Customs Act

2.1

Cases

AAi. FosterGrant of Canada Co. v. Canada (Commissioner of the Canada Customs and Revenue Agency), [2004] 3021 ETC, 2004 FCA 259

The taxpayer, which was a wholly-owned subsidiary of its U.S. parent, and which took title to goods upon their delivery to a warehouse facility owned by its U.S. parent and sold those goods to Canadian retailers, with the goods being delivered directly from the warehouse to those customers, was found to be carrying on business in Canada so that it was a "purchaser in Canada". Sharlow J.A. stated (at para. 20):

"In essence, the CITT adopted the principle that a corporation is not carrying on business if its affairs are subject to significant de facto control by the parent corporation. There is no authority for that proposition ..."

See Also

Pampered Chef, Canada Corp. v. CBSA, [2008] ETC 4514 (CITT)

Individual self-employed sales representatives of the taxpayer secured orders for sales of kitchen products shown at various home parties by them with the products then being imported by the taxpayer from its U.S. parent for shipment directly to the individual customers. The Tribunal found that the sales for export by the U.S. parent were made to the taxpayer rather than to the individual customers. On this basis, the taxpayer satisfied the test of carrying on business in Canada for the purposes of the definition of "permanent establishment" in the Valuation for Duty Regulations.

Ferragamo U.S.A. Inc. v. CBSA, [2007] ETC 4516

The taxpayer imported goods from Italy and sold them to its Canadian subsidiary. In finding that the taxpayer was the "purchaser in Canada" by virtue of s. 2.1(c)(ii), the Tribunal found that the personnel at the Canadian subsidiary had only minor input concerning the merchandise to be purchased and the quantities to be ordered for its operation and that the taxpayer had effective control of expenditures by the Canadian subsidiary except for routine payroll and petty cash expenditures. Accordingly, the Canadian subsidiary was not "resident".

Section 3.2

Administrative Policy

Memorandum D11-6-5 Interest and Penalty Provisions: Determinations/Re-determinations, Appraisals/Re-appraisals, and Duty Relief, 4 January 1993

Criteria for the Application of the Prescribed Rate of Interest Levied as a Result of Decisions under Sections 34 and 58 to 94 of the Customs Act or the Provisions of Part II of the Customs Tariff

(As specified by the Minister)

1. Where the importer, of his own volition, makes a voluntary amendment prior to any action being initiated by the Department and pays any additional duty owing.

2. Where specific information (see Note 1), on matters subject to interpretation (see Note 2), was not previously provided to the importer or his agent, and was not available in the public domain (see Note 3) which gives rise to the importer not providing the correct tariff classification, origin or value for duty information.

3. Where the action giving rise to the interest was as a result of a Certificate of Origin that was reasonably relied on but later was found to be invalid.

4. Where importations are made within 30 days of the first departmental decision made on a particular subject or issue, for example tariff classification or value for duty.

5. Where the importer requests a re-determination, re-appraisal or an appeal of an assessment or re-assessment and fails to provide acceptable security within 30 days but does so within 90 days. The prescribed rate of interest will apply for the entire period between the date of the Detailed Adjustment Statement (DAS) and the date security is provided.

6. Where an assessment or re-assessment of duties and taxes results in a substantial amount of money owing and the importer, who is unable to pay the amount at one time, negotiates a deferred payment plan and honours it.

7. Where the importation is non-commercial, that is, an importation for other than sale, commercial, industrial, occupational, institutional or other like use.

Notes: 1. This refers to information which is directly germane to the tariff classification, the value for duty or the origin of goods that are the subject of the importation at issue. Such information would normally be obtained from sources that are not in the public domain, such as departmental rulings, departmental opinions, previous determinations, appraisals, re-determinations and re-appraisals.

2. This refers to situations where no clear guidance has been issued to the importer and none is available within the public domain. For example, it is sometimes a matter of interpretation as to whether or not a "royalty payment" is to be included in the value for duty. However, this rule would not apply to the misclassification of an imported product where common sense ought to apply, for example a diamond ring cannot be classified under the tariff item for automotive piston rings.

3. This refers to information which has been published for dissemination to the public on matters relating to compliance with Customs legislation. This would include, but is not necessarily limited to, Customs Notices, D-Memoranda, Canadian International Trade Tribunal decisions, Court decisions, statutes and regulations published in Part I, II or III of the Canada Gazette and other relevant Government of Canada publications.

