Clearit.ca's Blog on Customs Brokerage and News Updates
Fail to prepare, prepare to fail. No matter what kind of business you are, if you are importing or exporting goods, you should be prepared for the likely situation that you will be audited. The Canada Border Services Agency (CBSA) audit will cover tariff classification, duties, verification of origin, and free trade agreements. There are 2 different kinds of CBSA audits: randomly selected, or a targeted verification.
In both cases, the audit is intended to make sure that your business is compliant with all applicable regulations in place.
You may want to ask yourself these questions in order to make sure you’re ready:
Have I classified goods properly?
As you may be aware, the classification of a good is determined by the Harmonized Tariff Schedule (HTS) — the schedule determines any duties, along with all of the potential classifications. The rule of thumb here is to know as much as possible about the good before you classify it.
For example: a knife can be under a different classification based on whether or not it’s serrated!
Is the value of goods correct?
You must declare the value for the imported goods — and it must be accurate! This value, typically the equivalent of the transaction value, determines how much duty is paid on the goods. The value is not simply the price paid, but is an overall sum that takes into account other payments such as royalties, commissions, and sometimes, transport costs.
If it is found that you did not value the goods correctly, it will likely result in significant fees, including the repayment of outstanding duties and taxes.
Am I applying Free Trade Agreements properly?
As an importer/exporter, you have the legal duty to accurately analyze the good’s FTA eligibility thoroughly and correctly before claiming any reduction in fees or duties, or issuing a Certificate of Origin.
Compliance with FTAs requires an understanding of the law and its effect on the importing/exporting procedures of varied goods — particularly, your own! It is highly recommended that you become, or remain, knowledgeable of these rules and regulations, as you may be subject to penalties if incorrectly claimed.
Did I report the right country of origin?
If all your information is marked clearly, then an audit will go smoothly. Identifying the correct country of origin is an important factor for determining duties and to properly inform customs. It is your responsibility to have this information readily available, and accurate. Keep in mind that there can only be one country of origin per good!
The case may be that your goods are assembled in multiple countries! So, it’s wise not to assume that the Country of export is the country of origin. You must perform a country of origin analysis to determine the correct origin.
Long ago, business owners that did not pay the duties imposed by monarchs were publicly flogged. Thankfully, that’s no longer the case. Being audited can go one of two ways. By ensuring that your books are in order and being diligent in providing the correct information relative to your goods, the process will leave you feeling confident in the face of so many rules and regulations- rather than sweating and being smacked with some hefty penalties!