[Title 19 CFR 171.64]
[Code of Federal Regulations (annual edition) - April 1, 2002 Edition]
[Title 19 - CUSTOMS DUTIES]
[Chapter I - UNITED STATES CUSTOMS SERVICE, DEPARTMENT OF THE TREASURY]
[Part 171 - FINES, PENALTIES, AND FORFEITURES]
[Subpart G - Supplemental Petitions for Relief]
[Sec. 171.64 - Waiver of statute of limitations.]
[From the U.S. Government Printing Office]
19CUSTOMS DUTIES22002-04-012002-04-01falseWaiver of statute of limitations.171.64Sec. 171.64CUSTOMS DUTIESUNITED STATES CUSTOMS SERVICE, DEPARTMENT OF THE TREASURYFINES, PENALTIES, AND FORFEITURESSupplemental Petitions for Relief
Sec. 171.64 Waiver of statute of limitations.
The deciding Customs official always reserves the right to require a
waiver of the statute of limitations executed by the claimants to the
property or charged party or parties as a condition precedent before
accepting a supplemental petition in any case in which less than one
year remains before the statute will be available as a defense to all or
part of that case.
Appendix A to Part 171--Guidelines for Disposition of Violations of 19
U.S.C. 1497
Liabilities incurred under section 497, Tariff Act of 1930 (19
U.S.C. 1497), shall be mitigated or remitted in accordance with the
following guidelines (see also part 148, Customs Regulations):
I. Violations Involving Dutiable Articles. For violations involving
articles subject to duty and for which there is no applicable exemption
from duty, the following rules apply:
[[Page 293]]
1. Mitigated Penalty for First Offense. For violations which are the
first offense, where there is knowledge of the declaration requirements,
and where the undeclared articles are discovered by the Customs
officers, the liabilities shall be remitted upon payment of Three Times
the Duty (but not less than $50), or the domestic value, whichever is
lower.
2. Mitigating Factors. When one or more of the following mitigating
factors are present, the deciding officer may, within his discretion,
remit the liabilities upon payment of Between One and One-Half and Three
Times the Duty or the domestic value, whichever is lower:
a. Communications with the violator are impaired because of language
barrier, mental condition, or physical ailment;
b. Violator cooperates with Customs officers after discovery of the
violation by providing additional information which facilitates
conclusion of the case;
c. Violator is an inexperienced traveler;
d. There is contributory Customs error (for example, violator
demonstrates he was given incorrect advice by a Customs officer).
3. Aggravating Factors. When one or more of the following
aggravating factors are present, the deciding officer may, within his
discretion, remit the liabilities upon payment of Between Three and Six
Times the Duty (but not less than $100), or the domestic value,
whichever is lower:
a. Documentary or other evidence discovered establishes violator's
intent;
b. Informant provides information which tends to establish
violator's intent and leads to discovery of the violation after the
violator has been given an opportunity to properly declare;
c. Violator is an experienced traveler;
d. Undeclared articles are concealed to evade U.S. law;
e. There is behavior, including extreme lack of cooperation, verbal
or physical abuse, or attempted escape, which tends to demonstrate a
lack of respect for law and authority.
4. Commercial Articles. When the undeclared articles are brought in
for commercial purposes, the liabilities shall be remitted upon the
payment of Six Times the Duty (but not less than $100), or the domestic
value, whichever is lower. Mitigating factors may be used to lower this
amount to as little as Three Times the Duty; aggravating factors may be
used to increase this amount up to Eight Times the Duty.
5. Extraordinary Mitigating Factor.
a. When an individual who has been cleared through Customs without
discovery of any undeclared article returns to the examination area and
declares that article, the deciding officer may, within his discretion,
remit the liabilities upon payment of One Times the Duty.
b. An individual who declares articles some time later (hours, days,
weeks, etc.) may be treated similarly.
6. Extraordinary Aggravating Factors.
a. When the offense is a second or subsequent violation, the
deciding officer may, within his discretion, remit the liabilities upon
payment of Between Six and Eight Times the Duty (but not less than
$250), or the domestic value, whichever is lower.
b. When the offense is a second or subsequent violation, and there
are aggravating factors present, generally there shall either be a
denial of relief or mitigation to No Less Than Eight Times the Duty or
the domestic value, whichever is lower.
c. When there is evidence of an ongoing scheme to defraud the
revenue involving multiple entries without declaration of articles
subject to declaration, the deciding officer shall act in accordance
with the preceding paragraph.
II. Violations Involving Absolutely or Conditionally Free Articles.
For violations involving articles either entitled to entry free of duty
absolutely (classifiable under a duty-free provision in Chapters 1-97,
Harmonized Tariff Schedule of the United States (HTSUS); (19 U.S.C.
1202)), or entry free of duty conditionally (entitled to treatment under
the Generalized System of Preferences (see Secs. 10.171-10.178, Customs
Regulations) or Chapter 98, HTSUS), the following rules apply:
1. Mitigated Penalty for First Offense.
a. For violations which are first offense, and involve articles
entitled to the benefit of GSP or Chapter 98, HTSUS, the liabilities
shall be remitted upon payment of One Times the Duty which would have
been due if the articles had not been entitled to the benefit.
b. For violations which are first offense, and involve absolutely
duty-free articles, the liabilities shall be remitted upon payment of
Between One and Five Percent of the Domestic Value, but not less than
$50 (or the domestic value, whichever is less) nor more than $1,000.
2. Mitigating Factors. When mitigating factors such as those
outlined above are present, the deciding officer may, in his discretion,
reduce the mitigated amount to a lower figure.
3. Aggravating Factors.
a. When aggravating factors such as those outlined above are
present, the deciding officer may, in his discretion, remit the
liabilities for conditionally free articles upon the payment of Between
One and Two Times the Duty (but not less than $100), or the domestic
value, whichever is lower.
b. For absolutely free articles, the deciding officer may remit the
liabilities upon payment of Between Five and Ten Percent of the Domestic
Value, but not less than $100.
4. Commercial Merchandise.
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The fact that undeclared duty-free articles are imported for
commercial purposes may be considered an aggravating factor under
section II.3. of these guidelines.
III. Other Applicable Rules.
1. These guidelines provide a framework and procedure by which
violations of 19 U.S.C. 1497 are to be analyzed. They are not mandatory
in the sense that they must be absolutely applied. Customs officers
varying from these guidelines must provide reasons for doing so in the
case record.
2. Customs officers shall document mitigating and aggravating
factors found in each case in the case file. There must be a basis shown
for mitigated amounts.
3. It is intended that mitigating and aggravating factors shall be
considered together and used to offset each other where appropriate.
4. The rate of duty to be used in calculating the mitigated penalty
shall be the appropriate rate from Chapters 1-97, HTSUS, and not the
flat rate from Chapter 98, HTSUS.
5. ``Duty'' means Customs duties and any internal revenue taxes
which would have attached upon importation (see section 101.1(i),
Customs Regulations). Therefore, multiples will also be applied to
internal revenue taxes which would have been due.
6. Customs officers may, within their discretion, consider other
factors not here delineated as aggravating or mitigating and apply the
guidelines accordingly. These additional factors must also be documented
in the case file.
7. These guidelines are not authority for admitting into the
commerce of the United States articles which are conditionally or
absolutely prohibited from entry.
8. The presence of one or more extraordinary aggravating factors,
including but not limited to those set forth in section I.6. of these
guidelines, may within the discretion of the deciding officer be a basis
for denial of relief.
9. If the violator is being prosecuted criminally, the civil (19
U.S.C. 1497) liability generally is administratively settled only after
completion of the prosecution or with the express approval of the
appropriate U.S. attorney. Criminal prosecution of the violator,
however, is insufficient grounds to delay indefinitely determination of
the civil liability. The Fines, Penalties, and Forfeitures Officer
should contact the Chief Counsel representative in the field to
determine the best course of action to follow with respect to the civil
liability. Chief Counsel representative will consult with the U.S.
attorney and the Penalties Branch at Customs Headquarters. Because of
time delay problems, all seizures involving criminal prosecutions must
be promptly coordinated in this manner, and consideration should be
given to immediate referral of the forfeiture action to the U.S.
attorney for the institution of a judicial proceeding.
[T.D. 83-145, 48 FR 30100, June 30, 1983, as amended by T.D. 89-1, 53 FR
51271, Dec. 21, 1988; T.D. 99-27, 64 FR 13676, Mar. 22, 1999]
Appendix B to Part 171--Customs Regulations, Guidelines for the
Imposition and Mitigation of Penalties for Violations of 19 U.S.C. 1592
A monetary penalty incurred under section 592 of the Tariff Act of
1930, as amended (19 U.S.C. 1592; hereinafter referred to as section
592) may be remitted or mitigated under section 618 of the Tariff Act of
1930, as amended (19 U.S.C. 1618), if it is determined that there are
mitigating circumstances to justify remission or mitigation. The
guidelines below will be used by the Customs Service in arriving at a
just and reasonable assessment and disposition of liabilities arising
under section 592 within the stated limitations. It is intended that
these guidelines shall be applied by Customs officers in pre-penalty
proceedings and in determining the monetary penalty assessed in any
penalty notice. The assessed penalty or penalty amount set forth in
Customs administrative disposition determined in accordance with these
guidelines does not limit the penalty amount which the Government may
seek in bringing a civil enforcement action pursuant to section 592(e).
It should be understood that any mitigated penalty is conditioned upon
payment of any actual loss of duty as well as a release by the party
that indicates that the mitigation decision constitutes full accord and
satisfaction. Further, mitigation decisions are not rulings within the
meaning of part 177 of the Customs Regulations (19 CFR part 177).
Lastly, these guidelines may supplement, and are not intended to
preclude application of, any other special guidelines promulgated by
Customs.
(A) Violations of Section 592
Without regard to whether the United States is or may be deprived of
all or a portion of any lawful duty, tax or fee thereby, a violation of
section 592 occurs when a person, through fraud, gross negligence, or
negligence, enters, introduces, or attempts to enter or introduce any
merchandise into the commerce of the United States by means of any
document, electronic transmission of data or information, written or
oral statement, or act that is material and false, or any omission that
is material; or when a person aids or abets any other person in the
entry, introduction, or attempted entry or introduction of merchandise
by such means. It should be noted that the language ``entry,
introduction, or attempted entry or introduction'' encompasses placing
merchandise
[[Page 295]]
in-bond (e.g., filing an immediate transportation application). There is
no violation if the falsity or omission is due solely to clerical error
or mistake of fact, unless the error or mistake is part of a pattern of
negligent conduct. Also, the unintentional repetition by an electronic
system of an initial clerical error generally will not constitute a
pattern of negligent conduct. Nevertheless, if Customs has drawn the
party's attention to the unintentional repetition by an electronic
system of an initial clerical error, subsequent failure to correct the
error could constitute a violation of section 592. Also, the
unintentional repetition of a clerical mistake over a significant period
of time or involving many entries could indicate a pattern of negligent
conduct and a failure to exercise reasonable care.
