[Federal Register Volume 59, Number 72 (Thursday, April 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-9118]


[[Page Unknown]]

[Federal Register: April 14, 1994]


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DEPARTMENT OF THE TREASURY

Customs Service

[T.D. 94-38]

 

Amendments to Customs Bond Cancellation Standards

AGENCY: U.S. Customs Service, Department of the Treasury.

ACTION: General notice.

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SUMMARY: Under the Omnibus Trade and Competitiveness Act of 1988, the 
Secretary of the Treasury is required to publish guidelines for 
cancellation of bond charges. The guidelines in effect at the time the 
Act was promulgated were published by Treasury Decision 89-48, dated 
April 14, 1989. This document amends certain portions of the guidelines 
that have proven to be inequitable or outdated, provides for new 
guidelines for cases in which petitions are filed untimely and for 
certain violations of regulations that have recently been promulgated, 
and republishes those guidelines which have worked successfully. The 
authority to promulgate these guidelines was delegated to the 
Commissioner of Customs by Paragraph 1 of Treasury Department Order No. 
165, revised (T.D. 53654). A document published in the Federal Register 
(59 FR 17144) on April 11, 1994 set forth the explanation of the 
guidelines, but inadvertently omitted the actual guidelines. This 
document republishes the explanation and sets forth the guidelines.

EFFECTIVE DATE: These guidelines will take effect upon April 14, 1994, 
and shall be applicable to all cases which are currently open at the 
petition or supplemental petition stage. No second supplemental 
petitions shall be accepted solely to gain the benefit of a less harsh 
guideline.

FOR FURTHER INFORMATION CONTACT: Jeremy Baskin, Penalties Branch, U.S. 
Customs Service, Franklin Court, 1301 Constitution Avenue, NW., 
Washington, DC 20229, (202) 482-6950.

SUPPLEMENTARY INFORMATION:

Background

    Section 1904 of the Omnibus Trade and Competitiveness Act of 1988 
(Pub.L. 100-418) amended section 623 of the Tariff Act of 1930 (19 
U.S.C. 1623) by adding the following sentence at the end of section 
623(c) of the Tariff Act of 1930 (19 U.S.C. 1623(c)):

    In order to assure uniform, reasonable and equitable decisions, 
the Secretary of the Treasury shall publish guidelines establishing 
standards for setting the terms and conditions for cancellation of 
bonds or charges thereunder.

    In T.D. 89-48, dated April 14, 1989, the text of guidelines for 
cancellation of claims for liquidated damages in effect at the time of 
enactment of the Omnibus Trade and Competitiveness Act was published. 
Because of changing enforcement priorities and the need for more 
efficient administrative processing, the guidelines require amendment. 
Through this document, Customs is publishing those changes.

