Relief of Interest and/or Penalties Including Voluntary Disclosure
Memorandum D11-6-4

ISSN 2369-2391

Ottawa, November 25, 2015

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In Brief

This memorandum is being updated to rectify the mailing address showing in paragraph 15 of Appendix B.

This memorandum provides information on the discretionary authority of the Minister or a delegated official to grant relief. Part I describes the circumstances that may be eligible for relief, such as extraordinary circumstances, certain actions of the Canada Border Services Agency (CBSA) and voluntary disclosures.

The CBSA will consider, on a case-by-case basis, whether or not it is appropriate to provide relief. Clients should consider how closely their situation is to the circumstances described in Part I and in most cases must fulfill the eligibility requirements described or referenced in Part II. In all cases, clients must provide a detailed explanation for the request.

The CBSA's capacity to provide discretionary relief is not intended to serve as a vehicle for clients to intentionally avoid their legislated obligations. Nor is it a substitute for the recourse mechanisms or other remedies available to resolve disagreements with CBSA decisions. For more information on how to appeal a decision taken by an official of the CBSA, refer to the CBSA's Web site.

Legislation

Customs Act

Penalty or Interest
3.2 – Prescribed rate may be authorized
3.3 – Waiver of penalty or interest

Federal Courts Act

Section 18.1 – Application for judicial review

Customs Tariff

125 – Prescribed rate may be authorized
126(1) – Waiver of interest
126(2) – Interest on interest refunded

Special Import Measures Act

2(10) – Application of Customs Act

Guidelines and General Information

Definitions

1. For the purposes of this memorandum,

Cancellation
means the reduction in full or in part of interest that has already been assessed to the client, whether or not it has been paid.
Client
means any person who has obligations under the legislation and is liable to be, or has been, assessed interest, and/or penalties. Depending on the context, "client" may include, but is not limited to, travellers, commercial and non-commercial importers, customs brokers, carriers, exporters, and warehouse operators.
Delegated Official
means the CBSA official formally delegated to make a decision, on behalf of the Minister, on the client's application.
Penalty
means an administrative monetary penalty (AMP) referred to in sections 109.1-109.3 of the Act.
Interest
means interest for which a client may be liable under the Customs Act, the Customs Tariff or the Special Import Measures Act:
Reason to believe date
means the date referred to in section 32.2 of the Act by which the importer must file a correction and described in Memorandum D11-6-6, “Reason to Believe” and Self-adjustment to Declarations of Origin, Tariff Classification, and Value for Duty.
Relief
means waiver or cancellation of interest, and/or waiver of penalties.
Restricted goods for export
has the same meaning as “restricted goods” as defined in Memorandum D20-1-1, Export Reporting.
Reviewing Officer
means the CBSA officer assigned to liaise with the client, organize the information, and provide a recommendation on the client’s application to the delegated official.
Voluntary Disclosure
means the circumstances in which clients come forward voluntarily to inform the CBSA of their non-compliance (this may include voluntary self-correction under section 32.2 of the Act). It may lead to waiver of penalties and a reduction of interest as described, and based on the conditions set out, in Part I – Criteria for Relief, of this memorandum.
Waiver
means the full or partial relief by the CBSA of interest, full relief of penalties, otherwise payable by a client before these amounts are assessed or charged to the client.

Application and Scope

2. The CBSA can provide relief under the Customs Act, and the Customs Tariff. This includes interest that is unpaid or late-paid anti-dumping and countervailing duty, and penalties associated with the information or record requirements of the Special Import Measures Act, which are assessed under the Customs Act.

3. The CBSA has authority to waive or cancel interest assessed under certain sections of the Customs Tariff at any time. The CBSA has authority to provide relief under the Act up until the time a Notice of Arrears is issued by the Canada Revenue Agency (CRA). Clients may send requests for cancellation of interest to CRA Collections after issuance of this notice.

4. This memorandum does not cover situations related to relief on the grounds of financial hardship or the inability to pay. Clients should initiate discussions with the CRA during the collection process. For further information, refer to the CRA's Web site.

Part 1 – Criteria for Relief

General

5. This part sets out the conditions that in most cases will be considered and the factors that influence or guide delegated officials in exercising their discretion when they consider applications for relief. Relief may be denied if a client has outstanding debts payable to the CBSA other than for the interest or penalty.

