MEMORANDUM D22-1-1

Ottawa, June 16, 2003

ADMINISTRATIVE MONETARY PENALTY SYSTEM

This Memorandum describes the Administrative Monetary Penalty System (AMPS) as it applies to the customs commercial clients, and establishes guidelines concerning the AMPS penalties that the Canada Customs and Revenue Agency (CCRA) may apply for non-compliance.

The AMPS penalties are designed to address non-compliance with Canada's trade and border legislation. Under the authority of the Customs Act, the AMPS provides for penalties for contraventions of the Customs Act, Customs Tariff, and any regulations thereunder including contraventions of the terms and conditions of licensing agreements and undertakings. The AMPS penalties largely replace the use of seizure and ascertained forfeitures as enforcement tools.

The AMPS does not apply retroactively to infractions that occurred prior to October 7, 2002, the date that the AMPS was implemented, with the exception of five contraventions relating to the Customs Self Assessment Program, which became effective December 3, 2001. However, prior rulings, court decisions, etc. respecting tariff classification, value for duty, and origin are still valid and are used to determine a client's awareness of the compliance requirements with respect to section 32.2 of the Customs Act.

TABLE OF CONTENTS

• Guidelines and General Information
  • Definitions
  • Legislation
  • Regulations
  • Overview of the Administrative Monetary Penalty System (AMPS)
    • Improved Compliance
    • The AMPS Client Contravention History
  • Notification to Service Providers
  • Application of the AMPS
  • The AMPS vs. Application of Other Enforcement Measures
  • Penalty Structure
    • Maximum Penalty Amount
  • Payment
    • Failure to Pay Penalty Assessment
  • Review of Enforcement Actions
    • Correction Process
    • Redress Process
  • Penalty Reduction Agreement (PRA)
  • Supplementary Information
  • Appendix A – Legislation
  • Appendix B – Regulations
  • Appendix C – Notice of Penalty Assessment Example
  • Appendix D – Customs Client Services
  • Appendix E – Index to Master Penalty Document

GUIDELINES AND GENERAL INFORMATION

DEFINITIONS

Administrative Monetary Penalty System (AMPS) – A system of administrative monetary penalties for failure to comply with legislative, regulatory, or program requirements.

Business Number (BN) – A CCRA assigned number that identifies the client responsible for payment of duty and taxes and any outstanding penalties.

Carrier Code – A four-digit number assigned by customs to all persons who transport goods pursuant to section 19 of the Customs Act.

Contravention – A failure to comply with any legislation, regulations and conditions of any licensing or undertaking administered by the CCRA.

Notice of Penalty Assessment (NPA) – A prescribed form given to the client containing detailed information on the contravention and penalty assessment.

Penalty Amount – The total amount of money owing as a result of a penalty assessment.

Penalty Assessment (PA) – The process of documenting a contravention and its penalties.

Penalty Assessment Number – A unique sequential numeric identifier that is assigned to all administrative monetary penalties.

Person – "Person" means an individual, a partnership, a corporation, the estate of a deceased individual, a trust, or a body that is a society, union, club, association, commission or other organization of any kind.

Prescribed Rate of Interest – A rate of interest equivalent to the Treasury Bill rate as set by the Bank of Canada. For more information about this rate, refer to Memorandum D17-1-19, Interest Rate for Customs Purposes Regulations.

Prohibited Goods – Goods, which are prohibited as imported goods into Canada under tariff items 9897.00.00, 9898.00.00, and 9899.00.00 of the Customs Tariff or under other legislation. For example, obscene publications, child pornography, and hate propaganda are prohibited importations under tariff item 9899.00.00. Certain types of agricultural goods are prohibited under legislation enforced by the Canadian Food Inspection Agency due to the risk of disease.

Specified Contraventions for the AMPS:

Specified Goods for the AMPS contraventions:

Sub-office work location – A four-digit number assigned by customs that identifies warehouse operator.

Undertakings – An agreement by a client to do or perform a specific action.

LEGISLATION

1. Sections 109.1 to 109.5, 127.1 and 129 of the Customs Act relate to the Administrative Monetary Penalties. The relevant legislation is provided in Appendix  A.

REGULATIONS

2. The relevant regulations are provided in Appendix B.

OVERVIEW OF THE ADMINISTRATIVE MONETARY PENALTY SYSTEM (AMPS)

3. The AMPS provides for monetary penalties for contraventions of the Customs Act, Customs Tariff, and the regulations pursuant to these Acts including contraventions of the terms and conditions of licensing agreements and undertakings. The AMPS penalties will be issued on a Form E650, Notice of Penalty Assessment, or NPA. An example of this form can be found in Appendix C.

4. The AMPS will impose monetary penalties in proportion to the type, frequency, and severity of the infraction. Most penalties are graduated and take the client contravention history into consideration. The AMPS penalty structure and penalty application process, as well as the correction and redress process, allows customs to treat its clients fairly, consistently, transparently, and impartially.

