thrust of the recent changes to CBSA's ‘Reason to Believe' ("RTB") and ‘Reassessment Policies'

To improve delivery of CBSA's core trade programs and focus its efforts on situations where importers have failed to exercise sufficient due diligence or there is a revenue shortfall to the Canadian government, CBSA announced in the summer of 2012 that it would make changes to its Memoranda D11-6-6 "Reason to Believe and Self-Adjustments to Declarations of Origin, Tariff Classification and Value for Duty" ("D11-6-6") and D11-6-10 "Reassessment Policy" ("D11-6-10").1 To replace the previous versions in effect from September 2008 and January 2007, respectively, CBSA released revised D11-6-6 and D11-6-10 concurrently on April 12, 2013 (the "Implementation Date").

Generally, section 32.2 of the Customs Act (the "Act") obligates an importer to self-adjust/correct any incorrect origin (tariff treatment), value for duty ("VFD") or tariff classification declaration within 90 days of the importer acquiring RTB (or specific information) that its declaration is incorrect. Along with correcting any such declarations, the importer would need to pay any additional duties and taxes owing as a result of the corrections within the 90-day period. CBSA imposes prescribed interest on such overdue amounts. These obligations generally extend for a period of up to 4 years from the date of accounting pursuant to subsection 32.2(4) of the Act.

The revised policies strike a balance between, on the one hand, placing an onus on an importer to ensure that they correctly account for imports and, on the other hand, recognizing that certain errors do not warrant imposing the administrative burden on the importer of correcting them due to mitigating circumstances. In particular, where an importer-initiated, or CBSA-initiated audit or review report discovers incorrect declarations, and before the report was prepared, specific information was available to the importer to acquire RTB that the errors had occurred, but no duties were payable, the legal requirements to correct under section 32.2 of the Act can be relaxed under the CBSA's revised administrative policies in D11-6-10, depending on the nature of the specific information (i.e., the degree of culpability of the importer).

To prevent revenue loss suffered by the federal government where there are any actual duties or taxes owing as a result of the errors (including any unrecoverable GST), then the importer would be required to correct back to the date of specific information, up to four years from accounting, in accordance with the strict legal requirements under section 32.2 of the Act in all such cases.

We discuss certain noteworthy changes to D11-6-6 and D11-6-10 below.

D11-6-6 and corresponding changes in D11-6-10

  • RTB Criterion (a): Revised D11-6-6 clarifies the scope of RTB criterion (a), which arises from not following evident (obvious or apparent) and transparent (clear or self-explanatory) legislative provisions. Previously, prior to the Implementation Date, an importer might find that CBSA would consider a legislative interpretation to meet this criterion, even if another interpretation applied by the importer could be reasonably supported. To address this concern (and eliminate or substantially reduce this element of subjectivity), CBSA restricts criterion (a) to legislative provisions that are prima facie (at first sight) evident and transparent.
  • RTB Criterion (e): Revised D11-6-6 clarifies the scope of what goods are covered by an importer's RTB under criterion (e). Under this criterion, an importer can acquire RTB from CBSA's written communications directed specifically to the importer. Prior to the Implementation Date, an importer might have had uncertainty about what goods are the subject of RTB and require corrections to their tariff classification declared. Under the revised D11-6-6, criterion (e) extends beyond the particular goods described in CBSA's written communication to similar goods that differ in size, colour, or some other characteristic, but that do not affect the tariff classification of the goods at the 8-digit tariff item level.
  • Scope of RTB: CBSA makes other changes related to those discussed in the previous bullet. The obligation to correct extends to the "same and similar goods" as those identified as declared erroneously, when "impacted by the same issues". Revised D11-6-6 defines the term "same and similar goods" as

"Identical and other models/styles that have the same function as the goods being verified, that differ in a manner (e.g., size, colour, capacity) that does not alter the tariff classification of the goods at the tariff item level."

Revised D11-6-6 adds another definition, explaining what is meant by "same issue":

"Identical program requirements or considerations relating to the legislative provisions that apply to imported goods."

These two definitions are added into revised D11-6-10 at paragraphs 40 and 41. Where CBSA finds errors identified in a trade compliance verification final report, "the importer must submit corrections to declarations relating to same and similar goods and/or the same issues within 90 days from the date of the ... report." [Paragraph 39 of revised D11-6-10.]

Like the replaced version of D11-6-6, the revised D11-6-6 provides examples to illustrate what is meant by the "same issue". CBSA gives the example of a "same origin issue" being a determination that goods do not qualify for a preferential tariff treatment. An example of "the same valuation issue" affecting other imported goods would be an "assist" (an adjustment to the transaction value representing the value of a good or service provided free of charge by a purchaser for the benefit of the foreign vendor to produce the goods sold for export to the purchaser) arising under subparagraph 48(5)(a)(iii) of the Act.

