---

CUSTOMS NON-COMPLIANCE NEVER PAYS!

HIGH DUTIES AND TARIFFS MAKE NON-COMPLIANCE A TEMPTING TRAP

Given the high tariff rates importers are facing due to Canada’s retaliatory tariffs (actually surtaxes), importers may be tempted to consider various methods to try and minimize the duty paid.  Unfortunately, most of these methods could be considered “evasion” – and there is no shortage of unscrupulous people hawking them.  On balance, these strategies are a poor choice given the potentially serious consequences for violating customs laws. 

As an example, the European Public Prosecutor’s Office (the “EPPO”) recently dealt with a customs evasion scheme in Italy involving Chinese electric bicycles (“e-bikes”).

Chinese E-Bikes in Italy

The alleged scheme was frustrated when the Italian Financial Police – at the request of the EPPO – froze the accounts of a suspected major customs violator.  The suspect company was alleged to have imported e-bikes into Italy in unassembled form across several separate shipments and declared them as “parts”.  The parts were then assembled and sold in Italy as finished e-bikes.

By importing the goods as parts, the importer had hoped to avoid the European anti-dumping duties applicable to Chinese e-bikes.  Unfortunately for the importer, the EPPO did not share this view and considered it impermissible avoidance of anti-dumping duties.

How is Customs Fraud and Non-Compliance Dealt with in Canada?

Fraud and non-compliance concerning the importation of goods is investigated by the Canada Border Services Agency (“CBSA”).  Under the relevant legislation, the CBSA has several options in cases of non-compliance ranging from administrative monetary penalties to criminal sanctions.

The CBSA is empowered to impose monetary penalties using the Administrative Monetary Penalty System (AMPS), which we have previously written about here.  AMPS exists to deter non-compliance, and attaches monetary penalties to various actions (e.g., the provision of false information for a permit, certificate, license, document or declaration required by several relevant Acts). Those penalties are graduated so that repeat offenders attract a greater penalty.

In contrast to AMPS, the CBSA also has the option to lay charges against a person under the Customs Act and potentially seek fines or even a prison sentence!  For example, under s. 153(a) and s. 160 of the Customs Act, it is an offence to make false statements or to “participate in, assent to or acquiesce in the making of, false or deceptive statements”.  If convicted of this offence on indictment, the potential penalty is a fine of up to $500,000, and imprisonment of up to 5 years!

In Ontario, a man convicted of importing a vehicle as “parts” (similar to the Italian e-bike situation) was convicted of several offences under the Customs Act, and had his conviction upheld by the Ontario Court of Appeal!

Takeaways

Given the potentially significant penalties for non-compliance with the Customs Act and related legislation and Regulations, importers who “have an idea” for minimizing customs duty should consult a legal professional with experience in customs and trade matters to ensure what they are proposing is legal.  Customs evasion schemes are to be avoided – the payoff is temporary, and the chance of serious consequence is high!

Importers should seek the advice of customs lawyers who can advise them on proper customs compliance and prevent them from getting into trouble with the CBSA. 

For help with customs duty, click here.

Download a PDF copy of this Blog here.