Key Legal Issues To Address When Customs Authorities Come Knocking


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A presentation on the key legal issues that need to be addressed before, during and after an audit by customs authorities, in this case the Canada Border Services Agency.

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Key Legal Issues To Address When Customs Authorities Come Knocking

  1. 1. Key Legal Issues to Address When CBSA Comes Knocking: A Legal Perspective on Customs Audits John W. Boscariol [email_address] Day 1 January 20, 2009 14th Annual Customs Compliance and Border Security Conference January 20 and 21, 2009 Delta Toronto Airport West Mississauga, Ontario
  2. 2. Overview <ul><li>preparation </li></ul><ul><li>audit scope </li></ul><ul><li>confidential and privileged information </li></ul><ul><li>voluntary disclosure </li></ul><ul><li>five common errors </li></ul>
  3. 3. Critical Steps for Preparation <ul><li>CBSA has notified you that you’re under audit — what now? </li></ul><ul><ul><li>questionnaires, information request, transactions samples </li></ul></ul><ul><ul><li>desk audit vs. visit </li></ul></ul><ul><li>internal engagement /education of management </li></ul><ul><ul><li>time and financial resources </li></ul></ul><ul><ul><li>exposure </li></ul></ul><ul><li>retaining counsel and other advisors </li></ul><ul><ul><li>“ lawyering up” </li></ul></ul><ul><ul><li>privilege </li></ul></ul>
  4. 4. Critical Steps for Preparation (cont’d) <ul><li>identification of internal players </li></ul><ul><ul><li>key personnel that will be involved </li></ul></ul><ul><ul><li>customs expert </li></ul></ul><ul><ul><li>finance, legal, accounting, accounts payable, sales and marketing, shipping and receiving, compliance </li></ul></ul><ul><ul><li>customs broker </li></ul></ul><ul><li>identification of single point of contact with CBSA </li></ul><ul><ul><li>responsibility for assembly, reviewing, submitting </li></ul></ul>
  5. 5. Critical Steps for Preparation (cont’d) <ul><li>preliminary internal assessment of compliance — little time </li></ul><ul><ul><li>identification of any problem areas </li></ul></ul><ul><ul><li>potential penalty exposure - management </li></ul></ul><ul><ul><li>voluntary disclosures? </li></ul></ul><ul><li>gather compliance documentation </li></ul><ul><ul><li>contravention history </li></ul></ul><ul><ul><li>CBSA rulings </li></ul></ul><ul><ul><li>internal reviews and assessments </li></ul></ul><ul><ul><li>prior verification reports </li></ul></ul><ul><ul><li>compliance manuals/policies </li></ul></ul><ul><ul><li>tariff rating guide </li></ul></ul>
  6. 6. Critical Steps for Preparation (cont’d) <ul><li>isolate privileged communications, documentation, legal opinions and analysis </li></ul><ul><li>review CBSA’s trade verification manual </li></ul><ul><li>request CBSA verification planning memorandum </li></ul><ul><li>access to information requests </li></ul>
  7. 7. Can We Get Out of This? <ul><li>generally, no </li></ul><ul><li>obtaining postponements </li></ul><ul><li>restructuring, new systems </li></ul>
  8. 8. Managing the Scope of the Audit <ul><li>review of Notification Letter </li></ul><ul><li>time period </li></ul><ul><li>commodity, product line </li></ul><ul><li>issue – valuation, classification, origin </li></ul><ul><li>critical for </li></ul><ul><ul><li>preparation </li></ul></ul><ul><ul><li>responding to questions and information requests </li></ul></ul><ul><ul><li>voluntary disclosure </li></ul></ul>
  9. 9. Best Practices for the Verification Visit <ul><li>full record of CBSA attendees and position, expertise </li></ul><ul><li>take notes of discussion and information requests, verbal responses to CBSA questions </li></ul><ul><li>take copies of all documentation provided to CBSA </li></ul><ul><li>attendance of customs counsel </li></ul><ul><li>supervision on premises, restricted areas </li></ul><ul><li>preparation of personnel in attendance, interviewees </li></ul>