Extraordinary Circumstances

6. The legislative provisions allowing the CBSA to provide relief recognize that extraordinary or other compelling circumstances that contribute to non-compliance may warrant it; and that the CBSA may sometimes achieve the legislation's compliance objectives more efficiently or effectively with or without penalties or with reduced interest.

7. CBSA may provide relief when extraordinary circumstances beyond the clients' control prevented them from complying with their legislative obligations. Examples of such circumstances may be:

8. With respect to paragraph 7 above, the CBSA seeks to balance the client's circumstances with their obligations. In doing so, consideration will be given to the following:

Certain Actions of the CBSA

9. The CBSA will, in most cases, provide relief when a client's failure to comply with the legislative obligations or the ability to seek other legislative redress is primarily the result of actions of the CBSA, or when actions of the CBSA contributed significantly to the amount of interest to which the client became liable (for information regarding the waiver and cancellation of late accounting penalties and interest please refer to Memorandum D17-1-5, Registration, Accounting and Payment for Commercial Goods). Examples of such actions may include:

Voluntary Disclosures

Scope and Purpose

10. The purpose of voluntary disclosures is to promote compliance with the requirements of the Customs Act, the Customs Tariff, the Special Import Measures Act, and their related regulations, by encouraging clients to come forward voluntarily to:

11. In the case of corrections submitted under section 32.2 of the Act presented more than 90 days after having "reason to believe", other than for a reassessment period in a trade verification, the CBSA may accept these submissions as voluntary disclosures and conditionally waive the whole penalty as per the conditions in paragraph 15.

12. In cases of an accepted voluntary disclosure, the CBSA will:

13. When a voluntary disclosure related to imported goods is accepted as valid, clients are still required to pay all duties and taxes owing and for commercial goods will pay interest at the prescribed rate. For export goods please refer to the Appendix B for details.

14. Should there be difficulties in making a single complete payment in relation to commercial goods; clients may be able to make arrangements for a schedule of payments with CRA Collections.

Conditions of a Valid Disclosure

15. A voluntary disclosure must meet the following conditions to be valid:

16. With respect to the “voluntary” condition in paragraph 15(a), above:

17. If the qualifying conditions of paragraph 15 and 16 above are met, a delegated CBSA officer will consider a disclosure to be voluntary and will decline to take available enforcement actions and/or will approve a reduction in the monetary impacts of such civil actions. Voluntary disclosure is only one of a number of considerations in determining whether a particular enforcement action will be taken. Acceptance of a voluntary disclosure does not preclude criminal prosecution when warranted and does not remove applicable duties and taxes owed on imported goods or other penalties imposed by other government departments (OGD).

18. When a CBSA officer does not consider the qualifying conditions to have been met, the officer may take the appropriate action. Such actions may be compliance verification, seizure or ascertained forfeiture and, in certain instances, prosecution.

Special Consideration

19. Some contraventions of the Act may involve other enforcement actions which do not result in the imposition of a penalty assessed under section 109 of the Act or that are outside of the scope of the relief provided by section 3.3 of the Act, such as terms of release demanded for the return of seized goods, amounts demanded on ascertained forfeitures taken against personal or commercial goods, etc.

20. The CBSA encourages voluntary disclosure of information relating to the possession of goods unlawfully imported or exported.

21. The CBSA has no authority to relieve penalties or interests applicable under the legislation of other government departments (OGDs).

22. Some contraventions of the Act may warrant prosecution. The Voluntary Disclosure Program (VDP) does not grant immunity from prosecution. Nor is the delegated officer reviewing the disclosure in a position to comment on the possibility or probability of prosecution.

23. In situations dealing with goods prohibited entry into Canada, whether by virtue of tariff item 9897.00.00, 9898.00.00 or 9899.00.00 of the Customs Tariff that have been inadvertently imported or misclassified:

24. With respect to goods for importation into or exportation from Canada that are regulated by OGD requirements:

“No Name” Disclosures

25. Clients or a third party may present a “no-name” disclosure in order to request advice from the CBSA as to the possibility of a successful voluntary disclosure without identifying the client. Discussions are informal, non-binding and general in nature.

26. The option is primarily intended to provide insight into the VDP process – to give the client or representative a better understanding of the risks involved in remaining non-compliant and the relief available under VDP. A no-name disclosure does not remove the client’s legal obligations under the Act.