New Sections XI and XII Added To Guidelines

    The most significant change involves the addition of a new Section 
XII to the guidelines governing the cancellation of any claim for 
liquidated damages in which the petition for relief is filed untimely. 
Under the provisions of Sec.  172.12(b)(1) of the Customs Regulations 
(19 CFR 172.12(b)(1)), a bond principal has 60 days from the date of 
mailing of the notice of liability for liquidated damages to file a 
petition for relief. If the principal does not pay the claim, arrange 
to pay the claim or file a petition within the 60-day period, then the 
surety is notified of the claim. Pursuant to the provisions of 
Sec. 172.12(b)(2) of the Regulations (19 CFR 172.12(b)(2)), the surety 
has 60 days after notification to file a petition for relief.
    Under the provisions of Sec. 172.2(a) of the Regulations (19 CFR 
172.2(a)), if any party liable for liquidated damages fails to pay, 
make arrangements to pay or file a petition for relief, the district 
director shall promptly refer the claim to the Department of Justice. 
If no response is received from both the principal and surety, Customs 
will issue bills to both parties, demanding payment of the unpaid 
claims. Billing is required before referral of the matter to the 
Department of Justice for commencement of judicial collection action in 
the Court of International Trade.
    Under the provisions of Sec. 172.23 of the Regulations (19 CFR 
172.23), no petition may be entertained after a claim has been referred 
to the Department of Justice. In the past, Customs has articulated 
that, as a matter of policy, no late petitions would be entertained 
even if the matter had not yet been referred to the Department of 
Justice, but the petitioning period had expired. Under current 
procedures, if a principal or surety wishes to respond to the claim 
after billing has begun but referral has not yet occurred, it may only 
do so through the submission of an offer in compromise pursuant to the 
provisions of title 19, United States Code, section 1617, and section 
161.5 of the Customs Regulations (19 CFR 161.5). Before acceptance of 
any offer, Customs must seek approval of the Office of General Counsel 
of the Treasury.
    Through this document, Customs is changing its policy with regard 
to acceptance of late petitions. Petitions which are not filed timely 
will be honored, but mitigation will be less generous than that offered 
in those situations where petitions are filed timely.
    Under new guidelines for mitigation to be offered when a petition 
is filed late, the district director will determine, based on the 
record and information submitted in the untimely filed petition, as to 
appropriate mitigation that would have been afforded had the petition 
been filed timely. The district director will then calculate the number 
of calendar days the petition is late. Weekends and holidays will not 
be excluded from the calculation of number of days late. He will then 
multiply the number of calendar days late by 0.1 percent. A calculation 
similar to that used to determine mitigation in late filing of entry 
summary cases will then be used, as the mitigation amount will be 
multiplied by the number of days late times 0.1 percent. A minimum 
additional payment of $100 on a late petition mitigation will be 
required.
    For example, on November 1, Customs issues a CF-5955A against a 
bonded carrier, indicating that the carrier is liable for liquidated 
damages of $100,000 for delivering merchandise directly to the 
consignee in violation of the provisions of 19 CFR 18.8 and its 
custodial bond. The petition for relief is due from the bond principal 
by January 1. A petition is received on January 21, some 20 days late. 
A review of the petition shows that entry was not made on the 
merchandise nor were estimated duties paid by the consignee. Had an 
entry been filed, duties of $9,900 would have been paid. The carrier 
was shown to have had a good record of compliance, militating toward 
mitigation in the low end of the $100-$1,000 range for that type of 
violation. Accordingly, had the petition been filed timely, mitigation 
to $10,000 ($9,900 in an amount equal to approximate lost revenue plus 
$100) would have been afforded. Insofar as the petition was 20 days 
late, the time of lateness (20 days) will be multiplied by 0.1 percent, 
resulting in a multiplier of 2 percent. The $10,000 mitigation will be 
multiplied by 2 percent, resulting in a calculation of $200. The $200 
amount is compared to the minimum charge of $100 for a late petition. 
Insofar as the computed amount is higher than the minimum amount, $200 
would be added to the mitigation. Mitigation would then be afforded in 
the amount of $10,200.
    As noted, under current procedures no petitions are accepted after 
billing of the principal and surety has commenced. While we are 
rescinding that policy through this document, in no case will a 
petition be accepted after the billing cycle has ended and the case has 
been determined by Customs to be eligible to be included in any surety 
sanctioning action pursuant to the provisions of Sec. 113.38 of the 
Regulations (19 CFR 113.38).
    Inasmuch as both the principal and surety have separate petitioning 
times, a question arises as to whether the late charge will apply to a 
bond principal who fails to file a petition in the time period afforded 
to him by regulation, but then files a petition during the time period 
afforded to surety. Because the principal failed to respond timely 
during the time period permitted to him, Customs takes the view that 
his petition will be considered to be late, even if filed during the 
time period afforded to surety, and mitigation will reflect that late 
filing.
    A new Section XI is added to the guidelines to provide cancellation 
standards involving claims for liquidated damages assessed against 
Centralized Examination Station (CES) operators for violations of their 
custodial bond. A Final Rule was published in the Federal Register on 
January 22, 1993 (58 FR 5596) as Treasury Decision (T.D.) 93-6, whereby 
Customs amended the Regulations to provide for a new part 118 (19 CFR 
part 118) and other amendments delineating the duties and 
responsibilities of CES operators. They are required, pursuant to new 
section 19 CFR 118.4(g), to maintain a Customs custodial bond in an 
amount set by the district director. The terms of the Customs custodial 
bond are found in Sec. 113.63 of the Customs Regulations (19 CFR 
113.63). Under the provisions of new section 19 CFR 151.15(b) (also 
added by T.D. 93-6), CES operators assume liability for merchandise for 
which they receipt or for which they transport to the CES under their 
operator's bond. Many of these violations are similar to those arising 
from breaches of Sec. 113.62(f) of the basic importation bond which 
involve failure to deliver to or hold merchandise at the place of 
examination (current Section X of the Guidelines). Accordingly, the 
cancellation standards relating to failure to keep merchandise safe in 
the CES or failure to deliver merchandise to the CES will be similar. 
The explanation of changes to Section X will detail these standards.
    The CES operator is also responsible, under the provisions of 19 
CFR 118.4(h), for the maintenance and retention of records connected 
with the operation of the CES. Failing to maintain those records would 
involve a violation not involving merchandise and would result in 
liquidated damages of $1,000 for each day the violation continues. The 
bond cancellation standards for these cases will mirror the guidelines 
used for cancellation of claims incurred by bonded warehouse operators 
for violations not involving merchandise. The background information to 
the changes to Section VII describes these guidelines.

