Of the myriad regulations that you face as an Importer, three very important regulations to be aware of are the “Administrative Monetary Penalty System – AMPS”, “Self Adjustments and Reason to Believe”, and “Compliance Verification Audits”.
Administrative Monetary Penalty System (AMPS)
AMPS is a penalty regime designed to “provide the Agency with a means to deter non-compliance by its client (the Importer), and thereby to encourage compliance. AMPS ensure a level playing field for all Canadian businesses by ensuring that there is a cost for non-compliance. To this end, AMPS is designed to be a remedial rather than a punitive program”. There are over 300 specific situations that can trigger an AMPS penalty to be issued. AMPS penalties can range from $150.00 per transaction up to $25,000.00 for multiple infractions.
Self-Adjustment – Reason to Believe
Each time that a shipment is cleared through Customs, an electronic transaction is presented to the CBSA which provides among other information, the quantity, description, tariff classification and value of each product in that particular shipment or transaction. This constitutes a declaration under subsection 32(1), (3) or (5) of the Customs Act.
If it becomes apparent after the original declaration, (transaction), has been acquitted with the CBSA, that there has been a change in tariff classification, country of origin, or value for duty, for any reason, the importer is required to make a correction to the declaration whether or not the correction results in duty or GST owing to the CBSA, or is revenue neutral.
An Importer has an obligation to file any corrections within 90 days of having a “Reason to Believe”, that an incorrect declaration has been made. “Reason to Believe” can take on a number of different forms. You may receive a NAFTA Certificate of Origin from your vendor that has a different classification on it than what has been declared to Customs, you may receive a corrected invoice which has a different country of origin than what has been declared, or you may discover that your vendor has been providing an incorrect or incomplete description or pricing on their invoices.
Any of these, and other instances can trigger the requirement for a correction to be filed with the CBSA for the affected transaction or transactions. Corrections may be required from the earliest date of having “Reason to Believe” that an incorrect declaration has been made to a maximum of four years. The specific provisions that cover this can be found in Customs Memorandum D11-6-6.
If you are unsure if you have corrections that require filing and have not done so, a member of our Trade Compliance Team can assist you in making that determination through a self-audit process. If it is discovered that corrections are required within the 90 day time limit then they should be dealt with immediately. If it is discovered that corrections are required past the 90 day time limit, it may be to your advantage to file a Voluntary Disclosure. If Customs accept a Voluntary Disclosure, it may mitigate the payment of AMPS penalties and punitive interest on any duty or taxes owing to the CBSA. Very important however, is the fact the corrections must be filed even if they are revenue neutral. For further information on the Voluntary Disclosure process please contact our office. It is important to note, that should your company be chosen for a Compliance Verification Audit prior to filing required corrections the Voluntary Disclosure is no longer an option and AMPS penalties and punitive interest may apply.
Compliance Verification Audit
Should the CBSA choose your company for a Compliance Verification Audit; you will be asked to provide a number of sample transactions for them to review. The verification could be for tariff classification, valuation, country or origin or a combination thereof. For tariff verification for example, you will be provided with a letter requesting copies of transactions that the CBSA wish to review. You may also be asked to provide samples of the products in question. At the conclusion of the review, a letter will be sent outlining the CBSA findings. If the CBSA makes a determination that all transactions were filed in accordance with the regulations, they will issue a letter to close the audit. If the CBSA determine that there are corrections required, and the “Reason to Believe” is determined to be the date of the final verification letter; corrections would be required to be filed on any affected transactions from the date of the final verification letter, including 12 months from the date of the last fiscal year end. However, if it is determined that there was “Reason to Believe” that an error had been made in the tariff classification, prior to the verification audit, corrections may be required to be filed on transactions going back four (4) years from the date of the final verification audit letter. Furthermore, in this scenario, the CBSA can issue AMPS penalties of $150.00 per transaction to a maximum of $25,000.00 for each correction required to be filed. It is important to note, that any CBSA findings and subsequent corrections and/or penalties are subject to appeal. Please see Appendix “A” for a list of the current CBSA National Audit Priorities.
We hope that you will find this information helpful and urge you to take the steps within your company to ensure that those who need to be aware of this information are made aware of it. As an Importer with the CBSA your company should be aware of all compliance requirements, and have mechanisms in place within your company to ensure that all information transmitted to the CBSA is as accurate as possible. It is very important that your company have a plan in place to make sure that any corrections that are required to be made are being addressed. Should your company have any corrections to file at this time, or on an ongoing basis, we are certainly able to provide this service for you.
As your Customs Broker, we make every effort to provide you with whatever tools and information we can to ensure that your company is as proactive as possible with the CBSA. We hope that in this way we can help to lessen your exposure to any penalties or fines. As part of our ongoing efforts, we offer a number of informative Trade Compliance Seminars throughout the year dealing with Customs Compliance among other subjects. We can also provide on-site seminars to any number of employees that you feel would benefit from them and we would be more than happy to discuss this option with you.
by Dave Bucholtz