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INFONEX
14th Annual Customs Compliance and Border Security
Delta Toronto Airport West
January 20, 2009
How to Avoid Customs Penalties: AMPS
Greg Kanargelidis
Blake, Cassels & Graydon LLP
greg.kanargelidis@blakes.com
2
Order of Presentation
1. Introduction to AMPS
2. Status of AMPS Revised Structure
3. Emerging Jurisprudence
3
PART I
INTRODUCTION TO AMPS
4
What is AMPS?
• Comprehensive sanctions regime designed to ensure
compliance with trade and border legislation and to
level the playing field among traders
• Enforced through a series of graduated civil penalties
that match the severity and frequency of
contravention
• Intended to be corrective rather than punitive
• Seizures and forfeitures are reserved for only the
most serious contraventions, such as drug or
weapons smuggling
5
Legal and Regulatory Framework
• AMPS regime enacted through section 109.1 of the Customs
Act
109.1 (1) Every person who fails to comply with any provision of
an Act or a regulation designated by the regulations made under
subsection (3) is liable to a penalty of not more than twenty-five
thousand dollars, as the Minister may direct.
(2) Every person who fails to comply with any term of condition
of a licence issued under this Act or the Customs Tariff or any
obligation undertaken under section 4.1 is liable to a penalty of
not more than twenty-five thousand dollars, as the Minister may
direct.
6
Legal and Regulatory Framework
109.1(3) The Governor in Council may make
regulations
(a) designating any provisions of this Act, the Customs
Tariff or the Special Import Measures Act or of any
regulation made under any of those Acts; and
(b) establishing short-form descriptions of the provisions
designated under paragraph (a) and providing for the
use of those descriptions
7
Legal and Regulatory Framework
• The Designated Provisions (Customs)
Regulations bring into effect the AMPS
by setting out the sections that are
subject to penalty
• Master Penalty Document contains
details of each contravention, including
“Backgrounders”, a source of confusion
for traders
8
Notice of Penalty Assessment
• When AMPS penalty is to be assessed, a
customs officer issues a Notice of Penalty
Assessment which includes:
– Client details
– Penalty assessment data
– Contravention and penalty details
– Correction/redress information
– Payment and interest information
9
Options for Dealing With a NPA
• Options after NPA is issued:
– Pay Penalty
– Request Correction
– Formal Review/Appeal
• Mitigation
• Penalty Reduction Agreement
10
Payment of Penalty
• Penalty payable on the day notice is issued
• Interest is calculated beginning on the day the notice is
issued and ending on the day notice is paid
• No interest payable if paid in full within 30 days of notice
served
11
Review of AMPS Penalties
• Two types of review of an NPA are available:
(1) Corrections
(2) Formal Appeal
• It is not necessary to pay the penalty assessment
amount before requesting correction or appealing
12
Request for Correction
• Requests for correction of errors made in NPAs are
pursuant to section 127.1 of the Customs Act
• Request for correction must be made within 30 days of
NPA
• Correction will be made if
(a) CBSA is satisfied there was no contravention; or
(b) there was a contravention but the CBSA considers that
there was an error with respect to the amount assessed
• Corrected at point of issuance – regional or local office
• TIP: file request ASAP because CBSA must act within the
30 day limit
13
Formal Review/Appeal
• Request for formal review made pursuant to section 129(1) of the
Customs Act
• Request must be filed within 90 days
• Extenuating circumstances will allow time limits up to a year
• Formal reviews handled by Recourse Directorate at CBSA
Headquarters in Ottawa
• Jurisdiction of Recourse Directorate limited to whether the
contravention occurred; generally no reductions in penalty amount
assessed are possible
• Since 2007, Recourse Directorate now has jurisdiction over Penalty
Reduction Agreements
14
Penalty Reduction Agreements
• PRA represents an undertaking by the importer to take
appropriate corrective measures or systems changes to
achieve compliance
• In return, the CBSA will reduce all or a portion of penalty
assessments on a dollar-for-dollar basis
• A Penalty Reduction Agreement sets out:
• the nature of the problem that lead to non-compliance
• the corrective action that will be undertaken
• timeframes to effect correction
• evaluation, review criteria
Penalty Reduction 15
Agreements, Cont’d
• Considered on a case-by-case basis
• Designed to provide relief to companies assessed large
