Administrative Monetary Penalty System
Contravention C083

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

Guidelines

The term “per issue” applies to each element of the value for duty provisions that is incorrect and for which a correction was not made, regardless of how often the error is repeated on commercial accounting declarations (CADs).

The term “per occurrence” applies to uncorrected value for duty errors of goods per CAD and not per line on the CAD.

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 an amount of customs duties and/or taxes is owing to the CBSA as a result of the required corrections, contravention C353 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 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 occurrences of the same error.

There will be a maximum penalty amount of $1,000 for each group of repeated errors where the IOR can demonstrate that the errors in the declarations 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 C083 and C353 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 (per issue basis) or $25,000 (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.

Errors in declarations of value for duty do not always lend themselves to a clear distinction on the assessment of penalties on a “per issue” or “per occurrence” basis. Where there is uncertainty over whether a penalty should be assessed on a “per issue” or “per occurrence” basis, officers are strongly encouraged to contact the Origin, Valuation and Negotiations Unit for assistance in the assessment of penalties.

“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 value for duty that gives an IOR reason to believe that a declaration is incorrect, can be found in:

1. Legislative provisions, such as specific valuation 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 intervenor
4. Information received from exporters, suppliers, etc. (e.g. vendor’s invoice indicating retroactive price increase for goods already purchased, corrected invoice)
5. Written communication, addressed directly to the IOR from the CBSA, such as a national customs ruling, 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

First Level Penalties

A value for duty error occurs when the value for duty of goods is not determined in accordance with the requirements of sections 44 to 55 of the Customs Act. A value for duty error can be, but is not limited to, the use of the wrong valuation method or its improper application, the use of the incorrect price paid or payable, or not making each of the required adjustments as required under the valuation provisions of the Customs Act. Each will be considered a separate error. Penalties apply where an IOR failed to make the required correction to a declaration of the value for duty of the goods 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 issue on the CAD, up to a maximum amount of $5000, regardless of how often the same error occurs on a CAD during the reassessment period, provided that all occurrences of the error are corrected within 90 days of the date of the trade compliance verification final report.

Errors that are not corrected within 90 days of the date of the trade compliance verification final report will be assessed a penalty of $500 per occurrence during 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 (f):

First level penalties for errors that are the result of one of the reason to believe criteria (b) through (f) 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 during 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 the same issues that have previously been assessed a first level penalty within the retention period.

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

Second level penalties will also be assessed for all adjustments made by IORs where they failed to make the required corrections to a declaration of value for duty 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 the same issues that have previously been assessed a second level penalty within the retention period.

For the same value for duty errors identified as a result of subsequent audits, examinations, verifications, or monitoring activities, third level penalties will be assessed at $1500 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 value for duty 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