Section 32

Subsection 32(1)

Administrative Policy

Memorandum D17-1-10 Coding of Customs Accounting Documents, 28 November 28 2012

Section 32.2

Administrative Policy

Memorandum D11-6-10 Reassessment Policy April 6, 2016

11. From the date that an NCR or an advance ruling is issued, the importer will be required to declare all future importations in accordance with that ruling as it becomes the importer's specific information providing "reason to believe".

  • Note: If it is determined that specific information was available to the importer prior to receiving the ruling, the earlier specific information will be considered by the CBSA to be the reason to believe that a declaration was incorrect.

27. In the case of a trade compliance verification where the CBSA determines that specific information was not available, the importer will not be considered to have had "reason to believe". The importer will be required to amend all incorrect declarations only for the verification period, as identified in the CBSA's initial notification letter and going forward.

  • For example, a letter from the CBSA dated March 23, 2015 notifies the importer of an upcoming trade compliance verification of goods imported during their January 2014 to December 2014 fiscal year. In its trade compliance verification final report dated September 8, 2015, the CBSA identifies errors but determines that the importer did not have reason to believe that the declarations were incorrect. In this case, the importer must amend all incorrect declarations accounted for during the verification period (i.e., January 1, 2014 to December 31, 2014), and going forward.

Memorandum D11-6-6 “Reason to Believe” and Self-adjustments to Declarations of Origin, Tariff Classification, and Value for Duty April 12, 2013

1. With respect to section 32.2 of the Customs Act (the Act), specific information regarding the origin, tariff classification, or value for duty of the imported goods that gives an importer reason to believe that a declaration is incorrect, can be found in:

  • (a) legislative provisions such as specific origin, tariff classification, or value for duty provisions that are prima facie (i.e., at first sight), evident (i.e., obvious, apparent), and transparent (i.e., clear, self-explanatory). ...
  • (b) formal assessment documents issued by the CBSA to the importer, relating to the imported goods, such as determinations (other than “deemed determinations”), re-determinations, further re-determinations, etc.;
  • (c) final tribunal or court decisions in which the importer was either the appellant, respondent or intervenor;
  • (d) information received from exporters, suppliers, etc. (e.g., cancellation of certificates of origin; vendor’s invoice indicating retroactive price increase for goods already purchased);
  • (e) written communication, addressed directly to the importer from the CBSA, such as a ruling (e.g., national customs ruling, advance ruling issued under section 43.1 of the Act), a trade compliance verification final report, or an official notification as a result of an exporter origin verification;
  • (f) a final report from an importer-initiated internal audit or review, or, from an external company conducting an audit or review of an importer’s company; or
  • (g) knowledge that the goods no longer qualify or comply with a condition of relief or a restriction imposed by the concessionary tariff item declared (e.g., goods diverted to a non-qualified conditional-use or conditional-user).

Section 33.4

Subsection 33.4(1)

Administrative Policy

Memorandum D11-6-5 Interest and Penalty Provisions: Determinations/Re-determinations, Appraisals/Re-appraisals, and Duty Relief, 4 January 1993

12. If the amount owing under subsection 58(2) of the Customs Act by the importer is paid within the 30-day time period, no additional interest will be charged. If the amount owing is not paid within 30 days, the importer will be liable to interest at the specified rate, calculated on the total amount owing, from the day after the date the amount was originally liable to be paid (e.g., end of month for importers on periodic payment), until the total amount is paid.

Section 61

Subsection 61(1)

Paragraph 61(1)(c)

Administrative Policy

Memorandum D11-6-3 Administrative Policy Respecting Re-determinations or Further Re-determinations Made Pursuant to Paragraph 61(1)(c) of the Customs Act 16 September 16 2008

6. At the time of entry, importers should account for subsequent goods in accordance with Agency advice at that time. The Agency may review, under subsection 59(1) of the Customs Act, the accounting records for subsequent goods imported prior to a decision of the CITT or court.

7. Once an importer has filed an appeal under section 67 or 68 of the Act, that importer no longer needs to submit adjustment requests against subsequent importations of the goods. This means that in this instance importers need not protect time limits formally or informally in order for their subsequent goods to be eligible for consideration under paragraph 61(1)(c) of the Act.

