On November 16, 2015, the Canada Border Services Agency (CBSA)
issued Customs Notice 15-035 in response to its growing concern
that goods transiting through the United States to a subsequent
destination are going unreported. There are limited reporting
requirements associated with goods exported to the U.S., but if
their final destination is another country and/or they merely
transit through the U.S., they must be fully reported.
Notice 15-035 should prompt two reactions from exporters:
First, exporters should carefully consider whether they have
made unreported exports in the previous six years.
Second, exporters should be alert to the fact that the CBSA
intends to step up enforcement against unreported goods through
applying its trade verification authority.
A Recap on Reporting Requirements
As a general rule, section 95 of the Customs Act
requires exporters to report all exports to the CBSA by submitting
export declarations. The Reporting of Exported Goods
Regulations set out certain exceptions to this general rule,
allowing the following categories of goods to be exported without
being reported: (i) personal household effects (i.e.,
non-commercial goods); (ii) commercial goods with a value under
$2,000; (iii) goods exported to the U.S.; (iv) goods for the
personal or office use of diplomatic or mission personnel; and (v)
It is important for exporters to note that these exceptions
apply only to "non-restricted goods".
"Non-restricted goods" are goods that do not require a
permit (under any Act of Parliament) in order to be legally
exported. Goods requiring an export permit must always
be reported, regardless of their use, their
commercial value or their ultimate destination.
The Six Month Grace Period
Unlike non-compliance associated with importation, exporters are
not relieved of penalties if they correct export declarations, or
make them when they had not previously done so, within a specified
period of time (for example, 90 days of having reason to believe
they erred). Export reporting irregularities attract penalties
unless they are corrected under the umbrella of a voluntary
disclosure. The CBSA is offering exporters a six-month grace period
during which the CBSA will not conduct export compliance
verifications and exporters can voluntarily disclose export
shipments which transited through the U.S. but went unreported. If
properly prepared and filed, these voluntary disclosures will
eliminate penalties otherwise attributable to failing to
The grace period runs from December 1, 2015, to June 1, 2016.
Upon the expiry of this period, the CBSA will be conducting
compliance verification and penalizing exporters who failed to
properly report their exports. Exporters should be aware that the
grace period only applies to goods exported prior to the issuance
of Notice 15-035; goods exported after November 16, 2015, will be
subject to the CBSA's usual compliance verification
Navigating the Voluntary Disclosure Process
Voluntary disclosures must include all unreported, non-exempt
exports. When compiling voluntary disclosures, exporters should be
guided by Memorandum D11-6-4, "Relief of Interest and/or
Penalties Including Voluntary Disclosure". The key points to
note are as follows:
Voluntary disclosure applications must include all instances of
non-compliance in the current year and for six years prior to the
The voluntary disclosure must explain (i) how the
non-compliance occurred and (ii) either how its cause has been
corrected or what measures the exporter has taken to reduce the
risk of future non-compliance.
An exporter's voluntary disclosure may be denied if a
previous voluntary disclosure was granted for the same compliance
As there is much at stake and there may be other non-compliance
that should be addressed, including failure to obtain other
government department licenses/permits or failure to comply with
non-customs regulations relating to exporting from Canada,
exporters should retain experienced legal counsel to fully evaluate
and address export compliance matters. At minimum, exporters of
goods transported through the U.S. should conduct internal reviews
of their export reporting systems and related export practices.
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.
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