Customs Analysis
A M P S
The Canada Customs and Revenue Agency’s (CCRA) Administrative Monetary Penalty System (AMPS) is now scheduled for implementation October 29, this year. While it is true that implementation has been delayed from April, the coming of AMPS has been touted for quite some time as a very significant shift in the government’s enforcement regime. In essence, AMPS is a shopping list of Customs-related obligations, complete with associated penalties for non-compliance and escalating penalty amounts, which apply to repetitive infractions.
I am surprised that a very large number of importers are either unaware of AMPS or oblivious to its ramifications. This apparent lack of concern could be based on the old saying, “You don’t know what you don’t know.” If you don’t think you are doing something wrong, then you’re not worried about it, or, won’t care what the penalty is for doing something wrong. Conversely, the apparent apathy may be a reflection on the CCRA’s failure to meet several other of its implementation dates; importers may simply be taking an “I’ll believe it when I see it” attitude.
Personally, I feel like the little kid watching the old horror flick on the big screen. I see the naive victim meandering about in his or her routine, as the vampire emerges from the dark to inflict its bite. No matter how loud I yell, a victim is going to take it in the neck!
To quote an article on AMPS from CCRA’s own Web site: “The important difference in our modernized sanctions regime is that it will affect the bottom line of non-compliers.” There is no justifiable reason for an importer to become a victim, yet believe me, many of you will.
My chief concern is that CCRA is looking to AMPS as the panacea for non-compliance. However, if non-compliance is a disease, it is one which CCRA inadvertently helped to spread. For many years the government has operated under a premise of Administrative Tolerance, allowing, if not accepting, less than adequate declarations and documentation in the name of cost-effective risk management. As a result, during the same period many companies, importers, exporters and service providers have developed bad habits, in effect, lowering the standard of their customs performance to the government’s perceived level of acceptance, as inferred from their enforcement activities.
I am sure that many of you know, or can relate to an instance where a NAFTA certificate with missing data elements (or some other inappropriate response) was submitted to support a refund claim to recover a couple of hundred dollars. In your mind you knew it was wrong and probably suspected it would be rejected. But no… the claim was considered low risk, probably not even looked at, and paid. Although the government’s response included a disclaimer statement to the effect of “decision does not have application for future,” the claim was paid. Money talks, and the governments “risk management” tool thereby created and reinforced a negative behavior.
The CCRA’s new mentality basically says companies which choose to enter and compete in the global marketplace should be prepared to put in place an infrastructure necessary to support their international trade activities. After all, you have to comply with many laws that govern the domestic workplace: employment equity, taxation, safety, etc., so why should your corporate attention to Customs-related international trade obligations be any different?
In this vein, CCRA has implemented other regulatory changes which have redefined the importing process. “Reason to Believe” has squarely focused the responsibility of total compliance on the importer. A 90-day window for voluntary adjustment and a four-year period of obligation, imposed when an importer has reason to believe that an error in tariff, value, or origin has occurred, could themselves be the basis for severe financial hardship.
What is lost in this mind set is the fact that there are many relatively inconsequential types of errors which occur, where the only deterrent to an importer’s compliance is the non-cost effective method of reporting the variance. Under reason to believe, once you have established an error exists, you are obligated to go back against each previous entry (four years) and file voluntary amendments. While I’m sure you will agree it is imperative to maintain accurate statistics, I’ll also bet you will resent the time and cost of compliance.
This is further complicated by the fact CCRA is administering AMPS based upon their presumption of an importer’s guilt; pay your penalties, then appeal. I believe many importers will be hard pressed to justify costly appeals against inconsequential trade data assessments, not realizing the potential impact on their compliance performance profile. A profile is maintained by CCRA to assess an importer’s ability to participate in preferential programs or the level of scrutiny you will attract.
For the purpose of demonstration, I will use examples of infraction, penalty, escalation from the most current version of the draft AMPS document. For example:
• In Customs’ opinion, reason to believe exists, yet you did not voluntarily correct the tariff, value or origin and they catch you: first occurrence — 5 percent of the value for duty (VFD) or $100.00, whichever is greater; second occurrence - 10 percent of VFD or $200.00, whichever is greater; third and every subsequent occurrence - 20 percent of VFD or $400.00, whichever is greater.
Importer or owner of goods fails to have a valid NAFTA certificate of origin in their possession when claiming preferential tariff treatment as prescribed: first occurrence $1,000.00; second occurrence $5,000.00; third occurrence $10,000.00; fourth and subsequent occurrences $25,000.00.
These are just two common examples. Ask yourself how many repetitive importations you have and consider that most importers/brokers use product tariff databases for consistency. Therefore, if an error appears on one document, what are the odds repetition will cause the penalty to escalate beyond being an inconvenience to be detrimental?
Review and/or create processes. Ask questions of your service provider(s). The government considers you responsible, it’s in your best interest to act that way — be proactive.