Administrative Monetary Penalty System
C081

Guidelines

The term “per issue” applies to each good for which a preferential tariff treatment (not related to a free trade agreement) was incorrectly claimed and for which a correction was not made, regardless of how often the error is repeated on import documents.

The term “per occurrence” at the first, second, and third levels applies to each uncorrected error for which a preferential tariff treatment (not related to a free trade agreement) was incorrectly claimed per B3 accounting document and not per B3 line.

Non-compliance is normally discovered by a Senior Officer Trade Compliance (SOTC) as a result of an audit, examination, verification, or subsequent monitoring activity.

Applied against the importer of record.

Where customs duties and/or taxes would be owed as a result of required corrections, see C351.

Where there is a failure to correct a declaration that would result in a refund of customs duties, no penalty will apply.

Errors discovered during a second or subsequent audit, examination, verification, or monitoring activity, that are unrelated to the first penalty assessment will incur only first level penalties.

The SOTC must record in their report each error along with a detailed explanation of what constituted “reason to believe” for that error. This is required in order to establish the level of penalty for the next occurrence of the same error.

There will be a cap of $1,000 for each group of repeated and incorrect declarations where the client can demonstrate to the SOTC that the errors in the declaration were caused by a single keystroke / data entry error. This cap will apply only to first level penalties and only where corrections are made within 90 days of the date of the trade compliance verification final report.

Any combination of penalties issued under C081 and C351 shall not exceed the maximum penalty amount for each specific level and shall include all penalties that are issued as a result of an audit, examination, verification or subsequent monitoring activity. The maximum penalty amount for the first level is $5,000 (per issue) or $25,000 (per occurrence) depending on applicable reason to believe criterion. The conditions under which either of the $5,000 or $25,000 maximum penalties would be applied are explained in the First Level Penalties paragraph below. The maximum penalty amount for the second level remains unchanged at $200,000. The maximum penalty amount for the third level also remains unchanged at $400,000.

“Reason to Believe”

In regards to the obligation to self-correct under section 32.2 of the Customs Act, specific information regarding the origin that gives an importer reason to believe that a declaration is incorrect, can be found in:

• (a) legislative provisions such as specific valuation provisions that are prima facie (i.e., at first sight), evident (obvious, apparent) and transparent (i.e., clear, self-explanatory). For example, proof of origin requirements under section 24 of the Customs Tariff and section 35.1 of the Customs Act
•  (b) formal assessment documents issued by the Canada Border Services Agency (CBSA) to the importer, relating to the imported goods, such as determinations (other than “deemed determinations”), redeterminations, further redeterminations, etc.;
• (c) final tribunal or court decisions in which the importer was the appellant, respondent or intervenor;
• (d) information received from exporters, suppliers, etc. (e.g. cancellation of certificates of origin);
• (e) written communication addressed directly to the importer from the CBSA such as a ruling (e.g., advance ruling issued under section 43.1 of the Customs Act), a trade compliance verification final report, or an official notification as a result of an exporter origin verification; or
• (f) a final report from an importer-initiated internal audit or review, or, from an external company conducting an audit or review of an importer’s company.

First Level Penalties

Penalties apply where an importer failed to correct the origin of goods within 90 days after having “reason to believe” that the declaration was incorrect.

For errors that have occurred as a result of reason to believe criterion (a):

First level penalties that are the result of criterion (a) will be assessed on a per issue basis for each issue not corrected within 90 days of having “reason to believe”. A penalty of $500 will be assessed for each issue up to a maximum of $5,000. First level penalties will be assessed at $500 for each issue regardless of how often an error is repeated during the reassessment period, provided that all occurrences of the error are corrected within 90 days of the date of the trade compliance verification final report.

Errors that are not corrected within 90 days of receiving the trade compliance verification final report will be assessed a penalty of $500 per occurrence to a maximum of $25,000.

Assessments of penalties on a “per issue” basis will not apply in circumstances where an importer fails to furnish any proof of origin upon request.

Example:

An importer declares multiple goods under tariff treatment and has valid multi-product or multi-page proof of origin in support of the majority of the declared goods. In the same shipment and under the same declaration, the importer incorrectly declares a tariff treatment for one or two goods that are not certified on the multi-product or multi-page proof of origin that has been provided. If the importer corrects the tariff treatment errors within 90 days of receiving the trade compliance verification final report, only one penalty of $500 for each good not covered by a certificate of origin will apply, regardless of how often the error is repeated over multiple accounting documents. If the error is not corrected within 90 days of receiving the trade compliance verification final report, a $500 penalty will apply for each occurrence of the error throughout the reassessment period, to a maximum of $25,000.

For errors that have occurred as a result of reason to believe criteria (b) through (f):

First level penalties that are the result of criteria (b) to (f) will be assessed on a per occurrence basis for each error not corrected within 90 days of having “reason to believe”. A $500 penalty will apply for each occurrence over the reassessment period up to a maximum of $25,000.

Example:

Where an importer has received information from an exporter (or producer) that advises a proof of origin provided by the exporter is no longer valid or that goods no longer qualify as originating, corrections to declarations of origin must be made within 90 days of receipt of this notification. This would be considered an importer’s “reason to believe” under criterion (d).

Second Level Penalties

Second level penalties can only be applied to errors made on the same goods that have been assessed a first level penalty within the retention period.

For the same origin errors previously assessed a penalty at the first level, a second level penalty will apply following all subsequent audits, examinations, verifications, or monitoring activity for each declaration (B3) where the importer failed to correct the origin within 90 days after having “reason to believe” that the declaration was incorrect, to a maximum of $200,000 for the reassessment period.

Second level penalties would also apply to all adjustments made by importers where they failed to correct declarations within 90 days of having “reason to believe” that corrections are required.

Third Level Penalties

Third level penalties can only be applied to errors made on the same goods that have been assessed a second level penalty within the retention period.

For the same origin errors previously assessed a penalty at the second level, a third level penalty will apply following all subsequent audits, examinations, verifications, or monitoring activity for each declaration (B3) where the importer failed to correct the origin within 90 days after having “reason to believe” that the declaration was incorrect, to a maximum of $400,000 for the reassessment period.

Third level penalties would also apply to all adjustments made by importers where they failed to correct declarations within 90 days of having “reason to believe” that corrections are required.

References

Legislation

Customs Act, paragraph 32.2(2)(a)

D-Memo

D11-6-6, “Reason to Believe” and Self-Adjustments to Declarations of Origin, Tariff Classification, and Value for Duty