On January 20, 2015, the Canada Border Services Agency (CBSA) issued revisions to its Administrative Monetary Penalty System (AMPS), found in Memorandum D22-1-1 Administrative Monetary Penalty System.

The AMPS applies monetary penalties against importers and exporters for contraventions of customs reporting, accounting and other requirements of the Customs Act and Customs Tariff. For example, penalties are applied against importers for the failure to amend incorrect declarations of tariff classification, valuation, and origin within 90 days of having reason to believe they have made erroneous declarations.

Typically, penalties are issued at the conclusion of CBSA trade verifications in the form of a Notice of Penalty Assessment (NPA). Penalty amounts graduate based on contravention history (i.e., penalty amounts escalate for second, third, and subsequent offences), but flat rate penalties apply for a small number of offences that are not suited to the graduated penalty structure, such as the failure to maintain books and records.

The revisions to Memorandum D-22-1-1 clarify the CBSA’s policy on the application of AMPS and reflect amendments to the Customs Act relating to the penalty assessment review process. In particular, importers and exporters should be aware of the following changes:

  • The CBSA’s policy for determining the contravention history of a company with more than one division separately operating in and/or importing into Canada is clarified. Memorandum D-22-1-1 states that if a company has more than one Canadian Business Number/import account, a poor client contravention history for one division will not affect the client contravention history or the penalty levels of the other divisions. In other words, each division, employing a separate business number/import account, will be treated as a distinct importer and will have ascribed to it a distinct compliance history. This policy is consistent with the treatment of importers who operate under separate divisional or corporate import numbers and whose practices have conformed with CBSA trade verification final reports in respect of which the substantive findings (e.g., classification/valuation/origin) are later amended. The CBSA will generally apply its discretion to assess the company/division in receipt of the previous incorrect findings on a prospective basis only, but will not apply the same discretion to other divisions or members of a multi-corporate enterprise. Relief in the latter circumstances may be available only through remission.
  • The time period to request a correction of a NPA pursuant to subsection 127.1 of the Customs Acthas been extended from 30 days to 90 days. The 90-day timeframe is calculated beginning on the date of issuance of the NPA. A request for a correction to a penalty assessment can be made if the penalty was applied in error because there was no contravention or the penalty amount is incorrect. The additional delay will allow time for the importer to better assess whether or not an error has been made, and should reduce the number of requests made to protect the importer against expiry of the limitation period.
  • On the administrative front, CBSA policy now provides that all requests for a review of a penalty assessment must be submitted to the CBSA Recourse Directorate at 1686 Woodward Drive, Ottawa, Ontario K1A 0L8. Requests for a review of a penalty assessment were formerly sent to the CBSA office that issued the NPA.
  • The “Penalty Reduction Agreement” is renamed the “Penalty Reinvestment Agreement”. The Penalty Reinvestment Agreement is a program that allows for a full or partial reduction of penalty amounts if the importer or exporter agrees to invest the penalty amount in its commercial information system for the purpose of correcting systematic problems that are causing customs reporting errors. The agreement identifies the nature of the problem, what will be done to correct the problem, and the timeframe required to make the corrections.

AMPS highlight the need for importers and exporters to implement robust customs compliance programs that include procedures for the self-assessment of compliance in advance of being CBSA audited. Early detection of customs reporting errors facilitates corrections and voluntary disclosures, as necessary, in order to mitigate the risk of penalties.