Administrative Monetary Penalty System
C083

Guidelines

The term “per issue” applies to each element of the value for duty provisions that is incorrect 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 value for duty error 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 C353.

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 C083 and C353 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.

Errors in declarations of value for duty do not always lend themselves to a clear distinction on the assessment of penalties on a “per issue” or “per occurrence” basis. Where there is uncertainty over whether a penalty should be assessed on a “per issue” or “per occurrence” basis, officers are strongly encouraged to contact the Origin and Valuation Policy Unit for assistance in the assessment of penalties.

“Reason to Believe”

In regards to the obligation to self-correct under section 32.2 of the Customs Act, specific information regarding the value for duty 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, packaging or assists provisions;
• (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”), re-determinations, further re-determinations, etc.;
• (c) final tribunal or court decisions in which the importer was the appellant, respondent or intervenor;
• (d) information received from vendors, freight forwarders, exporters, suppliers, etc. (e.g. vendor’s invoice indicating retroactive price increase for goods already purchased);
• (e) written communication addressed directly to the importer from the CBSA such as a national customs ruling, or a trade compliance verification final report; 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

A value for duty error occurs when the value for duty of goods is not determined in accordance with the requirements of sections 44 to 55 of the Customs Act. A value for duty error can be, but is not limited to, the use of the wrong valuation method or its improper application, the use of the incorrect price paid or payable, or not making each of the required adjustments as required under the valuation provisions of the Customs Act. Each will be considered a separate error. Penalties apply where an importer failed to correct the value for duty 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.

Example:

An importer failed to make an adjustment for assists, as required under the provisions of 48(5)(a)(iii) of the Customs Act. If the error is corrected within 90 days of receiving the trade compliance verification final report, only one penalty of $500 to a maximum of $5,000 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 each 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) through (f) will be assessed on a per occurrence basis for each error not corrected within 90 days of having “reason to believe”. A penalty of $500 will be assessed for each occurrence over the reassessment period up to a maximum of $25,000.

Second Level Penalties

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

For the same value for duty 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 value for duty 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 issues that have been assessed a second level penalty within the retention period.

For the same value for duty 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 value for duty 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