(B) Definition of Materiality Under Section 592
A document, statement, act, or omission is material if it has the
natural tendency to influence or is capable of influencing agency action
including, but not limited to a Customs action regarding: (1)
Determination of the classification, appraisement, or admissibility of
merchandise (e.g., whether merchandise is prohibited or restricted); (2)
determination of an importer's liability for duty (including marking,
antidumping, and/or countervailing duty); (3) collection and reporting
of accurate trade statistics; (4) determination as to the source,
origin, or quality of merchandise; (5) determination of whether an
unfair trade practice has been committed under the anti-dumping or
countervailing duty laws or a similar statute; (6) determination of
whether an unfair act has been committed involving patent, trademark, or
copyright infringement; or (7) the determination of whether any other
unfair trade practice has been committed in violation of federal law.
The ``but for'' test of materiality is inapplicable under section 592.
(C) Degrees of Culpability Under Section 592
The three degrees of culpability under section 592 for the purposes
of administrative proceedings are:
(1) Negligence. A violation is determined to be negligent if it
results from an act or acts (of commission or omission) done through
either the failure to exercise the degree of reasonable care and
competence expected from a person in the same circumstances either: (a)
in ascertaining the facts or in drawing inferences therefrom, in
ascertaining the offender's obligations under the statute; or (b) in
communicating information in a manner so that it may be understood by
the recipient. As a general rule, a violation is negligent if it results
from failure to exercise reasonable care and competence: (a) to ensure
that statements made and information provided in connection with the
importation of merchandise are complete and accurate; or (b) to perform
any material act required by statute or regulation.
(2) Gross Negligence. A violation is deemed to be grossly negligent
if it results from an act or acts (of commission or omission) done with
actual knowledge of or wanton disregard for the relevant facts and with
indifference to or disregard for the offender's obligations under the
statute.
(3) Fraud. A violation is determined to be fraudulent if a material
false statement, omission, or act in connection with the transaction was
committed (or omitted) knowingly, i.e., was done voluntarily and
intentionally, as established by clear and convincing evidence.
(D) Discussion of Additional Terms
(1) Duty Loss Violations. A section 592 duty loss violation involves
those cases where there has been a loss of duty including any marking,
anti-dumping, or countervailing duties, or any tax and fee (e.g.,
merchandise processing and/or harbor maintenance fees) attributable to
an alleged violation.
(2) Non-duty Loss Violations. A section 592 non-duty loss violation
involves cases where the record indicates that an alleged violation is
principally attributable to, for example, evasion of a prohibition,
restriction, or other non-duty related consideration involving the
importation of the merchandise.
(3) Actual Loss of Duties. An actual loss of duty occurs where there
is a loss of duty including any marking, anti-dumping, or countervailing
duties, or any tax and fee (e.g., merchandise processing and/or harbor
maintenance fees) attributable to a liquidated Customs entry, and the
merchandise covered by the entry has been entered or introduced (or
attempted to be entered or introduced) in violation of section 592.
(4) Potential Loss of Duties. A potential loss of duty occurs where
an entry remains unliquidated and there is a loss of duty, including any
marking, anti-dumping or countervailing duties or any tax and fee (e.g.,
merchandise processing and/or harbor maintenance fees) attributable to a
violation of section 592, but the violation was discovered prior to
liquidation. In addition, a potential loss of duty exists where Customs
discovers the violation and corrects the entry to reflect liquidation at
the proper classification and value. In other words, the potential loss
in such cases equals the amount of duty, tax and fee that would have
occurred had Customs not discovered the violation prior to liquidation
and taken steps to correct the entry.
(5) Total Loss of Duty. The total loss of duty is the sum of any
actual and potential loss of duty attributable to alleged violations of
section 592 in a particular case. Payment of any actual and/or potential
loss of duty shall not affect or reduce the total loss of duty
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used for assessing penalties as set forth in these guidelines. The
``multiples'' set forth below in paragraph (F)(2) involving assessment
and disposition of cases shall utilize the ``total loss of duty'' amount
in arriving at the appropriate assessment or disposition.
(6) Reasonable Care. General Standard: All parties, including
importers of record or their agents, are required to exercise reasonable
care in fulfilling their responsibilities involving entry of
merchandise. These responsibilities include, but are not limited to:
providing a classification and value for the merchandise; furnishing
information sufficient to permit Customs to determine the final
classification and valuation of merchandise; taking measures that will
lead to and assure the preparation of accurate documentation, and
determining whether any applicable requirements of law with respect to
these issues are met. In addition, all parties, including the importer,
must use reasonable care to provide accurate information or
documentation to enable Customs to determine if the merchandise may be
released. Customs may consider an importer's failure to follow a binding
Customs ruling a lack of reasonable care. In addition, unreasonable
classification will be considered a lack of reasonable care (e.g.,
imported snow skis are classified as water skis). Failure to exercise
reasonable care in connection with the importation of merchandise may
result in imposition of a section 592 penalty for fraud, gross
negligence or negligence.
(7) Clerical Error. A clerical error is an error in the preparation,
assembly or submission of import documentation or information provided
to Customs that results from a mistake in arithmetic or transcription
that is not part of a pattern of negligence. The mere non-intentional
repetition by an electronic system of an initial clerical error does not
constitute a pattern of negligence. Nevertheless, as stated earlier, if
Customs has drawn a party's attention to the non-intentional repetition
by an electronic system of an initial clerical error, subsequent failure
to correct the error could constitute a violation of section 592. Also,
the unintentional repetition of a clerical mistake over a significant
period of time or involving many entries could indicate a pattern of
negligent conduct and a failure to exercise reasonable care.
(8) Mistake of Fact. A mistake of fact is a false statement or
omission that is based on a bona fide erroneous belief as to the facts,
so long as the belief itself did not result from negligence in
ascertaining the accuracy of the facts.
(E) Penalty Assessment
(1) Case Initiation--Pre-penalty Notice.
(a) Generally. As provided in Sec. 162.77, Customs Regulations (19
CFR 162.77), if the appropriate Customs field officer has reasonable
cause to believe that a violation of section 592 has occurred and
determines that further proceedings are warranted, the Customs field
officer will issue to each person concerned a notice of intent to issue
a claim for a monetary penalty (i.e., the ``pre-penalty notice''). In
issuing such a pre-penalty notice, the Customs field officer will make a
tentative determination of the degree of culpability and the amount of
the proposed claim. Payment of any actual and/or potential loss of duty
will not affect or reduce the total loss of duty used for assessing
penalties as set forth in these guidelines. The ``multiples'' set forth
in paragraphs (F)(2)(a)(i), (b)(i) and (c)(i) involving assessment and
disposition of duty loss violation cases will use the amount of total
loss of duty in arriving at the appropriate assessment or disposition.
Further, where separate duty loss and non-duty loss violations occur on
the same entry, it is within the Customs field officer's discretion to
assess both duty loss and non-duty loss penalties, or only one of them.
Where only one of the penalties is assessed, the Customs field officer
has the discretion to select which penalty (duty loss or non-duty loss)
shall be assessed. Also, where there is a violation accompanied by an
incidental or nominal loss of duties, the Customs field officer may
assess a non-duty loss penalty where the incidental or nominal duty loss
resulted from a separate non-duty loss violation. The Customs field
officer will propose a level of culpability in the pre-penalty notice
that conforms to the level of culpability suggested by the evidence at
the time of issuance. Moreover, the pre-penalty notice will include a
statement that it is Customs practice to base its actions on the
earliest point in time that the statute of limitations may be asserted
(i.e., the date of occurrence of the alleged violation) inasmuch as the
final resolution of a case in court may be less than a finding of fraud.
A pre-penalty notice that is issued to a party in a case where Customs
determines a claimed prior disclosure is not valid--owing to the
disclosing party's knowledge of the commencement of a formal
investigation of a disclosed violation--will include a copy of a written
document that evidences the commencement of a formal investigation. In
addition, a pre-penalty notice is not required if a violation involves a
non-commercial importation or if the proposed claim does not exceed
$1,000. Special guidelines relating to penalty assessment and
dispositions involving ``Arriving Travelers,'' are set forth in section
(L) below.
(b) Pre-penalty Notice--Proposed Claim Amount
(i) Fraud. In general, if a violation is determined to be the result
of fraud, the proposed claim ordinarily will be assessed in an amount
equal to the domestic value of the merchandise. Exceptions to assessing
the
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penalty at the domestic value may be warranted in unusual circumstances
such as a case where the domestic value of the merchandise is
disproportionately high in comparison to the loss of duty attributable
to an alleged violation (e.g., a total loss of duty of $10,000 involving
10 entries with a total domestic value of $2,000,000). Also, it is
incumbent upon the appropriate Customs field officer to consider whether
mitigating factors are present warranting a reduction in the customary
domestic value assessment. In all section 592 cases of this nature
regardless of the dollar amount of the proposed claim, the Customs field
officer will obtain the approval of the Penalties Branch at Headquarters
prior to issuance of a pre-penalty notice at an amount less than
domestic value.
(ii) Gross Negligence and Negligence. In determining the amount of
the proposed claim in cases involving gross negligence and negligence,
the appropriate Customs field officer will take into account the gravity
of the offense, the amount of loss of duty, the extent of wrongdoing,
mitigating or aggravating factors, and other factors bearing upon the
seriousness of a violation, but in no case will the assessed penalty
exceed the statutory ceilings prescribed in section 592. In cases
involving gross negligence and negligence, penalties equivalent to the
ceilings stated in paragraphs (F)(2)(b) and (c) regarding disposition of
cases may be appropriate in cases involving serious violations, e.g.,
violations involving a high loss of duty or significant evasion of
import prohibitions or restrictions. A ``serious'' violation need not
result in a loss of duty. The violation may be serious because it
affects the admissibility of merchandise or the enforcement of other
laws, as in the case of quota evasions, false statements made to conceal
the dumping of merchandise, or violations of exclusionary orders of the
International Trade Commission.
(c) Technical Violations. Violations where the loss of duty is
nonexistent or minimal and/or that have an insignificant impact on
enforcement of the laws of the United States may justify a proposed
penalty in a fixed amount not related to the value of merchandise, but
an amount believed sufficient to have a deterrent effect: e.g.,
violations involving the subsequent sale of merchandise or vehicles
entered for personal use; violations involving failure to comply with
declaration or entry requirements that do not change the admissibility
or entry status of merchandise or its appraised value or classification;
violations involving the illegal diversion to domestic use of
instruments of international traffic; and local point-to-point traffic
violations. Generally, a penalty in a fixed amount ranging from $1,000
to $2,000 is appropriate in cases where there are no prior violations of
the same kind. However, fixed sums ranging from $2,000 to $10,000 may be
appropriate in the case of multiple or repeated violations. Fixed sum
penalty amounts are not subject to further mitigation and may not exceed
the maximum amounts stated in section 592 and in these guidelines.