AMPS penalties resulting from repetitive, systemic errors
in their Customs Information Systems (automated or
manual)
• NPA must total at least $5,000 [CBSA has recently
proposed to eliminate this requirement]
• CBSA may accept or reject a proposed PRA at its
discretion
CCRA’s Voluntary Disclosure 16
Policy
Aim
• to promote voluntary compliance with the
accounting and payment of duty and tax
provisions under the Customs Act and
Customs Tariff
• Legislative authority in 3.3(1) of the
Customs Act and 126(1) of the Customs
Tariff
Voluntary Disclosure Policy - 17
Principles
• Importers/exporters can make disclosures to correct
inaccurate or incomplete information, or to disclose
information not previously reported to the CBSA
• Persons making a valid voluntary disclosure are required
to pay taxes and duties, plus interest
• CBSA can relieve monetary penalties and prosecution
that would otherwise be imposed, as well as from
specified interest
• Prescribed interest may also be waived for importers
eligible for the GST “wash transactions” policy
• Policy does not apply to goods subject to forfeiture
and/or seizure under the Customs Act
18
Conditions for Valid Disclosure
• Must be voluntary and be initiated by the
person (this excludes disclosures made with
knowledge of a CBSA audit or investigation)
• Must be complete (i.e., a full and accurate
reporting of all previously inaccurate,
incomplete or unreported information and
cannot contain any material errors or
omissions)
• Must involve at least one monetary penalty
• Can involve disclosures less than one year
overdue
Voluntary Disclosure Policy - 19
If Unsure
• You can discuss your situation on a no-name or
hypothetical basis with an officer responsible for
handling voluntary disclosures
• Customs will be bound by no-name opinions for
a period of 30 calendar days after the date of the
opinion
• If a Voluntary Disclosure is made following
receiving a no-names opinion, the effective date
of disclosure will be the date the request was
received
Voluntary Disclosure Policy - 20
Exclusions
• Does not apply to penalties associated with
legislation administered by Customs on behalf of
other government departments and agencies
• May still be subject to seizure actions (i.e.,
prohibited or controlled goods)
• No right of appeal to challenge the CBSA’s
refusal to waive interest and penalty, but a
second review to Recourse Directorate is
available, or judicial review to Federal Court
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PART II
STATUS OF REVISED AMPS STRUCTURE
Source: CBSA, Presentation by Rachel Auclair and Colleen McGonigle, October 28, 2008
22
AMPS Review
• Since implementation, numerous
issues/concern raised by both clients and
employees:
– too many penalties
– penalty structure too complex
– some penalties/backgrounders not clear
23
AMPS Review, cont’d
• Fundamental review of penalty regime
– review of existing penalties to ensure fairness and
consistency
– identify and correct inconsistencies with future
direction
– extensive consultations (internal and external)
throughout process
• Results: 10 recommendations approved in May
2007 and currently being implemented in
consultation with the private sector (BCCC,
AMPS Subcommittee)
24
Top 10 Trade Contraventions
C082 Importer failed to correct tariff classification within 90 days.
C353 Importer failed to pay duties as a result of a required correction-
Valuation.
C352 Importer failed to pay duties as a result of a required correction-
Tariff.
C070 Importer failed to account for goods in prescribed time.
C214 Person failed to report non-compliance with term-condition of
duty relief or remission order.
C083 Importer failed to correct value for duty within 90 days.
C004 Person failed to provide the correct SIMA code.
C215 Person failed to repay duties relief not entitled to.
C152 Person failed to furnish proof of origin.
C350 Importer failed to pay duties as a result of a required correction-
FTA origin.
25
Top 10 Border Contraventions
C336 Person failed to pay duties on accounted goods
C005 Person failed to provide true, accurate and complete
information.
C008 Carrier used incorrect carrier code or failed to use bar code for
CCN.
C348 Person intentionally provided false information
C018 Failure to transport passengers and crew to Customs Office.
C358 Person removed unreleased goods from customs office or
sufferance warehouse
C033 Carrier moved, delivered or exported goods without
authorization.
C071 Person failed to provide permit/certificate or information before
goods released.
C021 Carrier failed to report regular goods ($1,600 or greater).
C274 Goods reported as arrived when they are not
arrived.
