Auditor General Audit Recap on Customs Duties Management by CBSA, Global Affairs & Finance Canada

CBSA Mandate:

The Canada Border Services Agency administers more than 90 acts, regulations, and international agreements for federal organizations, the provinces, and the territories. It is responsible for assessing the duties and taxes owed to the Government of Canada. The Agency has a competing mandate—it must ensure the security of the border while facilitating the flow of goods and people.


Audit Objective:

To determine whether the Department of Finance Canada, Global Affairs Canada, and the Canada Border Services Agency adequately managed the customs duties according to their roles and responsibilities in relation to the following:

-perform regular reviews of the Customs Tariff, using sound analyses;

-ensure the correct assessment of customs duties owed to the Crown;

-provide support to commercial importers to enable compliance with importing requirements;

-ensure that the tariff rate quotas were respected; and

-ensure that the goods imported under the Duties Relief Program were not unlawfully diverted into the Canadian economy.


Summary of findings:


1. Overall, the Auditor’s Report found that the Canada Border Services Agency was unable to accurately assess all customs duties owed to the government on goods coming into Canada.


2. Over the last 15 years, the Agency’s compliance verifications on specific goods revealed that importers misclassified imported goods more than 20 percent of the time.


3. Examined 1.4 million records, each of which contained only one narrative description and a single classification number. We found that 74 percent of them did not provide a description that allowed us to determine whether the number used was the right one.


4. These findings matter because when the Canada Border Services Agency fails to accurately assess customs duties, the Government of Canada might lose revenue. The Agency’s verifications indicated lost revenues from misclassifications.


5. The Canada Border Services Agency should review its penalties in order to better protect import revenues and ensure compliance with trade programs.


6. In consultation with its legal services, the Canada Border Services Agency will conduct a review of the current framework that allows for retroactive changes on the import form.


7. Found that in 2015, importers brought quota-controlled goods into Canada without permits and without paying the right amount of customs duties. These quota-controlled goods included dairy, chicken, turkey, beef, and egg products, for which the importers would have paid $168 million in customs duties if the Canada Border Services Agency had compared the permit information with the import form.


RESULT: Various Reviews have been put in place to examine issues identified in the AG Report and are listed with the expected completion date.


Review Completion Dates:

September 2017    CBSA to collaborate with Global Affairs to review permit verification process for quota-controlled goods. An automated means of validation for improved enforcement is being explored.

June 2018   Non-compliance is occurring due to CBSA controls not working.  As a result, CBSA will review invoice requirements to ensure descriptions are sufficient to determine if HS was correct and what was imported.  The goal is to improve the quality of the information submitted.

September 2018   Review of penalties to ensure there is a meaningful deterrent. (Out of 16,000 penalties for 2015/16 with a revenue of 4.4 million this represented less than 1/10th of 1% of the transactions for the year and averaged a penalty of $151.00 each.)

October 2018   Review of the Duties Relief program to be monitored to ensure the goods meet or have met the conditions for the relative Duties Relief Program.  Outcome of the review could possibly entail renewable program licenses made conditional on a participant’s compliance record, and also the requirement of a financial deposit proportionate to the duty risk.

December 2019   Review of the current Import Forms.  Presently, Importers are able to change information on import forms up to 4 years after the importation of the goods, but the CBSA are not able to collect meaningful information about what had been imported at the time of entry.  This review will likely result in the reduction in time for a retroactive correction may be made.

Finance Canada   Regular reviews of the Customs Tariff should be made to identify tariff items no longer meeting their policy objectives of protecting manufacturers and meeting our international obligations.

In concert with our clients, Thompson Ahern can assist by:

1. Reviewing of invoice requirements for correct information to classify correctly.

2. Reviewing document requirements relating to Other Government Departments to ensure validity and compliance.

3. Reviewing  Database to ensure correct HS, applicable tariff codes.

5. Reviewing documents and providing assistance in the event of a CBSA audit.


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