Archive for the ‘Customs Compliance’ Category

Friday, November 12th, 2010

At the 2010 CSCB Conference in September, there was a joint CSCB-CBSA session on Compliance at the Border. The presentation for that session included changes to AMPS that had been discussed at a bilateral meeting between the CSCB and CBSA.

Since the conference, these changes were discussed by the BCCC AMPS Subcommittee and between CBSA and its regions. Clarification has been provided by CBSA and we are pleased to say that changes presented at our conference will be going forward. The updated AMPS documents are currently being translated into both official languages and are before the regional Trade Directors, in draft format, for their review.

Final versions of the AMPS documents should be ready for release by the end of this calendar year and will be made available when the proposed AMPS amendments are enacted. The related contravention documents will explain all of these provisions in much greater detail, and will include specific examples that should help the importing community to better understand the trade-related AMPs.

Last, we have also been advised that these changes will not be retroactive.

Clarification of the information provided at the conference follows. Please note the difference between “per error” and “per instance” or “per occurrence”. Per error refers to the same error, made more than once. Per instance, or per occurrence, means each time the same error is made.

1. For contraventions C080, 081, 082, and 083, the CBSA is currently working on the following changes:
At the first level, penalties will be assessed per error, except in instances where the importer has already received written instructions from the CBSA (currently they are issued each time the error occurs).
For example, if pens are misclassified 500 times and each of those 500 times the same incorrect HS is used, a single penalty will be assessed, at the first level of AMPS.

CSCB: Please confirm that if more than one HS error is made, on different items, the maximum penalty still remains $5,000.00.

CBSA: The proposed maximum for any first level penalty is $5,000. Where two different tariff classification errors are made, two $150 penalties will apply, for a total of $300.00. To that end, 33 different tariff classification errors would be required to reach the proposed $5,000 maximum.

2. CSCB: What is CBSA’s position for those who have not received written instructions from CBSA? That is, those who CBSA have determined have reason to believe based on other factors?

CBSA: AMPs only apply in cases where the CBSA has determined that the importer had “reason to believe”. The intention of this proposed amendment is to make a distinction between cases where the CBSA has specifically addressed the issue with the importer in writing previously versus other factors that constitute “reason to believe” (e.g. legislative provisions that are evident (obvious, apparent) and transparent (clear, self-explanatory).

In cases where written instructions have been provided by the CBSA, the $150 penalty would apply per occurrence, to the $5,000 maximum.

In cases where written instructions have not been provided by the CBSA, the $150 penalty per error would apply, to the $5,000 maximum.

3. CSCB: Can you confirm what is meant by the verification period?

CBSA: The verification period is as identified in the letter to the importer initiating the compliance verification activity. Generally speaking, this is typically the importer’s last closed full fiscal year.

4. For contraventions C350, 351, 352, and 353, the CBSA is currently working on the following changes:
Penalties under these contraventions will generally be identical to those under C080, 081, 082, and 083.
However, penalties will be issued for all transactions within the reassessment period (as compared to those within the verification period).

CSCB: Can you confirm what is meant by the reassessment period?

CBSA: The reassessment period is that contemplated in the Canada Border Services Agency (CBSA) Memorandum D11-6-10, Reassessment Policy. In accordance with the Customs Act, this period can extend back a full four years where the importer has had “reason to believe”.

5. There will be $1,000 cap on clerical errors.

CSCB: Can you explain how CBSA will determine what is and what is not a clerical error?

CBSA: A clerical error is an inadvertent mistake, generally of an obvious transcription or typographical nature. The CBSA will make this determination on a case-by-case basis when presented with specific information.

6. CSCB: With this structure in place, what is the process with a second audit if the same error is made? What if a different error is made, but in the same program?

CBSA: Where the same error is found, during a subsequent verification, to have been repeated, a second level penalty will apply. The second level penalties will not change and will therefore continue to have a maximum of $200,000. Where a new error is found, a first level penalty will apply, as second level penalties will only be applied to errors previously made that triggered the first level penalty.

Monday, May 3rd, 2010

HST and GST: CRA Provides Answers

The Canada Revenue Agency has provided answers to questions asked by CSCB members regarding HST on customs brokers’ services. These questions and answers are reproduced below and are also available as a PDF document.

Members with additional questions, or questions regarding any of the information contained in this message, can contact the CSCB at
CSCB: The Canada Border Services Agency requires an export permit for certain goods being exported from Canada. A Canadian customs broker applies for the export permit (in Canada) on behalf of the Canadian exporter.

