CBSA Compliance Audits Part 1

How to Avoid Running into Issues During a CBSA Compliance Audit

Some people never experience an audit, while others can feel as though they’re being unfairly and disproportionately picked on by customs. Whilst random audits do take place, certain imports are frequently misclassified and therefore run a greater risk of attracting the investigative attentions of the Canada Border Services Agency (CBSA). Take a look at the latest Trade Compliance Verifications List to see if you deal in any of the items mentioned.

Regardless of whether your products or industry are susceptible to the risk of audit, all importers are wise to prepare for this possibility. If customs agents do come a knocking at your door for audit purposes, you’ll want to ensure that your import records are all in order.

There are many ways you can avoid falling into the same traps that commonly befall other importers. Here are some of the most relevant and achievable:

• Take care to correctly value your goods. Undervaluation is one of the biggest bugbears of the CBSA. This is a ruse whereby the value of goods stated on the invoice is reduced in order to reduce the duties and taxes payable on the goods. Customs has unparalleled access to vendor-specific trade prices globally and is not easily fooled as to the value and origin of merchandise. For this reason (and to keep a clear conscience), it’s just not worth tampering with the true figures.
• Stay up-to-date with classification changes. These take place intermittently, so ensure you’re not caught out by mistakenly filing your items in the wrong category just because it was once-upon-a-time the right category.
• Double check your vendor information. Sellers make mistakes occasionally, sometimes innocently, sometimes in order to procure for themselves more favourable insurance or transportation costs. When this happens you will be in the firing line, not them.
• Account for any preferential tariff treatments. Retain completed Certificates of Origin proving that any goods for which you’ve claimed preferential tariffs are legitimately entitled to such treatment.
• If you spot a mistake, rectify the problem. As long as you get in there early enough, it’s rarely too late to fess up if you realise you’ve previously made an erroneous declaration. To document the change and apply for a correction, file an adjustment request by submitting Form B2 or ask your broker to do this on your behalf. Bear in mind that you will be liable for any back duty if you’ve underpaid.
• Maintain records for a period of 6 years. Keeping a comprehensive log of your imports over the past 6 years is essential to account for activities which may become the subject of future audits. Records can be in hard copy or electronic and should comprise all the relevant documentation evidencing each import, including bills of lading, invoices, receipts, certificates of origin and B3 Forms.

What Are the Consequences of Non-Compliance?

The CBSA plays fair and has no interest in creating problems where problems don’t exist. So, if you follow the steps above and conscientiously comply with declaration procedures, requirements and record-keeping, you’re unlikely to encounter any difficulties.

If, however, anomalies, errors or shady dealings are discovered during an audit, there will be a price to pay. This will come in the form of penalties, interest and other sanctions, such as possible retraction of importing privileges. The CBSA is entitled to go back 4 years to collect unpaid taxes and duties, which can really eat into your bottom line.

Reach out for Help

If you have worries about your compliance record, one of the most sensible and straightforward ways to verify previous documentation and ensure future compliance is via the services of a broker. Taking these measures proactively, in advance of any potential problems, will help keep you import activities on the straight and narrow.

Orbit Brokers are a Toronto-based brokerage firm, one of whose fields of expertise is helping clients escape the sanctions and penalties imposed by auditors due to faulty declarations. We can help you ensure that your products are classified and valued correctly as well as properly documented so that you don’t lose sleep over the prospect of an adverse audit. Avoid needless exposure by Contacting Us and letting us help guide you through the dos and don’ts!