Changes to Section I

    Section I of the bond cancellation standards includes guidelines 
for the cancellation of charges for late filing of entry summaries. The 
Option 1 immediate payment of a preset mitigated amount in lieu of 
filing a petition for relief is an extremely successful procedure and 
is being retained in late filing of entry summary cases. For those 
violators who do not wish to take advantage of the Option 1 mitigated 
amount, petitioning rights will be protected; however, under new 
guidelines, a party who chooses to petition for relief in a late filing 
case will no longer necessarily be afforded the Option 1 mitigation 
amount. If the petitioning party fails to show that the violation did 
not occur or that it occurred as a result of Customs error, the 
district director may cancel the claim upon payment of an amount no 
less than $100 greater than the Option 1 amount.
    Under the current guidelines, when a petition for relief is filed 
in a late filing case, a distinction is made between when the entry 
summary is late by less than 30 days and when it is late by more than 
30 days. Different criteria apply to the review of those two types of 
petitions. This distinction has proved to be meaningless. Petitions are 
generally filed on the basis that the violation did not occur, or that 
it occurred as a result of contributory Customs error. In general, 
petitions are submitted without regard to whether the entry summary was 
more or less than 30 days late. Additionally, the factors delineated in 
the current guidelines to be considered when the entry summary is more 
than 30 days late are not consistent with the Option 1 procedure which 
does not turn on the intent of the violator, the circumstances causing 
the lateness or the past record of the violator. Accordingly, Customs 
is eliminating the distinction in the guidelines between cases that are 
late by more or less than 30 days.
    The current guidelines note that ordinarily, mitigation granted 
under Option 2 shall not be in an amount less than that determined in 
accordance with Option 1 unless extraordinary mitigating factors are 
present. It has been Customs experience that those extraordinary 
circumstances generally relate to contributory Customs error or 
inaccurate detection of the violation. Accordingly, the guidelines are 
being amended to reflect this fact.
    The guidelines do not indicate whether applicable merchandise 
processing fees, harbor maintenance fees and internal revenue taxes are 
included in the term ``withheld duty'' for purposes of mitigation of 
late filing cases. Questions have arisen as to the propriety of 
inclusion of these fees and taxes in the withheld duties upon which 
mitigation is based. In our view, the Government is deprived of not 
only duties but also these fees when an entry summary is filed and 
payment of duties and fees is tendered late. Accordingly, the 
guidelines are amended to provide a definition of ``withheld duties'' 
to include any fees and charges that are due and owing at the time of 
filing of the entry summary.
    With the streamlining of the entry process and the onset of 
automation, multiple entry summaries are often filed by Customs brokers 
either in a combined single statement with a single duty check attached 
or a single electronic fund transfer occurring to satisfy the 
appropriate duties, fees and taxes. (This electronic fund transfer is 
known as the Automated Clearing House, or ACH.) On occasion, an entry 
statement check or an electronic fund transfer will be filed untimely. 
Because each individual entry summary on the statement is covered by 
its own importation bond, when an untimely filing occurs separate 
claims for liquidated damages are generated for each entry summary. 
Multiple assessments arise stemming from the same incident. Bond 
cancellation standards call for mitigation of each claim separately. 
This could involve mitigation of $100 or $200 per entry summary 
(depending upon whether Customs must bill for duties or the duties are 
paid voluntarily prior to billing) plus the concomitant interest 
charges.
    Multiple liquidated damages assessments arise against numerous 
bonded parties because of a single error made with regard to the filing 
of the statement. An electronic fund transfer that is deficient a small 
amount of money on a large payment of duties will result in rejection 
of an entire statement. In these instances, mitigation based on each 
individual bond breach could provide an anomalous result and prove 
counterproductive to Customs desire to encourage the filing of 
statement entries. Accordingly, the bond cancellation guidelines are 
being amended to permit the district director, in his or her 
discretion, to grant extraordinary relief from multiple claims for 
liquidated damages when a statement is filed untimely. If it appears 
from the facts available at the time of the breach that a Customs 
broker is responsible for the untimely filing of the statement, the 
district director is afforded the discretion to mitigate all claims 
arising from the breach in the same manner as an Option 1 calculation, 
except that rather than take a $100 base charge for each entry in the 
statement or batch (as the traditional guidelines dictate), one $500 
base amount may be taken in settlement of all claims from the statement 
or batch. The appropriate interest calculation shall be added to the 
$500 base amount to arrive at the final Option 1 figure. If the 
responsible broker fails to pay such Option 1 mitigation within the 
time period prescribed or fails to petition for relief, the mitigation 
will be withdrawn and liquidated damages will be issued against all 
bond principals who have entries included in the statement. Those cases 
will then be treated individually within appropriate guidelines. 
District directors are encouraged to use the $500 guideline for first-
time violators. Use of these guidelines on subsequent violations is at 
the district directors' discretion.
    In Treasury Decision 93-37, published in the Federal Register on 
May 28, 1993, (58 FR 30979), Customs amended the provisions of the 
basic importation and entry bond to provide for liquidated damages when 
estimated duties, fees and taxes are paid in an untimely manner, when 
an estimated duty check is returned unpaid by a financial institution 
or when an electronic fund transfer is made without sufficient funds in 
the debited account. This claim for liquidated damages is assessed only 
when the entry documents are filed or electronically submitted timely, 
but the estimated duty payment is not timely. A claim for liquidated 
damages of double the unpaid estimated duties, fees and taxes is 
assessed. The new bond cancellation standards are amended to include 
these violations in the Option 1 late filing of entry summary 
guidelines.
    Treasury Decision 93-37 also amended the provisions of the 
international carrier bond to provide for liquidated damages against 
international carriers who collect passenger processing fees as 
required by law, but who fail to remit those fees to Customs in a 
timely manner. Under the provisions of Sec. 24.22(g) of the Customs 
Regulations (19 CFR 24.22(g)), carriers are required to pay passenger 
processing fees over to Customs no later than 31 days after the close 
of the calendar quarter in which they were collected. The failure to 
remit the collected fees as required by regulation results in 
assessment of liquidated damages equal to two times the collected but 
unremitted fees. The guidelines for cancellation of claims for late 
filing of estimated duty payments are amended to include guidelines for 
those claims established for late remission of collected passenger 
processing fees.

