Trade Compliance

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Canada Customs Updates Trade Compliance Verification Targets for 2020

Posted January 16, 2020


The Canada Border Services Agency has published an amended list of its current verification priorities as of January 2020, updating the status of various goods under review and to include new additions.

CBSA Compliance Management


The CBSA manages trade compliance with the Tariff Classification, Valuation, and Origin programs using a combination of two methods post-release – “random” and “targeted” verifications. 

Random Verifications


This approach is designed primarily to measure compliance rates and revenue loss, but the results may be used for many purposes, including:

  • Risk Assessment
  • Revenue Assessment
  • Promoting Voluntary Compliance

How Likely Are You to be a “Random” Target?

  • Understand what the CBSA is looking for when it comes to spotting risks of non-compliance (and associated revenue loss). This will improve your ability to estimate the chances of becoming the target of a “random” verification. 
  • For example, verification targets often identify that of misclassification; specifically, where a potential alternative classification to the correct one is used in order to claim free or reduced duty. Not all goods can be intentionally misclassified so easily though. 
  • The vast majority of products cannot be confused, as they are specifically identified in the Harmonized System classification scheme of the Customs Tariff.
  • However, if the classification of your product is unclear and could be covered by one or more different tariff classification numbers (at varying rates of duty), the odds of non-compliant misclassification makes it far more likely to be the target of a “random” verification.
  • Many other factors can also come into play when it comes to which shipments are selected by the CBSA for random verification, which may create a higher compliance risk profile for certain types of products.

What can be done to prevent the chance of being audited by Customs?

Regularly review the classification of your products to ensure they are consistently accurate. Specifically review past transactions to ensure the subject products are not being incorrectly classified or improperly valued, whether as indicated in the risk profiles or otherwise.

Targeted Verification Targets


The CBSA’s targeted verification priorities add new targets throughout the year. Verification priorities may also be carried over from previous years.

The CBSA’s current verification priorities are as follows:

Furniture for Non-Domestic Purposes (Round 3)
Harmonized System Number(s): Headings 94.01 and 94.03
Risk Identified: Goods may be misclassified as furniture for non-domestic purposes, which is duty-free, instead of furniture for domestic purposes, which attracts a duty rate up to 9.5%.R

Batteries (Round 3)
Harmonized System Number(s): Heading 85.06
Risk Identified: Goods may be misclassified under duty-free tariff items within Heading 85.06, whereas they should be properly classified under other tariff items within the same heading, and be subject to a duty rate of 7%.

Footwear ($30 or more per pair) (Round 4)
Harmonized System Number(s): Heading 64.03
Risk Identified: Goods subject to a duty rate of 18% could be misclassified under other related tariff items, such as women’s footwear valued at $30 or more per pair, which attracts a duty rate of 11%.

Articles of Apparel and Clothing Accessories (Round 3)
Harmonized System Number(s): Heading 39.26
Risk Identified: In the case of clothing containing a layer of plastic, combined with textile fabric that is not considered as reinforcement to the plastic, such goods could be incorrectly classified within Heading 39.26, which attracts lower duty rates, instead of being properly classified under tariff item 6210.40.90 (other men’s or boys’ garments) or 6210.50.90 (other women's or girls’ garments), which are subject to the significantly higher duty rate of 18%.

Articles of Plastics (Round 3)
Harmonized System Number(s): Subheading 3926.90
Risk Identified: Goods could be incorrectly classified within Heading 39.26, instead of being properly classified elsewhere within the same Heading, potentially subject to a 6.5% duty rate.

Parts of Lamps (Round 3)
Harmonized System Number(s): Heading 94.05
Risk Identified: Goods could be incorrectly classified as parts of lamps, within Heading 94.05, instead of being properly classified elsewhere within the same Heading, or under other Chapters, and potentially be subject to various duty rates.

Pasta (Round 2)
Harmonized System Number(s): Heading 19.02
Risk Identified: Goods could be incorrectly classified within Heading 19.02, which is subject to various duty rates, instead of being properly classified elsewhere within the same Heading, and potentially be subject to higher duty rates.

Cellphone Cases (Round 2)
Harmonized System Number(s): Headings 39.26, 42.02 and 85.17
Risk Identified: Goods could be incorrectly classified under various tariff items within Headings 39.26, 42.02 and 85.17, whereas the goods could potentially be properly classified under tariff item 4202.32.90 (articles of a kind normally carried in the pocket or in the handbag; with outer surface of sheeting of plastics or of textile materials; other), and be subject to a duty rate of 8%.

Olive Oil (Round 2)
Harmonized System Number(s): Headings 15.09 and 15.10
Risk Identified: Goods could be incorrectly classified as olive oil (under Heading 15.09) or others oils obtained solely from olives (under Heading 15.10), which are duty free, instead of being properly classified elsewhere within Chapter 15, and be subject to duty rates up to 11%.

