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INFONEX 14th Annual Customs Compliance and Border Security Delta Toronto Airport West January 20, 20

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January 20, 2009. How to Avoid Customs Penalties: AMPS. Greg Kanargelidis ... Source: CBSA, Presentation by Rachel Auclair and Colleen McGonigle, October 28, 2008 ... – PowerPoint PPT presentation

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Title: INFONEX 14th Annual Customs Compliance and Border Security Delta Toronto Airport West January 20, 20


1
INFONEX14th Annual Customs Compliance and Border
SecurityDelta Toronto Airport WestJanuary 20,
2009How to Avoid Customs Penalties AMPSGreg
KanargelidisBlake, Cassels Graydon
LLPgreg.kanargelidis_at_blakes.com

2
Order of Presentation
  • 1. Introduction to AMPS
  • 2. Status of AMPS Revised Structure
  • 3. Emerging Jurisprudence

3
  • PART I
  • INTRODUCTION TO AMPS

4
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 contravention
  • Intended to be corrective rather than punitive
  • Seizures and forfeitures are reserved for only
    the most serious contraventions, such as drug or
    weapons smuggling

5
Legal and Regulatory Framework
  • AMPS regime enacted through section 109.1 of the
    Customs Act
  • 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 direct.

6
Legal and Regulatory Framework
  • 109.1(3) The Governor in Council may make
    regulations
  • (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

7
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

8
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

9
Options for Dealing With a NPA
  • Options after NPA is issued
  • Pay Penalty
  • Request Correction
  • Formal Review/Appeal
  • Mitigation
  • Penalty Reduction Agreement

10
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 served

11
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

12
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 NPA
  • 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

13
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

14
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

15
Penalty Reduction Agreements, Contd
  • 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 manual)
  • 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
    discretion

16
CCRAs Voluntary Disclosure Policy
  • Aim
  • 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 Tariff

17
Voluntary Disclosure Policy - Principles
  • 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

18
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 omissions)
  • Must involve at least one monetary penalty
  • Can involve disclosures less than one year overdue

19
Voluntary Disclosure Policy - 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
    opinion
  • If a Voluntary Disclosure is made following
    receiving a no-names opinion, the effective date
    of disclosure will be the date the request was
    received

20
Voluntary Disclosure Policy -Exclusions
  • 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 CBSAs
    refusal to waive interest and penalty, but a
    second review to Recourse Directorate is
    available, or judicial review to Federal Court

21
  • PART II
  • STATUS OF REVISED AMPS STRUCTURE
  • Source CBSA, Presentation by Rachel Auclair and
    Colleen McGonigle, October 28, 2008

22
AMPS Review
  • Since implementation, numerous issues/concern
    raised by both clients and employees
  • too many penalties
  • penalty structure too complex
  • some penalties/backgrounders not clear

23
AMPS Review, contd
  • Fundamental review of penalty regime
  • review of existing penalties to ensure fairness
    and consistency
  • identify and correct inconsistencies with future
    direction
  • 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)

24
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- Valuation.
  • C352 Importer failed to pay duties as a result of
    a required correction- Tariff.
  • 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.

25
Top 10 Border Contraventions
  • C336 Person failed to pay duties on accounted
    goods
  • C005 Person failed to provide true, accurate and
    complete information.
  • C008 Carrier used incorrect carrier code or
    failed to use bar code for CCN.
  • 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 authorization.
  • 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
    arrived.

26
AMPS Penalty Appeals DataTrade 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

27
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

28
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. reputation)
  • Penalty amounts will be set accordingly
  • Limited number of penalty structures (currently
    29) based on risk
  • Future contraventions will follow model

29
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 volume
  • Increased delay before escalation from level 1 to
    level 2, for low-risk contraventions only

30
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 clients compliance history
  • Issuing to brokers would ensure penalties would
    not adversely affect clients
  • No easy solution probably maintain status quo

31
CBSA Recommendations
  • 5. Regional Review Committees
  • All regions originally had review committees
  • Reinstate regional review committees to ensure
    consistency and accuracy

32
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 upheld

33
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.

34
CBSA Recommendations
  • 8. Update AMPS automated system
  • Necessary to implement modified contraventions
  • System will be easier and faster to use
  • Resolve current technical issues

35
CBSA Recommendations
  • 9. Training CBSA officers
  • Extensive training required once updated system
    is available
  • New regime and system
  • Will include border, trade and appeals officers
  • Centralization and clear guidelines for
    application of correction option

36
CBSA Recommendations
  • 10. Ongoing communications
  • provide ongoing information to clients/stakeholder
    s regarding new AMPS program
  • consultations to continue through BCCC and AMPS
    subcommittee
  • information sessions will be held for trade
    community prior to implementation
  • prior notice to trade community of contraventions
    and penalty amounts

37
  • PART III
  • EMERGING JURISPRUDENCE

38
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
    decision
  • appeal is by way of action

39
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 penalty
  • 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

40
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

41
The Case for a Due Diligence Defence
  • CBSA position that due diligence defence does not
    apply to AMPS penalties
  • position is contrary to GST and other customs
    jurisprudence
  • leading GST case is Consolidated Canadian
    Contractors Inc.
  • leading customs seizure case is Cata
    International Inc.

42
INFONEX14th Annual Customs Compliance and Border
SecurityDelta Toronto Airport WestJanuary 20,
2009How to Avoid Customs Penalties AMPSGreg
KanargelidisBlake, Cassels Graydon
LLPgreg.kanargelidis_at_blakes.com
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