tariff classification fresh cut · pdf file• the risk identified is that fresh cut...

Archived Verification Priorities January 2018

Tariff Classification:

Fresh Cut Flowers

• The risk identified is that fresh cut flowers may be misclassified as “other” fresh cut flowers, which attract a duty rate of 6%.

• Flowers named in the Customs Tariff should be classified under their respective tariff items, which attract duty rates from 8% to 16%.

• This verification priority was released in April 2012 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by

Importers ($) Penalties ($) Total ($)

32 32 23 72% $13,294 $112,971 $66,000 $192,265

• The results show that many flowers specifically named in the Customs Tariff were misclassified as other fresh cut flowers.

• A verification priority regarding the valuation of fresh cut flowers is also completed.

Palm Oil (Round 2)

• The risk identified is that crude palm oil of tariff item 1511.10.00 and other palm oils of tariff item 1511.90.90, which are dutiable, could be misclassified under other tariff items that are duty-free.

• This verification priority was released in May 2013 and $151k was assessed in revenue, as 5 out of 9 cases were found to be in error.

• A second round of verifications was released in November 2014 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by

Importers ($)

Penalties ($) Total ($)

8 8 5 63% $295,550 $4,850,778 $150 $5,146,478

• The results show that most of the goods that were found to be misclassified were properly re-classified under subheading 1517.90 or under tariff item 1511.90.90 of the Customs Tariff.

Wheel Rims and

Spokes (Round 2)

• The risk identified is a potential misclassification of goods under tariff item 8714.92.00, which is duty-free and applies only to wheel rims and spokes for vehicles of Headings 87.11 to 87.13 (e.g., motorcycles, bicycles, and carriages for disabled persons). It was suspected that some goods should have been classified under tariff item 8708.70.19 as road wheels of motor vehicles of Headings 87.01 to 87.05, which attracts a duty rate of 6%.

• This verification priority was released in February 2012 and $153k was assessed in revenue, as 8 out of 9 cases were found to be in error.

• A second round of verifications was released in August 2013 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


12 12 12 100% $11,554 $15,654 $300 $27,508

• The results confirmed that the majority of the goods that were verified were in fact for use on motor vehicles.

Apparel Samples

• The risk identified is that apparel classified under conditional relief tariff item 9936.00.00, which is duty-free, may not comply with the usage conditions set out in this tariff item. Duty rates for apparel range as high as 18%.

• This verification priority was released in March 2014 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


9 9 8 89% $13,111 $5,334 $1,350 $19,795

• The results show that some of the goods that were verified did not qualify for the use of conditional relief tariff item 9936.00.00 of the Customs Tariff.

Bags of Polymers of

Ethylene

• The risk identified is that bags of polymers of ethylene may be misclassified under tariff items that attract a duty rate of 6.5% under the MFN or 3% under the GPT, but should instead be classified under Headings 42.02, 46.02 and 63.05, which attract duty rates as high as 18% under the MFN or 7% under the GPT.


Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


18 18 4 22% $1,291 $46,321 $0 $47,612

• The results show that most of the goods that were found to be misclassified were properly re-classified under Heading 42.02 of the Customs Tariff.

Generating Sets

• The risk identified is that generating sets could be incorrectly classified within Heading 85.02, instead of being properly classified elsewhere within the same position, and potentially be subject to a duty rate of 2%.

• This verification priority was released in August 2014 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


24 24 20 83% $89,171 $2,053 $2,100 $93,294

• The results show that the goods that were found to be misclassified were properly re-classified under various tariff items of Chapters 84 and 85 of the Customs Tariff.

Coconut Milk from

Asian Countries (Round 2)

• The risk identified is that full cream or whole milk powder, properly classified as dairy products under Heading 04.02, may be misclassified as coconut powder or milk under various tariff items. Many tariff items of Heading 04.02 contain “over access commitment” duty rates as high as 295.5%.

• This verification priority was released in May 2012 and $160k was assessed in revenue, as 7 out of 9 cases were found to be in error.

• A second round of verifications was released in July 2013 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


33 33 14 42% $27,643 $61,730 $4,950 $94,323

• The results show that the goods that were found to be misclassified were properly re-classified under Chapters 4, 11, 12, 19, 20, 21 and 22 of the Customs Tariff.

Gazebos (Round 2)

• The risk identified is that gazebos could be misclassified as pre-fabricated buildings, which attracts a duty rate of 6% under the Most-Favoured-Nation Tariff (MFN) and is duty-free under the General Preferential Tariff (GPT). The goods may be properly classified as structures of aluminum under tariff item 7610.90.90, which attracts a duty rate of 6.5% (MFN) and 5% (GPT).

• This verification priority was released in November 2013 and $613k was assessed in revenue, as 4 out of 4 cases were found to be in error.

• A second round of verifications was released in August 2014 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


29 29 15 52% $58,715 $57,639 $300 $116,654

• The verifications confirmed the suspected misclassification.

Machinery for

Public Works

• The risk identified is that machinery could be misclassified as machinery for public works, building or the like, which is duty-free, instead of being properly classified under tariff item 8705.90.10, which focuses primarily on special purpose motor vehicles and attracts a duty rate of 6.1%.


Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


10 10 2 20% $0 $0 $0 $0

• The results show that the majority of the goods verified were properly classified as machinery for public works.