(a) If the Canadian exporter is registered for the GST, does GST/HST apply to the broker’s service for applying for the permit?  What if the Canadian exporter is not registered?

CRA: A supply of a service is made in Canada by a Canadian customs broker.  A determination would have to be made as to whether the supply of the service is made in a participating province, using the proposed place of supply rules in respect of services announced by the Department of Finance on February 25, 2010, in its document “Place of Supply, Self-Assessment and Rebate Rules for the Harmonized Sales Tax (HST) <> ” and by the CRA on February 26, 2010, in its document “Place of Supply Rules for Determining whether a Supply is Made in a Province <> “.  There are no provisions in the ETA that would zero-rate the GST or HST in this scenario.  As a result, GST could be payable at the rate of 5% or HST could be payable at the rate of 12%, if the service is deemed to be made in BC, or 13%, if the service is deemed to be made in the other participating provinces.  Note that the rate of HST in Nova Scotia is proposed to increase to 15%.

The answer is the same for a Canadian exporter who is not registered.

(b) If a registered U.S. importer of the goods is billed by the Canadian customs broker for obtaining the export permit, does GST/ HST apply to the broker’s service?  What if the U.S. importer of the goods is not registered?

CRA: We assume that the U.S. importer is the recipient of the service supplied by the Canadian broker.  While the supply of the service would be deemed to be made in Canada, the supply of the services would likely be zero-rated under Part V of Schedule VI to the ETA.  Because a customs broker would often be considered an agent of its client, section 5 of Part V of Schedule VI would apply to zero-rate a supply made to a non-resident person of a service of acting as the person’s agent or of arranging for, procuring or soliciting orders for supplies by or to the person, where the service is in respect of a supply to the person included elsewhere under Part V of Schedule VI or a supply made outside Canada by or to the person.

Where an agency relationship does not exist, it is possible that the general zero-rating provision for services under section 7 of Part V of Schedule VI may apply to zero-rate the supply to the unregistered non-resident.

The answer is the same for a U.S. importer who is not registered.


CSCB: If a Canadian customs broker who is also licensed as a U.S. broker prepares an entry for goods entering the U.S., and bills for this service from within Canada, is the service taxable if it is billed to the U.S. non-registrant importer? U.S. registrant importer? What if the Canadian exporter is billed for the preparation of a U.S. customs entry?

CRA: We assume that part of the service is performed in Canada, and therefore the place of supply of the service is deemed to be made in Canada.

The location at which a supplier prepares a bill for a supply is not relevant for determining the tax treatment of the supply.  Under the ETA place of supply rules for services, a service will be deemed to be supplied in Canada if it is performed, or is to be performed, in whole or in part in Canada.  As a result, a supply of a broker’s service that is made in Canada will generally be subject to GST at the rate of 5%, or HST at the rates of 12% or 13% if deemed to be supplied in BC or the other participating provinces, respectively, if the recipient of the supply is a Canadian resident  (note that the rate of HST in Nova Scotia is proposed to increase to 15%).

If the recipient is a non-resident, and the Canadian broker is acting as the recipient’s agent when the service is being provided, the supply of the service would likely be zero-rated under section 5 of Part V of Schedule VI, regardless of the non-resident’s GST/HST registration status.


CSCB: Can you clarify customs brokerage services that are zero-rated? Does the fact that exports are zero-rated mean that any services provided with respect to exported goods are not subject to GST/HST? Are examples available?

CRA: Customs brokerage services may be zero-rated if they meet the conditions outlined in section 5 of Part V of Schedule VI to the ETA, as described in 1(b) above.  If an agency relationship does not exist between the broker and the client, section 7 of Part V of Schedule VI may zero-rate the supply of the broker’s services where none of the exclusions in the provision apply.

Regarding the second part of your question, the tax status of brokerage services depends on:

a) Whether the service is performed in whole or in part in Canada (if not, the supply of a service is considered to be made outside Canada and is not subject to GST/HST);

b) If the supply is deemed made in Canada, whether the supply is determined to be made in a participating province in accordance with the place of supply rules for customs brokerage services outlined in Finance’s announcement of February 25, 2010 and CRA’s Technical Interpretation Bulletin of February 26, 2010.  Note that where the supply of a service does not meet the description of a “customs brokerage service” under the Place of Supply (GST/HST) Regulations, the general place of supply rules for services, as outlined in both the Finance and CRA documents, will apply to determine if the supply is made in a participating province; and

c) Whether the conditions for zero-rating under section 5 or 7 of Part V of Schedule VI to the ETA are met, as discussed above.