(d) Statute of Limitations Considerations--Waivers. Prior to
issuance of any section 592 pre-penalty notice, the appropriate Customs
field officer will calculate the statute of limitations attributable to
an alleged violation. Inasmuch as section 592 cases are reviewed de novo
by the Court of International Trade, the statute of limitations
calculation in cases alleging fraud should assume a level of culpability
of gross negligence or negligence, i.e., ordinarily applying a shorter
period of time for statute of limitations purposes. In accordance with
section 162.78 of the Customs Regulations (19 CFR 162.78), if less than
1 year remains before the statute of limitations may be raised as a
defense, a shortened response time may be specified in the notice--but
in no case, less than 7 business days from the date of mailing. In cases
of shortened response times, the Customs field officer should notify
alleged violators by telephone and use all reasonable means (e.g.,
facsimile transmission of a copy of the notice) to expedite receipt of
the notice by the alleged violators. Also in such cases, the appropriate
Customs field officer should advise the alleged violator that additional
time to respond to the pre-penalty notice will be granted only if an
acceptable waiver of the statute of limitations is submitted to Customs.
With regard to waivers of the statute of limitations, it is Customs
practice to request waivers concurrently both from all potential alleged
violators and their sureties.
(2) Closure of Case or Issuance of Penalty Notice.
(a) Case Closure. The appropriate Customs field officer may find,
after consideration of the record in the case, including any pre-penalty
response/oral presentation, that issuance of a penalty notice is not
warranted. In such cases, the Customs field officer will provide written
notification to the alleged violator who received the subject pre-
penalty notice that the case is closed.
(b) Issuance of Penalty Notice. In the event that circumstances
warrant issuance of a notice of penalty pursuant to Sec. 162.79 of the
Customs Regulations (19 CFR 162.79), the appropriate Customs field
officer will give consideration to all available evidence with respect
to the existence of material false statements or omissions (including
evidence presented by an alleged violator), the degree of culpability,
the existence of a prior disclosure, the seriousness of the violation,
and the existence of mitigating or aggravating factors. In cases
involving fraud, the penalty notice will be in the amount of the
domestic value of the merchandise unless a lesser amount is
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warranted as described in paragraph (E)(1)(b)(i). In general, the degree
of culpability or proposed penalty amount stated in a pre-penalty notice
will not be increased in the penalty notice. If, subsequent to the
issuance of a pre-penalty notice and upon further review of the record,
the appropriate Customs field officer determines that a higher degree of
culpability exists, the original pre-penalty notice should be rescinded
and a new pre-penalty notice issued that indicates the higher degree of
culpability and increased proposed penalty amount. However, if less than
9 months remain before expiration of the statute of limitations or any
waiver thereof by the party named in the pre-penalty notice, the higher
degree of culpability and higher penalty amount may be indicated in the
notice of penalty without rescinding the earlier pre-penalty notice. In
such cases, the Customs field officer will consider whether a lower
degree of culpability is appropriate or whether to change the
information contained in the pre-penalty notice.
(c) Statute of Limitations Considerations. Prior to issuance of any
section 592 penalty notice, the appropriate Customs field officer again
shall calculate the statute of limitations attributable to the alleged
violation and request a waiver(s) of the statute, if necessary. In
accordance with part 171 of the Customs Regulations (19 CFR part 171),
if less than 180 days remain before the statute of limitations may be
raised as a defense, a shortened response time may be specified in the
notice--but in no case less than 7 business days from the date of
mailing. In such cases, the Customs field officer should notify an
alleged violator by telephone and use all reasonable means (e.g.,
facsimile transmission of a copy) to expedite receipt of the penalty
notice by the alleged violator. Also, in such cases, the Customs field
officer should advise an alleged violator that, if an acceptable waiver
of the statute of limitations is provided, additional time to respond to
the penalty notice may be granted.
(F) Administrative Penalty Disposition
(1) Generally. It is the policy of the Department of the Treasury
and the Customs Service to grant mitigation in appropriate
circumstances. In certain cases, based upon criteria to be developed by
Customs, mitigation may take an alternative form, whereby a violator may
eliminate or reduce his or her section 592 penalty liability by taking
action(s) to correct problems that caused the violation. In any case, in
determining the administrative section 592 penalty disposition, the
appropriate Customs field officer will consider the entire case record--
taking into account the presence of any mitigating or aggravating
factors. All such factors should be set forth in the written
administrative section 592 penalty decision. Once again, Customs
emphasizes that any penalty liability which is mitigated is conditioned
upon payment of any actual loss of duty in addition to that penalty as
well as a release by the party that indicates that the mitigation
decision constitutes full accord and satisfaction. Finally, section 592
penalty dispositions in duty-loss and non-duty-loss cases will proceed
in the manner set forth below.
(2) Dispositions.
(a) Fraudulent Violation. Penalty dispositions for a fraudulent
violation will be calculated as follows:
(i) Duty Loss Violation. An amount ranging from a minimum of 5 times
the total loss of duty to a maximum of 8 times the total loss of duty--
but in any such case the amount may not exceed the domestic value of the
merchandise. A penalty disposition greater than 8 times the total loss
of duty may be imposed in a case involving an egregious violation, or a
public health and safety violation, or due to the presence of
aggravating factors, but again, the amount may not exceed the domestic
value of the merchandise.
(ii) Non-Duty Loss Violation. An amount ranging from a minimum of 50
percent of the dutiable value to a maximum of 80 percent of the dutiable
value of the merchandise. A penalty disposition greater than 80 percent
of the dutiable value may be imposed in a case involving an egregious
violation, or a public health and safety violation, or due to the
presence of aggravating factors, but the amount may not exceed the
domestic value of the merchandise.
(b) Grossly Negligent Violation. Penalty dispositions for a grossly
negligent violation shall be calculated as follows:
(i) Duty Loss Violation. An amount ranging from a minimum of 2.5
times the total loss of duty to a maximum of 4 times the total loss of
duty--but in any such case, the amount may not exceed the domestic value
of the merchandise.
(ii) Non-Duty Loss Violation. An amount ranging from a minimum of 25
percent of the dutiable value to a maximum of 40 percent of the dutiable
value of the merchandise--but in any such case, the amount may not
exceed the domestic value of the merchandise.
(c) Negligent Violation. Penalty dispositions for a negligent
violation shall be calculated as follows:
(i) Duty Loss Violation. An amount ranging from a minimum of 0.5
times the total loss of duty to a maximum of 2 times the total loss of
duty but, in any such case, the amount may not exceed the domestic value
of the merchandise.
(ii) Non-Duty Loss Violation. An amount ranging from a minimum of 5
percent of the dutiable value to a maximum of 20 percent of the dutiable
value of the merchandise, but, in any such case, the amount may not
exceed the domestic value of the merchandise.
[[Page 299]]
(d) Authority to Cancel Claim. Upon issuance of a penalty notice,
Customs has set forth its formal monetary penalty claim. Except as
provided in 19 CFR part 171, in those section 592 cases within the
administrative jurisdiction of the concerned Customs field office, the
appropriate Customs field officer will cancel any such formal claim
whenever it is determined that an essential element of the alleged
violation is not established by the agency record, including pre-penalty
and penalty responses provided by the alleged violator. Except as
provided in 19 CFR part 171, in those section 592 cases within Customs
Headquarters jurisdiction, the appropriate Customs field officer will
cancel any such formal claim whenever it is determined that an essential
element of the alleged violation is not established by the agency
record, and such cancellation action precedes the date of the Customs
field officer's receipt of the alleged violator's petition responding to
the penalty notice. On and after the date of Customs receipt of the
petition responding to the penalty notice, jurisdiction over the action
rests with Customs Headquarters including the authority to cancel the
claim.
(e) Remission of Claim. If the Customs field officer believes that a
claim for monetary penalty should be remitted for a reason not set forth
in these guidelines, the Customs field officer should first seek
approval from the Chief, Penalties Branch, Customs Service Headquarters.
(f) Prior Disclosure Dispositions. It is the policy of the
Department of the Treasury and the Customs Service to encourage the
submission of valid prior disclosures that comport with the laws,
regulations, and policies governing this provision of section 592.
Customs will determine the validity of the prior disclosure including
whether or not the prior disclosure sets forth all the required elements
of a violation of section 592. A valid prior disclosure warrants the
imposition of the reduced Customs civil penalties set forth below:
(1) Fraudulent Violation.
(a) Duty Loss Violation. The claim for monetary penalty shall be
equal to 100 percent of the total loss of duty (i.e., actual +
potential) resulting from the violation. No mitigation will be afforded.
(b) Non-Duty Loss Violation. The claim for monetary penalty shall be
equal to 10 percent of the dutiable value of the merchandise in
question. No mitigation will be afforded.
(2) Gross Negligence and Negligence Violation.
(a) Duty Loss Violation. The claim for monetary penalty shall be
equal to the interest on the actual loss of duty computed from the date
of liquidation to the date of the party's tender of the actual loss of
duty resulting from the violation. Customs notes that there is no
monetary penalty in these cases if the duty loss is potential in nature.
Absent extraordinary circumstances, no mitigation will be afforded.
(b) Non-Duty Loss Violation. There is no monetary penalty in such
cases and any claim for monetary penalty which had been issued prior to
the decision granting prior disclosure will be remitted in full.
(G) Mitigating Factors
The following factors will be considered in mitigation of the
proposed or assessed penalty claim or the amount of the administrative
penalty decision, provided that the case record sufficiently establishes
their existence. The list is not all-inclusive.
(1) Contributory Customs Error. This factor includes misleading or
erroneous advice given by a Customs official in writing to the alleged
violator, or established by a contemporaneously created written Customs
record, only if it appears that the alleged violator reasonably relied
upon the information and the alleged violator fully and accurately
informed Customs of all relevant facts. The concept of comparative
negligence may be utilized in determining the weight to be assigned to
this factor. If it is determined that the Customs error was the sole
cause of the violation, the proposed or assessed penalty claim shall be
canceled. If the Customs error contributed to the violation, but the
violator also is culpable, the Customs error will be considered as a
mitigating factor.
(2) Cooperation with the Investigation. To obtain the benefits of
this factor, the violator must exhibit extraordinary cooperation beyond
that expected from a person under investigation for a Customs violation.
