LexSage

Directors’ And Officers’ Liability For
Failure To Obtain An Import Permit

September 17, 2016

The Government of Canada (in particular, Global Affairs Canada, the Canada Border Services Agency, and the Canadian Food Inspection Agency) may pursue directors and officers of a corporation who fail to obtain the required import permits, licenses and certifications. Corporations cannot act on their own.  Individuals make decisions that cause the corporation to take actions.  With respect to imports, individuals take the steps that cause the import to occur.  It may be that an individual makes the decision to not obtain the required import permit, license or certificate.  For example, a good may be on Canada’s Import Control List and an officer/director may be prosecuted for failing to obtain an import permit when that officer/director authorized an import of the good in circumstances where a general import permit or exemption does not apply.

It is important to note that many of Canada’s import restrictions relate to textiles and apparel, chemicals, steel, and agricultural products.  Canada also imposes restrictions on imports of firearms, related goods and ammunition.

Section 14 of the Export and Import Permits Act states:

“No person shall import or attempt to import any goods included in an Import Control List except under the authority of and in accordance with an import permit issued under this Act.”

A person does not contravene section 14 of the Export and Import Permits Act if, at the time of importation, the person would have imported the goods under the authority of and in accordance with an import permit issued under the Export and Import Permits Act had they applied for it, and if, after the importation, the permit is issued.

Section 20 of the Export and Import Permits Act states:

“Where a corporation commits an offence under this Act, any officer or director of the corporation who directed, authorized, assented to, acquiesced in or participated in the commission of the offence is a party to and guilty of the offence and is liable on conviction to the punishment provided for the offence whether or not the corporation has been prosecuted or convicted.”

There are a number of important points:

1. The Crown can pursue an officer/director even if the Crown has not prosecuted (and the Court has not convicted) the corporation;
2. An officer or director who directed, authorized, assented to, acquiesced in or participated in the commission of the offence may be prosecuted for the offence;
3. Employees are not identified in section 20 of the Export and Import Permits Act, which means that only officers and directors may be pursued personally; and
4. The limitation period in subsection 19(2) of the Export and Import Permits Act (that is, three years after the time when the subject-matter of the complaint arose) applies to prosecutions of officers and directors.

Subsection 19(1) of the Export and Import Permits Act states that:

“Every person who contravenes any provision of this Act or the regulation is guilty of
(a) an offence punishable on summary conviction and liable to a fine not exceeding twenty-five thousand dollars or to imprisonment for a term not exceeding twelve months, or to both; or
(b) an indictable offence and liable to a fine in an amount that is in the discretion of the court or to imprisonment for a term not exceeding ten years, or to both.”

This means that the Crown may elect to pursue a corporation (or officer/director) by way of summary conviction or indictment.  If the Crown pursues the corporation (or officer/director) by way of summary conviction, the maximum penalty is $25,000 and/or imprisonment of no more than 12 months. However, if the Crown pursues the corporation (or officer/director) by way of indictment, the judge has discretion to set a fine in any amount.  The judge cannot impose a term of imprisonment in excess of 10 years.

Canadian importers of food products should also watch the Safe Food For Canadians Act, which was passed and received Royal Assent in 2012. The Safe Food For Canadians Act consolidates a number of food related laws, including the Meat Inspection Act, the Fish Inspection Act, the Canada Agricultural Products Act and the food labeling provisions of the Consumer Packaging and Labelling Act.  The Safe Food For Canadians Act was to come into force in 2015 and no statement was issued before the federal election.  When and if the Safe Food for Canadians Act comes into effect, more robust offence provisions will also come into effect.  Section 39 of the Safe Food for Canadians Act provides

“A person who contravenes a provision of this Act, other than sections 7 and 9, or a provision of the regulations — or fails to do anything the person was ordered to do by, or does anything the person was ordered not to do by, the Minister or an inspector under this Act other than subsection 32(1) — is guilty of an offence and is liable

(a) on conviction on indictment, to a fine of not more than $5,000,000 or to imprisonment for a term of not more than two years or to both; or
(b) on summary conviction, for a first offence, to a fine of not more than $250,000 or to imprisonment for a term of not more than six months or to both and, for a subsequent offence, to a fine of not more than $500,000 or to imprisonment for a term of not more than 18 months or to both.”

Pursuant to subsection 39(4) of the Safe Food for Canadians Act, any of the person’s directors or officers, or agents or mandataries, who directs, authorizes, assents to or acquiesces or participates in the commission of the offence is a party to the offence and is liable on conviction to the punishment provided for by this Act, even if the person is not prosecuted for the offence.

Due Diligence

Unlike may directors and officer’s liability provisions, there is no due diligence defense in the Export and Import Permits Act for offences committed by the corporation or officer/director.  There is a due diligence defence in the Safe Food For Canadians Act.  An argument may be raised that common law allows for a due diligence defense where the officer/director can show that reasonable care was taken to avoid the commission of an offence.  A failure to obtain an import permit is a strict liability offense. For example, if an officer/director implemented a policy to obtain import permits and underlings failed to follow proper procedures, it may be that the facts would support a due diligence defense.

A due diligence defense is available where a Canadian corporation obtains an import permit for a non-resident and that non-resident commits an offence.  Section 21 of the Export and Import Permits Act states:

“Where a permit under this Act is issued to a person who has applied for it for, on behalf of, or for the use of, another person who is not a resident of Canada and that other person commits an offence under this Act, the person who applied for the permit is, whether or not the non-resident has been prosecuted or convicted, guilty of the like offence and liable, on conviction, to the punishment provided for the offence, on proof that the act or omission constituting the offence took place with the knowledge or consent of the person who applied for the permit or that the person who applied therefor failed to exercise due diligence to prevent the commission of the offence.”

If the officer/director can show that that he/she exercised due diligence to prevent an offence from taking place, he/she should not be convicted (depending on the facts).

If you have any questions, please contact Cyndee Todgham Cherniak at 416-307-4168 or cyndee@lexsage.com.

This article was originally published on www.Canada-USBlog.com. Republished with permission.