Changes to Section II

    Section II includes the standards for cancellation of claims 
resulting from breaches of Temporary Importation Bonds (TIBs).
    Under current guidelines, if merchandise is exported or destroyed 
but not within the bond period, or if it was exported but not under 
Customs supervision (if required), or if it was timely exported or 
destroyed but Customs was not notified (See C.S.D. 91-19 for timeliness 
of notification requirements) so as to cancel the bond, the guidelines 
call for cancelling the claim for liquidated damages upon payment of an 
amount between 1 and 5 percent of the ``bond amount'' but not less than 
$100. This language has caused some confusion, insofar as the bond 
amount is often the full amount of a term bond. The bond amount can far 
exceed and double the duty or 110 percent of the duty claim that might 
arise because of a breach. Accordingly, Customs is amending this 
guideline by replacing the phrase ``bond amount'' with the term ``the 
claim.''
    Customs has determined that less culpability exists in those cases 
where the merchandise is exported or destroyed in a timely fashion and 
the required proof is filed untimely as opposed to those instances 
where the merchandise is exported or destroyed outside the bond period. 
Therefore, the former claims will continue to be cancelled upon payment 
of an amount between 1 and 5 percent of the claim for liquidated 
damages (usually double or 110 percent of the duties), but in the 
latter instances (exportation or destruction outside the bond period), 
the claims will be cancelled upon payment of an amount between 5 and 10 
percent of the claim, but not less than $200.
    Under current guidelines, relief is granted to one times the duty 
on merchandise which is sold but later exported. This does not take 
into account whether merchandise is exported within or outside of the 
bond period. Customs is amending the guidelines to grant relief to one 
times the duty on merchandise which is sold but later exported within 
the bond period. For merchandise which is sold but later exported 
outside the bond period, the claim for liquidated damages will be 
cancelled upon payment of an amount equal to one and one-half times the 
duty. No relief shall be granted in these cases involving liquidated 
damages of 110 percent of the duties.
    Under current policy, when Customs wishes to supervise the 
exportation or destruction of TIB merchandise, the entry is designated 
at the time of presentation for Customs supervision of exportation or 
destruction. If the importer fails to obtain Customs supervision of 
exportation or destruction, despite the specific designation by 
Customs, he receives the same mitigation as the importer who receives 
the requisite supervision but does so outside the bond period. Customs 
is of the view that, inasmuch as supervision of exportation or 
destruction is required so infrequently, the TIB importer who fails to 
obtain such supervision should receive less generous mitigation. 
Accordingly, the guidelines are amended to take an amount between ten 
and twenty-five percent of the claim amount, but not less than $500, 
when supervision is required but not obtained.
    TIBs are sometimes taken on goods that are otherwise duty-free. 
Under the provisions of Sec. 10.31(f) of the Customs Regulations (19 CR 
10.31(f)), the district director is empowered to require a bond amount 
necessary to protect the revenue. In those instances where a breach 
occurs regarding otherwise duty-free merchandise, Customs should follow 
the appropriate guideline based on the circumstances surrounding the 
breach, but in no case should Customs cancel the claim upon payment of 
an amount less than two times the applicable merchandise processing fee 
or $100, whichever is greater.