Polyurethanes in

Primary Forms

• The risk identified is that goods could be incorrectly classified under subheading 3909.50 (i.e. polyurethanes in primary forms), which is duty-free, whereas the goods may not be in a primary form and therefore should instead be classified in tariff items that are subject to a duty rate of 6.5%.

• This verification priority was released in July 2014 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


21 21 8 38% $39,709 $101,153 $150 $141,012

• The results show that the goods that were found to be misclassified were properly re-classified under various tariff items of Chapters 32, 35 and 38 of the Customs Tariff.

Articles of Iron or Steel

• The risk identified is that articles of iron or steel could be incorrectly classified within Heading 73.26, instead of being properly classified elsewhere within the same Heading, and potentially be subject to a duty rate of 6.5%.

• This verification priority was released in May 2015 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


14 14 10 71% $6,061 $20,507 $9,900 $36,468

The results show that most of the goods that were found

to be misclassified were properly re-classified elsewhere within Chapter 73 of the Customs Tariff.

Spectacle Lenses

(Round 2)

• The risk identified is that spectacle lenses may be misclassified within Heading 90.01, which is duty-free for certain goods, and may be properly classified under other tariff items within the same heading as "other" products, which attract a duty rate of 2%.

• This verification priority was released in January 2013 and $776k was assessed in revenue, as 8 out of 10 cases were found to be in error.

• A second round of verifications was released in November 2014 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


19 19 15 79% $13,589 $118,919 $4,500 $137,008

• The results show that most of the goods that were found to be misclassified were properly re-classified under tariff item 9001.50.90 of the Customs Tariff.

Cereals

• The risk identified is that cereals could be incorrectly classified under Heading 10.08, whereas the accurate tariff items could potentially be subject to various duty rates depending on the appropriate classification that may be determined.

• This verification priority was released in December 2014 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


7 7 7 100% $17,247 $12,631 $150 $30,028

The results show that the goods that were found to be

misclassified were properly re-classified under various tariff items within Chapters 10, 11, 12 and 19 of the Customs Tariff.

Valuation:

Fresh Cut Flowers

• The risk identified is that aside from the potential misclassification of fresh cut flowers, there is also a risk of undervaluation of the goods.

• Companies were selected for both valuation and tariff classification trade compliance verifications.


Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


30 30 23 77% $119,183 $508,915 $18,000 $646,098

• The results show that many goods were found to be valued incorrectly (e.g., transportation costs were not added to the price paid or payable).

Yachts for Pleasure

or Sport

• The risk identified is that importers of yachts and pleasure crafts may not be in compliance with the valuation provisions of the Customs Act. The industry has been selected given the high rates of duty associated with Heading 89.03. Tariff items under this heading are dutiable with the exception of tariff item 8903.99.10 (racing shells), which is duty-free.


Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


10 10 3 30% $5,171 $3,460 $450 $9,081

• The results show that some goods were found to be valued incorrectly (e.g., service fees were not added to the price paid or payable).

Footwear

• Given the high rates of duty associated with footwear (Chapter 64), there is a risk that importers of footwear may not be in compliance with the valuation provisions of the Customs Act. The duty rates vary from 10% to 20%.

• This verification priority was released in February 2012 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


16 16 7 44% $380,334 $2,351,737 $1,950 $2,734,021

• The results show that many goods were found to be valued incorrectly (e.g., freight charges and service fees were not added to the price paid or payable).

Preparations and

Pastrycooks’ Products

• Given the rates of duty associated with preparations of cereals, flour, starch, milk, and pastrycooks’ products, this industry was selected for verification. The products are generally classified under Chapter 19 and the majority of the Harmonized System numbers are dutiable, while others are subject to Tariff Rate Quotas.

• This verification priority was released in June 2012 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


9 9 5 56% $116,454 $1,023,919 $2,400 $1,142,773

• The results show that many goods were found to be valued incorrectly (e.g., packaging and transportation costs were not added to the price paid or payable).

Origin:

Mattress Upholstery

• This verification priority was initiated following an industry complaint about exports of mattress casings from the USA to Canadian mattress manufacturers, claiming the provisions of NAFTA, when textile material may have been sourced from outside NAFTA territories.


Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


18 18 8 44% $64,453 $115,342 $25,900 $205,695

• The results show that some goods did not qualify under NAFTA.

Bedding and Drapery

• The risk identified is that manufacturers in the United States of America 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.

• This verification priority was released in February 2012 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


15 15 8 53% $57,385 $558,930 $525 $616,840

• The results confirmed that many of the products that were verified did not qualify under NAFTA because of the inputs used in their production.

Cotton Pants

• Previous verifications indicated that there was evidence that men’s or boy’s cotton pants of subheading 6203.42 frequently failed challenges to their entitlement as originating goods under the NAFTA tariff treatments due to the fabric-forward requirement of the specific rule of origin governing the goods.

• This verification priority was released in May 2012 and is now complete.

Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by Importers ($)

Penalties ($) Total ($)

13 13 1 8% $653,389 $0 $0 $653,389

• The results indicated that most of the verified goods qualified under NAFTA.

Jewelry

• The risk identified is that jewelry classified in Chapter 71 may not meet the specific rule of origin and therefore does not qualify for duty-free importation under NAFTA.


Targeted Companies

Cases Closed

Cases in Error

% Non-Compliance

DAS Issued ($)

Self-Adjustments by


9 9 3 33% $0 $167,684 $4,500 $172,184

• The results show that some goods classified as jewelry do not qualify under NAFTA.

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