In 2017, the Government of Canada released the report of the of the Auditor General of Canada which specifically focused on Customs Duties. Importers can read a summary of the report here. One item discussed in the report is an increased focus on Reason to Believe.
What is Reason to Believe?
Reason to Believe occurs whenever an importer has specific information regarding the origin, tariff classification, value for duty, or diversion of imported goods that gives the CBSA reason to believe that a declaration is incorrect.
Whenever a shipment is cleared through Customs, an electronic transaction is presented to the CBSA which provides information they need, such as the quantity, description, tariff classification, and value of each product in that particular shipment. For an importer, this means you must know as much about your product as possible and be aware of any tariff changes that occur for any products that you regularly import before you ship them.
If it becomes apparent that there is an error after the original declaration has been submitted, the importer is required to correct any discrepancies on import documentation. This includes:
- Incorrect HS tariff classification, Country of Origin, or Value for Duty on entry declarations
- The Customs declaration was contrary to Customs’ written advice, precedent decisions, or published directives or policies (informed compliance)
If it is found that the importer had reason to believe that the declaration was incorrect and did not correct within 90 days, an AMPS penalty will be applicable. The penalties are:
- 1st offence: $150 to a maximum of $5000 (per issue) or $25,000 (per occurrence)
- 2nd offence: $225 to a maximum of $200,000 (per occurrence)
- 3rd offence and Subsequent: $450 to a maximum of $400,000 (per occurrence)
How to Avoid Penalties Under Reason to Believe
If 90 days has been exceeded and an error is found, an importer may use “voluntarily disclosure”, which means that clients come forward voluntarily to inform the CBSA of their non-compliance. In cases of an accepted voluntary disclosure, the CBSA will:
(a) Waive penalties and, when interest is to be assessed at a specified rate, reduce it to an amount calculated at the prescribed rate on commercial goods; or
(b) Waive interest in full and opt to not take action against the goods or the person for non-commercial goods (casual goods)
It should be noted that even if your voluntary disclosure is accepted, duties and taxes are still required to be paid. To learn more about voluntary disclosure, you can read CBSA Memo D11-6-4.
To learn more about Reason to Believe, you can read the CBSA D-Memo 11-6-6.