Changes to Section III

    Section III includes bond cancellation standards for claims which 
arise from violation of a custodial bond maintained by a bonded 
carrier. With the proliferation of overnight courier services, the 
volume of violations involving misdelivery of in-bond merchandise has 
risen. These result in violations of 19 CFR 18.8 and the assessment of 
claims for liquidated damages. In many instances, informal entries are 
filed on the misdelivered merchandise. The claims for liquidated 
damages are generally cancelled upon payment of $100, an amount that 
often exceeds the value of the misdelivered merchandise. Accordingly, 
Section III of the Customs Bond Cancellation Standards is amended to 
provide for cancellation upon payment of an amount between $50 and 
$1,000 of any claim for which entry is made and duties, fees and taxes 
are paid via the informal entry process.
    Additionally, many times in-bond violations are discovered when 
carriers come forward and disclose the violations to Customs. In order 
to encourage this behavior, new guidelines have been promulgated to 
permit mitigation to as low as $25 per entry when the in-bond carrier 
brings such violations to Customs attention.
    Occasionally, the merchandise which is not properly delivered or is 
delivered short is, in fact, restricted merchandise. In those 
instances, mitigation guidelines based upon a loss of revenue do not 
take into account the possible inadmissibility of the merchandise. 
Accordingly, the guidelines are amended to specifically address these 
situations. Where the principal or surety can show that entry was made, 
duties were paid and the merchandise was found to be admissible, the 
claim shall be cancelled upon payment of an amount between $100 and 
$1,000, consistent with guidelines for admissible merchandise; however, 
in those instances where the bond principal cannot show that entry was 
made, duties were paid and the merchandise was found to be admissible, 
the claim shall be cancelled upon payment of an amount equal to the 
duties plus an amount between 25 and 50 percent of the value of the 
merchandise, but not less than $250.
    Finally, the in-bond guidelines are amended to permit use of the 
Option 1 mitigation procedures when the violation involves the late 
delivery of in-bond merchandise or the late delivery of in-bond 
documents to Customs.

