Guidelines

The term "per issue" applies to each good for which a preferential tariff treatment under a free trade agreement was incorrectly claimed 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 errors for which a preferential tariff treatment under a free trade agreement was incorrectly claimed 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 C350 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 C080 and C350 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.

"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 self-correction under section 32.2 of the Customs Act , specific information regarding the origin that gives an IOR reason to believe that a declaration is incorrect, can be found in:

Legislative provisions, such as specific origin 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

Formal assessment documents (for example, statement of adjustment) issued by the CBSA to the IOR, relating to the imported goods, such as determinations (other than deemed determinations), re-determinations , further re-determinations , etc

Final tribunal or court decisions in which the IOR was the appellant, respondent or intervenor

Information received from exporters, suppliers, etc. (for example, cancellation of certificates of origin)

Written communication, addressed directly to the IOR from the CBSA, such as a ruling (for example, advance ruling issued under section 43.1 of the Customs Act ), a trade compliance verification final report, a directed compliance letter, a final compliance validation letter or an official notification as a result of an exporter origin verification

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

Penalties apply where an IOR failed to make the required correction to a declaration of the origin of goods subject to a free trade agreement 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 $5,000, regardless of how often the same error occurs on the 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 of $25,000.

Assessments of penalties on a "per issue" basis will not apply in circumstances where an IOR fails to furnish any proof of origin upon request.

Example

An IOR declares multiple goods under an FTA preferential tariff treatment (FTA PTT) and has a valid multiple product or multi-page proof of origin in support of the majority of the declared goods. In the same shipment and under the same declaration, the IOR incorrectly declares an FTA PTT for one or two goods that are not certified on the multi-product or multi-page proof of origin. If the IOR corrects the tariff treatment errors within 90 days of the date of the trade compliance verification final report, only one penalty of $500 on a per issue basis will be assessed, regardless of how often the error occurred over multiple CADs. However, if all occurrences of the error are not corrected within 90 days of the date of the trade compliance verification final report, a penalty of $500 will be assessed for each occurrence of the error throughout 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) to (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.

Example

Where an IOR has received information from an exporter (or producer) that advises a certificate of origin is no longer valid or that goods no longer qualify as originating, corrections to declarations of origin must be made within 90 days of receipt of this notification. This would be considered an IOR's reason to believe under criterion (d).

Second Level Penalties

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

For the same origin 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 origin 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 goods that have previously been assessed a second level penalty within the retention period.

For the same origin 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 origin within 90 days of having reason to believe that corrections are required.

References

Legislation

Customs Act , paragraph 32.2(1)(a)

D-Memo

D11-6-6: Reason to believe and corrections to the declaration of origin, tariff classification or value for duty