27. CBSA will respond to written requests for no-name disclosures based on the information provided and will be bound by the response given for a period of 90 calendar days after the date of the opinion provided. The response will be based on the facts presented and is subject to change if any new details come to light during the VDP. If a client chooses not to come forward to initiate a full VDP after receiving the response, CBSA will not use any of the information provided for any purpose.

Part II: How to Make an Application

28. Each application must be made in writing, include sufficient detail, and be presented in a clear and coherent manner to allow for review of the facts. Any information submitted is subject to review or verification by the CBSA.

29. To avoid additional interest accumulating (or the risk of specified interest for late payment on trade declarations or adjustments) and recognizing the discretionary nature of interest relief, clients seeking cancellation or reduction of interest already assessed should pay that interest within the time period indicated in the assessment notice or statement of account. The CBSA will pay clients interest at the prescribed rate, or credit their accounts, on any amount refunded, including any interest they have paid if their applications for relief are successful.

30. Please refer to the appropriate appendix for information about other applications:

31. The requirements in Appendices A and B apply to no-name disclosures except that the party presenting the disclosure does not need to provide information that identifies the client.

Part III: How the CBSA Reviews the Application and Makes its Decision

32. A delegated official will make a final decision about whether or not to grant relief. Before making the decision, the official will consider all information about the case in accordance with the Law.

33. Except for voluntary disclosures filed to comply with section 32.2 of the Act, once the appropriate CBSA office receives the application, an officer will acknowledge its receipt. An officer will then confirm the information received and, if necessary, request additional information and/or arrange a visit to the client's premises, if warranted. If the requested information is not received within the specified time frame (generally 30 days), a decision will be made based on the information on file.

34. For applications related to extraordinary circumstances as described in Part I of this memorandum, the CBSA will consider the following factors in addition to the required information explained in Appendix C of the memorandum:

35. Delegated officials may grant, partly grant or deny any application. A detailed reason for all decisions will be provided in every case.

36. In most cases of waiver of interest and penalties, or cancellation of interest, the reviewing officers will inform clients in advance of a preliminary recommendation to deny or only partly grant the application. Clients may make further submissions within 30 days of being informed of the preliminary recommendation.

37. For commercial transactions, a reviewing officer may receive and make a recommendation on a client's application for waiver of interest or penalties during the trade verification process. The reviewing officer records the application and makes a reference or appends the delegated official's decision in the final trade verification report. That reviewing officer may also subsequently receive and make a recommendation on applications for cancellation of interest when interest has already been assessed and the issue of waiver was not previously raised. (If the issue of waiver was previously raised and denied, refer to Part IV of this memorandum.)

38. Voluntary amendments of corrections under section 32.2 of the Act outside of the scope of a trade verification will be submitted on form B2 and undergo the normal process to produce a Detailed Adjustment Statement (DAS).

39. When processing voluntary self-correction, any applicable penalties will be considered to be conditionally waived. The CBSA may inform the client that the conditional waiver will no longer apply and that it may assess penalties when subsequent trade verification reveals that:

Part IV: Where Relief is Denied

40. If a client believes that a request for relief should have been granted, but was denied, a request for a judicial review is the only avenue of appeal. If an enforcement action was taken or if a trade program decision is issued under section 59 of the Act, the client may request an appeal pursuant to the Act. Additional information on how to file an appeal is available on the CBSA Web site.

Judicial Review

41. Where no alternative review or appeal process in the CBSA exists and the client believes that the CBSA has not exercised the available discretion in a fair and reasonable manner, apply for judicial review. While there is no legislated right of appeal for discretionary decisions, they fall under the jurisdiction of the Federal Court. A client may apply for judicial review of that decision under section 18.1 of the Federal Courts Act. Applications must be made within 30 days of the time the decision is communicated to the client.

42. For more information on how to file an application for judicial review, including the applicable fee, or for other general enquiries, contact the, Courts Administration Service or consult the Federal Court of Canada.

Additional Information

43. For more information, within Canada call the Border Information Service at 1-800-461-9999. From outside Canada call 204-983-3500 or 506-636-5064. Long distance charges will apply. Agents are available Monday to Friday (08:00 – 16:00 local time / except holidays). TTY is also available within Canada: 1-866-335-3237.