8. The Agency cautions importers to take protective action whenever it is doubtful whether the appellate decision will apply to other imported goods. They should contact their regional Recourse Division for written confirmation that the goods in question are considered to be subsequent goods or, alternatively, file timely dispute notices under section 60, or applications for refund under paragraph 74(1)(e). The Agency will generally delay processing such dispute notices requests/applications until after the CITT or court decision. ...

16. Applications or requests which may have been filed, respectively, under paragraph 74(1)(e) or under subsection 60(1) of the Act concerning the same issue, and which were held in abeyance pending a decision by the CITT or the court, will be processed under those sections of the Act respectively, in accordance with the CITT or court decision rendered. Importers should note that interest payments on refund applications made under paragraph 74(1)(e) are not as beneficial as those made on decisions made under subsection 60(4) or paragraph 61(1)(c) of the Act.

Section 67

Subsection 67(1)

Cases

Spike Marks Inc. v. Canada (Attorney General), 2008 FCA 406

CBSA (and, ultimately, the CITT) has carriage of the re-determination of tobacco excise duties

The Federal Court determined that it had no jurisdiction to consider the appellant’s application for review of the decision of the CBSA to increase duties imposed under ss. 42 and 43 of the Excise Act, 2001 on imported cigars, because s. 67(1) of the Customs Act provided the appellant with a right to appeal such decisions to the CITT.

In affirming this finding, Ryer JA stated (at para. 18-19):

Parliament intended the result that was stipulated by the applications judge, namely that section 44…empowers the CBSA to assess duties arising under sections 42 and 43…where such duties relate to the importation of raw leaf tobacco and tobacco products. It follows that in exercising this assessment power, the CBSA must apply, and therefore interpret, the relevant provisions of the Excise Act, 2001 to the extent necessary to properly calculate, assess and collect those duties in accordance with its mandate under section 44 of the Excise Act, 2001.

Accordingly…a complaint with respect to a decision of the CBSA relating to the calculation and assessment of duties in relation to the importation of raw leaf tobacco and tobacco products that are imposed under sections 42 and 43 of the Excise Act, 2001 is a matter to which the appeal right in subsection 67(1) of the Customs Act would apply.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Excise Act, 2001 - Section 44 CBSA (and, ultimately, the CITT) has carriage of the re-determination of tobacco excise duties 338

Section 74

Subsection 74(1)

Paragraph 74(1)(d)

Administrative Policy

Memorandum D18-3-1 Reporting and Accounting of Excise Duties on Imported Tobacco, Tobacco Products, Wine and Spirits, and Release of Those Goods, September 17, 2008

28. There is no provision within the Excise Act, 2001 to offset the excise duties paid at the time of entry on imported goods, nor are there any provisions to allow Excise to refund the duties erroneously paid to Customs. However, Customs will consider a request for refund of the excise duties under the Customs Act as an incorrect calculation of duties owing based on a clerical, typographical or similar error.

29. Importers that want to claim a refund of those duties paid in error must submit their claims to Customs. Claims must be submitted in the prescribed form and manner as outlined in Memorandum D6-2-3, Refund of Duties. ...

31. Under "Justification for Request", the importer should state that the claim is for a "Refund of Excise Duties" under paragraph 74(1)(d) of the Customs Act, with an explanation that the excise duties were paid in error at the time of accounting and should have been accounted under Excise Licence Number 99-XX-99999.

Section 109.1

Subsection 109.1(1)

Cases

United Parcel Service Canada Ltd. v. Canada (Public Safety and Emergency Preparedness), 2011 FC 204

one NPA could assess multiple infractions

The applicant (UPS) was assessed penalties totalling $522,000 under the AMPS system for failure to report small value packages shipped to Canada and removed from sufferance warehouses. The assessment dealt only with a three-month period although the reporting problem covered a broader period. The assessment, which related to 174 shipments (“SNKs”), initially was made in only one notice of penalty assessment notwithstanding the $25,000 maximum in s. 109.1(1). Near J stated (at para. 53):

I can see nothing in the legislation, and no justification in the Applicant’s submissions, to support the contention that each NPA can only contain one contravention or penalty. It is obvious from the record that the CBSA debated about how to proceed, whether by a single NPA to cover all SNKs, or individual NPAs for each SNK. Each SNK was given a nominal value of $1. In light of the scale of the contravention, the CBSA then applied the AMPS maximum of $3000 to each SNK to arrive at the amount demanded.

