Companies involved in the commercial import/export, brokerage,
carrier or warehouse business may be aware of the Penalty Reduction
Agreement policy of the Canada Border Services Agency
("CBSA"). This policy allows those assessed a
customs-related penalty to reduce the amount of the penalty.
On November 25, 2010, the CBSA introduced the Penalty
Reinvestment Agreement ("PRA") policy, which builds on
the Penalty Reduction Agreement policy. Where penalties for
customs issues have been assessed, importers should seriously
consider using this penalty reinvestment policy as a way to divert
penalties back into the enterprise, increase efficiency in the
importing function, and reduce the likelihood of future errors and
Penalty Reinvestment Agreement - What Is It?
A PRA allows a claimant to invest in corrective measures for its
business to fix a systemic commercial information system
("CIS") problem using all or part of an
administrative penalty. The PRA helps the claimant become compliant
with the Customs Act,Customs Tariff and related
regulations by providing an incentive to invest in correcting an
underlying systemic problem that resulted in the application of
administrative monetary penalties.
Application Process - Eligibility
A commercial importer, exporter, broker, carrier or warehouse
operator ("client") may apply for a PRA if four
conditions are present:
they have been issued an administrative monetary penalty
involving repeated contraventions caused by a systemic
they have not received a minister's decision under s. 131
of the Customs Act;
they have identified the cause of the systemic problem;
they are willing to invest in corrective measures.
To apply, Form BSF266, Penalty Reinvestment Agreement (PRA)
Application Form, must be submitted.
Limitations on eligibility include cases where the penalty
involves prohibited or inadmissible goods, the penalty was issued
under an Act other than the Customs Act, or there are
other outstanding debts payable to the CBSA.
A client should apply for a PRA within 90 days of receiving a
Notice of Penalty Assessment. The process will be expedited where
the client makes a formal statement acknowledging that the
penalties were correctly issued by the CBSA.
Although paying a penalty can be deferred until a decision is
made, if approval for a PRA is not granted the penalty will accrue
interest from the day after notice was served until the penalty is
Penalties issued after a PRA application has been submitted can
be added to the total expenses claimed by the applicant if the
systemic CIS problem described in the application is the same as
the one that resulted in the subsequent penalty, and the CBSA has
not completed its review of the PRA.
Verification Process - Eligible Expenses
All supporting documentation proving the cost of the corrective
action must be provided to the CBSA. The CBSA will also
ensure that the corrective action is implemented and
effective. If the measures are not effective, then the CBSA
will not grant the PRA and will request that the outstanding
penalty amount be paid with interest.
Eligible costs included in a PRA are those associated with
purchasing/implementing a new CIS system or upgrade, obtaining
technical assistance to implement or test the effectiveness of the
system, and training employees to perform activities related
to implementation of the corrective measures. Eligible costs
do not include ongoing employee training, renovation costs, or
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While that agreement mandated export measures on Canadian softwood lumber exports destined for the United States, it also protected those lumber exports from the potential imposition of onerous import measures by the U.S.
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