  10. 10. Confidential and Privileged Information <ul><li>CBSA requesting sensitive information — trade secret, formula </li></ul><ul><li>asserting privilege </li></ul><ul><ul><li>solicitor-client privilege </li></ul></ul><ul><ul><li>litigation privilege </li></ul></ul>
  11. 11. Confidential and Privileged Information (cont’d) <ul><li>solicitor-client privilege </li></ul><ul><ul><li>ensure confidentiality regarding communication between lawyer and client </li></ul></ul><ul><ul><li>communication between solicitor and client </li></ul></ul><ul><ul><li>entails the seeking or giving of legal advice </li></ul></ul><ul><ul><li>intended to be confidential by the parties </li></ul></ul>
  12. 12. Confidential and Privileged Information (cont’d) <ul><li>litigation privilege </li></ul><ul><ul><li>a “zone of privacy” to facilitate investigation and preparation of a case </li></ul></ul><ul><ul><li>where “dominant purpose” of communication is for litigation </li></ul></ul><ul><ul><li>applies to confidential and non-confidential information </li></ul></ul><ul><ul><li>applies to communication between counsel and client </li></ul></ul><ul><ul><li>counsel and third party </li></ul></ul><ul><ul><li>self-represented litigant and third party </li></ul></ul>
  13. 13. How Can I Challenge CBSA’s Findings? <ul><li>opportunities to address issues or concerns throughout the process </li></ul><ul><ul><li>responding to the systems review and valuation questionnaires, and related information requests </li></ul></ul><ul><ul><li>during the verification — verbally and in writing </li></ul></ul><ul><ul><li>after release of the interim verification report </li></ul></ul><ul><ul><li>after release of the final verification report ( Customs Act ) </li></ul></ul><ul><li>significant strategic decision </li></ul>
  14. 14. “ We’ve Got a Problem: Is Voluntary Disclosure an Option?” <ul><li>errors identified during post-initiation review </li></ul><ul><li>CBSA Voluntary Disclosure Policy </li></ul><ul><ul><li>available to reduce or eliminate penalties or reduce interest </li></ul></ul><ul><ul><li>cannot reduce duties owing </li></ul></ul><ul><ul><li>must be “voluntary” and “complete” </li></ul></ul><ul><ul><li>not initiated to avoid legal obligations </li></ul></ul><ul><ul><li>does not form part of, or continue pattern of, non-compliance </li></ul></ul>
  15. 15. “ We’ve Got a Problem: is Voluntary Disclosure an Option?” (cont’d) <ul><li>“ no-name” disclosures — 60-day letter </li></ul><ul><li>if CBSA denies </li></ul><ul><ul><li>second review by local Director of Client Services – 30 days </li></ul></ul><ul><ul><li>judicial review in the Federal Court </li></ul></ul>
  16. 16. Five Common Errors During CBSA Verification <ul><li>1. Ignoring CBSA or delaying your response </li></ul>
  17. 17. Five Common Errors During CBSA Verification (cont’d) <ul><li>2. Insufficient engagement of management and others within the company </li></ul>
  18. 18. Five Common Errors During CBSA Verification (cont’d) <ul><li>3. Waiting until the final verification report is issued before challenging CBSA conclusions </li></ul>
  19. 19. Five Common Errors During CBSA Verification (cont’d) <ul><li>4. Disclosing too much or too little information </li></ul>
  20. 20. Five Common Errors During CBSA Verification (cont’d) <ul><li>5. Underestimating resources required to respond to the audit </li></ul>
  21. 21. John W. Boscariol Partner McCarthy Tétrault LLP Suite 5300 Toronto Dominion Bank Tower Toronto-Dominion Centre Toronto, Ontario M5K 1E6 Direct Line:  416-601-7835 E-mail:   [email_address]
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