No examples are specifically available.

Thursday, February 25th, 2010

In 2006, the BCCC created a sub-committee to undertake a fundamental review of the CBSA Administrative Monetary Penalty System (AMPS). The purpose of the review was to make amendments to AMPS to ensure it was fair, consistent, and transparent, and was easy to administer. Streamlining the penalty regime and reducing the number of contraventions was also part of the sub-committee’s mandate.

Some of the changes to AMPS will be implemented on April 14th of this year. These changes include:

- a new penalty amount structure, based on risk;
- new penalty amounts; and
- a 30-day delay in the escalation of certain penalty levels.

The collapsing and renumbering of penalties will take place at a later date.

Available at this time is a Customs Notice highlighting the phases of implementation ; a short document listing all current and revised penalty amounts ; a summary of the 30-day escalation of certain penalty levels ; and the penalty grid .

A few contraventions have penalty amounts that are outside the grid as penalty escalation was not considered suitable, for example, failure to keep any records at all which attracts a flat penalty amount. Note that most of the percentage of value for duty penalty amounts have been eliminated, as well as penalty amounts based on the value for duty less than $1,600. Consequently, this led to the elimination of a number of contraventions.

Members should note in particular changes to the following two penalties: 1) late accounting and 2) failing to provide a certificate, licence, permit or information that is required before interim or final accounting, and before the goods are released (C071).

The penalty for 1) late accounting has increased from $25.00 to $100.00 and 2) the penalty under C071 has increased from $100 t o $500 for the first infraction.

To improve access to the corrections process, regions have been advised to include the issuing office fax number on the Notices of Penalty Assessment for a faster application process.

The CSCB Board of Directors has managed our participation in the AMPS review, and continue their work on this issue.

Members will be provided with additional information, as soon as it becomes available.

Comments can be directed to the CSCB at

Related Links: PenaltyAmounts_20090122.pdf

Friday, January 29th, 2010

This article is excerpted from the 28 January 2010 edition of “American Shipper”.

The fact that big importers with large information technology resources are still not able to properly file the Importer Security Filing every time illustrates the compliance challenge facing businesses, a couple of international trade professionals said last week.

The U.S. government this week began enforcing the one-year-old cargo security rule that requires more detailed commercial data from importers before a shipment goes on a vessel. After 12 months in which shippers were encouraged to electronically submit the ISF form without consequences for late filing or other errors, Customs and Border Protection is now closely monitoring shipments, detaining those without the necessary documentation and building a case for damage claims later this year against companies that don’t improve their performance.

The rule, also known as “10+2” for the number of data types that importers and carriers must submit, has arguably caused more far-reaching changes in industry business process than any other U.S. measure related to international cargo security. Importers have had to identify which overseas business partners possesses missing pieces of information, audit themselves to learn where other necessary data internally resides within their far-flung enterprises, and set up software applications to collect and transmit the data. The lift is often more difficult for small and medium-size importers that do not have extensive contacts overseas or the budgets for new technology.

Many importers are able to meet the filing deadline — 24 hours prior to vessel loading — for a portion of their supply chains, but hitting the 100 percent mark is still difficult, Rosanne Esposito, executive vice president of global customs for Expeditors International, said at a trade seminar in Los Angeles.

The 80-20 rule applies to “10+2,” she said, with 20 percent of problem shipments requiring the most resources to track down the necessary data about the shipper, consolidation center or cargo contents.

CBP officials have expressed understanding of the implementation difficulties and said they will be more lenient towards companies that have made a good faith effort to file ISFs and correct

A big problem for industry is that a significant number of importers have not automated, or only partially automated, supply chain processes that would enable easier information sharing and completion of the ISF, said Matthew Varner, director of trade operations for Nike&hellip.

About 20 percent of Nike’s ISFs are filed by customs brokers because they are in a better position to deal with smaller suppliers who still share information by paper, Varner said.

Despite the growing pains, Nike has determined there is a business case for the rule because it has forced the trade unit to better integrate with other divisions in the company and has improved status updates and security of shipments throughout the supply chain.

Thursday, May 7th, 2009

C-TPAT members to get “10+2” report cards

The following is excerpted from today’s edition of the “American Shipper”.

U.S. Customs and Border Protection will issue the first “10+2” progress reports on May 10 to let importers and their agents know how well they are complying with the rule for submitting advance electronic data about their cargo shipments, Assistant Commissioner Thomas Winkowski announced Wednesday.

