A 4-hour HS audit found $340K of recoverable duty
A mid-market distributor thought their broker had classification handled. A four-hour catalog audit revealed four years of overpayment on one repeat SKU.
Names and numbers changed, but the story is real.
A Canadian distributor of industrial fasteners had been importing the same line of stainless steel threaded rods from Taiwan for six years. Monthly volume, 40-foot containers, predictable tariff classification. Their broker had been filing under the same HS code since day one.
What we found
The product sits at a classification fork. One sub-heading carries 0% MFN duty. The adjacent sub-heading carries 6.5%. The distinction turns on a single material property — and the broker had picked the wrong side six years ago.
Four years of recoverable duty (the CBSA refund window) totalled $340,000. On a product the importer never thought was a problem. If you want to spot-check your own SKUs before booking an audit, our free HS code & duty calculator lets you compare classifications against the live CBSA tariff.
How it happened
It happened the way it always happens:
- The first shipment arrived under time pressure
- Somebody classified it in 20 seconds
- Nobody ever went back to check
- The error compounded for six years
The broker was not lazy. They were doing what brokers do — filing entries. What was missing was a classification audit, which nobody had asked for and nobody had scheduled.
The audit process
A catalog audit is not complicated. It is just uncomfortable to bill for, because it looks like we are second-guessing the prior broker. So nobody does it.
- Pull the catalog. SKU, description, current HS, supplier invoice, country of origin.
- Score for risk. High-volume SKUs, classification forks, recent tariff changes, products at the edge of a heading.
- Review the top risks. Line by line, against tariff, explanatory notes and advance rulings.
- File B2 refund claims. For every correction that recovers duty.
- Update going-forward classifications. So the leak stops.
The lesson
If nobody has audited your catalog in the last two years, you are almost certainly overpaying on something. The question is whether you find out in time to claim the refund. This is exactly what our duty strategy practice is built for.
Frequently Asked Questions
How far back can I claim a refund for overpaid customs duties in Canada?
CBSA allows duty refund claims under section 74 of the Customs Act for up to four years from the date of payment. You must file formal B2 adjustments with supporting documentation showing the error. After four years, recovery rights expire.
What is the difference between MFN duty rates at 0% and 6.5% on industrial fasteners?
The difference typically turns on material composition, heat treatment, or technical specifications within HS Chapter 73. A single misread property can place identical-looking products in adjacent sub-headings with radically different duty rates. Always verify against CBSA Customs Tariff explanatory notes.
How long does a customs tariff classification audit usually take?
A catalog-based HS audit for a mid-market importer typically takes 4 to 8 hours, depending on SKU count and complexity. High-risk products—those near classification forks or subject to recent tariff changes—are prioritized. Results often surface refund opportunities within the first session.
Can I change the HS code my broker has been using for years?
Yes. You control classification, not the broker. If you discover an error, file corrected Commercial Accounting Declarations going forward and submit B2 refund requests for past entries within the four-year window. CBSA expects importers to self-correct when errors are identified.
What happens if CBSA disagrees with my HS classification change?
CBSA may issue a re-determination under section 59 or 60 of the Customs Act, often triggering a verification or audit. You can appeal to the CITT within 90 days. Proactive classification rulings reduce this risk before you file adjustments.
Do I need to tell my current broker if I want a second opinion on HS codes?
No. Classification audits are independent. Many importers run parallel reviews to validate high-volume or high-duty SKUs without switching brokers. If corrections are needed, you simply instruct your broker to file updated CADs and B2 claims.
What is a B2 adjustment and how does it recover overpaid duty?
A B2 is a formal refund request filed with CBSA when you overpaid duty due to classification, valuation, or origin errors. It references the original transaction number, states the correction, and includes supporting documents. CBSA processes valid B2s and issues refunds directly to the importer of record.
How often should I audit my HS classifications?
Best practice is every 18 to 24 months, or immediately after product changes, supplier switches, or major tariff updates like CUSMA or CETA amendments. High-volume SKUs and products near duty cliffs warrant annual review to catch errors within the four-year refund window.