  • Importer's Report is Incorrect: Where a CBSA trade compliance verification report finds that an importer-initiated review and report is incorrect, the CBSA's report can take precedence over the importer's internal or external report and become the importer's RTB. Where there was no RTB prior to the verification report, CBSA will generally allow the importer, under revised D11-6-10, to limit self-adjustment, as applicable, to only those incorrect declarations within the verification period and going forward. Under revised D11-6-6 and D11-6-10, where the CBSA's report finds that specific information was available to the importer before the CBSA's verification report, which gave the importer RTB that its declarations were incorrect, then the reassessment period requiring corrections could date back to this RTB (but not beyond four years from the date of accounting).
  • Imputed Knowledge: Revised D11-6-6 makes clear that the CBSA can impute knowledge of specific information to an importer, with such imputed knowledge giving rise to RTB. In paragraph 26 of the previous version of D11-6-6, RTB arises when "the importer has specific information on how to account for the goods correctly". In paragraph 5 of revised D11-6-6, RTB arises "on the date that the importer has, or was considered to have had, specific information that a declaration was incorrect." [Emphasis added.] If the importer should have had knowledge of the specific information, the importer does not need to have actual knowledge of the specific information. This objective, reasonableness standard precludes an importer from being rewarded for being careless, negligent or reckless as to its customs import compliance.

To convey that the importer is held to an objective, reasonableness standard in regard to RTB, paragraph 4 of revised D11-6-10 incorporates nuanced refinements to the superseded wording in former paragraph 5 of D11-6-10. Under the former paragraph 5, RTB "occurs when the importer has specific information" that a declaration is incorrect. Under paragraph 4 in revised D11-6-10, RTB "occurs when specific information was considered to be available to the importer to indicate that" a declaration was incorrect. [Emphasis added.]

  • Post-Importation Price Decreases: Paragraph 48(5)(c) of the Act states that any rebate or decrease in price effected after importation should be disregarded. Therefore, paragraph 22 of revised D11-6-6 and paragraph 14 of revised D11-6-10 advise that any such post-importation rebate or price decrease should not result in any obligation to self-correct under section 32.2 of the Act. (Determining whether it is a price rebate or decrease effected after importation is not necessarily straight-forward and the jurisprudence on this point may need to be considered.)
  • Re-Determination of What Issue(s)?: Paragraph 29 of the revised D11-6-6 states:

"A decision issued by the CBSA on a correction or refund request for a specific program (e.g., origin) does not constitute a decision under other programs (e.g., tariff classification and valuation)."

That is, if CBSA re-determines the tariff classification, the importer cannot seek to challenge the origin or valuation as CBSA has made no decision on either of them in re-determining the tariff classification. In this regard, refer to C.B. Powell Ltd. v CBSA.2

Therefore, if duties would result from the importer self-adjusting its tariff classification, the importer should consider whether there is a preferential tariff treatment claim available to the importer that would eliminate the duties, and if such claim is available, should self-adjust to claim the preferential tariff treatment contemporaneously. In Frito-Lay Canada, Inc. v CBSA,3 CBSA sought to deny an importer's U.S. Tariff Treatment ("UST") self-adjustment claim intended to eliminate the duty liabilities that would be caused by the importer's contemporaneous tariff classification self-adjustments, if the Most Favoured Nation (MFN) tariff treatment were to continue to apply.

CBSA sought to deny the UST self-adjustments on the basis that duty refund claims were not made within one year of accounting as required under paragraph 74(1)(c.1) and subparagraph 74(3)(b)(ii) of the Act. They are only permissible if the duty refund claims are made with one year of accounting.

As no duty refund claims under section 74 were sought, the Canadian International Trade Tribunal (the "CITT") disagreed. "Rather, according to subsection 32.2(4), the obligation to make the corrections provided for under subsection 32.2(2) exists for a four-year period after initial accounting, and the record shows that Frito-Lay was within that time frame (and under the obligation ) for all of the corrections (and for all the categories of transactions) that it filed under subsection 32.2(2)."4

Unchanged in D11-6-10 "Reassessment Policy"

  • Note that both the replaced and current D11-6-10 apply to errors giving rise to requirements to correct under section 32.2 of the Act where either duties are owing or no duties are owing (i.e., the errors are revenue neutral). They do not, however, apply to situations where the importer makes errors that result in the overpayment of duties where the importer can claim duty refunds within the applicable time-period under section 74 of the Act.
  • Under both CBSA's former and current versions of D11-6-10, where there was no specific information giving rise to RTB before the importer's self-initiated audit or review report, CBSA would permit the importer to correctly account for the imported goods from the date of the importer's report.