AMPS Penalty & Appeals Data 26
Trade Statistics (2007/08)
• AMPs contraventions 15,024
• Appeals filed 2,103 14%
• Decisions taken 1,546
• Penalty upheld 1,086 70%
• Penalty cancelled 438 28%
• Administrative closure 22 2%
• Corrections completed 495
• Net contraventions: 14,091
27
CBSA Recommendations
1. Reduce Contraventions
– Currently too many penalties (246)
– lack of clarity, too complex, duplication
– Collapse current contraventions where
possible, based on legislation
– Prepare new guidelines to match
28
CBSA Recommendations
2. Risk-based contraventions and
penalty amounts
– Contraventions will be assessed on risk associated
with potential harm of non-compliance (i.e., national
security, health & safety, economy, and int.
reputation)
– Penalty amounts will be set accordingly
– Limited number of penalty structures (currently 29)
based on risk
– Future contraventions will follow model
29
CBSA Recommendations
3. Volumetric Fairness
– Large clients and transporters may be more
vulnerable to AMPS due to high volumes
– Requesting accommodation based on high
compliance (may apply only to CSA and PIP
approved clients)
– Must ensure fairness for all clients regardless of
volume
– Increased delay before escalation from level 1 to
level 2, for low-risk contraventions only
30
CBSA Recommendations
4. Third Party Liability
– Originally requested by customs brokers
– Brokers are paying penalties assessed against
clients resulting from broker error
– Remain part of client’s compliance history
– Issuing to brokers would ensure penalties would not
adversely affect clients
– No easy solution – probably maintain status quo
31
CBSA Recommendations
5. Regional Review Committees
– All regions originally had review committees
– Reinstate regional review committees to
ensure consistency and accuracy
32
CBSA Recommendations
6. Periodic Reports Made Public
– Quarterly report providing statistics,
analyses, trends, and recommendations
– Public version of report will be posted on the
CBSA Website
– National AMPS statistics and trend analysis,
penalties assessed by client type, by mode
and penalties appealed, overturned and
upheld
33
CBSA Recommendations
7. Enhance Appeals Process
– Client concerns that time frames for decisions are too long
– Financial impact for client if penalty is upheld a significant
amount of time after issuance
– Timeframes include legislated times to complete certain steps,
(redress review is available within the first 90 days, under
section 129(1) of the Customs Act), that are not changeable
– Proposals to include time frames for decisions, increase
consistency, improve transparency and issue more
substantive decisions.
34
CBSA Recommendations
8. Update AMPS automated system
– Necessary to implement modified
contraventions
– System will be easier and faster to use
– Resolve current technical issues
35
CBSA Recommendations
9. Training CBSA officers
– Extensive training required once updated
system is available
– New regime and system
– Will include border, trade and appeals
officers
– Centralization and clear guidelines for
application of correction option
36
CBSA Recommendations
10. Ongoing communications
– provide ongoing information to clients/stakeholders
regarding new AMPS program
– consultations to continue through BCCC and AMPS
subcommittee
– information sessions will be held for trade
community prior to implementation
– prior notice to trade community of contraventions
and penalty amounts
37
PART III
EMERGING JURISPRUDENCE
38
Appeals to Federal Court
• an appeal from a decision of the Recourse
Directorate is available to the Federal Court of
Canada [ss. 135(1) Customs Act]
• appeal must be filed within 90 days of the
decision
• appeal is by way of action
39
Judicial Review
• Statutory appeal by action before Federal Court
– Trial Division limited to validity of the NPA
issuance vs. quantum of the amount of the
penalty
• Amount of AMPS penalty must be challenged by
separate proceeding in Federal Court
– application for judicial review – FC will accord a high
degree of deference to CBSA
40
Recent Case Law
Jean-Pierre Samson
• first substantive AMPS decision
• released on September 28, 2007
• Court deflects issue of whether “due diligence defence” applies
Marimac Inc.
• deals with time extensions, namely, importance of acting within
statutory time limits and/or showing bona fide intention to appeal
The Brick Warehouse Corp.
• deals with importance for legal counsel to obtain all NPAs from
client and to appeal each individual NPA
The Case for a Due Diligence 41
Defence
• CBSA position that due diligence defence does not apply
to AMPS penalties
• position is contrary to GST and other customs
jurisprudence
• leading GST case is Consolidated Canadian Contractors
Inc.
• leading customs seizure case is Cata International Inc.
INFONEX
14th Annual Customs Compliance and Border Security
Delta Toronto Airport West
January 20, 2009
How to Avoid Customs Penalties: AMPS
Greg Kanargelidis
Blake, Cassels & Graydon LLP
greg.kanargelidis@blakes.com
