In early January 2018, the Canada Border Services Agency ("CBSA") issued its January 2018 Trade Compliance Verification Priorities. Twice a year, the CBSA posts trade compliance verification priorities for tariff classification, origin and valuation. These are the items that the CBSA is going to target. The CBSA will send letters to importers that they identify to obtain information and conduct a targetted verification. In the January 2018 Trade Compliance Verification priorities, the CBSA has hidden on page 44 a new target – "Import Permit Numbers". This verification was originally released in October 2017.
The Import Permit Numbers priority is related to supply managed goods, such as meat and poultry (Chapter 2) and dairy products and eggs (Chapter 4). The compliance obligations on importers does not end with the application for an import permit.
If an importer has an import permit for a shipment of "supply managed goods" that was properly issued by Global Affairs Canada, the "supply managed goods" may enter Canada under the "within access commitment" tariff code, which has a lower duty rate or could be duty free. Only importers who have been allocated import quota or who have entered into an arrangement to use a quota holder's quota may import "supply managed goods" under an import permit (they are the only ones who will receive an import permit from Global Affairs Canada). Import permits are issued on a shipment-by-shipment basis for a specific product and a specific quantity of that product (e.g., 1000 kgs of chicken wings). If the importer does not have an import permit for "supply managed goods", the goods enter Canada under the "over access commitment" tariff code and are subject to significant duties (often over 300%).
The CBSA will be targeting quota holders and persons without quota who imported using a "within access" tariff code or another tariff code that is not covered by the supply management program (such as spent fowl). The CBSA is looking for errors in classification of "supply managed goods". Even if a person received an import permit, the CBSA may find non-compliance if the good imported does not match the permit issued or if the quantities imported do not match the quantities on the permit. There is the potential for significant assessments given the duty rates applicable if the imports are re-classified under an "over access" tariff rate. For example, if an importer imported whole frozen chicken, the duty rate might increase from 5% to 238%
Consider whether you are at risk of a verification letter from the CBSA and whether you may benefit from making a voluntary correction or voluntary disclosure. All import permit holders should review their records and correct any discrepancies before the CBSA contacts them for a verification. A voluntary disclosure cannot be made after the CBSA has sent a letter seeking information or notifying the importer of an upcoming verification. In addition, persons who import "supply managed goods" using an incorrect tariff code should make corrections before the CBSA calls them for a verification. Any importers who import under chapter 2 or chapter 4 should at a minimum conduct their own internal review of their records.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
