Administrative Monetary Penalty System
Contravention C082

Authorized person failed to make the required corrections to a declaration of tariff classification within 90 days after having reason to believe that the declaration was incorrect.

Guidelines

The term “per issue” applies to each uncorrected tariff classification error of goods regardless of how often the error is repeated on commercial accounting declarations (CADs).

The term “per occurrence” applies to uncorrected tariff classification errors of goods per CAD and not per line on the CAD.

”Goods” include same and similar goods, which are identical and other models/styles of goods that have the same purpose/function as the goods being subject of the specific information that gives reason to believe, that differ in a manner (e.g., size, colour, capacity, etc.), but that are classified under the same tariff item number at the 8-digit level.

Non-compliance is normally discovered by a Senior Officer Trade Compliance (SOTC) as a result of an audit, examination, verification, or subsequent monitoring activity.

Penalties are applied against the importer of record (IOR).

Where customs duties and/or taxes are owed to the CBSA as a result of the required corrections, contravention C352 will apply.

Where a correction to a declaration results in a claim for refund of customs duties, no penalty will apply.

Errors unrelated to the first penalty assessment, as they don’t pertain to same and similar goods, that are discovered during a subsequent audit, examination, verification, or monitoring activity, will only incur first level penalties.

The SOTC must record each error in their report and include a detailed explanation as to what constituted “reason to believe” for that error. This is required in order to establish the level of penalty for any subsequent occurrence of the same error.

There will be a maximum penalty amount of $1,000 applied to each group of repeated errors where the IOR can demonstrate that the errors in the CAD were caused by a single keystroke/data entry error. This maximum penalty amount will only apply to first level penalties and only where corrections are made within 90 days of the date of the trade compliance verification final report.

Any combination of penalties issued under C082 and C352 shall not exceed the maximum penalty amount for each specific level and shall include all penalties issued at the same level as a result of an audit, examination, verification or subsequent monitoring activity. The maximum penalty amount for the first level is $5,000 (on a per issue basis) or $25,000 (on a per occurrence basis) depending on the applicable reason to believe criterion. The conditions under which either the $5,000 or $25,000 maximum penalty amount would be applied are explained in the First Level Penalties paragraph below. The maximum penalty amount for the second level remains unchanged at $200,000. The maximum penalty amount for the third level also remains unchanged at $400,000.

“Reason to Believe”

As provided in paragraph 1 of Memorandum D11-6-6, Reason to believe and corrections to the declaration of origin, tariff classification or value for duty, in regards to the obligation to make a correction under section 32.2 of the Customs Act, specific information regarding the tariff classification or diversion of the imported goods that gives an importer reason to believe that a declaration is incorrect, can be found in:

1. Legislative provisions, such as specific tariff classification provisions, that are prima facie (that is, at first sight), evident (that is, obvious, apparent), and transparent (that is, clear, self-explanatory). For detailed examples of prima facie, evident, and transparent legislative provisions, refer to the Appendix in Memorandum D11-6-6
2. Formal assessment documents (e.g., statement of adjustment) issued by the Canada Border Services Agency (CBSA) to the IOR, relating to the imported goods, such as determinations (other than deemed determinations), re-determinations, further re-determinations, etc.
3. Final tribunal or court decisions in which the IOR was the appellant, respondent or intervener
4. Information received from exporters, suppliers, manufacturers or producers, etc. (e.g., change in production material or functionality that would impact the tariff classification)
5. Written communication, addressed directly to the IOR from the CBSA, such as a ruling (e.g., national customs ruling, advance ruling issued under section 43.1 of the Customs Act), a trade compliance verification final report, a directed compliance letter, or a final compliance validation letter
6. A final report from an importer-initiated internal audit or review, or from an external company conducting an audit or review of the IOR’s company
7. Knowledge that the goods were diverted (that is, goods that no longer qualify or comply with a condition of relief or a restriction imposed by the concessionary tariff item declared), such as the diversion of goods to a non-qualified conditional use or conditional user

First Level Penalties

A tariff classification error occurs when goods are not classified and accounted for in accordance with the rules and schedules of the Customs Tariff Act. Penalties apply where an IOR failed to make the required corrections to a declaration of tariff classification within 90 days after having reason to believe that the declaration was incorrect.

For errors that have occurred as a result of reason to believe criterion (a):

First level penalties for errors that are the result of reason to believe criterion (a) will be assessed on a per issue basis for each issue not corrected within 90 days from the day the IOR has reason to believe. First level penalties will be assessed at $500 for each distinct issue on the CAD, up to a maximum amount of $5,000, regardless of how often the same error occurs on the CAD during the applicable reassessment period, provided that all occurrences of the error are corrected within 90 days of the date of issuance of the trade compliance verification final report.

Errors that are not corrected within 90 days of receiving the trade compliance verification final report will be assessed a penalty of $500 per occurrence over the reassessment period, up to a maximum amount of $25,000.

For errors that have occurred as a result of reason to believe criteria (b) through (g):

First level penalties for errors that are the result of one of the criteria (b) through (g) will be assessed on a per occurrence basis for errors not corrected within 90 days of having reason to believe. A penalty of $500 will be assessed for each occurrence over the reassessment period, up to a maximum amount of $25,000.

Second Level Penalties

Second level penalties can only be applied to subsequent errors made on same and similar goods that have previously been assessed a first level penalty within the retention period.

For the same tariff classification errors previously assessed a penalty at the first level that have been identified as a result of subsequent audits, examinations, verifications, or monitoring activities, second level penalties of $750 will be assessed on a per occurrence basis, up to a maximum amount of $200,000 for the reassessment period.

Second level penalties will also be assessed on all adjustments made by IORs where they failed to make the required corrections to a declaration of tariff classification within 90 days of having reason to believe that corrections are required.

Third Level Penalties

Third level penalties can only be applied to subsequent errors made on same and similar goods that have been previously assessed a second level penalty within the retention period.

For the same tariff classification errors previously assessed a penalty at the second level that have been identified as a result of subsequent audits, examinations, verifications, or monitoring activities, third level penalties of $1,500 will be assessed on a per occurrence basis, up to a maximum amount of $400,000 for the reassessment period.

Third level penalties would also apply to all adjustments made by IORs where they failed to make the required corrections to a declaration of tariff classification within 90 days of having reason to believe that corrections are required.

References

Legislation

Customs Act, paragraph 32.2(2)(a)

D-Memo

D11-6-6, “Reason to Believe” and Self-Adjustments to Declarations of Origin, Tariff Classification, and Value for Duty