Canada-U.S. Blog Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

The CBSA targets “supply managed” goods as a trade compliance verification priority

Posted in Canada's Federal Government, Customs Law, Imports Restrictions, tariff classification

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.  In the January 2018 Trade Compliance Verification priorities, the CBSA has hidden on page 44 a new target – “Import Permit Numbers”.  This verification was released in October 2017.

The Import Permit Numbers priority appears to related supply managed goods, such as meat and poultry (Chapter 2) and dairy products and eggs (Chapter 4).  If the importer has an import permit for a shipment of “supply managed goods” 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 is 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.  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.

For more information or if you would like assistance with an import permit diagnostic, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.