Changes to D11-6-10 "Reassessment Policy"

Significant revisions to D11-6-10 include the following:

  • RTB Prior to Importer's Report: Where the current version departs from the former version is its treatment of situations where there was specific information available prior to the date of the report. Under the former version, corrections were required back to the date of the specific information, up to four years from the date of accounting, in all situations in strict accordance with section 32.2 of the Act. Under revised D11-6-10, strict compliance with section 32.2 applies in all cases where the errors would result in duties owing or revenue loss to the federal government.

In addition, in revenue neutral situations where the importer's RTB acquired before the report arises under any of the criteria (b) to (g) in paragraph 1 of revised D11-6-6, then the importer is subject to this same treatment (i.e., to correct in strict compliance with the legal requirements under section 32.2 of the Act).

By contrast, where the importer's pre-report RTB arises from criterion (a) in paragraph 1 of revised D11-6-6 (i.e., not following prima facie or "at first sight" evident and transparent legislative provisions), then the importer may be allowed to correct only back to the starting date of the last completed fiscal year, notwithstanding that the RTB occurs before that date.

The reason for this more lenient treatment of criterion (a) than of criteria (b) to (g) appears to be that the importer's conduct could be considered less culpable than when the RTB arises under criterion (a). Criteria (b) to (g) would generally be situations where the importer has actual knowledge of the errors, whereas criterion (a) could arise where the importer is imputed to have knowledge of the errors.5

  • Importer's Report Correct, but not Followed: Under revised D11-6-10, the importer would amend any incorrect declarations dating back to the importer's report up to a maximum of four years or back to the starting date of the verification period if the importer's report was completed after that date.
  • CBSA Audit or Verification Report: Where an importer is the subject of a CBSA audit or verification and specific information was not available before the audit or verification, then under revised D11-6-10, the importer would generally be allowed to amend only any incorrect declarations within the verification period and going forward, even if errors occurred before the period. Under the former D11-6-10, the importer would generally be limited to self-adjust erroneous declarations back to the beginning of the most recently completed fiscal year before the date of the CBSA's notification of the verification.

Where specific information precipitating RTB was available before the audit or verification, the previous version of D11-6-10 required the importer to self-adjust incorrect declarations back to the date of specific information, up to four years from the date of accounting, in strict conformity with the legislative requirements. Under the current version, this treatment applies where the federal government would suffer a revenue loss in the absence of such treatment (i.e., customs duties or excise taxes or duties are payable or GST payable cannot be fully recovered by the importer by input tax credit claims).

Whether or not the CBSA will relax the legal requirements for self-correcting where there is no revenue loss, once again depends on the nature of the RTB (as is the case noted above with RTB arising before an importer's self-initiated report). Where the pre-enforcement RTB arises under any of criteria (b) to (g), then the importer is required to self-adjust incorrect declarations back to the date of specific information, up to four years from the date of accounting. If the pre-enforcement RTB arises under criterion (a), then the CBSA would generally relax the legal requirements so that the importer would only need to self-adjust any incorrect declarations within the verification period and forward.6

  • Requesting an Extension to the 90-Day Self-Adjustment Period: In revised D11-6-10 at paragraphs 42 to 48 inclusive, CBSA has formalized its policies and process for requesting an extension to the 90-day period for filing self-corrections with CBSA. CBSA formerly allowed such extensions, but there was no written guidance on this subject in CBSA's published administrative policies. The written request should be sent to CBSA's Trade Programs Directorate at the address noted, be made no later than 45 days from the date of RTB, demonstrate that the correction process has begun and "be accompanied by a fulsome explanation of why the 90-day period cannot be met."

Paragraph 47 states:

"Even if an extension is granted, the importer will be required to submit corrections for the first year of the reassessment period by the 90th day of the filing period."

If such corrections are not received by the 90th day, then CBSA will revoke the extension and impose Administrative Monetary Penalties ("AMPs") against the importer not self-adjusting its errors in a timely fashion under section 32.2 of the Act.


Many of the changes are welcome. The incorporation into revised D11-6-10 of written guidelines for requesting an extension to the 90-day self-adjustment period should facilitate transparency and fairness. In cases such as natural disaster that are beyond the control of the importer, we would hope that CBSA would relax certain of the conditions for obtaining an extension in appropriate circumstances. Overall, the changes seek to strike a reasonable balance between the two objectives of (1) promoting self-adjustment by importers under a voluntary self-assessment system, and (2) reducing the administrative burden on importers when the circumstances warrant.

Given the complexity of the changes and revised policies, importers are encouraged to consult with professional customs advisors when considering their customs import compliance, contemplating any self-adjustments or facing CBSA audit or verification activity relating to their imports. A pro-active approach by importers toward compliance may ultimately yield the best results and be a good investment. Establishing and following appropriate procedures to ensure compliance requires ongoing diligence and monitoring.