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A Cautionary Tale at the Border

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The recent Federal Court case Saad v CBSA (2016 FC 1382) is a cautionary tale in two respects.

 

In the first place, it is a reminder that travellers who are found not to have properly declared imported goods, risk having their vehicle seized by the Canadian Border Services Agency (“CBSA”), which has a broad range of powers under the Customs Act.

 

At the border, the Customs Act imposes on travellers a positive obligation to report all goods purchased, received or acquired while outside of Canada and, if a traveller fails to so report, a customs officer can seize the goods and any conveyance that the officer believes to be associated with the undeclared goods.  Put simply, if you don’t properly declare goods at the border, customs officers can seize your goods and your car.

 

In the second place, the case emphasizes the importance of following proper procedures when appealing penalties or seizures imposed by CBSA officers.  These procedures are not self-evident and are frequently misunderstood where customs disputes are involved.

 

Customs non-compliance, and the issue of whether or not there has been a contravention of the Customs Act is separate and distinct from the issue of the amount of the penalty assessed, and must be raised in a separate proceeding before the Federal Court (“FCC”). Both issues can be raised simultaneously, provided that each is raised on its own terms.

 

On the facts, Mr. Saad travelled to the United States, via Niagara Falls, to pick up a swimming pool cover he had purchased on-line. On return to Canada, he and his wife were stopped and questioned.  While there was dispute about what happened next –Mr. Saad claiming that he reported the pool cover and that the customs officers were aggressive, with the customs officers claiming that Mr. Saad was deceptive and had not done so.  The upshot was that the customs officers searched Mr. Saad’s car, found the pool cover, and found or were given a receipt for the pool cover.

 

The customs officers then seized both the pool cover and Mr. Saad’s car on the basis that the pool cover had been unlawfully imported due to Mr. Saad’s failure to report it.  In order for the pool cover and the car to be released, Mr. Saad was required to pay a penalty of $355.59.

 

The penalty was calculated based on 40% of the value of the pool cover, plus an additional 50%. Mr. Saad paid the penalty.

 

Subsequently, Mr. Saad requested a review of the customs officer’s actions.  A notice of Reasons for Action was provided to Mr. Saad by a Senior Appeals Officer, and ultimately the decision was upheld by the Minister, who emphasized that the onus to properly declare all goods purchased, received, or acquired was on the importer (i.e. Mr. Saad).  With respect to the penalty, the Minister concluded that it was in accord with the CBSA guidelines.

 

The Minister outlined options for further appeal to Mr. Saad: (i) file an action appeal whether the Customs Act had been contravened (section 131); or (ii) file an application for judicial review to contest the amount of the penalty assessed (section 133).

 

Mr. Saad, mistakenly, chose the second option.

 

In its analysis, the FCC affirmed the Minister’s appeal instructions to Mr. Saad and stated that, on judicial review, the only issue before the court is the quantum of the penalty.

 

Considering the penalty, the FCC noted that Mr. Saad’s intentions and good faith were irrelevant because the Customs Act imposes a positive obligation on travellers to report at the time of entry, citing prior jurisprudence that “the Customs Act depends, for its effective operation, on voluntary reporting and strict liability attaches to those that fail to report.”

 

Turning to the amount of the penalty, the FCC observed that section 117 of the Customs Act authorizes the CBSA to offer a monetary penalty for the release of goods and conveyances seized, and that this amount may equal the aggregate of the full value for duty of the goods and the amount of any duties levied. The FCC found that the penalty amount determined by the CBSA was within the range allowed by the Customs Act, and held that the penalty was reasonable.

 

This case highlights the seriousness of properly reporting and valuing imported goods and underlines that, in appealing seizure and penalty decisions, the proper procedures are critical.

 

This case is also a sober reminder that too often, the importer’s version of what was said to the customs officer differs radically from the officer’s version – with the courts usually preferring the later.  The importer’s situation is materially enhanced where they have recorded the initial conversation (extremely rare) or where there is another person who heard the exchange.  Here, the importer’s wife was in the car but did not give evidence to corroborate her husband’s testimony that he had reported properly.  

 

At Millar Kreklewetz LLP we provide legal assistance to importers in these – and even more serious – sorts of situations.

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Guest Wednesday, 20 November 2019

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