Canadian Association of Importers _ Exporters 75th Annual by rt3463df


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


      Order of Presentation
1. Introduction to AMPS

2. Status of AMPS Revised Structure

3. Emerging Jurisprudence

       PART I


             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

• Intended to be corrective rather than punitive

• Seizures and forfeitures are reserved for only the
  most serious contraventions, such as drug or
  weapons smuggling

Legal and Regulatory Framework

• AMPS regime enacted through section 109.1 of the Customs

  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

Legal and Regulatory Framework
 109.1(3) The Governor in Council may make

 (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

 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

   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

 Options for Dealing With a NPA

• Options after NPA is issued:

  – Pay Penalty
  – Request Correction
  – Formal Review/Appeal
     • Mitigation
     • Penalty Reduction Agreement

           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

   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

       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
• 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

        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

  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

• 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
  CCRA’s Voluntary Disclosure                16

• 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
   Voluntary Disclosure Policy -                             17

• 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

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
• Must involve at least one monetary penalty
• Can involve disclosures less than one year
   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
• If a Voluntary Disclosure is made following
  receiving a no-names opinion, the effective date
  of disclosure will be the date the request was
   Voluntary Disclosure Policy -                     20

• 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

                                 PART II

Source: CBSA, Presentation by Rachel Auclair and Colleen McGonigle, October 28, 2008

            AMPS Review
• Since implementation, numerous
  issues/concern raised by both clients and
  – too many penalties
  – penalty structure too complex
  – some penalties/backgrounders not clear

        AMPS Review, cont’d
• Fundamental review of penalty regime
  – review of existing penalties to ensure fairness and
  – identify and correct inconsistencies with future
  – 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)

  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-
C352   Importer failed to pay duties as a result of a required correction-
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.

 Top 10 Border Contraventions
C336   Person failed to pay duties on accounted goods
C005   Person failed to provide true, accurate and complete
C008   Carrier used incorrect carrier code or failed to use bar code for
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
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
     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

   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

      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.
  –   Penalty amounts will be set accordingly
  –   Limited number of penalty structures (currently 29)
      based on risk
  –   Future contraventions will follow model

      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
  –   Increased delay before escalation from level 1 to
      level 2, for low-risk contraventions only

      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

   CBSA Recommendations
5. Regional Review Committees
  – All regions originally had review committees
  – Reinstate regional review committees to
    ensure consistency and accuracy

   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

      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.

   CBSA Recommendations
8. Update AMPS automated system
  – Necessary to implement modified
  – System will be easier and faster to use
  – Resolve current technical issues

   CBSA Recommendations
9. Training CBSA officers
  – Extensive training required once updated
    system is available
  – New regime and system
  – Will include border, trade and appeals
  – Centralization and clear guidelines for
    application of correction option

      CBSA Recommendations
10. Ongoing communications
  –   provide ongoing information to clients/stakeholders
      regarding new AMPS program
  –   consultations to continue through BCCC and AMPS
  –   information sessions will be held for trade
      community prior to implementation
  –   prior notice to trade community of contraventions
      and penalty amounts

        PART III


    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

• appeal is by way of action

             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

• 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

           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

• CBSA position that due diligence defence does not apply
  to AMPS penalties

• position is contrary to GST and other customs

• leading GST case is Consolidated Canadian Contractors

• leading customs seizure case is Cata International Inc.
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

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