Trade Compliance

Canadian Society of Customs Brokers

2012 Annual Conference

October 1, 2012

Introduction

• The administration of the traditional trade programs (i.e. tariff classification, trade incentives, origin and valuation) is housed within the CBSA’s Tariff, Origin and Valuation Division, which forms part of the Programs Branch in Ottawa.

• The majority of the related compliance activities, primarily trade verifications, are carried out by the CBSA’s Operations Branch with offices located across the country reporting through regional Trade Compliance Divisions.

Why Does the CBSA Invest in Trade Compliance?

Compliance Objectives

• To ensure that Canadian importers pay the appropriate duties and taxes on imported goods;

• To ensure proper self-assessment of the tariff classification, origin, and value for duty;

• To measure compliance with trade rules and to correct errors in declarations; and

• To ensure a level playing field for all importers.

Trade Compliance Activities

• Advance Rulings / National Customs Rulings

• B2 Adjustment Reviews

• Client Service Initiatives (including the Border

Information Service –BIS)

• Compliance Verifications: Random Selection Risk Based Selection

• Monitoring

Compliance Verification

• The CBSA performs trade compliance verifications for its primary trade programs (i.e. Tariff Classification, Tariff Treatment, Origin (Exporter), Valuation) and also for its Transportation and Trade Incentives programs.

• The verification procedures and processes are standardized and form part the CBSA’s Trade Verification Manual.

• The verification process remains the same regardless of whether the verification case has been randomly selected or risk based as a verification priority.

Trade Compliance Verification

Compliance Verification: Random Selection

• To measure compliance with the trade programs (tariff classification, valuation and tariff treatment) and the requirements of Other Government Departments (e.g. CFIA or DFAIT);

• To measure revenue gap;• May Also Be Used For:

• Risk assessment purposes• Developing and delivering client service activities• Revenue assessment• Promoting voluntary compliance.

* Importers selected using a statistically-sound methodology.

Compliance Verification: Risk Based Selection

• To identify inherent weaknesses within the trade programs;

• To engage stakeholders in the management of risks related to the trade programs;

• To keep stakeholders informed of the CBSA’s compliance verification activities and the ensuing results;

• To report on and monitor compliance verification results.

Verification / Audit Process

• Preliminary research • Case assignment• Initial notification to the company of the verification

(with initial information request)• Follow-up request for information / sample(s)• Report detailing the findings of the verifications

(with 30-day representation period)• Final letter / report

* Verification procedures are tailored to the specific trade program.

Verification / Audit Process (cont’d)

• The time line for the completion of a verification will depend on numerous factors:

• Trade program being addressed• Extensions granted for production of records and

other information• Requirement for an on-site visit• Requirement for laboratory analysis• Representation period

Post-Verification Considerations

• Detailed Adjustment Statement (DAS)• Self-corrections for the verification period or the

reassessment period• Reassessment Policy• Reason to Believe• AMPS• Recourse Mechanism• On-going Compliance - Monitoring

Upcoming Changes

• Increased efficiencies in the verification process to ensure timelier determinations.

• Focus on periodical adjustments to ease the frustrations with the self-assessment process.

• Greater emphasize on monitoring activities.

Being Proactive and Limiting Your Liability to Assessments and Penalties

Investing in Trade Compliance

• With falling duty rates, many decision makers within the trading community are finding it difficult to justify investments to ensure that their business is compliant;

• Duty assessments are not the only liabilities relating to trade non-compliance. Importers are subject to penalties (AMPS) and other sanctions (e.g. border restrictions);

• Example of investments to ensure trade compliance: Training for internal staff (in-house customs and others) Hiring qualified in-house customs personnel Benefitting from service providers Self-auditing of your customs reporting processes Developing and maintaining a Customs Compliance Manual.

• Binding rulings that offer assurance that declarations are correct:

• Advance Ruling (ARs)– Tariff Classification (D11-11-3)– Origin (D11-4-16)

• National Customs Ruling (NCRs) (D11-11-1)– Valuation– Non-preferential origin (GPT, LDCT)

• Negotiated provisions in Free Trade Agreements, including Recourse for tariff classification

• Provided by the CBSA free of charge.

Advance Rulings

• Clients can voluntarily make corrections before a CBSA audit/verification begins

• Applies to corrections made more than 90 days after having RTB

• Must be a full and complete accounting of all inaccurate, incomplete, or unreported information

• CBSA will waive AMP and specified interest

Voluntary Disclosure Program

Contact Information

Eric Trudel

Manager

Verification Unit

Tariff, Origin and Valuation Division

Trade Programs & CARM Directorate

Eric.Trudel@cbsa.gc.ca