Authors: Drew Tyler, Linden Dales
The Canada Border Services Agency (“CBSA”) has broad power to waive or cancel all or any portion of a penalty or interest that would otherwise be payable under the Customs Act and/or the Customs Tariff. Voluntary disclosure is one of the avenues for importers to access this relief and reduce their exposure.
The voluntary disclosure process allows importers to correct inaccurate or incomplete information or to disclose previously unreported information. For example, if the error relates to origin, tariff classification or value for duty, section 32.2 of the Customs Act requires an importer to correct that error within 90 days after the importer had “reason to believe” that a false declaration was made. An importer that misses this 90-day period is exposed to potential penalties and interest. The voluntary disclosure process may allow that importer to fix this error and reduce or eliminate its risk.
This article outlines certain key requirements for a voluntary disclosure.
Disclosure Must Be Voluntary
A critical requirement for a valid voluntary disclosure is that it is in fact voluntary. If the disclosure is prompted by action taken by the CBSA or another government department, such as a CBSA compliance verification, then voluntary disclosure may no longer be an option.
There are exceptions. For example, if CBSA adds the goods in question to its verification priorities list, this does not preclude voluntary disclosure with respect to those goods unless/until a verification “notification letter” is issued. Given the enhanced likelihood of an audit for items on the verification priorities list, companies should be particularly vigilant in reviewing compliance. At the time of writing, CBSA’s verification priorities were last updated in January 2021 and can be found here: https://www.cbsa-asfc.gc.ca/import/verification/2021-01-eng.pdf.
Disclosure Must Be Comprehensive
When a company identifies an import compliance error, it is necessary to conduct a further review to identify:
All such incidences must be included in the voluntary disclosure for it to be valid.
Other considerations, such as compliance with requirements under other legislation, must also be considered before a voluntary disclosure is made. If an incomplete voluntary disclosure is filed the disclosure will be rejected, and the applicant could miss a valuable opportunity to obtain relief.
Taking the Best Approach to Managing Risk
Errors and omissions when importing to Canada can have serious consequences. Every company that imports goods should proactively verify the accuracy of its import declarations. If a company believes that an error may have been made, it is important to consider all options and to act quickly. In some cases, a “no name” disclosure may be warranted to confirm whether voluntary disclosure will be successful.
Obtaining advice from trade counsel will help to ensure that the appropriate action is taken and risk is mitigated. If voluntary disclosure is the best option in the circumstances, it is important to make sure that the disclosure is complete and has the greatest chance of being accepted.