Pickled Vegetables (Round 4)
Harmonized System Number(s): Heading 20.01
Risk Identified: Goods could be incorrectly classified as gloves within Headings 39.26 and 42.03, instead of being properly classified within Chapter 61 or 62, and potentially be subject to higher duty rates up to 18%.

Gloves (Round 2 – New)
Harmonized System Number(s): Headings 39.26 and 42.03
Risk Identified: Goods could be incorrectly classified as gloves within Headings 39.26 and 42.03, instead of being properly classified within Chapter 61 or 62, and potentially be subject to higher duty rates up to 18%.

Safety Headgear (Round 4)
Harmonized System Number(s): Subheading 6506.10
Risk Identified: Goods could be incorrectly classified under duty-free tariff items, whereas the goods could potentially be properly classified as other safety headgear under tariff item 6506.10.90, which attracts a duty rate of 8.5%.

Bags (Round 2 – New)
Harmonized System Number(s): Heading 42.02
Risk Identified: Goods could be incorrectly classified as bags within Heading 42.02, instead of being properly classified elsewhere within the same heading, and potentially be subject to duty rates up to 11%.

Import Permit Numbers (Round 2)
Harmonized System Number(s): Chapters 2 and 4
Risk Identified: Goods could be classified under “within access commitment” tariff items within Chapter 2 (meat of bovine animals and poultry) and Chapter 4 (dairy products), without the required import permit number on the declaration.

Other Mountings and Fittings, Suitable for Furniture
Harmonized System Number(s): Heading 83.02Risk Identified: Goods could be incorrectly classified as mountings and fittings, suitable for furniture, within Heading 83.02, instead of being properly classified elsewhere within various chapters, and be subject to duty rates up to 6.5%.

Air Heaters and Hot Air Distributors (Round 2 – New)
Harmonized System Number(s): Heading 73.22
Risk Identified: Goods could be incorrectly classified as air heaters and hot air distributors within Heading 73.22, instead of being properly classified elsewhere within the same chapter, and be subject to duty rates up to 7.5%.

Flashlights and Miners’ Safety Lamps (Round 2 – New)
Harmonized System Number(s): Heading 85.13

Risk Identified: Goods could be incorrectly classified as flashlights and miners’ safety lamps within Heading 85.13, instead of being properly classified elsewhere within the same heading, and be subject to a duty rate of 7%.

Stone Table and Counter Tops (Round 2)
Harmonized System Number(s): Heading 94.03
Risk Identified: Goods could be incorrectly classified under tariff item 9403.90.00, which is duty-free, instead of being properly classified under various tariff items within Heading 68.02, which attract duty rates up to 6.5%.

Disposable and Protective Gloves (Round 4)
Harmonized System Number(s): Subheadings 3926.20 and 4015.19
Risk Identified: Goods which are duty-free if the gloves qualify for specific end-uses, may be properly classified under tariff items 3926.20.91 or 4015.19.90, which attract a duty rate of 6.5% and 15.5% respectively.

Parts of Machines and Mechanical Appliances
Harmonized System Number(s): Heading 84.79
Risk Identified: Goods could be incorrectly classified as parts of machines and mechanical appliances within Heading 84.79, instead of being properly classified elsewhere within various chapters, such as 39 and 73, and be subject to duty rates up to 6.5%.

Other Chemical Products
Harmonized System Number(s): Heading 38.24
Risk Identified: Goods could be incorrectly classified as other chemical products within Heading 38.24, instead of being properly classified elsewhere within various chapters, such as 15 and 38, and be subject to duty rates up to 11%

Valuation:


Apparel (Round 3)
Harmonized System Number(s): Chapters 61 and 62
Risk Identified: Given the high rates of duty (10% – 18%) associated with the apparel industry (Chapters 61 and 62), importers of such goods may not be in compliance with the valuation provisions of the Customs Act.

Footwear (Round 2)
Harmonized System Number(s): Chapter 64
Risk Identified: Given the high rates of duty (10% – 20%) associated with footwear (Chapter 64), there is a risk that importers of such goods may not be in compliance with the valuation provisions of the Customs Act

Origin:


Bedding and Drapery (Round 2)
Harmonized System Number(s): Various goods of Headings 63.01, 63.02 and 63.03
Risk Identified: Manufacturers in the U.S. were using fabrics not produced in the NAFTA territories as an input for bedding and drapery (under Headings 63.01, 63.02 and 63.03), but were declaring the goods as “Made in USA” in order to qualify for NAFTA.

Need More Information?


Should you have any questions about the CBSA’s verification programs or want to discuss how GHY can provide you with an assessment of your exposure to risk of a customs audit, please contact our Consulting Department.

 

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