Municipal Textile Shopping Bag Promotions Have Caught the Attention of the Canada Border Services Agency
The Canada Border Services Agency (CBSA) is targeting textile bags in its 2011 national priorities for post-release trade compliance verifications. Is this a coincidence or a result of the increase in imports of textile bags due to the municipal plastic bag fees and preferences for reusable shopping bags? While the CBSA’s national priority is not restricted to reusable shopping bags, I have drawn the connection between the risk assessment activities that take place prior to the determination of the annual trade compliance post-release verification national priorities list. Importers of any type of textile bags, including shopping bags, luggage, purses, shoe bags, etc. may find themselves being audited by the CBSA this year.
The CBSA will select a number of importers of alleged plastic grocery sacks and bags who will receive letters of an upcoming verification. The focus of the verification will be tariff classification and tariff treatment (for example, if the importer claimed NAFTA treatment, the goods meet the rules of origin). The H.S. tariff classification code that the CBSA has indicated correlates with the textile bags verification priority is H.S. Code 39184.108.40.206. This H.S Code is broken down as follows:
3923 - Articles for the conveyance or packing of goods, of plastics
3923.29 - Of other plastics (other than polymers of ethylene, polymers of propylene or other olefins, polymers of styrene, polymers of vinyl chloride or of other halongenated olefins, vinylidene chloride polymers, etc.)
3923.29.90. - Other
39220.127.116.11 - Other than grocery sacks and bags
What this tells me is that the CBSA has three main issues:
- Are the importers using the correct H.S. Code on customs documentation?
- Are importers of textile grocery bags misclassifying the textile bags as plastic shopping bags by mistake?
- Are importers of shopping bags incorrectly classifying the bags as grocery bags when they are multi-purposes?
- Did the importer claim the correct tariff treatment (which looks at origin of the textile bags)?
- If General Preferential Tariff (GPT) treatment is claimed, do the imported goods meet the criteria or should Most-Favoured Nation (MFN) tariff treatment have been claimed? The GPT rate of duty is 3% and the MFN rate of duty is 6.5%.
- If NAFTA treatment is claimed (0% rate of duty), do the finished bags meet the rules of origin? In the case of textile bags, the goods might not be considered to be of U.S. origin if the textile fabric is foreign (e.g. from China).
The CBSA must believe that there is non-compliance by importers of textile bags and that is the reason why this particular category of goods was newly selected for the 2011 national priorities trade compliance post-release verification target list. To be honest, I think the CBSA has made a smart choice with this category of goods.
If you are an importer of textile bags into Canada, this is a good time to review your tariff classification and tariff treatments. If you have not yet received a letter from the CBSA about a verification, you may be entitled to make a voluntary disclosure should you find a mistake. If you are entitled to make a voluntary disclosure, you may save the amount that would be charged as penalties if the CBSA finds the mistakes during a verification. In addition, if you make a voluntary disclosure of mistakes that result in an increase in customs duties payable, you save the interest from the date of the voluntary disclosure. In addition, based on my experience, the CBSA has a greater willingness to discuss reasonable payment arrangements when a person makes a voluntary disclosure and does not have the ability to pay the additional customs duties.
For more information, please contact Cyndee Todgham Cherniak, a Canadian customs lawyer, at 416-307-4168.