ADMINISTRATIVE MONETARY PENALTY SYSTEM

Customs Compliance Defined

It is the obligation of all importers, exporters and their service providers to comply with the laws governing importation and exportation

The Consequences of Non-Compliance in the past
Financial exposure resulting from reassessment and or penalties on goods already customs cleared/duty paid Exposure to audits and financial penalties for non-qualifying goods imported under NAFTA and other trade agreements Customs facilitation linked to a client’s compliance record Privilege revocation

Old System

Compliance of importers was examined on a transaction by transaction basis.

If officer questioned something about a shipment, the shipment was held up/delayed while the importer or the Customs Broker fixed it, and / or it was inspected. After Customs release, entries were reviewed and examined for errors. Officers were looking for incorrect H.S.#’s, G.S.T. application, and Tariff Treatment, especially if the result was additional duties and taxes being assessed

Reasons for need to change

Increase in the number and value of imports into Canada Decrease in Departmental budgets and manpower due to Government downsizing. Increase in Electronic interaction Decrease in amounts of Revenue collected

Reasons for need to change con’t...
Increase in the number and complexity of Trade Agreements Increased pressure from Canadian Business to reduce the cost and burden of importing into Canada The system no longer met C.B.S.A.’s needs

Reaction
1. C.B.S.A. decided to move emphasis away from transactional

“per shipment” analysis to periodic verification audits called “Compliance Assessment Reviews” and C.B.S.A. will use the audit results to measure compliance.
6. Compliance of Individual clients is monitored and reported both

per individual shipment, and via audit. 3. Introduction of Administrative Monetary Penalty System (AMPS)

Compliance Assessment Reviews
Officers arrive at a company and examine it for:

Systems Review : Examine accounting systems and procedures related to

Customs activities.
Linkages between various processes like Purchasing, Customs release,

receiving, payables, accounting and reporting.

Compliance Assessment Reviews con’t...

Program Compliance:
Test level of compliance with various Customs related requirements Sample of 25- 100 entries

Steps to a Compliance Assessment Review
Company is selected by C.B.S.A. Headquarters Notification Letter sent to Company Questionnaire(s) sent and completed by company and initial meeting set up. Information Systems of Company in question is contacted Systems review performed at initial meeting

Steps to a C.A.R.
Twenty Five (25) samples will be requested. If necessary additional samples may be requested Review is performed for program compliance. An interim report is issued. Response to the interim report is received from the company and incorporated into the final report. Final report is issued.

Steps to a C.A.R.

The interim report will state that entries may require amendment. All future transactions will be placed under “enforcement” to ensure the results of the Audit are adhered to. If same mistakes are made in the future, AMPS penalties will be issued.

Compliance Trail
Invoice #1234 Purchase Order # 4444 Date Supplier Amt: $1,000 Qt 4 Item Engines PO #:4444 Waybill #8888 #123456789 CADEX Item Qt Engines 4 REF: T.C.8401.02.13.32 V.F.D:$1000. INV # 1234

B3

Engines PO # 4444

Amt: $1,000 Qt 4 Item Engines

Demonstrating Consistency and accuracy in each step of a shipments journey !

General Ledger Journals

Receipt #333 Date Qt 4
Date Supplier Amt $1000 Inv # 1234

Item Engines Amt: $1,000

REF: # INV # 1234

What C.B.S.A. Sees
#123456789 CADEX Item Qt Engines 4 REF: T.C.8401.02.13.32 V.F.D:$1000. INV # 1234

B3

What needs to be demonstrated
Invoice #1234 Purchase Order # 4444 Date Supplier Amt: $1,000 Qt 4 Item Engines PO #:4444 Waybill #8888 #123456789 CADEX Item Qt Engines 4 REF: T.C.8401.02.13.32 V.F.D:$1000. INV # 1234

B3

Engines PO # 4444

Amt: $1,000 Qt 4 Item Engines

Consistency and accuracy in each step of a shipments journey !

General Ledger Journals

Receipt #333 Date Qt 4
Date Supplier Amt $1000 Inv # 1234

Item Engines Amt: $1,000

REF: # INV # 1234

Ranges of Compliance gathered via initial CBSA CAR Audits
Accounting: Classification Valuation Tariff Treatment 67% 23% 33% 0% - 100% 98%

- 100% - 100%

A.M.P.S. Defined
“Administrative Monetary Penalty System”
Fines for any contravention of:
 Customs Act  Customs Tariff  Special Import Measures Act  License Conditions  Regulations

Definition cont’d…

Designed to be corrective not punitive. “Help not Hurt” Escalate for repeat contraventions Fines may be a flat rate or a % of value Minimum fine for first offense: $100.00 Maximum fine per entry is $25,000.00 CAD

Definition cont’d…
Although the A.M.P.S. penalty calculations started fresh, prior non-compliances will be a factor.

Applies to: Importers (Travelers and Commercial) Exporters Customs Brokers Bonded Warehouses & Duty Free shops Importers utilizing C.S.A. Can be applied at time of release or via audit.

$$$$$ Consequences
Fines will probably be on goods already sold

Increased Tension in relationships with suppliers and clients

increased Customs Inspections

increased Customs fines and their frequency:

“AMPS Penalties bring more AMPS Penalties”

Administrative Monetary Penalties

EXAMPLES OF INFRACTIONS

Customs Act Section 13 Person reporting goods inside or outside Canada failed to answer truthfully any question asked by an officer with the respect to goods. This includes all designated goods e.g. alcohol, tobacco products 1st - $2000 or 20%, 2nd - $4000 or 40% and 3rd - $6000 or 60% (greater)

Contravention # C154

Customs Act Section 40 (1) Person who imports fails to keep, for 6 yrs. following the importation records covering origin, marking, purchase, value etc. 1st - $1,000 2nd - $5,000 3rd - $10,000 & subsequent $25,000 Over 3 year period

Contravention # C152
Customs Act Section 35 (1)
Importer or owner fails to furnish the proof of origin upon request 1st - $500 2nd - $2,500 3rd - $5,000 4th & subsequent $25,000 per request Over 3 years

Importer or owner of goods fails to have a certificate for origin in the person’s possession when claiming preferential tariff treatment as prescribed

Contravention # C080

Customs Act Section 32.2 (1) Failed to make the required corrections to a declaration of origin, tariff classification, or value for duty of imported goods within 90 days after having reason to believe that the information was incorrect 1st - $100 or 5% of the VFD (greater) 2nd - $200 or 10% & 3rd $400 or 20%

TOP 6 Contravention's Issued By C.B.S.A.
C004 – Special Import Measures Act “S.I.M.A.” C070 – Non-Accounting of Goods C082 – Tariff Classification, Revenue Neutral C152 – Certificate of Origin C352 – Tariff Classification, Revenue C353 – Valuation, Revenue

AMPS

Majority of AMPS Penalties have been issued at time of clearance. C.B.S.A. projects “back-end” compliance verification penalties are projected to increase by at least 100%. C.B.S.A. is issuing 2nd and 3rd level penalties as fines can now be applied for entire audit period.

AMPS

AMPS Penalties can be appealed. Once AMPS penalty is issued the company being fined must pay the penalty before an appeal can be entertained by CBSA