A report by the
Auditor General of Canada on Canadian customs duties is likely to result in changes to the customs compliance and enforcement regime.
Recommendations
Three of the report’s recommendations relate directly to how the CBSA assesses duties. In summary, it recommended that the CBSA:
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Review its customs broker licensing regime by considering features such as:
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a licensing process that requires periodic assessment of a broker’s compliance record, and
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shared liability between brokers and importers for compliance with import requirements and payment of duties and taxes.
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Review its penalties in order to better protect import revenues and ensure compliance with trade programs.
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Review the period allowed for retroactive changes on the import form – without compromising its ability to conduct compliance verifications.
The report also included a review of importer compliance with tariff rate classifications and found many instances of incorrect or insufficient documentation – meaning a good likelihood of greater scrutiny of import documentation going forward.
In response, the CBSA committed to taking action to comply with each of the recommendations within a specified time period (ranging from June 2018 to December 2019).
What to watch for
Cole’s industry specialists have reviewed the report for indications of potential impacts to our clients. We recommend that Canadian businesses watch for changes down the road that could include any of the following:
- Increased compliance measures could result in increases in the value and frequency of penalties, driving up your costs.
- If the minimum value for duty exemption increases – as is alluded to in the report – Canadian manufacturers and retailers could face greater competition from foreign suppliers.
- There could be increased responsibility on the importer to supply more comprehensive product descriptions on import documents, resulting in clearance delays and increased time and costs for providing information.
- CBSA could step up scrutiny on refund claims and appeals, meaning longer processing times. A by-the-book application of the rules will likely result in more rejected claims.
- Shorter time frames for filing for duty refunds may result in missed deadlines and lost opportunities.
- Increased scrutiny around quota goods, drawbacks and duty relief programs will mean increased controls, more audits, higher penalties and longer approval times to qualify for these benefits.
- CBSA may mandate joint liability for compliance on importers and their brokers. This could have the benefit of closer working relationships between the two parties, but it could also increase brokerage fees paid by importers.
Be prepared
Keep your ear to the ground for news of impending changes to the customs compliance and enforcement regime. And in the meantime, take the time to plan your trade strategy:
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Start working with your vendors now to improve product descriptions on import documentation.
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Review your customs tariff database and preferential trade programs with your broker.
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Talk to experienced trade consultants or trade lawyers to review your current compliance levels and your readiness to import under a stronger compliance and penalty environment.
The
full Auditor General’s report can be found
here.
We can help
Email our Consulting department to discuss how these potential changes could affect you and for advice on planning your trade strategy in a tighter compliance environment.
Information provided by: Canadian Customs Consulting Dept. - Cole International