Appendix A

Apply for Voluntary Disclosure When Making Corrections Under Section 32.2 of the Customs Act

Further to the guidance in Part II of this memorandum:

1. This process applies only to named clients seeking waiver of specified interest and penalties when they voluntarily disclose non-compliance with their obligation, under section 32.2 of the Act, i.e., when they file corrections to Customs declarations more than 90 days after the "reason to believe" (RTB) date.

2. Such disclosures may be subject to subsequent trade verification.

3. Customs Self-Assessment Program (CSA) clients should refer to Part II of this Appendix.

I. General Procedure

4. Use Form B2, Canada Customs – Adjustment Request, to apply for the Voluntary Disclosure Program (VDP) to correct trade data declarations. (For further information about filing corrections, refer to Memorandum D11-6-6, “Reason to Believe” and Self-adjustments to Declarations of Origin, Tariff Classification, and Value for Duty and Memorandum D17-2-1, Coding of Adjustment Request Forms.)

5. In the B2 field for “legislative reference”, record “32.2 VDP”.

6. Insert the following text in the “justification/explanation” field on the Form B2, identifying the specific trade program(s) for which the voluntary disclosure is being made:

7. Also include whichever of the following is applicable in the “explanation” field:

8. Address and send disclosures to the B2 processing center for self-adjustments (as identified in paragraph 81 of Memorandum D17-1-5, Registration, Accounting and Payment for Commercial Goods).

II. Procedures for Customs Self-Assessment Program (CSA) Importers

9. When a CSA importer chooses to make a voluntary disclosure the importer will adapt the procedures described in Part I of this Appendix by:

III. Procedures for CSA-Self Verification (SV) Clients

10. CSA-SV clients will find the procedures for obtaining conditional waivers of penalties for their voluntary disclosures in their CSA handbook.

11. CSA-SV clients will report the following information annually about their voluntary disclosures, if any:

Appendix B

Apply for Voluntary Disclosure Other Than on Corrections Made Under Section 32.2 of the Customs Act

Further to the guidance in Part II of this memorandum:

1. To apply for the benefits of the voluntary disclosure program (VDP) other than as described in Appendix A, contact the CBSA in the manner described below:

2. When applying, provide all information required to verify the validity of the voluntary disclosure as described in Parts I and II of this memorandum, including any applicable information set out in the client agreement form for voluntary disclosure application that can be found in Appendix D or the information contained therein.

3. Where the disclosure involves previously unreported goods, the CBSA may require clients to present the goods for inspection and/or determination of value.

4. In cases where the good(s) cannot be presented (e.g., due to damage or theft), the proof of the acquisition (i.e., receipt, sales invoice, purchase agreement or other documentation) can be accepted in lieu of the actual good(s).

5. Take all steps necessary to return to a compliant status, including full payment of all duties, taxes and, for commercial goods, interest owing.

I. Non-commercial Goods

6. Clients who have imported non-commercial goods should contact the CBSA office where the goods entered Canada or closest to where the clients reside.

7. Clients may present an application in person or in writing. A detailed explanation for the request will be required during the review process.

8. In cases where the officer must establish the value for duty, the client should be prepared to present a proof of payment (receipt, bill of sale or other proof of payment). In cases where a proof of payment is not available, the client will need to provide sufficient information to determine a value for duty that is consistent with the provisions of the Customs Act. In some instances, the CBSA may need to hold the disclosed goods so an independent third party can appraise the goods.

9. Clients will have to pay any duty and taxes owing on the goods disclosed.

II. Commercial Goods (Other Than for Corrections Under 32.2 of the Act)

10. Full payment of duties and prescribed interest made prior to the application for, or completion of, the voluntary disclosure does not automatically entitle the client to the benefits of a voluntary disclosure. Access to a voluntary disclosure will be determined once all available facts related to the disclosure have been reviewed.

11. Resident clients must contact the CBSA office in the region where their books and records are kept.
Non-resident clients must contact the CBSA office in the region where the majority of their imports occur.

12. In areas where geographical considerations impede direct contact with the CBSA, clients may contact the nearest CBSA office. This office will forward the disclosure information to the appropriate office, which will then contact the client to arrange the most convenient method to continue the disclosure process.