Some examples of the cooperation contemplated include assisting Customs
officers to an unusual degree in auditing the books and records of the
violator (e.g., incurring extraordinary expenses in providing computer
runs solely for submission to Customs to assist the agency in cases
involving an unusually large number of entries and/or complex issues).
Another example consists of assisting Customs in obtaining additional
information relating to the subject violation or other violations.
Merely providing the books and records of the violator should not be
considered cooperation justifying mitigation inasmuch as Customs has the
right to examine an importer's books and records pursuant to 19 U.S.C.
1508-1509.
(3) Immediate Remedial Action. This factor includes the payment of
the actual loss of duty prior to the issuance of a penalty notice and
within 30 days after Customs notifies the alleged violator of the actual
loss of duties attributable to the alleged violation. In appropriate
cases, where the violator provides evidence that immediately after
learning of the violation, substantial remedial action was taken to
correct organizational or procedural defects, immediate remedial action
[[Page 300]]
may be granted as a mitigating factor. Customs encourages immediate
remedial action to ensure against future incidents of non-compliance.
(4) Inexperience in Importing. Inexperience is a factor only if it
contributes to the violation and the violation is not due to fraud or
gross negligence.
(5) Prior Good Record. Prior good record is a factor only if the
alleged violator is able to demonstrate a consistent pattern of
importations without violation of section 592, or any other statute
prohibiting false or fraudulent importation practices. This factor will
not be considered in alleged fraudulent violations of section 592.
(6) Inability to Pay the Customs Penalty. The party claiming the
existence of this factor must present documentary evidence in support
thereof, including copies of income tax returns for the previous 3
years, and an audited financial statement for the most recent fiscal
quarter. In certain cases, Customs may waive the production of an
audited financial statement or may request alternative or additional
financial data in order to facilitate an analysis of a claim of
inability to pay (e.g., examination of the financial records of a
foreign entity related to the U.S. company claiming inability to pay).
(7) Customs Knowledge. Additional relief in non-fraud cases (which
also are not the subject of a criminal investigation) will be granted if
it is determined that Customs had actual knowledge of a violation and,
without justification, failed to inform the violator so that it could
have taken earlier corrective action. In such cases, if a penalty is to
be assessed involving repeated violations of the same kind, the maximum
penalty amount for violations occurring after the date on which actual
knowledge was obtained by Customs will be limited to two times the loss
of duty in duty-loss cases or twenty percent of the dutiable value in
non-duty-loss cases if the continuing violations were the result of
gross negligence, or the lesser of one time the loss of duty in duty-
loss cases or ten percent of dutiable value in non-duty-loss cases if
the violations were the result of negligence. This factor will not be
applicable when a substantial delay in the investigation is attributable
to the alleged violator.
(H) Aggravating Factors
Certain factors may be determined to be aggravating factors in
calculating the amount of the proposed or assessed penalty claim or the
amount of the administrative penalty decision. The presence of one or
more aggravating factors may not be used to raise the level of
culpability attributable to the alleged violations, but may be utilized
to offset the presence of mitigating factors. The following factors will
be considered ``aggravating factors,'' provided that the case record
sufficiently establishes their existence. The list is not exclusive.
(1) Obstructing an investigation or audit,
(2) Withholding evidence,
(3) Providing misleading information concerning the violation,
(4) Prior substantive violations of section 592 for which a final
administrative finding of culpability has been made,
(5) Textile imports that have been the subject of illegal
transshipment (i.e., false country of origin declaration), whether or
not the merchandise bears false country of origin markings,
(6) Evidence of a motive to evade a prohibition or restriction on
the admissibility of the merchandise (e.g., evading a quota
restriction),
(7) Failure to comply with a lawful demand for records or a Customs
summons.
(I) Offers in Compromise (``Settlement Offers'')
Parties who wish to submit a civil offer in compromise pursuant to
19 U.S.C. 1617 (also known as a ``settlement offer'' ) in connection
with any section 592 claim or potential section 592 claim should follow
the procedures outlined in Sec. 161.5 of the Customs Regulations (19 CFR
161.5). Settlement offers do not involve ``mitigation'' of a claim or
potential claim, but rather ``compromise'' an action or potential action
where Customs evaluation of potential litigation risks, or the alleged
violator's financial position, justifies such a disposition. In any case
where a portion of the offered amount represents a tender of unpaid
duties, taxes and fees, Customs letter of acceptance may identify the
portion representing any such duty, tax and fee. The offered amount
should be deposited at the Customs field office responsible for handling
the section 592 claim or potential section 592 claim. The offered amount
will be held in a suspense account pending acceptance or rejection of
the offer in compromise. In the event the offer is rejected, the
concerned Customs field office will promptly initiate a refund of the
money deposited in the suspense account to the offeror.
(J) Section 592(d) Demands
Section 592(d) demands for actual losses of duty ordinarily are
issued in connection with a penalty action, or as a separate demand
without an associated penalty action. In either case, information must
be present establishing a violation of section 592(a). In those cases
where the appropriate Customs field officer determines that issuance of
a penalty under section 592 is not warranted (notwithstanding the
presence of information establishing a violation of section 592(a)), but
that circumstances do warrant issuance of a demand for payment of an
actual loss of duty pursuant to section 592(d), the Customs field
officer shall follow the
[[Page 301]]
procedures set forth in section 162.79b of the Customs Regulations (19
CFR 162.79b). Except in cases where less than one year remains before
the statute of limitations may be raised as a defense, information
copies of all section 592(d) demands should be sent to all concerned
sureties and the importer of record if such party is not an alleged
violator. Also, except in cases where less than one year remains before
the statute of limitations may be raised as a defense, Customs will
endeavor to issue all section 592(d) demands to concerned sureties and
non-violator importers of record only after default by principals.
(K) Customs Brokers
If a customs broker commits a section 592 violation and the
violation involves fraud, or the broker commits a grossly negligent or
negligent violation and shares in the benefits of the violation to an
extent over and above customary brokerage fees, the customs broker will
be subject to these guidelines. However, if the customs broker commits
either a grossly negligent or negligent violation of section 592
(without sharing in the benefits of the violation as described above),
the concerned Customs field officer may proceed against the customs
broker pursuant to the remedies provided under 19 U.S.C. 1641.
(L) Arriving Travelers
(1) Liability. Except as set forth below, proposed and assessed
penalties for violations by an arriving traveler must be determined in
accordance with these guidelines.
(2) Limitations on Liability on Non-commercial Violations. In the
absence of a referral for criminal prosecution, monetary penalties
assessed in the case of an alleged first-offense, non-commercial,
fraudulent violation by an arriving traveler will generally be limited
as follows:
(a) Fraud--Duty Loss Violation. An amount ranging from a minimum of
three times the loss of duty to a maximum of five times the loss of
duty, provided the loss of duty is also paid;
(b) Fraud--Non-duty Loss Violation. An amount ranging from a minimum
of 30 percent of the dutiable value of the merchandise to a maximum of
50 percent of its dutiable value;
(c) Gross Negligence--Duty Loss Violation. An amount ranging from a
minimum of 1.5 times the loss of duty to a maximum of 2.5 times the loss
of duty provided the loss of duty is also paid;
(d) Gross Negligence--Non-duty Loss Violation. An amount ranging
from a minimum of 15 percent of the dutiable value of the merchandise to
a maximum of 25 percent of its dutiable value;
(e) Negligence--Duty Loss Violation. An amount ranging from a
minimum of .25 times the loss of duty to a maximum of 1.25 times the
loss of duty provided that the loss of duty is also paid;
(f) Negligence--Non-duty Loss Violation. An amount ranging from a
minimum of 2.5 percent of the dutiable value of the merchandise to a
maximum of 12.5 percent of its dutiable value;
(g) Special Assessments/Dispositions. No penalty action under
section 592 will be initiated against an arriving traveler if the
violation is not fraudulent or commercial, the loss of duty is $100.00
or less, and there are no other concurrent or prior violations of
section 592 or other statutes prohibiting false or fraudulent
importation practices. However, all lawful duties, taxes and fees will
be collected. Also, no penalty under section 592 will be initiated
against an arriving traveler if the violation is not fraudulent or
commercial, there are no other concurrent or prior violations of section
592, and a penalty is not believed necessary to deter future violations
or to serve a law enforcement purpose.
(M) Violations of Laws Administered by Other Federal Agencies.
Violations of laws administered by other federal agencies (such as
the Food and Drug Administration, Consumer Product Safety Commission,
Office of Foreign Assets Control, Department of Agriculture, Fish and
Wildlife Service) should be referred to the appropriate agency for its
recommendation. Such recommendation, if promptly tendered, will be given
due consideration, and may be followed provided the recommendation would
not result in a disposition inconsistent with these guidelines.
(N) Section 592 Violations by Small Entities
In compliance with the mandate of the Small Business Regulatory
Enforcement Fairness Act of 1996, under appropriate circumstances, the
issuance of a penalty under section 592 may be waived for businesses
qualifying as small business entities.
Procedures established for small business entities regarding
violations of 19 U.S.C. 1592 were published as Treasury Decision 97-46
in the Federal Register (62 FR 30378) on June 3, 1997.
[T.D. 00-41, 65 FR 39093, June 23, 2000]
Appendix C to Part 171--Customs Regulations Guidelines for the
Imposition and Mitigation of Penalties for Violations of 19 U.S.C. 1641
The Trade and Tariff Act of 1984 promulgated numerous changes to the
current statute relating to Customs brokers. The following document
attempts to define that conduct which is to be proscribed and to suggest
penalty amounts to be assessed for such
[[Page 302]]
violations. It also chronicles procedures to be followed in assessment
and mitigation of penalties.
Note: Assessment of a monetary penalty is an alternative sanction to
revocation or suspension of the broker's license or permit.
I. Penalty Assessment Procedures--19 CFR Part 111, Subpart E
A. When a penalty against a broker is contemplated, the
``appropriate Customs officer'', (i.e., the Fines, Penalties, and
Forfeitures Officer) shall issue a written notice which advises the
violator of the allegations which would warrant imposition of a penalty.
The written notice shall be in a format similar to a prepenalty notice
that would be issued in contemplation of assessment of a penalty under
section 1592 or 1584.
B. The written notice shall inform the violator that he has 30 days
to respond as to why a penalty should not be issued. See 19 CFR 111.92.
C. If no response is received from the violator, or, if after
receipt of the response, it is determined that the penalty should be
issued as stated in the prepenalty notice, a notice of penalty CF-5955A
shall be issued formally assessing a monetary penalty against the
broker.
D. The Fines, Penalties, and Forfeitures Officer may reduce the
amount of the contemplated penalty or cancel its issuance altogether if,
after review of the violator's submission in response to the prepenalty
notice, he is satisfied that the acts which are the basis for the
penalty did not occur as charged or occurred in a manner that would
permit a reduction in the contemplated penalty.
