LexSage

Undervaluation of Goods Can Lead
to Criminal Charges And Conviction
In Canada

August 19, 2016

On August 5, 2016, the Canada Border Services Agency (“CBSA”) posted on the CBSA web-site a News Release entitled “Dartmouth store owner charged for falsifying documents and undervaluing shipments”. This News Release should cause Canadian business owners who import goods and/or general counsel of companies that import goods to ask important questions:

“Is my import paperwork accurate, true and complete?”
“If I am audited, will the CBSA have any problems with my paperwork?”
“When was the last time I looked at my customs documentation to ensure that the import paperwork accurately reflects the value of the goods?”
“Do I know what information is being provided to the customs broker in order to properly declare the value and contents of each shipment?”
“Who in my import company is providing information to the customs broker and have I adequately supervised that person enough to know correct information is being provided?”
If a business owner/general counsel cannot answer these questions, it is time for an internal compliance review of customs documentation in order to identify under-valuations; failures to add to value for duties, royalties, assists, subsequent proceeds, etc.; overvaluation; errors in tariff classifications; errors in origin statements; descriptions of goods; etc. Most business owners believe that if errors have been made, the CBSA will issue a monetary penalty (e.g., a Detailed Adjustment Statement and AMPs Notice of Penalty) rather than anything more serious.  Think again and read the CBSA News Release below carefully.

The News Release stated:

“Canada Border Services Agency (CBSA) announced today that on July 21, 2016, Kelly Elizabeth Wall, of Bedford, Nova Scotia, pled guilty in Dartmouth Provincial Court to two charges under the Customs Act. One charge was under section 12(1) for non-report and one under section 153(a) for making false statements.

A CBSA investigation determined that between May 2008 and July 2014, Kelly Wall undervalued 32 commercial shipments to her store “Encore Décor Ltd” in Dartmouth which imported and sold household accessories such as bedding and curtains. Wall used fictitious invoices to account for less cargo than was imported and undervalued the cargo that was being reported. The total undervaluation was $340,882.73.  It is also alleged that on 16 of the importations Wall forged the CBSA Cargo Control Documents by changing the number of pallets and weight to a lesser quantity to better match the invoices.

Wall was sentenced to a fine of $15,000 on each count ($30,000 in total) and is required to amend 32 commercial accounting documents which will recover approximately $77,000 in evaded duty and taxes.

Quick Facts

• All commercial goods must be reported to the CBSA whether you transport it yourself or have a carrier transport it for you.
• All goods entering Canada, regardless of mode, must be reported to the CBSA and may be subject to a more in-depth exam.
• Failure to declare goods and other Customs Act violations may lead to seizure and/or prosecution in a court of law.

Quotes

“Every importer is required to accurately report all goods being imported into Canada.  The Canada Border Services Agency will continue to prosecute those who purposely evade duties and taxes. ”
– Gina Kennedy, Acting Director, Enforcement and Intelligence Division, Atlantic Region”

This story from a smaller urban center in Nova Scotia was not picked up by many news outlets.  In the Halifax Metro, an article was written entitled “Dartmouth store owner fined for falsifying documents and undervaluing shipments”.  The reporter had contacted the CBSA and quoted Blair MacDonald as saying:

“I’ve not seen a commercial case where someone is only declaring their shipments on the average of less than 20 per cent.”
“We do see people will low ball their shipments. I’ve never seen it to this extent. This is one of the more significant under-valuations that I’ve ever seen and I’ve been doing this for a lot of years.”
“When I started comparing manifests she presented to us … if I see eight, it had (actually been) 18; the ones that say nine, it was 19; if it was 21, she deleted the two and changed the number one to a seven.”
“This is the first time in my career I’ve ever seen anybody alter, forge, a customs manifest.”

It is important to remember that in the case of Ms. Wall, the CBSA was looking at 32 shipments over a 7 year period of time.  Many businesses can have 32 shipments in one day or in one week or in one month.

The best advice I can give business owners and general counsel is to conduct an internal investigation and look carefully at all the paperwork in a number of transactions.  Hire a lawyer to help you because a lawyer will conduct the review under solicitor-client privilege.  If problems are located, develop plans to make a voluntary disclosure and correct the entries.  You may have to explain to the CBSA how the errors occurred.  But, that could lead to a better result than if you let the CBSA find serious problems during a verification/audit.  Honesty could prevent the commencement of a criminal investigation. Don’t delay in asking a few important questions.

For more information about voluntary disclosures, please go to www.lexsage.com.  We have posted a number of articles about customs matters.  Recent articles that may be helpful are:

What is a No-Names Voluntary Disclosure?

What Every Importer Should Know About Canada’s Customs Duties Reassessment Policy

Canada’s Voluntary Disclosure Policy Has Been Revised

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.