Administrative Policy

Memorandum D22-1-1 Administrative Monetary Penalty System, January 30, 2015

10. CBSA post-release verification activities may identify multiple occurrences of an identical contravention. To ensure that clients have the opportunity to become compliant before penalties move to the next level, all occurrences of an identical contravention identified during the same CBSA post-release verification process will be assessed at the same penalty level.

24. CBSA will not apply more than one AMPS contravention to any single instance of non-compliance. For example, if the circumstances of a single instance of non-compliance involve providing information to an officer that is not true, accurate and complete (contravention C005) as well as failing to report imported goods (contravention C021), only one penalty will be applied.

32. Contravention retention periods are for penalty calculation purposes only and used to determine when penalties escalate from one level to the next. They are calculated either one year or three years from the date of the last contravention against the client. Once the retention period has expired, and the same contravention occurs again, the system will begin a new retention period and calculates penalty amounts from the first level. Most contraventions resulting from post release verifications have retention periods of three years; border related contraventions have a retention period of one year.

Master Penalty Document

C353

Penalty

  • 1st: $150 to a maximum of $5,000 (per issue) or $25,000 (per occurrence)
  • 2nd: $225 to a maximum of $200,000 (per occurrence)
  • 3rd and Subsequent: $450 to a maximum of $400,000 (per occurrence)

Penalty basis: Per issue or per occurrence*

Retention period: 36 months

Contravention: Authorized person failed to pay duties as a result of 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 import documents.

The term “per occurrence” at the first, second, and third levels applies to each uncorrected value for duty error per B3 accounting document and not per B3 line.

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

Contravention C353 applies only in cases where customs duties and/or taxes are payable by the importer as a result of the correction. Where customs duties and/or taxes would not be owed as a result of required corrections, see C083.

Contravention C083 will not be applied in addition to this contravention.

Errors discovered during a second or subsequent audit, examination, verification, or monitoring activity that are unrelated to the first penalty assessment will incur only first level penalties. ….

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 that are issued 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) or $25,000 (per occurrence) depending on applicable reason to believe criterion. …

“Reason to Believe”

In regards to the obligation to self-correct under section 32.2 of the Customs Act, specific information regarding the value for duty that gives an importer reason to believe that a declaration is incorrect, can be found in:

  • (a) legislative provisions such as specific valuation provisions that are prima facie (i.e., at first sight), evident (obvious, apparent) and transparent (i.e., clear, self-explanatory). For example, packaging or assists provisions;
  • (b) formal assessment documents issued by the Canada Border Services Agency (CBSA) to the importer, relating to the imported goods, such as determinations (other than “deemed determinations”), re-determinations, further re-determinations, etc.; …
  • (e) written communication addressed directly to the importer or the importer’s agent from the CBSA such as a national customs ruling, or a trade compliance verification final report; …

First Level Penalties

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

First level penalties that are the result of criterion (a) will be assessed on a per issue basis for each issue not corrected within 90 days of having “reason to believe”. A penalty of $150 will be assessed for each issue up to a maximum of $5,000. First level penalties will be assessed at $150 for each issue regardless of how often an error is repeated during the reassessment period, provided that all occurrence 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 receiving the trade compliance verification final report will be assessed a penalty of $150 per occurrence to a maximum of $25,000.

Example:

An importer failed to make an adjustment for assists, as required under the provisions of 48(5)(a)(iii) of the Customs Act. If the error is corrected within 90 days of receiving the trade compliance verification final report, only one penalty of $150 to a maximum of $5,000 will apply regardless of how often the error is repeated over multiple accounting documents. If the error is not corrected within 90 days of receiving the trade compliance verification final report, a $150 penalty will apply for each occurrence of each error throughout the reassessment period, to a maximum of $25,000.

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

First level penalties that are the result of criteria (b) through (f) will be assessed on a per occurrence basis for each error not corrected within 90 days of having “reason to believe”. A penalty of $150 will be assessed for each occurrence over the reassessment period up to a maximum of $25,000.