E. After issuance of a penalty notice, the petitioning provisions of
part 171 of the Customs Regulations are in effect.
F. If the broker does not comply with a final mitigation decision
within 60 days, the matter shall be referred to the Department of
Justice for commencement of judicial action.
II. Penalty Assessment--Conducting Customs Business Without a License
(19 U.S.C. 1641(b)(6))
A. No person may conduct Customs business, other than solely on
behalf of that person, without a broker's license.
B. Penalty amount:
1. The maximum penalty for any one incident of conducting Customs
business without a license is $10,000.
2. Total aggregate penalties for violation of this or any other
section of the broker penalty statute is $30,000. As a general rule,
$10,000 will be the maximum assessment for a violation solely involving
conducting Customs business without a license, without regard to the
frequency of violations. In particularly aggravated circumstances, this
rule shall be suspended.
C. Customs business includes:
1. Classification and valuation.
2. Payment of duties, taxes or other charges.
3. Drawback or refund of duties.
4. Filing of entries or other documents relating to issues covered
by 1-3.
D. Customs business does not include:
1. Marine transactions.
2. In-bond movement or transportation of merchandise.
3. Foreign Trade Zone admissions. See C.S.D. 84-23.
E. Penalty amounts to be imposed for transacting Customs business
without a license are as follows:
1. No penalty action when importation is conducted on behalf of a
family member. For purposes of this subsection, ``family member'' is
defined as a parent, child, spouse, sibling, grandparent or grandchild.
2. No penalty action against an individual who has a power of
attorney to act as an unpaid agent on a non-commercial shipment. See 19
CFR 141.33.
3. A $250 penalty for:
a. First violation when transaction is non-commercial but is
conducted on behalf of any business entity, or
b. First violation where the importation is commercial in nature
(i.e., imported merchandise is for resale) or where the violator is
compensated for his action, e.g., an importation of raw material or
parts of merchandise that is to be manufactured, refined or assembled
here before resale would be a commercial entry because the merchandise
eventually would be resold, albeit in another form than that which it
was entered.
4. A $1,000 penalty for repeat violation involving:
a. Commercial importation.
b. Non-commercial importation made on behalf of a business entity.
c. Non-commercial importation for which compensation is received by
the violator.
5. A $10,000 penalty when:
a. Violator falsely holds himself out as being a licensed Customs
broker.
b. A continuing course of conduct can be shown (determined by
frequency of violations or number of entries involved) which would
indicate that the violator is entering merchandise for others on a
regular commercial basis, e.g., if the violator has incurred numerous
penalties under subsections (3) and (4) above, but the smaller penalties
have had no deterrent effect, the $10,000 penalty under this subsection
should be assessed in an action separate from those smaller penalties.
F. Mitigation--No mitigation will be afforded for any violation
involving conducting Customs business without a license unless the
violator can show an inability to pay such penalty.
[[Page 303]]
G. IMPORTANT: As a general rule, a separate penalty should not be
imposed for each unlawful Customs business transaction if numerous
transactions occur contemporaneously. For example:
1. If an unlicensed individual files six commercial entries at one
time, that should be treated as one violation. It should not be treated
as six violations because the entries were presented contemporaneously.
2. If Customs discovers that an individual has conducted Customs
business without a license on numerous occasions, but such individual
acted without knowledge of the prohibition on such conduct, those
numerous transactions should be treated as one violation for purposes of
imposition of any penalty.
H. Note: Conducting Customs business without a license is not the
same violation as conducting Customs business without a permit. The
latter violation is discussed later in this appendix in the section
involving Violation of Other Laws or Regulations Enforced by Customs.
I. Intent to violate the law is not an element of this violation.
Reference to ``intentionally transacts Customs business'' in subsection
1641(b)(6) relates to the intentional transaction of the business
itself, not to any intentional attempt to violate the terms of the
statute.
III. Section 1641(d)(1)(A)--Making a False or Misleading Statement or an
Omission as to Material Fact Which Was Required To Be Stated in Any
Application for a License or Permit
A. If the license would not have been issued but for the false
statement, the proper sanction would be suspension or revocation of the
license. If the false or misleading statement would not have absolutely
resulted in the denial, revocation or suspension of a license, then
penalty sanctions are proper.
B. Material facts include but are not limited to:
1. Facts as to identity.
2. Facts as to citizenship status of an individual.
3. Facts as to moral character of an individual which relate to his
fitness to conduct Customs business.
4. The organization of any corporation, association or partnership.
5. The status of the license of a license holder who is a corporate
officer or partner.
C. Penalty Amount--$5,000 for each false statement, to a maximum of
$30,000.
D. Examples of situations where revocation of the license is
appropriate.
1. An applicant states that he is 21 years old (as required by 19
CFR 111.11) and he is not. But for the false statement, the applicant
could not meet the age requirement for a license.
2. An applicant provides an alias in the application which is a
material false statement as to identity.
E. Mitigation guidelines.
1. Violation due to clerical error (clerical error as defined by 19
U.S.C. 1520(c)(1)), mitigated without payment.
2. Violation due to negligence.
a. This is defined as more than clerical error, but not an
intentional violation. Examples include:
i. Failing to list a new corporate office because corporate records
have not been kept current.
ii. Listing an incorrect address for a reference because applicant
has failed to update his records.
b. Mitigate to $500 for each $5,000 penalty assessed.
c. This category excludes cases of harmless error, i.e., a mistake
which could not possibly harm the government's interests. Cases falling
in this category should be mitigated in full.
3. Intentional violations--Revocation of a license which has been
granted is the preferred sanction. If no license has been granted, no
mitigation.
IV. Section 1641(d)(1)(B)--Broker Convicted of Certain Felonies or
Misdemeanors Subsequent To Filing License Application
A. As a general rule, license revocation is the standard sanction
for these violations. If the conviction occurs subsequent to the filing
of an application, monetary penalties may be assessed according to the
following criteria.
B. Unlawful conduct must relate to:
1. Importation or exportation of merchandise.
2. Conduct of Customs business (this shall include violations
relating to taxes and duties and documents required to be filed with
regard to such taxes and duties).
3. Relevant convictions would include:
a. 18 U.S.C. 1001--making a false statement to Customs or any other
agency with regard to any relevant transaction.
b. 18 U.S.C. 545--unlawful importation of merchandise.
c. 18 U.S.C. 542--unlawful importation by means of a fraudulent act
or omission.
d. 22 U.S.C. 2778--illegal exportation of munitions.
C. Monetary penalties may not be imposed in connection with
convictions relating to conduct described in subsection
1641(d)(1)(B)(iii) including larceny, theft, robbery, extortion,
counterfeiting, fraudulent concealment or conversion, embezzlement or
misappropriation of funds. Either suspension or revocation is the
appropriate penalty for these infractions.
D. Penalty amounts.
1. $15,000 for a misdemeanor conviction.
[[Page 304]]
2. $30,000 for a felony conviction.
E. Mitigation.
1. For a misdemeanor conviction, mitigation to a lesser amount is
permitted if the conviction related to Customs business and the domestic
value of the merchandise involved is less than $15,000. In such case,
mitigation to an amount equal to the domestic value of the merchandise
is appropriate.
2. For other misdemeanor convictions, no relief.
3. Felony convictions, no relief.
V. Section 1641(d)(1)(C)--Violation of Any Law Enforced by the Customs
Service or the Rules or Regulations Issued Under Any Such Provision
A. Penalties under this section may be imposed in addition to any
penalty provided for under the law enforced by Customs. Exception:
Penalties imposed against a broker under 19 U.S.C. 1592 at a culpability
level of less than fraud or under 19 U.S.C. 1595a(b) shall not be
imposed in addition to a broker's penalty.
B. Additional penalties under this section shall also be imposed
against any broker where the other statute violated only moves against
property, or the violator has demonstrated a continuing course of
illegal conduct or evidence exists which indicates repeated violations
of other statutes or regulations.
C. Conducting Customs business without a permit penalties should be
assessed under this section.
1. The penalty notice should also cite 19 CFR 111.19 as the
regulation violated. A party operating without a permit is required to
apply for one under the above-noted regulation.
2. Assessment amount--$1,000 per transaction conducted without a
permit.
3. Mitigation.
a. Negligence, mitigate to $250-$500 per transaction depending on
the presence of mitigating factors (lack of knowledge of permit
requirement).
b. Intentional, grant no relief.
c. No mitigation if permit revoked by operation of law.
4. Generally, a separate penalty should not be assessed for each
non-permitted transaction if numerous transactions occurred
contemporaneously. For example, if a broker files 30 entries the day
after a permit expires, the 30 filings should be treated as one
violation, not 30 separate violations.
D. Penalties for failure to exercise due diligence in payment,
refund or deposit of monies received from clients in connection with
clients' Customs business also should be assessed under this section.
This includes failure to pay over to a client, or file a written
statement to a client accounting for, funds received.
1. The penalty notice should also cite 19 CFR 111.29 as the
regulation violated.
2. Assessment amount--an amount equal to the value of any monies up
to a maximum of $30,000, to be deposited with Customs or refunded or
accounted for to a client.
3. No mitigation shall be afforded until the monies are properly
paid to Customs or refunded or accounted for to the clients.
4. If any claims for liquidated damages result against the client's
bond from the failure to pay monies to Customs, no mitigation from the
penalty shall be granted until the claim for liquidated damages is
settled by the violating broker either through payment of the full claim
or a mitigated amount.
5. After monies are paid or accounted for and/or liquidated damages
claims are settled as stated in 3. and 4. above, mitigation may be
afforded. If the violator is found to be negligent, the penalty may be
mitigated to an amount between 25 and 50 percent of the assessed amount,
but no lower than $250. No mitigation from an intentional violation.
E. Penalties for failure to retain powers of attorney from clients
to act in their names.
1. The penalty notice should also cite 19 CFR 141.46 as the
regulation violated.
2. Assessment amount--$1,000 for each power of attorney not on file.
3. Mitigation--for a first offense, mitigate to an amount between
$250 and $500 unless extraordinary mitigating factors are present, in
which case full mitigation should be afforded. An extraordinary
mitigating factor would be a fire, theft or other destruction of records
beyond broker control. Subsequent offenses--no mitigation unless
extraordinary mitigating factors are present.
4. Penalty should be mitigated in full if it can be established that
a valid power of attorney had been issued to the broker, but it was
misplaced or destroyed through clerical error or mistake.
