Periodic Verification - Where Are We Today?

Periodic verification (PV) was introduced in 1995 and yet, many people still don't know what PV is. It is important to recognize that this is a broad-based audit, encompassing teams of government personnel comprised of Revenue Canada staff trained in: systems analysis, customs valuation, tariff classification, relief programs, tariff treatment (e.g. NAFTA etc.), accounting, GST, income tax and other government departmental regulations (e.g. Statistics Canada).

Recognition of PV requires the attention of senior and/or executive management within your organization, and this has proven to be an extremely difficult hurdle for many companies to overcome. We frequently hear of companies who treat Customs as a non-entity. The story is much the same whether speaking to traffic, purchasing, Customs or accounting departments - "I can't get the attention of management!"

With four years of data now available, Revenue Canada has identified a number of significant problem areas. As presented at a recent seminar, they include the following:

In addition, Revenue Canada commented that linkages between various departments and computer systems are often missing or inadequate, and they have experienced poor record keeping systems. Also the attitude of "goods are duty free so who cares" leads to potential non-compliance.

The question "why should you care" can be answered by "AMPS". While AMPS (Administrative Monetary Penalty System) is still in the development stage, it will be a reality. Currently, Customs has few options in dealing with infractions of the various Acts they administer. A more flexible system needed to be devised to meet today's challenges and tailored to the severity of the contraventions incurred.

There are approximately 250 proposed commercial contraventions under AMPS, as noted in our spring issue of the Customs Reporter, a complete list of the proposed violations is available at: www.cscb.ca/listinfo/amps.htm.

Penalties for contraventions will be designed so that they will be appropriate for the type of violation and will increase with repetitive contraventions and will apply to both importers and exporters. The distribution of draft penalties is expected in the fall of 1999.

Importers should remember that with the introduction of the Customs Act amendments effective January 1, 1998, Customs have the authority to review entries for the previous four years and make redeterminations as they deem necessary. With the introduction of a monetary penalty system, this could significantly affect your bottom line.

Having said all that, the importing community has also encountered significant issues in dealing with a PV audit. Next issue we will have a look at some of the challenges importers have faced while undergoing an audit.