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Introduction

The Administrative Monetary Penalty System, commonly referred to by its acronym "AMPS", arrived at the customs division of the Canada Customs and Revenue Agency ("CCRA") on October 7, 2002. On that date, the AMPS provisions applicable to commercial importers, exporters, customs brokers, carriers, freight forwarders and customs warehouse operators came into effect.

The coming into force of AMPS is an important event for those affected, as it creates a new series as what are known as "strict liability" contraventions for non-compliance with the requirements of the Customs Act, the Customs Tariff and the Special Import Measures Act . Strict liability contraventions are ones for which intent is not relevant when determining if a contravention has occurred. The only issue is whether or not the statutory requirement was met. If not, a person is strictly liable for the breach. The only real available defence to strict liability contraventions is due diligence. Such a defence requires an enterprise to establish that it took all reasonable steps to ensure compliance so that no contraventions occurred and that the non-compliance was, in effect, an "unavoidable accident".

Purpose of AMPS

The purpose of AMPS is to enforce compliance with the relevant statutes and regulations. AMPS is really an additional enforcement tool for Canada Customs, which retains its current seizure and forfeiture powers, as well as the ability to lay charges under the Customs Act for serious intentional contraventions.

AMPS contraventions

There are almost 250 AMPS contraventions. They range from the relatively innocuous, such as loss of a paper record for some aspect of a transaction, to the more serious, such as the failure to pay duties on imported goods. A complete list of AMPS contraventions and the penalties applicable to each are set out in the AMPS Master Penalty Document. That document as well as other detailed documents regarding AMPS can be found on the CCRA website at www.ccra.gc.ca/customs/general/amps.

The penalties per contravention range from $100 to $25,000. Most of the penalties are graduated, increasing each time a person commits the same contravention, with maximum penalties applicable upon and after the third or fourth contravention. Most of the minor contraventions, such as the failure to properly complete a customs import document, carry a fine of $100 for the first occurrence. The fine increases to $200 on the second occurrence and $300 on the third and subsequent occurrences. More serious breaches, such as the failure of an exporter to truthfully answer questions asked by a customs officer, carry a fine of $1,000 on the first occurrence, $5,000 on the second occurrence, $10,000 on the third occurrence and $25,000 on the fourth and subsequent occurrences. Other serious contraventions, such as a complete failure to keep records, have a flat rate of $25,000 per occurrence. Other contraventions have fines based on a percentage of the value for duty of the imports in issue.

Multiple contraventions can arise from a single import or export transaction, which means that in certain cases, penalties could quickly reach tens of thousands of dollars. For example, if the CCRA reviews an import transaction, it may find that the importer failed to provide all accurate information on the documents and therefore is subject to a $100 fine, that the importer failed to account for the goods in the prescribed time, which means that a $100 fine can be imposed, and also that the enterprise failed to provide a relevant certificate, which carries a $100 fine. Accordingly, on this single transaction, an importer could be fined $300.

A more serious potential for AMPS liability rests in customs audits and investigations. In such audits and investigations, the CCRA usually reviews imports over a prior year and does have the statutory authority to go back four years. If multiple contraventions are found in the course of the audit, AMPS penalties could quickly escalate to the tens of thousands of dollars for a regular importer or potentially hundreds of thousands of dollars in the case of very large volume importers. Luckily, such high amounts are unlikely to be levied in the near future, since AMPS is not retroactive. Indeed, only contraventions that occur on or after October 7, 2002 will be subject to AMPS.

Risk minimization measures

Importers, exporters and other persons affected by the new AMPS regime should review the customs aspects of their operations in order to minimize the risk of AMPS penalties and avoid the imposition of penalties in the event of an accidental contravention. Being a strict liability regime with very few defences available, the best defence is to avoid non-compliance in the first place. Risk minimizing measures for enterprises subject to AMPS include a full review of customs operations of the enterprise and the establishment of a written compliance plan and program. Such a compliance plan should include the following:

1. statement of commitment from senior management;
2. summary of established company procedures and confirmation that they are fully compliant;
3. requirement for periodic internal review and audit;
4. requirement for regular training of staff; and
5. mechanism for reporting and dealing with possible non-compliance.

Where there are doubts about whether compliance is being achieved, enterprises can obtain National Customs Rulings from the CCRA which will provide guidance and be an effective bar to AMPS penalties if the rulings are complied with.

If non-compliance is found to exist, either when reviewing operations or when monitoring operations as part of a compliance program, resort can be had to the CCRA's Voluntary Disclosure Program. If a voluntary disclosure is made pursuant to the requirements of that CCRA program, the enterprise making the disclosure will not be subject to AMPS penalties, though it will be required to pay any taxes and duties owing, plus any applicable interest.

Appeals

The new AMPS regime does allow for assessments to be questioned or appealed. A Notice of Penalty Assessment ("NPA") can be questioned within thirty days of issuance in regard to technical problems with the NPA. This correction mechanism is intended to provide for the correction of clear clerical or mathematical errors in the NPA. It is not an appeal of the contravention per se.

The appeal route for an NPA is the same appeal route currently available for seizures and ascertained forfeitures. The first level of appeal is to the Minister of National Revenue (in reality, the Adjudications Division of the CCRA Appeals Branch). It remains to be seen whether this first level of appeal will be an effective appeal level, or whether it will simply result in rubber stamping of the CCRA's initial NPAs.

Once the Minister issues a decision in response to an appeal, the person affected may appeal to the Federal Court Trial Division within ninety days of the Minister's decision. The appeal to the Court is in essence an action in Federal Court where the person assessed the penalty is the plaintiff and the Minister is the defendant. The decision of the Federal Court Trial Division is subject to appeal to the Federal Court of Appeal and thereafter to the Supreme Court of Canada.

Conclusion

In conclusion, the AMPS regime will have a significant effect on the manner in which the CCRA enforces the relevant customs legislation at the border. Importers, exporters and other persons affected by AMPS will have to increase vigilance and put programs in place in order to reduce their risk of penalties and properly defend against penalty assessments in the event of technical contraventions of customs legislation. Given that the AMPS regime at customs is in its infancy, it is uncertain how much administrative tolerance and discretion will be exercised by the CCRA. The manner in which the CCRA administers the new AMPS enforcement tool will in large measure determine whether or not AMPS will result in the condition described by joining together the acronyms for the department and the system, i.e., CCRAAMPS!

The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault or any member of the Firm on the points of law discussed.

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