F. If the other statute violated moves only against property, the
violator shall incur a monetary penalty equal to the domestic value of
such property or $30,000, whichever is less.
e.g., Violation of 22 U.S.C. 401 for unlawful exportation of merchandise
results in seizure and forfeiture of the violative merchandise. There
are no penalty provisions which Customs enforces against parties
responsible for the seizable offense. If brokers are recalcitrant and
are constantly responsible for offenses which result in seizure of
merchandise, a penalty equal to the domestic value of such merchandise
(in no case to exceed $30,000) should be imposed.
G. Use of a broker's importation bond to aid an importer who has had
his immediate delivery privileges revoked.
1. The broker has aided his client in avoiding the immediate
delivery sanctions. The penalty notice should cite 19 CFR 142.25(c) as
the regulation violated. Before assessment of
[[Page 305]]
this penalty, the broker should be shown to have known or been negligent
in not knowing of the client's sanction.
2. A penalty equal to the value of the merchandise, not to exceed
$30,000, should be assessed.
3. Mitigation--The penalty shall be mitigated to an amount between
25 and 50 percent of that assessed for a first violation where
negligence is shown. Any knowing violation or a subsequent negligent
violation (not necessarily involving the same client) will result in no
mitigation.
H. If the other statute violated provides for a personal penalty,
the violator shall incur an additional monetary penalty under this
section equal to such personal penalty or $30,000, whichever is less.
I. Penalties assessed under this provision are not limited to
violations just involving Customs business as defined in the statute.
J. Mitigation guidelines.
1. If the other law violated moves only against property, mitigate
the penalty using guidelines in effect for the other statute violated.
For example, if the broker is responsible for a 401 seizure of
merchandise valued at $45,000, he incurs a penalty of $30,000. The
guidelines for remission of the 401 forfeiture are applicable to
mitigation of the broker penalty. Thus, if the forfeiture is remitted
upon payment of 5 percent of the merchandise's value, the penalty will
be mitigated upon payment of a like amount.
2. If the other law violated provides for a personal penalty,
mitigate the broker penalty using guidelines in effect for the other
statute violated.
For example, a broker incurs a $40,000 penalty under 1592. The penalty
amount represents eight times the loss of revenue because a preliminary
finding of fraud is made (see section V.A. of this appendix). A penalty
of $30,000, in addition to the $40,000 penalty issued under 1592, may be
assessed. The 1592 penalty is later mitigated to $25,000, an amount
equal to five times the loss of revenue, as the finding of fraud is
upheld and it is also determined that the broker shared in the financial
benefits of the violation. The broker penalty also should be mitigated
to that $25,000 figure, for a total collection of $50,000.
VI. Section 1641(d)(1)(D)--Counseling, Commanding, Inducing, Procuring
or Knowingly Aiding and Abetting Violations by Any Other Person of Any
Law Enforced by the Customs Service
A. If the law violated by another moves only against property, a
monetary penalty equal to the domestic value of such property or $30,000
whichever is less, may be imposed against the broker who counsels,
commands or knowingly aids and abets such violation.
B. If the law violated provides for only a personal penalty against
the actual violator, a penalty may be imposed against the broker in an
amount equal to that assessed against the violator, but in no case can
the penalty exceed $30,000.
C. If the broker is assessed a penalty under the statute violated by
the other person, he may be assessed a penalty under this section in
addition to any other penalties.
D. Examples of violations of this subsection:
1. A broker counsels a client that certain gemstones are absolutely
free of duty and need not be declared upon entry into the United States.
The client arrives in the United States and fails to declare a quantity
of gemstones worth $45,000. A penalty of $30,000 may be imposed against
the broker for such counseling. The client would incur a personal
penalty of $45,000 under the provisions of title 19, United States Code,
section 1497, but the penalty against the broker cannot exceed $30,000.
2. A client imports $15,000 worth of merchandise by vessel. The
merchandise is unladen at the wharf but Customs has not appraised or
released it. Customs informs the broker that the shipment must be held
for an intensive examination. The broker informs the client that the
merchandise can be moved and delivered to the consignee. The broker
assures his client that he will handle all the necessary paperwork. The
merchandise is moved from the wharf. The broker is subject to a $15,000
penalty for counseling and inducing his client to violate the provisions
of title 19, United States Code, section 1448 and title 19, United
States Code, section 1595a(b).
E. Mitigation--Follow guidelines applicable to the other penalty or
forfeiture statute involved.
VII. Section 1641(d)(1)(E)--Knowingly Employing or Continuing to Employ
Any Person Who Has Been Convicted of a Felony, Without Written Approval
of Such Employment From the Secretary of the Treasury
A. A broker has 30 days to seek approval of the Secretary for such
employment. If he seeks the approval within such time, no penalty will
be assessed.
B. A $5,000 penalty for knowingly employing any convicted felon and
failing to make application with the Secretary approving such employment
within 30 days of the date of discovery of the felony conviction.
C. A $25,000 penalty for knowingly employing any convicted felon
without seeking approval for employment.
D. A $30,000 penalty for knowingly employing any convicted felon and
continuing to employ same after approval has been denied
[[Page 306]]
(generally revocation or suspension of the license would be appropriate
under this circumstance).
E. Example: If a broker unknowingly employs a convicted felon and 1
year after employment discovers the existence of such a conviction, the
following actions would dictate imposition of a penalty:
1. If he seeks approval of the Secretary within 30 days after
discovery of the existence of the conviction, no penalty will be
assessed.
2. If he seeks approval at some time after 30 days from the date of
discovery, a $5,000 penalty would lie.
3. If he does not seek approval until after Customs becomes aware of
the violation, a $25,000 penalty would lie.
4. If he seeks approval, but is denied, and continues to employ the
convicted felon, a $30,000 penalty would lie.
F. Customs discovery of a felony conviction. If Customs discovers
the felony conviction and there is no indication that the employer is
aware of same, Customs may inform the employer of such conviction.
Discretion should be used in divulging this information.
G. Mitigation will only be permitted from the $5,000 penalty as
follows:
1. If the application for approval is submitted within 60 days, but
after 30 days, mitigate to $2,000.
2. If there is no application beyond the 60-day period, no
mitigation shall be granted. Continued employment will result in further
penalties as described above in sections E.3 and E.4.
VIII. Section 1641(d)(1)(F)--In the Course of Customs Business, With
Intent to Defraud, Knowingly Deceiving, Misleading or Threatening Any
Client or Prospective Client
A. An unsubstantiated accusation by a client is inadequate basis to
assess any penalty under this section of law.
B. A $30,000 penalty should be imposed for any violation of this
section.
C. Mitigation--Inasmuch as evidence of intent must be shown before a
penalty can be imposed, no mitigation should be permitted if a violation
is found to lie. A petition for mitigation could be entertained only on
the issue of whether such violation did, in fact, occur.
IX. Section 1641(b)(5)--The Failure of a Customs Broker That is Licensed
as a Corporation, Association or Partnership to Have, For Any Continuous
Period of 120 Days, at Least One Officer of the Corporation or
Association or One Member of the Partnership Validly Licensed
A. Important: Violation of this section results in the revocation of
the broker's license by operation of law.
B. A $10,000 penalty may be imposed pursuant to section 1641(b)(6)
because the revocation by operation of law results in the broker
conducting Customs business without a license. No penalty liability
would be incurred specifically under section 1641(b)(5).
C. Mitigation--Grant no mitigation from any penalty incurred by a
broker for conducting Customs business without a license as a result of
revocation of that license by operation of law.
X. Section 1641(c)(3)--Failure of a Customs Broker Granted a Permit to
Conduct Business in a Certain District to Employ, for a Continuous
Period of 180 Days, at Least One Individual Who is Licensed Within the
District or Region
A. Important: Violation of this section results in the revocation of
a permit by operation of law.
B. Penalties may be imposed for violation of the provisions of
1641(d)(1)(C), violation of other laws enforced by Customs. Guidelines
for imposition of penalties for conducting Customs business without a
permit should be followed.
C. Mitigation--No mitigation should be permitted from any penalty
imposed for failure to have a permit when the permit lapses by operation
of law.
XI. Section 1641(b)(4)--Failure of a Licensed Broker to Exercise
Responsible Supervision and Control Over the Customs Business That it
Conducts
A. Standards of responsible supervision and control shall be issued
by the Commissioner of Customs. Statutory authority to set such
standards is provided by section 1641(f).
Note: All penalties assessed for violation of 1641(b)(4) shall also
cite section 1641(d)(1)(C) as the statute violated in all notices issued
to the alleged violator.
B. The following penalty amounts shall be assessed against brokers
who fail to exercise
[[Page 307]]
responsible supervision and control over business conducted at district
level.
1. A penalty of $1,000 against any broker who:
a. Continuously makes the same errors on a particular type of entry;
b. Fails to properly instruct employees about Customs business,
thereby resulting in the filing of incorrect entries or the mishandling
of transactions relating to Customs business;
c. Knowingly allows his entry bond to be used to effect release of
merchandise in districts where he does not have a license or permit
(this is imposed in addition to any penalty for conducting Customs
business without a license);
d. Fails to comply with regulations or procedures but does not
commit violations that would warrant any higher penalty amount as
described below.
2. A penalty of $5,000 against any broker who, when requested, is
unable to produce documents relating to specific Customs business which
are material to that business (e.g., if the business regards an entry he
should have the invoice, packing list, etc.). This requirement excludes
documents not required to be kept by a broker.
3. A penalty of $5,000 against any broker who is unable to satisfy
the deciding Customs official that he has a working knowledge of any
operation material to his ability to render valuable service to others
in the conduct of Customs business.
Examples include:
a. A working knowledge of all automated systems in use in the
district;
b. A knowledge of the cash flow procedures in each district of
operation;
c. Retention of copies of all surety bonds in proper form and in
sufficient dollar amount;
d. Knowledge of filing systems and document record storage in each
district;
e. Continuous monitoring to ensure timely payment of all obligations
including duties, taxes and refunds.
4. A penalty of $5,000 against any broker who fails to exercise
responsible supervision and control over the Customs business that it
conducts as defined in section XI.C. of this appendix.
5. A penalty of $10,000 against any broker who is found to have
failed to maintain satisfactory accounting records or records of
documents filed with Customs on any matter.
C. The following factors shall be indicative of a lack of
supervision or lack of working knowledge of Customs procedures (the list
is not conclusive):
1. A high rate of entry rejections when compared with other brokers
in the permitted district.
2. A high rate of late filing liquidated damages cases when compared
with other brokers in the permitted district.
3. In the case of entry summaries filed in the broker's name, a high
number of missing document cases when compared with other brokers in the
permitted district.
4. An inordinate number of entries for which free entry is claimed,
but no documentation supporting such claim is submitted, resulting in
liquidation of the entries as dutiable.
5. Inability to assist or failure to cooperate with an audit,
including failure to provide all records and any other necessary
information pertaining to a broker's Customs business to assist
auditors.
