What are CBSA Audits?
Canada Border Services Agency (CBSA) is authorized to conduct Trade Compliance Verifications or Audits of companies involved in cross-border trade in Canada. CBSA is mostly focussing on identifying potential errors in matters of tariff classification, tariff valuation, rules of origin and tariff treatment and main objective is to ensure that importers are paying the applicable duties and taxes.
CBSA can conduct audits either by a random verification or a targeted verification. A random verification can happen to anyone at any time regardless of what they import. The objective of random audits is to measure risk assessment, revenue assessment and to promote voluntary compliance. In case of targeted verification, CBSA publishes a list of “targeted verification priorities” at least twice a year to identify the areas where they will focus most of their verification efforts. Sometimes verification priorities may also be carried over from previous years. The list identifies specific industries and goods that have shown to have a higher risk of noncompliance and that CBSA will therefore pay special attention to when it comes to audit efforts. Verifications are conducted on a select sample of importations within a specific time period. When non-compliance is determined, importers must, by law, file self-corrections for importations of same and similar goods within a specified period of up to four years. Escalating penalties are applied as a corrective measure in cases of non-compliance.
Sometimes CBSA will conduct a “Desk Audit” and will request some information and proof of a some transaction and if they are provided with everything they asked for, and they are satisfied with the information then the file is closed. However a more serious and time consuming audit is a “Compliance Assessment Review (CAR)”. This happens when CBSA has selected you, the importer, for a targeted audit. They might be reviewing country of origin, tariff treatment eligibility, HS classification or values declared at time of import. They will start with a letter and possibly request 25 or more files to review. They then may send you a questionnaire. Once they have received and reviewed your files and your questionnaire response, they will come and visit your firm. What customs will want to see are details of your product to determine correct HS classification, certificates of origin, to prove eligibility for the use of preferential tariff treatments, and finally the importers’ books and records to determine valuation. Books and records simply mean that customs wants to see that the purchase order matches the goods received and the payment to the vendor. CBSA needs to ensure that all three match with what was declared to CBSA at time of import. If there was more or less was received, then the import record should reflect that a correction was made after receipt.