Improved Compliance

5. The most important objectives of the AMPS are to correct non-compliance and to establish a level playing field for all clients. Providing comprehensive penalty coverage for contraventions of customs requirements and obligations will result in a significant overall improvement in the level of client compliance nationally. This will eliminate the competitive advantage which non-complying clients currently have over those who have invested in compliance.

6. Clients can avoid the AMPS penalties by ensuring that they are fully compliant with all customs requirements. To encourage compliance, it is customs' policy that when clients come forward to voluntarily disclose and correct their non-compliance, the AMPS penalties will not be issued. This approach to achieving compliance is not intended to address repetitive problems caused by clients' failure to exercise thoroughness and due care in their customs related business dealings, nor will it be considered if the non-compliance is revealed by a client during a customs verification process. In order to ensure that the health and safety of Canadians is protected, non-compliance involving goods that are restricted, controlled, or prohibited, may be subject to enforcement measures ranging from the AMPS penalties to prosecution. To ensure complete transparency, clients should consider presenting a "what if" scenario to customs (if desired, through a third party to protect anonymity) fully disclosing the nature of the non-compliance in order to determine whether or not enforcement measures would be applied by customs.

The AMPS Client Contravention History

7. Each time clients are issued a penalty, this information is added to their client contravention history. Clients who demonstrate a poor compliance record can expect to receive increased attention from customs. This may range from Client Services officers arranging to meet with them to assist in identifying corrective action, to increased examinations at the border or compliance verifications of the company's books and records.

8. The AMPS penalties are assessed against a client identifier using a CCRA number such as the Business Number (BN) at the company's customs account level, carrier code or sub-office work location number. If a company has several divisions with different customs BNs, a poor client contravention history for one division will not affect the client contravention history or the penalty levels of the other divisions.

9. The AMPS client contravention history contains information on contraventions issued, closed and cancelled during the retention period. In most cases, contraventions have retention periods of three years, except for contraventions relating to late accounting which are retained for a period of one year.

10. Under subsection 107(9) of the Customs Act, clients can request copies of their own AMPS client contravention history maintained by customs. Each client is limited to two requests for copies per calendar year.

11. A company's AMPS contravention history is available only to the particular company whose information is contained therein. Requests must be received on company letterhead and sent to the client's customs Client Services office (see Appendix D) and shall provide the following information:

NOTIFICATION TO SERVICE PROVIDERS

12. When an NPA is carried out against a single transaction or release, the service provider will receive a copy of the NPA only when their account security number is used in the documentation.

13. When an NPA is carried out during a verification, a disclosure authorization letter from the client is required, since the client may be using the services of more than one service provider. For an upcoming verification, customs sends a verification notice to the client together with a blank disclosure authorization letter. If any NPAs are assessed as a result of the verification, the service provider will be informed only if the client has identified the service provider on the disclosure authorization letter and has sent it to customs.

APPLICATION OF THE AMPS

14. It is the policy of the CCRA, in accordance with the guidelines set out in this Memorandum, to apply the Administrative Monetary Penalties under the authority of sections 109.1 and 109.2 of the Customs Act, for contraventions of the Customs Act, and the Customs Tariff, and any regulations thereunder including contraventions of the terms and conditions of licensing agreements and undertakings.

15. The AMPS applies to all commercial clients including importers, exporters, brokers, warehouse and duty free shop operators, carriers, freight forwarders or representatives thereof. The penalties largely replace seizures and ascertained forfeitures for commercial importations and exportations of goods.

16. The AMPS penalties are applied against the person in response to their non-compliance as opposed to seizures, which are applied against goods, thereby enabling the use of the collections provisions in the Customs Act when payment of penalties becomes an issue.

17. Customs 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 customs verification process will be assessed at the same penalty level.

18. Penalty levels for identical contraventions identified during customs verifications will be determined on the basis of the penalty level in place in the client's contravention history rather than progressively on a transactional basis. For example, contraventions identified during the first occurrence of a customs verification would be assessed at the first penalty level. If, however, during a second customs verification, identical contraventions were once again identified, penalties would be assessed at the second level for each infraction, i.e., per incorrect document or declaration. Penalty levels would be determined accordingly for identical infractions identified during third and subsequent customs verifications.

THE AMPS VS. APPLICATION OF OTHER ENFORCEMENT MEASURES

19. The AMPS penalties are designed to address non-compliance within the commercial stream of the customs program. These penalties largely replace the use of seizure and ascertained forfeitures for technical infractions. Duties do not form part of the penalty amount under the AMPS and must be accounted for and paid separately.

20. When an AMPS penalty is issued, seizure action may also be initiated in specific circumstances. These may include instances where goods are prohibited or controlled.

21. The application of an AMPS penalty, or the use of seizure and ascertained forfeiture, does not preclude the CCRA's option to prosecute. Criminal prosecution will continue to be undertaken where warranted, due to the seriousness of the offence or the potential harm to society.