The report cards will be sent by e-mail to all parties that have submitted Importer Security Filings (ISF) for their ocean shipments since the rule went into effect on Jan. 26.

CBP originally intended to send the progress reports only to filers, which will then be responsible for separating the individual spreadsheets and sending them on to their various customers. Most importers are using third-party vendors, such as customs brokers, forwarders and compliance software providers, to file on their behalf.

In a new twist, the border agency will also begin issuing report cards directly to all importers that participate in the Customs-Trade Partnership Against Terrorism, Winkowski told the 20 industry representatives on the Commercial Operations Advisory Committee meeting in Washington.

Tier 3 members of the voluntary supply chain security program — those who have taken the most precautions to control their shipments — will begin to receive the progress reports within 30 days, followed by other companies in the program….

Sharing the reports with C-TPAT members is a response to the trade community’s request to receive more trade facilitation benefits in exchange for making security investments, Winkowski said.

Richard DiNucci, program manager for ISF, said CBP would eventually send progress reports directly to a number of large importers as well to make their lives easier….

The progress reports will measure how many ISFs a company filed per month, the on-time rate, whether CBP accepted or rejected the filing, and the overall accuracy for each of the data elements.

Alison Reichstein, customs operations and compliance manager for Hewlett-Packard Co., told CBP officials that the report cards need to be more detailed so that companies can drill down to the actual mistakes made on each shipment and correct them.

“Aggregate data won’t be sufficient to drive down to corrective action,” especially for high-volume filers, she said. And many service providers are at various stages of readiness to map the aggregate data to their individual transaction records in a unified report for their customers, she warned….

DiNucci said Customs’ systems have been able to process the high volume of data without any deterioration in performance.

He repeated that the rejection rate for inaccurate or incomplete ISFs has fallen to between 5 percent and 6 percent per day since the early days. Most of the errors that cause CBP to reject the filing are due to duplicate transmissions from filers who do not give the system enough time for a response before trying to resend. In other cases a filer may submit a form in test mode, receive an ISF transaction number and then resend the filing using the identification number. In a few cases, CBP has processed transactions twice. DiNucci said these are simple mistakes that can be easily corrected.

A small number of rejections involve invalid harmonized tariff numbers or city codes in address fields, which are considered simple data entry mistakes.

Another 4 percent to 5 percent of “10+2” filings are accepted with warnings, meaning that 90 percent of the filings overall are coming in clean.

“The thing we’re not seeing is rejections because the data elements are not there,” which means filers are able to pull together the information they need in a timely fashion, DiNucci said.

Only 3 percent to 5 percent of filers are taking advantage of the unified filing option, which gives importers the ability to piggyback their customs entry data onto the ISF filing, he said.

And less than 1 percent of filings take advantage of the flexible arrangements that allow shippers extended time windows to update certain of the data elements that are difficult to obtain, such as container stuffing location and consolidator. Those data elements are usually being submitted correctly the first time, he added.

Friday, April 17th, 2009

The following news release was issued by the CBSA on 17 April 2009.

The Honourable Peter Van Loan, Minister of Public Safety, today announced that the Canada Border Services Agency (CBSA) has successfully met the Government of Canada’s target for all participating departments and agencies to reduce 20 percent of the requirements their policies and forms impose on Canadian business.

This 20 percent reduction is part of the Government of Canada-led Paperwork Burden Reduction Initiative. Through this initiative, the CBSA has eliminated over 1,600 obsolete, non-essential requirements and administrative demands imposed on business, making the overall CBSA commercial process clearer and easier for Canadian businesses to comply with and understand.

Through its own business simplification initiative and in support of the Paperwork Burden Reduction Initiative, the CBSA partners with key representatives from business, industry and trade to continue making the commercial process easier at the Canadian border. One of these key partnerships is with the Canadian Federation of Independent Business (CFIB). The CFIB has played an important role in the CBSA’s ongoing business simplification efforts.”The CBSA’s business simplification working group is an exemplary illustration of how the private and public sectors are working together towards paperwork reduction,” said Corinne Pohlmann, Vice-President of National Affairs at the CFIB. Ms. Pohlmann is also the co-chair of the CBSA’s business simplification working group.

Tuesday, January 13th, 2009

Administrative Monetary Penalties (AMPS) places the responsibility for compliance and accuracy on all importers, exporters, and companies that facilitate the transactions. There are four main compliance areas for importers: origin, classification, valuation, and when the quantities of imported goods do not match the invoice, underages and overages must be reported.