Changes to Section IV

    Section IV of the bond cancellation standards includes guidelines 
for cancellation of claims arising from failure to redeliver 
merchandise to Customs custody. An anomalous situation results under 
current guidelines for cancellation of claims for failing to mark 
merchandise with the country of origin (as required by the provisions 
of 19 U.S.C. 1304) when the merchandise is not marked and liquidation 
of the entry has become final, which would preclude Customs from 
assessing marking duties. Pursuant to current guidelines, if 
liquidation is final, thereby barring the assessment of marking duties, 
claims are cancelled upon payment of an amount equal to no less than 50 
percent of the value. This places the bond principal whose entry has 
been liquidated and such liquidation has become final at a mitigation 
disadvantage compared to the bond principal whose entry has not been 
liquidated.
    The latter principal, if a first-time violator, would receive 
mitigation to an amount between 10 and 25 percent of the value of the 
merchandise, after marking duties have been deposited. This would leave 
this principal with an ultimate liability, combining the payment of 
marking duties and the bond charge cancellation amount, of between 20 
and 35 percent of the value of the shipment. Rather than further 
penalize the principal whose entry has been liquidated and such 
liquidation has become final, Customs is amending the guidelines to 
provide for mitigation to an amount between 20 and 35 percent of the 
value of the merchandise for the first-time violator whose entry has 
been liquidated and such liquidation has become final and to an amount 
between 35 and 60 percent of the value of the merchandise to the 
subsequent violator whose entry has been liquidated and such 
liquidation has become final, thereby barring the assessment of marking 
duties.
    The guidelines are amended to add a section dealing with 
cancellation of bond claims that arise from failing to redeliver 
merchandise that is marked with a false designation of origin in 
violation of the provisions of 15 U.S.C. 1124 and 1125. These 
guidelines, designated as a new paragraph F provide for mitigation less 
generous than that afforded violations involving failing to mark 
merchandise with the country of origin.
    The guidelines for cancellation of claims for violation of other 
Customs statutes and regulations permit cancellation of claims incurred 
by first-time violators upon payment of an amount between one and five 
percent of the value of the merchandise. This guideline does not 
provide Customs with sufficient mitigation flexibility. Accordingly, 
Customs amends the guidelines to permit cancellation of claims incurred 
by first-time violators upon payment of an amount between one and 
fifteen percent of the value of the merchandise.
    A new guideline has been formulated for cases that involve failure 
to provide a sample to Customs. Under current guidelines, if an 
importer fails to provide a sample and liquidated damages result, the 
importer will receive mitigation in the one to five percent range 
because this is considered to be a violation of other Customs statutes 
or regulations. If an importer has a violative shipment, and a sample 
will serve to provide evidence of the shipment's inadmissibility, the 
importer could benefit in mitigation from failing to provide that 
sample.
    For example, if an import specialist requests a sample to determine 
whether a shipment of merchandise bears a genuine or counterfeit 
trademark and the importer provides the sample and a violation is 
determined to exist, any resultant claim for liquidated damages would 
be cancelled using the guidelines for trademark violative goods 
(generally a 25-50 percent result). Under current guidelines, by 
failing to provide a sample, the importer would be granted relief in 
the one to five percent range. The guidelines are amended to provide 
that a claim for liquidated damages for failure to provide a sample 
will be cancelled consistent with guidelines in effect for any 
violation that is suspected with regard to the sample.
    Finally, a new guideline is promulgated which will provide that in 
any case where redelivery or compliance with country of origin marking 
occurs, but not in a timely manner (i.e., outside the 30-day redelivery 
period or any other redelivery period which may be designated by the 
district director), the claim shall be cancelled upon payment of $100 
or one percent of the value of the shipment, whichever is higher, but 
in no case shall the amount exceed $1,000. This guideline will only be 
appropriate for compliance that occurs prior to the issuance of the 
Notice of Claim for Liquidated Damages.

Change to Section VI

    Section VI of the bond cancellation guidelines covers Guidelines 
for Cancellation of Claims Arising From Failure to Timely File 
Shipper's Export Declarations (SEDs). The guidelines provide for relief 
for the first and second violations incurred by a carrier, but after 
two violations, no relief is afforded from any claim. These guidelines 
do not take into account the fact that most carriers file large numbers 
of SEDs each year and that three violations may be a very small number 
when considering the total number of SEDs filed. Accordingly, Customs 
is amending the guidelines to remove the references to first or second 
violations. All claims will be cancelled upon payment of an amount 
between 25 and 50 percent of the claim but not less than $100, except 
that no relief shall be granted from any claims written for $50 or 
$100. If this mitigation does not have a deterrent effect upon a 
chronic violator, then cancellation upon payment of an amount exceeding 
50 percent (or denial of relief) may be warranted. In order to promote 
administrative efficiency, the guidelines are also being amended to 
permit Option 1-type mitigation in failure to file SED cases.

