key legal issues to address when customs authorities come knocking

Key Legal Issues to Address When CBSA Comes Knocking:

A Legal Perspective on Customs Audits

John W. Boscarioljboscariol@mccarthy.ca

Day 1Day 1January 20, 2009January 20, 2009

14th Annual Customs Compliance and Border Security 14th Annual Customs Compliance and Border Security ConferenceConference

January 20 and 21, 2009January 20 and 21, 2009

Delta Toronto Airport WestDelta Toronto Airport WestMississauga, OntarioMississauga, Ontario

Slide No. 2John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Overview

• preparation

• audit scope

• confidential and privileged information

• voluntary disclosure

• five common errors

Slide No. 3John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Critical Steps for Preparation

• CBSA has notified you that you’re under audit — what now? • questionnaires, information request, transactions samples • desk audit vs. visit

• internal engagement /education of management • time and financial resources • exposure

• retaining counsel and other advisors • “lawyering up” • privilege

Slide No. 4John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Critical Steps for Preparation (cont’d)• identification of internal players

• key personnel that will be involved

• customs expert

• finance, legal, accounting, accounts payable, sales and marketing, shipping and receiving, compliance

• customs broker

• identification of single point of contact with CBSA

• responsibility for assembly, reviewing, submitting

Slide No. 5John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Critical Steps for Preparation (cont’d)• preliminary internal assessment of compliance — little

time

• identification of any problem areas• potential penalty exposure - management• voluntary disclosures?

• gather compliance documentation

• contravention history• CBSA rulings• internal reviews and assessments• prior verification reports• compliance manuals/policies• tariff rating guide

Slide No. 6John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Critical Steps for Preparation (cont’d)

• isolate privileged communications, documentation, legal opinions and analysis

• review CBSA’s trade verification manual

• request CBSA verification planning memorandum

• access to information requests

Slide No. 7John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Can We Get Out of This?

• generally, no

• obtaining postponements

• restructuring, new systems

Slide No. 8John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Managing the Scope of the Audit

• review of Notification Letter

• time period

• commodity, product line

• issue – valuation, classification, origin

• critical for

• preparation

• responding to questions and information requests

• voluntary disclosure

Slide No. 9John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Best Practices for the Verification Visit• full record of CBSA attendees and position, expertise

• take notes of discussion and information requests, verbal responses to CBSA questions

• take copies of all documentation provided to CBSA

• attendance of customs counsel

• supervision on premises, restricted areas

• preparation of personnel in attendance, interviewees

Slide No. 10

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Confidential and Privileged Information

• CBSA requesting sensitive information — trade secret, formula

• asserting privilege

• solicitor-client privilege

• litigation privilege

Slide No. 11

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Confidential and Privileged Information (cont’d)

• solicitor-client privilege

• ensure confidentiality regarding communication between lawyer and client

• communication between solicitor and client

• entails the seeking or giving of legal advice

• intended to be confidential by the parties

Slide No. 12

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Confidential and Privileged Information (cont’d)

• litigation privilege

• a “zone of privacy” to facilitate investigation and preparation of a case

• where “dominant purpose” of communication is for litigation

• applies to confidential and non-confidential information

• applies to communication between counsel and client

• counsel and third party

• self-represented litigant and third party

Slide No. 13

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

How Can I Challenge CBSA’s Findings?• opportunities to address issues or concerns

throughout the process • responding to the systems review and valuation

questionnaires, and related information requests

• during the verification — verbally and in writing

• after release of the interim verification report

• after release of the final verification report (Customs Act)

• significant strategic decision

Slide No. 14

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

“We’ve Got a Problem: Is Voluntary Disclosure an Option?”

• errors identified during post-initiation review

• CBSA Voluntary Disclosure Policy • available to reduce or eliminate penalties or

reduce interest

• cannot reduce duties owing

• must be “voluntary” and “complete”

• not initiated to avoid legal obligations

• does not form part of, or continue pattern of, non-compliance

Slide No. 15

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

“We’ve Got a Problem: is Voluntary Disclosure an Option?” (cont’d)

• “no-name” disclosures — 60-day letter

• if CBSA denies

• second review by local Director of Client Services – 30 days

• judicial review in the Federal Court

Slide No. 16

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Five Common Errors During CBSA Verification

1. Ignoring CBSA or delaying your response

Slide No. 17

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Five Common Errors During CBSA Verification (cont’d)

2. Insufficient engagement of management and others within the company

Slide No. 18

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Five Common Errors During CBSA Verification (cont’d)

3. Waiting until the final verification report is issued before challenging CBSA conclusions

Slide No. 19

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Five Common Errors During CBSA Verification (cont’d)

4. Disclosing too much or too little information

Slide No. 20

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group

Five Common Errors During CBSA Verification (cont’d)

5. Underestimating resources required to respond to the audit

John W. BoscariolPartner McCarthy Tétrault LLPSuite 5300Toronto Dominion Bank TowerToronto-Dominion CentreToronto, Ontario M5K 1E6

www.mccarthy.ca

Direct Line: 416-601-7835 E-mail:  jboscariol@mccarthy.ca