13. For goods already reported but not accounted for within the applicable billing period, and for unreported goods not accounted for within the billing period that would have applied if they had been properly reported and accounted for, non-CSA clients may submit a B3-Type V, Canada Customs Coding Form and payment of duties and taxes or account security to the nearest CBSA office, whichever applies. A Senior Officer Trade Compliance will calculate the prescribed interest owing from the date the goods should have been duty paid when or after a copy of the B3 is received. For unreported goods, the carrier may be subject to penalties, even if the importer is not.

14. For goods imported by a CSA client that have not been accounted for within the payment period that would have applied if they had been accounted for within the normal accounting time frames, the clients submit on a B3s and capture the data (including interest) on their Revenue Summary Forms (RSF). The CBSA will consider their liability to penalties at year-end

III. Commercial Export Shipments Not Reported Under Section 95 of the Customs Act

Further to the guidance in Part II of this memorandum:

15. To apply for the benefits of the VDP clients must contact the CBSA Importer and Exporter Compliance Unit at ie_compliance-ie_conformite@cbsa-asfc.gc.ca or in writing at 171 Slater Street, 2nd floor, Ottawa, Ontario, K1A0L8. In cases of disclosure of non-report, clients may request a summary template to assist in preparing their voluntary disclosure.

16. When applying, provide all information required to verify the validity of the voluntary disclosure as described in Parts I and II of this memorandum, including any applicable information set out in the Client Agreement Form Voluntary Disclosure Application that can be found in Appendix D of this memorandum or the information contained therein.

17. As mentioned in paragraphs 21 and 24 of this memorandum, in the case of a shipment which is controlled under OGD Regulations other requirements must also be met.

18. Where the goods of an export shipment are controlled or regulated by any Act of Parliament and a permit, licence or certificate is required to export these commodities, in addition to providing the details of the disclosure to the CBSA, it is the responsibility of the exporter to contact the applicable permit officer to start the Export VDP process with the OGD(s). These government departments recognize that, on occasion, exporters inadvertently fail to comply or may be unaware that an export shipment may be controlled or regulated. The CBSA encourages exporters to come forward and will work with the OGD to determine if the exporter is eligible to receive relief from non-compliance.

19. For example Foreign Affairs Trade Development Canada (DFATD) has established procedures for the reporting of voluntary disclosures. DFATD requirements can be found in the Export Controls Handbook.

Appendix C

All Other Applications for Relief

The following procedures apply to:

These applications arise primarily from the extraordinary circumstances or CBSA errors or delays described in Part I of this memorandum (for information regarding the waiver and cancellation of late accounting penalties and interest, please refer to Memorandum D17-1-5, Registration, Accounting and Payment for Commercial Goods).

Information/Documentation Required

Further to the guidance in Part II of this memorandum:

1. When trade verification for commercial goods is planned, in progress, or recently concluded, clients should give or send their related applications for relief to the reviewing officer.

2. When a dispute notice has been filed under section 60 of the Act, clients should give or send their application to the assigned recourse officer.

3. When an appeal has been filed under section 67 of the Act, clients should send their application to the assigned senior appeals officer.

4. For all other applications:

5. Clients must provide all relevant information, including the following, where applicable:

Appendix D

Client Agreement for Voluntary Disclosure Application

Section I: Client identification

In your letter, you must have the following client identification information:

Identify whether you are:

Provide the following applicable information:

Section II: Disclosure details and reasons

Please provide details surrounding your disclosure such as the ones listed below as well as any other details or documents that would help an officer get a clear understanding of your situation:

If full details or all documents cannot be provided at the time of initial disclosure, please indicate what will follow and by what date.

Section III: Client declarations and acknowledgements

Please include the following applicable text (verbatim) in your letter:

Ensure you've identified your name and position and that you have signed and dated the letter. Or if you are the representative, ensure that your client's information is provided and signature is present. Include the following:

Section IV: The reviewing officer will identify the following

The reviewing officer will be identifying the following information to help assess your disclosure:

Following the review the officer will provide his/her findings including the following information such as (but not limited to):

References

Issuing office:
Trade and Anti-dumping Programs Directorate
Headquarters file:
 
Legislative references:
Customs Act
Federal Courts Act
Customs Tariff
Special Import Measures Act
Other references:
D11-6-6, D11-6-10, D17-1-5, D17-1-9, D17-2-1, D20-1-1, D20-1-4, D22-1-2
Superseded memorandum D:
D11-6-4 dated
Date modified: