AMPS Under The Microscope: The Continual Evolution

What Is The Administrative Monetary Penalty System?

The Administrative Monetary Penalty System (AMPS) is a Canada Border Services Agency (CBSA) sanctions regime that authorizes the CBSA to issue civil monetary penalties for the violation of CBSA’s trade and border legislation in the commercial stream. AMPS are intended to deter non-compliance and have been issued by CBSA for the last 20 years. Penalties are issued for non-compliance found either at the border at the time of importation or through post-release verification of company records. When a CBSA officer finds that a client has not complied with their obligations under the Customs Act, an AMPS penalty will be applied. The CBSA officer identifies the infraction and selects the appropriate contravention from the AMPS Master Penalty Document.

History of AMPS

CBSA has conducted reviews of its sanctions system and the first one was done in 2009 wherein modifications to AMPS took effect in 2010. The number of contraventions was reduced, many penalty amounts were decreased, and some penalties were increased. 

In January of 2015, the CBSA issued revisions to AMPS as a result of amendments made to the Customs Act.

These revisions were:

• If a company had more than one Canadian Business Number/Import Account, a poor contravention history for one division will not affect the client contravention history or the penalty levels of the other divisions.
• The time period to request a correction of a Notice of Penalty Assessment (NPA) was extended from 30 days to 90 days. The 90 days starts on the date of the issuance of the Notice of Penalty Assessment.
• All requests for review of a penalty assessment are to be submitted to the CBSA.
• Recourse Directorate in Ottawa instead of the CBSA office that issued the Notice of Penalty Assessment.
• The Penalty Reduction Agreement was renamed Penalty Reinvestment Agreement. The new agreement allows for full or partial reduction of the penalty if the client agrees to “invest” the penalty amount in its system for the purpose of correcting systemic problems that are causing errors. The agreement identifies the problem and what is needed to correct it in a specific timeframe. 

The Office of the Auditor General (OAG) for Canada conducted an audit on Customs duties wherein they reviewed the payment of customs duties for the period January 1, 2013 to May 31 2016. They released their findings in Report 2 - Customs Duties, from the 2017 Spring Reports of the Auditor General of Canada - Part 1.

AMPS Review Findings

For the purposes of this posting we will concentrate on the findings and recommendations with respect to AMPS that the Office of the Auditor General made in this audit. 

Overall the audit revealed that CBSA was unable to accurately assess all customs duties owed to the government on goods imported. The audit made a number of findings and recommendations. The Office of the Auditor General suggested that AMPS penalties failed to control compliance as the penalties were too low to be effective at making importers comply with the import rules. 

The Office of the Auditor General Reported

“In the 2014-2015 fiscal year, the Agency charged 16,000 penalties - less than one tenth of one percent of the transactions for that year. In the 2015-16 fiscal year, total revenue from penalties was $4.4 million for an average penalty of $151.00.” 

The Office of the Auditor General recommended that CBSA review its penalties to better protect import revenues and ensure compliance. The CBSA agreed and promised to review the AMPS penalty system in order to create a meaningful deterrent to importers not complying. They promised to complete this review by June 2018 and provide a report by the end of September 2018. 

In its review the CBSA conducted stakeholder consultations on changes to AMPS. The consultations found that:

• AMPS should be used to deter non-compliance.
• Current penalty levels can be absorbed by some importers as simply the cost of doing business with the exception that AMPS can have a high negative impact on small businesses.
• Compliance enforcement to include AMPS should focus on intentional and recurring infractions not incidental errors. 

As a result of the consultations and review the CBSA agreed with the Office of the Auditor General that penalties should be increased in order to protect revenues and deter non-compliance. 

AMPs: Increasing April 1, 2019

CBSA issued Customs Notice 19-05 which addressed the AMPS increases. The notice informed importers that “The purpose of this notice is to advise importers that 22 contraventions related to commercial trade will be amended, effective April 1, 2019. The increases will bring penalty levels in line with other non-trade commercial penalties. These increases affect non-compliant importers only.”

AMPS & CARM

With CARM Release 2 around the corner, CBSA is again reviewing the AMPS process. The Border Commercial Consultative Committee (BCCC) asked the following questions:

• Are there penalties which are redundant? Penalties C005 and C348 which cover providing true information to CBSA are very similar.
• Are there gaps where no penalty currently exists?
• Are there penalties which are unclear in their application?
• Are there AMPS which are inevitable in any meaningful volume of transactions, regardless of a company’s compliance controls and systems?

The BCCC suggests that “with the implementation of CARM Release 2 in 2023, there will be a period of adjustment to the new system and ways of doing business on the part of industry, with inadvertent non-compliance likely resulting.”

The AMPS regime will need to take this adjustment period into account.

Compliance Verifications can not be the only tool CBSA has to measure or address non-compliance. Compliance Verifications are very labor intensive and can take some time to complete. They generally focus on larger importers and the assessments made can sometimes cover up to 4 years of importations. 

The Border Commercial Consultative Committee agrees that compliance interventions should be more surgical and focused. As an example, the interventions should focus on specific transactions and not a period of time. There should be early identification and correction. Examples of early interventions are:

• Direct Compliance Letter (DCL): The Importer would be sent a DCL which would address instances of known non-compliance and be accompanied by a reassessment.
• Compliance Validation Letter (CVL): The Importer would be sent a CVL which would address instances of suspected non-compliance and make corrective action clear. The letter would request the importer to provide information within 30 days.
• Trade Advisory Notice (TAN): TANs are nudges to the Importer with guidance to assist where there is potential non-compliance. A TAN would request that the Importer review the declaration and provide public resources for guidance.

Industry has provided feedback to the Border Commercial Consultative Committee regarding these interventions and a Customs Notice is being prepared to alert trade chain partners of these new interventions. 

CBSA continues to review and improve the Compliance and Culpability Framework. We will continue to keep an eye on this and provide you with any upcoming changes with the AMPS framework and the suggested interventions.

Should you have any questions with respect to AMPS or how you can stay ahead of the curve when it comes to compliance give one of our Trade Advisors a call. We are here to help.