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 penalties.
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 record-keeping problem;
- they have not received a minister's decision under s. 131 of the Customs Act;
- they have identified the cause of the systemic problem; and
- 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 paid.
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 administrative costs.
About Ogilvy Renault
Ogilvy Renault LLP is a full-service law firm with close to 450 lawyers and patent and trade-mark agents practicing in the areas of business, litigation, intellectual property, and employment and labour. Ogilvy Renault has offices in Montréal, Ottawa, Québec, Toronto, Calgary and London (England), and serves some of the largest and most successful corporations in Canada and in more than 120 countries worldwide. Find out more at www.ogilvyrenault.com.
Ogilvy Renault joins Norton Rose Group on June 1, 2011.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.