22. The policy regarding the use of the AMPS does not place any restriction on the application of any other enforcement authority that may be available to customs in the enforcement of any laws governing the movement of goods and people into or out of Canada for which customs has legislative responsibility.

PENALTY STRUCTURE

23. The AMPS penalty structure is graduated in most cases, providing for higher monetary penalties for repeat incidences of the same type of contravention. Some penalties are based on a specific percentage of the value for duty of the goods involved or a flat rate monetary penalty, whichever is higher. For others, the penalty consists simply of a flat rate monetary penalty.

24. Each contravention relates to a breach of a specific requirement set out in the legislation. In some cases there may be several contraventions relating to a single legislative requirement. This has been done in order to establish penalty amounts that will reflect the seriousness of the particular contravention.

25. The complete AMPS contraventions are listed in the AMPS Master Penalty Document (MPD) – the link to the Website is provided in the Supplementary Information section. An index of the MPD is provided in Appendix E.

Maximum penalty amount

26. Under the AMPS, the maximum penalty amount for a single contravention is $25,000. However, the total penalty amount assessed on an NPA may exceed $25,000 if there is more than one AMPS contravention identified on the NPA.

27. Customs 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 involved providing information to an officer that is not true, accurate and complete (contravention C005) as well as failing to report imported goods (contravention C022), only one penalty would be applied. The client's contravention history and the circumstances of the non-compliance would be considered by the officer in the process of determining the appropriate penalty to apply.

28. In the case of the specified contraventions of section 7.1, 12, 13, 15, 95, or 96 of the Customs Act, and where the value for duty of goods involved in the contravention were to result in a penalty exceeding the legislated maximum of $25,000, the goods may be seized rather than subjected to the AMPS penalty. If the goods are not specified goods or otherwise prohibited or controlled, terms of release may be offered with the amount payable being the same as the AMPS penalty specified for the given contravention.

PAYMENT

29. A penalty assessed under the AMPS becomes payable on the day the NPA is served on the person. An NPA may either be served to the person by hand or sent by registered mail.

30. Interest is payable on penalties at the prescribed rate, beginning the date following the date of the NPA. However, if the penalty is paid within 30 days after the date of the NPA, no interest will apply.

Failure to pay penalty assessment

31. Any amount assessed as a penalty in an NPA issued under section 109.3 of the Customs Act constitutes a debt due to Her Majesty by the person to whom the NPA was issued.

32. The Assessment and Collections Branch is responsible for recovering debts that are in default.

REVIEW OF ENFORCEMENT ACTIONS

33. When a person does not agree with the findings outlined in an NPA, there are two types of review available. They are:

34. If a client requests a correction or redress, the payment of the NPA may be deferred until a decision is rendered. However, if it is determined that the penalty was correctly issued, and the penalty was not paid within 30 days, interest (at the prescribed rate) will be calculated on arrears from the day after the date the NPA was served, until the date the amount owing is paid in full.

Correction Process

35. Following the assessment of a penalty, a designated officer may, on behalf of the Minister, cancel or amend the penalty within 30 days of its issuance if any errors in the assessment have been determined. Correction requests should be submitted to the customs office which issued the NPA.

36. The information required in a correction request is:

37. If a request for correction under section 127.1 of the Customs Act is denied, the client still has the option of requesting a minister's decision as described below.

Redress Process

38. If a client disputes the assessment of a penalty, a request for a ministerial decision can be made pursuant to section 129 of the Customs Act. These requests are reviewed by the CCRA Appeals Branch. Information on the redress process is provided on the NPA. It is recommended that clients provide as much information as possible relating to their objection to the penalty.

39. Clients can submit a request for a ministerial decision under the redress process within 90 days from the day the NPA was served. In exceptional circumstances this may be extended to one year. These requests should be sent to the customs office which assessed the penalty as shown on the NPA. The request will then be forwarded to the appropriate Appeals Branch office for review. An acknowledgement letter will be sent to confirm receipt of the request.

PENALTY REDUCTION AGREEMENT (PRA)

40. The purpose of a Penalty Reduction Agreement (PRA) is to assist the client in becoming compliant with the Customs Act, Customs Tariff and related Regulations by providing an incentive to invest in the correction of underlying systemic problems, which result in the application of penalties.

41. The PRA is a formal agreement between the CCRA and a client, which, under certain conditions, may allow for full relief from or partial reduction of substantial penalties applied under the AMPS.

42. The PRA defines the nature of the identified problem, what will be done to correct the matter, the time frame required to make the correction, as well as post-correction validation criteria. The level of reduction to be provided may range from partial to the full penalty assessment. The policy regarding PRAs will be presented in a separate Memorandum.

SUPPLEMENTARY INFORMATION

43. More information regarding AMPS and the complete AMPS Master Penalty Document can be obtained from the AMPS Web pages on the CCRA Web site at www.cbsa-asfc.gc.ca/amps/

44. More information on the import/export processes and requirements can be obtained from the CCRA Web site at www.cbsa-asfc.gc.ca

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