6. Failure to settle (including petitioning) liquidated damages
claims in a timely manner.
7. Evidence to indicate that timely duty refunds to clients are not
made or accounted for and adequate records of same are not kept (usually
will result in penalty assessed in accordance with section B.5. above).
8. Employing a licensed individual for a minimal number of days each
120- or 180-day period (see sections 1641(b)(5) and 1641(c)(3) so as to
avoid violation of the statute.
a. For purposes of imposition of penalties under this subsection, a
minimal number of days shall be 10 working days for each 120-day period
or 15 working days for each 180-day period.
b. It shall be presumed that temporary employment of such a licensed
individual is undertaken solely to avoid revocation of a license or
permit. Such minimal employment shall be prima facie evidence of lack of
supervision.
D. Mitigation.
1. $1,000 penalties shall not be mitigated unless the broker can
show that extraordinary mitigating factors are present.
2. $5,000 penalties for failure to produce documents may be
mitigated to an amount between $2,000 and $3,500 if the documents are
produced but not in a timely fashion. No mitigation shall be afforded if
the documents are not produced, unless the broker can satisfactorily
demonstrate that such failure to produce was caused by circumstances
beyond the control of the broker or his client (e.g., a rupture of
relations with the party responsible for generating the documents). Full
mitigation shall be afforded in the case of destruction of records by
events beyond a broker's control, such as theft, flood, fire or other
acts of God.
3. $5,000 penalty for failure to have a working knowledge of any
operation for which a broker is licensed to do business may be mitigated
to a lesser amount upon a showing by the broker that steps have been
taken to improve instruction and supervision of employees and an
improvement in the knowledge of his operation occurs.
4. $5,000 penalty for failure to exercise responsible supervision
and control may be mitigated to a lesser amount if the broker
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immediately corrects the problem which was the basis for the assessment
and sufficiently monitors the situation to avoid recurrence.
5. $10,000 penalty for failure to maintain satisfactory accounting
records will only be subject to mitigation in full if the broker can
prove that satisfactory accounting records and documents records are
being kept. Mitigation in a lesser degree may be afforded upon a showing
by the broker that a bona fide attempt was made to establish a
satisfactory accounting and/or recordkeeping system, or upgrade a
deficient system, but such efforts proved unsuccessful or only partially
effective.
6. Penalty equal to the value of monies not properly paid or
accounted for.
a. If the broker shows that the monies were paid or accounted for
and requisite notifications were made, albeit in an untimely fashion not
to exceed 30 days after any due date, the penalty may be mitigated upon
payment of 25 percent of the assessed amount, but no less than $250.
b. If the monies were paid and notifications made more than 30 days
after any due date, the penalty may be mitigated upon payment of 50
percent of the assessed amount, but not less than $1,000.
c. If there is no proof of proper payment of duties, refunds, etc.,
no mitigation shall be granted.
XII. Limits of Penalty Assessments
A. A broker shall be penalized a maximum of $30,000 for any
violation or violations of the statute in any one penalty notice.
B. If a broker is penalized to the maximum the statue will allow and
continues to commit the same violation or violations, revocation or
suspension of his license would be the appropriate sanction. Barring
such revocation or suspension action, he may again be penalized to the
maximum the statute will allow.
C. From any one audit, the maximum aggregate penalty for all
violations discovered is $30,000.
XIII. Consolidation of Cases
Whenever multiple penalties arising from a particular fact situation
or pattern are contemplated against brokers or individuals operating in
different districts, the cases may be consolidated in one district.
Approval for consolidation must be sought from the Brokers Compliance
Branch, Office of Trade Compliance at Headquarters.
[T.D. 90-20, 55 FR 10056, Mar. 19, 1990, as amended by T.D. 97-82, 62 FR
51771, Oct. 3, 1997; T.D. 99-27, 64 FR 13676, Mar. 22, 1999; T.D. 00-57,
65 FR 53578, Sept. 5, 2000; 65 FR 65770, Nov. 2, 2000]
Appendix D to Part 171--Guidelines for the Imposition and Mitigation of
Penalties for Violations of 19 U.S.C. 1593a
A monetary penalty incurred under section 593A, Tariff Act of 1930,
as amended (19 U.S.C. 1593a; hereinafter referred to as section 593A),
may be remitted or mitigated under section 618, Tariff Act of 1930, as
amended (19 U.S.C. 1618; hereinafter referred to as section 618), if it
is determined that there exist such mitigating circumstances as to
justify remission or mitigation. The guidelines below will be used by
Customs in arriving at a just and reasonable assessment and disposition
of liabilities arising under section 593A within the stated limitations.
It is intended that these guidelines will be applied by Customs officers
in prepenalty proceedings, in determining the monetary penalty assessed
in the penalty notice, and in arriving at a final penalty disposition.
The assessed or mitigated penalty amount set forth in Customs
administrative disposition determined in accordance with these
guidelines does not limit the penalty amount which the Government may
seek in bringing a civil enforcement action pursuant to 19 U.S.C.
1593a(i).
(A) Violations of Section 593A
A violation of section 593A occurs when a person, through fraud or
negligence, seeks, induces, or affects, or attempts to seek, induce, or
affect, the payment or credit to that person or others of any drawback
claim by means of any document, written or oral statement, or
electronically transmitted data or information, or act which is material
and false, or any omission which is material, or aids or abets any other
person in the foregoing violation. There is no violation if the falsity
is due solely to clerical error or mistake of fact unless the error or
mistake is part of a pattern of negligent conduct. Also, the mere
nonintentional repetition by an electronic system of an initial clerical
error will not constitute a pattern of negligent conduct. Nevertheless,
if Customs has drawn the person's attention to the nonintentional
repetition by an electronic system of an initial clerical error,
subsequent failure to correct the error could constitute a violation of
section 593A.
(B) Degrees of Culpability
There are two degrees of culpability under section 593A: negligence
and fraud.
(1) Negligence. A violation is determined to be negligent if it
results from an act or acts (of commission or omission) done with actual
knowledge of, or wanton disregard for, the relevant facts and with
indifference to, or disregard for, the offender's obligations under the
statute or done through the failure
[[Page 309]]
to exercise the degree of reasonable care and competence expected from a
person in the same circumstances in ascertaining the facts or in drawing
inferences from those facts, in ascertaining the offender's obligations
under the statute, or in communicating information so that it may be
understood by the recipient. As a general rule, a violation is
determined to be negligent if it results from the offender's failure to
exercise reasonable care and competence to ensure that a statement made
is correct.
(2) Fraud. A violation is determined to be fraudulent if the
material false statement, omission or act in connection with the
transaction was committed (or omitted) knowingly, i.e., was done
voluntarily and intentionally, as established by clear and convincing
evidence.
(C) Assessment of Penalties
(1) Issuance of Prepenalty Notice. As provided in Sec. 162.77a of
the Customs Regulations (19 CFR 162.77a), if Customs has reasonable
cause to believe that a violation of section 593A has occurred and
determines that further proceedings are warranted, a notice of intent to
issue a claim for a monetary penalty will be issued to the person
concerned. In issuing such prepenalty notice, the appropriate Customs
field officer will make a tentative determination of the degree of
culpability and the amount of the proposed claim. A prepenalty notice
will not be issued if the claim does not exceed $1,000.
(2) Issuance of Penalty Notice. After considering representations,
if any, made by the person concerned pursuant to the notice issued under
paragraph (C)(1), the appropriate Customs field officer will determine
whether any violation described in section (A) has occurred. If a notice
was issued under paragraph (C)(1) and the appropriate Customs field
officer determines that there was no violation, Customs will promptly
issue a written statement of the determination to the person to whom the
notice was sent. If the appropriate Customs field officer determines
that there was a violation, Customs will issue a written penalty claim
to the person concerned. The written penalty claim will specify all
changes in the information provided in the prepenalty notice issued
under paragraph (C)(1). The person to whom the penalty notice is issued
will have a reasonable opportunity under section 618 to make
representations, both oral and written, seeking remission or mitigation
of the monetary penalty. At the conclusion of any proceeding under
section 618, Customs will provide to the person concerned a written
statement which sets forth the final determination and the findings of
fact and conclusions of law on which such determination is based.
(D) Maximum Penalties
(1) Fraud. In the case of a fraudulent violation of section 593A,
the monetary penalty will be in an amount not to exceed 3 times the
actual or potential loss of revenue.
(2) Negligence.
(a) In General. In the case of a negligent violation of section
593A, the monetary penalty will be in an amount not to exceed 20 percent
of the actual or potential loss of revenue for the first violation.
(b) Repetitive Violations. For the first negligent violation that is
repetitive (i.e., involves the same issue and the same violator), the
penalty will be in an amount not to exceed 50 percent of the actual or
potential loss of revenue. The penalty for a second and each subsequent
repetitive negligent violation will be in an amount not to exceed the
actual or potential loss of revenue.
(3) Prior Disclosure.
(a) In General. Subject to paragraph (D)(3)(b), if the person
concerned discloses the circumstances of a violation of section 593A
before, or without knowledge of the commencement of, a formal
investigation of such violation, the monetary penalty assessed under
this Appendix will not exceed:
(i) In the case of fraud, an amount equal to the actual or potential
revenue of which the United States is or may be deprived as a result of
overpayment of the claim; or
(ii) If the violation resulted from negligence, an amount equal to
the interest computed on the basis of the prevailing rate of interest
applied under 26 U.S.C. 6621 on the amount of actual revenue of which
the United States is or may be deprived during the period that begins on
the date of overpayment of the claim and ends on the date on which the
person concerned tenders the amount of the overpayment.
(b) Condition Affecting Penalty Limitations. The limitations in
paragraph (D)(3)(a) on the amount of the monetary penalty to be assessed
apply only if the person concerned tenders the amount of the overpayment
made on the claim either at the time of the disclosure or within 30 days
(or such longer period as Customs may provide) from the date of notice
by Customs of its calculation of the amount of overpayment.
(c) Burden of Proof. The person asserting lack of knowledge of the
commencement of a formal investigation has the burden of proof in
establishing such lack of knowledge.
(d) Commencement of Investigation. For purposes of this Appendix, a
formal investigation of a violation is considered to be commenced with
regard to the disclosing party, and with regard to the disclosed
information, on the date recorded in writing by Customs as the date on
which facts and circumstances were discovered which caused Customs to
believe that a possibility of a violation of section 593A existed.
[[Page 310]]
(e) Exclusivity. Penalty claims under section D will be the
exclusive civil remedy for any drawback-related violation of section
593A.
(E) Deprivation of Lawful Revenue
Notwithstanding section 514, Tariff Act of 1930, as amended (19
U.S.C. 1514), if the United States has been deprived of lawful duties
and taxes resulting from a violation of section 593A, Customs will
require that such duties and taxes be restored whether or not a monetary
penalty is assessed.
