requested. It is advisable that a single point of accountability within your company at a senior level be assigned to work with Customs throughout the process, and to be the point person to oversee changes in your import processes that may need to be implemented as a result of Customs findings.

Your Canadian or US Account Manager should be advised as soon as you are notified by Customs that you will be undergoing a review, and be made aware of any changes to your import procedures that may result. After you have received the final report from Customs, it is imperative to address the prescribed corrective actions identified without exception, as these are considered to fall under “reason to believe” criteria, that will be reviewed on a priority basis in subsequent audits, and penalized retroactively.

Beyond the Custom’s audit findings, where errors or omissions are discovered by you or with the help of GHY Consulting, it is important to take the appropriate corrective action and report to Customs proactively within 90 days, to protect against the potential of penalties on those items.
 

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