(F) Final Disposition of Penalty Cases When the Drawback Claimant Is Not
a Certified Participant in the Drawback Compliance Program
(1) In General. Customs will consider all information in the
petition and all available evidence, taking into account any mitigating,
aggravating, and extraordinary factors, in determining the final
assessed penalty. All factors considered should be stated in the
decision.
(2) Penalty Disposition When There Has Been No Prior Disclosure.
(a) Nonrepetitive Negligent Violation. The final penalty disposition
will be in an amount ranging from a minimum of 10 percent of the actual
or potential loss of revenue to a maximum of 20 percent of the actual or
potential loss of revenue.
(b) Repetitive Negligent Violation.
(i) First Repetitive Negligent Violation. The final penalty
disposition will be in an amount ranging from a minimum of 25 percent of
the actual or potential loss of revenue to a maximum of 50 percent of
the actual or potential loss of revenue.
(ii) Second and Each Subsequent Repetitive Negligent Violation. The
final penalty disposition will be in an amount ranging from a minimum of
50 percent of the actual or potential loss of revenue to a maximum of
100 percent of the actual or potential loss of revenue.
(c) Fraudulent Violation. The final penalty disposition will be in
an amount ranging from a minimum of 1.5 times the actual or potential
loss of revenue to a maximum of 3 times the actual or potential loss of
revenue.
(3) Penalty Disposition When There Has Been a Prior Disclosure.
(a) Negligent Violation. The final penalty disposition will be in an
amount equal to the interest determined in accordance with paragraph
(D)(3)(a)(ii).
(b) Fraudulent Violation. The final penalty disposition will be in
an amount equal to 100 percent of the actual or potential loss of
revenue.
(4) Mitigating Factors. The following factors will be considered in
mitigation of the proposed or assessed penalty claim or final penalty
amount, provided that the case record sufficiently establishes their
existence. The list is not exclusive.
(a) Contributory Customs Error. This factor includes misleading or
erroneous advice given by a Customs official in writing to the alleged
violator, but this factor may be applied in such a case only if it
appears that the alleged violator reasonably relied upon the written
information and the alleged violator fully and accurately informed
Customs of all relevant facts. The concept of comparative negligence may
be utilized in determining the weight to be assigned to this factor. If
the Customs error contributed to the violation, but the alleged violator
is also culpable, the Customs error is to be considered as a mitigating
factor. If it is determined that the Customs error was the sole cause of
the violation, the proposed or assessed penalty is to be cancelled.
(b) Cooperation With the Investigation. To obtain the benefits of
this factor, the alleged violator must exhibit cooperation beyond that
expected from a person under investigation for a Customs violation. An
example of the cooperation contemplated includes assisting Customs
officers to an unusual degree in auditing the books and records of the
alleged violator (e.g., incurring extraordinary expenses in providing
computer runs solely for submission to Customs to assist the agency in
cases involving an unusually large number of entries and/or complex
issues). Another example consists of assisting Customs in obtaining
additional information relating to the subject violation or other
violations. Merely providing the books and records of the alleged
violator may not be considered cooperation justifying mitigation
inasmuch as Customs has the right to examine an importer's books and
records pursuant to 19 U.S.C. 1508-1509.
(c) Immediate Remedial Action. This factor includes the payment of
the actual loss of revenue prior to the issuance of a penalty notice and
within 30 days after Customs notifies the alleged violator of the actual
loss of revenue attributable to the violation. In appropriate cases,
where the alleged violator provides evidence that, immediately after
learning of the violation, substantial remedial action was taken to
correct organizational or procedural defects, immediate remedial action
may be granted as a mitigating factor. Customs encourages immediate
remedial action to ensure against future incidents of non-compliance.
(d) Prior Good Record. Prior good record is a factor only if the
alleged violator is able to demonstrate a consistent pattern of filing
drawback claims without violation of section 593A, or any other statute
prohibiting the making or filing of a false statement or document in
connection with a drawback claim. This factor will not be considered in
alleged fraudulent violations of section 593A.
[[Page 311]]
(e) Inability to Pay the Customs Penalty. The party claiming the
existence of this factor must present documentary evidence in support
thereof, including copies of income tax returns for the previous 3 years
and an audited financial statement for the most recent fiscal quarter.
In certain cases, Customs may waive the production of an audited
financial statement or may request alternative or additional financial
data in order to facilitate an analysis of a claim of inability to pay
(e.g., examination of the financial records of a foreign entity related
to the U.S. company claiming inability to pay). In addition, the alleged
violator must present information reflecting ownership and related
domestic and foreign parties and must provide information reflecting its
current financial condition, including books and records of account,
bank statements, other tax records (for example, sales tax returns) and
a list of assets with current values; if the alleged violator is a
closely held corporation, similar current financial information must be
provided on the shareholders, wherever they are located.
(f) Customs Knowledge. This factor may be used in non-fraud cases
(which also are not the subject of a criminal investigation) if it is
determined that Customs had actual knowledge of a violation and failed,
without justification, to inform the violator so that it could have
taken earlier remedial action. This factor is not applicable when a
substantial delay in the investigation is attributable to the alleged
violator.
(5) Aggravating Factors. Certain factors may be determined to be
aggravating factors in calculating the amount of the proposed or
assessed penalty claim or the amount of the final administrative
penalty. The presence of one or more aggravating factors may not be used
to raise the level of culpability attributable to the alleged
violations, but may be used to offset the presence of mitigating
factors. The following factors will be considered ``aggravating
factors'', provided that the case record sufficiently establishes their
existence. The list is not exclusive.
(a) Obstructing an investigation or audit.
(b) Withholding evidence.
(c) Providing misleading information concerning the violation.
(d) Prior substantive violations of section 593A for which a final
administrative finding of culpability has been made.
(e) Failure to comply with a Customs summons or lawful demand for
records.
(G) Drawback Compliance Program Participants
(1) In General. Special alternative procedures and penalty
assessment standards apply in the case of negligent violations of
section 593A committed by persons who are certified as participants in
the Customs drawback compliance program and who are generally in
compliance with the procedures and requirements of that program.
Provisions regarding the operation of the drawback compliance program
are set forth in part 191 of the Customs Regulations (19 CFR part 191).
(2) Alternatives to Penalties. When a participant described in
paragraph (G)(1) commits a violation of section 593A, in the absence of
fraud or repeated violations and in lieu of a monetary penalty, Customs
will issue a written notice of the violation (warning letter).
(a) Contents of Notice. The notice will:
(i) State that the person has violated section 593A;
(ii) Explain the nature of the violation; and
(iii) Warn the person that future violations of section 593A may
result in the imposition of monetary penalties and that repetitive
violations may result in removal of certification under the drawback
compliance program until the person takes corrective action that is
satisfactory to Customs.
(b) Response to Notice. Within 30 days from the date of mailing of
the written notice, the person must notify Customs in writing of the
steps that have been taken to prevent a recurrence of the violation
unless the person establishes to the satisfaction of Customs that no
violation took place (see Sec. 162.73a(b)(2)(ii) of the Customs
Regulations, 19 CFR 162.73a(b)(2)(ii)). If the person fails to provide
the required notification in a timely manner, any penalty assessed for a
repetitive violation under paragraph (G)(3) will not be subject to
mitigation under this Appendix.
(3) Repetitive Violations.
(a) In General. A person who has been issued a written notice under
paragraph (G)(2) and who subsequently commits a negligent violation that
is repetitive (i.e., involves the same issue), and any other person who
is a participant described in paragraph (G)(1) and who commits a
repetitive negligent violation, is subject to one of the following
monetary penalties:
(i) An amount not to exceed 20 percent of the loss of revenue for
the first repetitive violation that occurs within three years from the
date of the violation of which it is repetitive;
(ii) An amount not to exceed 50 percent of the loss of revenue for
the second repetitive violation that occurs within three years from the
date of the first of two violations of which it is repetitive ; and
(iii) An amount not to exceed 100 percent of the loss of revenue for
the third and each subsequent repetitive violation that occurs within
three years from the date of the first of three or more violations of
which it is repetitive.
(b) Repetitive Violations Outside 3-Year Period. If a participant
described in paragraph (G)(1) commits a negligent violation that is
repetitive but that did not occur within 3 years of the violation of
which it is repetitive, the new violation will be treated as a first
violation for which a written notice will
[[Page 312]]
be issued in accordance with paragraph (G)(2), and each repetitive
violation subsequent to that violation that occurs within any 3-year
period described in paragraph (G)(3)(a) will result in the assessment of
the applicable monetary penalty prescribed in that paragraph.
(4) Final Penalty Disposition When There Has Been No Prior
Disclosure.
(a) In General. Customs will consider all information in the
petition and all available evidence, taking into account any mitigating
factors (see paragraph (F)(4)), aggravating factors (see paragraph
(F)(5)), and extraordinary factors in determining the final assessed
penalty. All factors considered should be stated in the decision.
(b) First Repetitive Negligent Violation Within 3 Years of Violation
Handled Under Paragraph (G)(2). The final penalty disposition will be in
an amount ranging from a minimum of 10 percent of the loss of revenue to
a maximum of 20 percent of the loss of revenue.
(c) Second Repetitive Negligent Violation Within 3 Years of
Violation Handled Under Paragraph (G)(2) or (G)(3). The final penalty
disposition will be in an amount ranging from a minimum of 25 percent of
the loss of revenue to a maximum of 50 percent of the loss of revenue.
(d) Third and Each Subsequent Repetitive Negligent Violation Within
3 Years of Violation Handled Under Paragraph (G)(2) or (G)(3). The final
penalty disposition will be in an amount ranging from a minimum of 50
percent of the loss of revenue to a maximum of 100 percent of the loss
of revenue.
(e) Fraudulent Violations. The final penalty disposition will be
determined in the same manner as in the case of fraudulent violations
committed by persons who are not participants in the drawback compliance
program (see paragraph (F)(2)(c)).
(5) Final Penalty Disposition When There Has Been A Prior
Disclosure. The final penalty disposition will be determined in the same
manner as in the case of persons who are not participants in the
drawback compliance program (see paragraph (F)(3)).
(H) Violations by Small Entities
In compliance with the mandate of the Small Business Regulatory
Enforcement Fairness Act of 1996, under appropriate circumstances, the
issuance of a penalty under section 593A may be waived for businesses
qualifying as small business entities. Procedures that were established
for small business entities regarding violations of 19 U.S.C. 1592 in
Treasury Decision 97-46 published in the Federal Register (62 FR 30378)
are also applicable for small entities regarding violations of section
593A.
[T.D. 00-5, 65 FR 3809, Jan. 25, 2000]