Change to Section VII

    In Treasury Decision 92-81 (57 FR 37692), Customs published a Final 
Rule amending the Customs Regulations to provide for regulations 
specific to duty-free stores. The bond cancellation standards for 
violations of warehouse bond regulations are amended to make clear that 
they are also applicable to duty-free stores.
    Under current policy, claims for liquidated damages for non-
merchandise violations relating to the maintenance of a bonded 
warehouse are issued at $1,000 for each day that a violation continues. 
For example, under the provisions of Sec. 19.12(a)(4) of the 
Regulations (19 CFR 19.12(a)(4)), a bonded warehouseman is required to 
update a permit file folder related to a bonded warehouse entry within 
two business days after any transaction related to that entry 
(generally a withdrawal for consumption) is accomplished. By failing to 
update within two business days, he is in breach of his bond. If the 
violation continues for 100 business days, he will be liable for 
liquidated damages of $100,000. This has provided some overly harsh 
claims for liquidated damages for relatively minor violations.
    Through this document, Customs amends Section VII of the Customs 
Bond Cancellation Standards to provide for a limit of $10,000 on any 
continuing warehouse bond violation not involving merchandise. The 
promulgation of this cap on assessment of the claims will not affect 
guidelines for cancellation currently in effect, but will serve to 
eliminate overly harsh assessments and concomitantly harsh cancellation 
amounts. The guidelines are also amended to permit implementation of 
Option 1 procedures in all warehouse bond cases that involve claims for 
liquidated damages based upon defaults not involving merchandise.
    The current guidelines for claims arising from defaults involving 
merchandise do not accurately reflect commercial reality. The 
guidelines include a category of defaults arising from clerical error 
or mistake, that is a non-negligent, inadvertent error. Under Customs 
Directives issued concerning assessment of these claims, district 
directors are given broad discretion to issue claims for liquidated 
damages when breaches are detected. Issuance of claims for liquidated 
damages for violations arising from clerical error or mistake, as a 
matter of policy, is unnecessary in order to encourage compliance. 
Accordingly, if a claim for liquidated damages is established and the 
warehouse proprietor can show that the claim arose from clerical error 
or mistake and no loss of revenue occurred, then the claim will be 
cancelled without payment. If a loss of revenue occurred, it shall be 
prima facie evidence that something other than clerical error or 
mistake occurred and other sections of the guidelines should be 
followed.
    The guidelines for cancellation of claims arising from defaults 
involving merchandise which are based upon negligence do not 
distinguish between those violations involving merchandise that do not 
necessarily involve a threat to the revenue (i.e., manipulation of 
merchandise without Customs permit or not in accordance with the 
activity described in the permit) and those which do involve a threat 
to the revenue (i.e., removal of merchandise from the warehouse without 
permit, or failure to locate or account for merchandise in the 
warehouse.) The guidelines are amended to provide for a revenue-based 
distinction in violations involving merchandise. Violations involving 
merchandise which result from negligence but involve no loss of revenue 
shall be cancelled upon payment of an amount between one and fifteen 
percent of the value of the merchandise but not less than $100 nor more 
than $10,000. No distinction shall be made between violations involving 
restricted merchandise and violations involving merchandise which is 
not restricted; however, if the violation does involve restricted 
merchandise, that shall be considered to be an aggravating factor which 
will result in less generous mitigation. Violations involving 
merchandise which result from negligence but involve a potential loss 
of revenue shall be cancelled upon payment of an amount between one and 
three times the loss of revenue on the merchandise which cannot be 
accounted for, unless that merchandise is restricted, in which case the 
claim shall be cancelled upon payment of an amount between three and 
five times the loss of revenue but in no case less than 10 percent of 
the value of such merchandise. If the violation is found to be 
intentional in nature, then no relief from the claim shall be granted.

Change to Section VIII

    Under Section VIII of the guidelines, a reference is made to 
cancellation of claims for liquidated damages arising from violation of 
airport security regulations as published in Sec. 122.14 of the Customs 
Regulations (19 CFR 122.14). In Treasury Decision 90-82, the provisions 
of Sec. 122.14 were renumbered as 19 CFR 122.181 et. seq. The 
guidelines are amended to reflect that change.
    For violations involving unauthorized entry into a secured area, 
failure to openly display or possess the identification card, strip or 
seal, or failure to surrender identification upon demand by an 
authorized Customs officer, under current guidelines a first violation 
is cancelled upon payment of $200, a second violation is cancelled upon 
payment of $500 and a third or subsequent violation results in no 
mitigation. If a bond principal has three employees or contractors who 
enter into a secured area without authorization, three violations 
immediately occur and any benefit given for a first or second violation 
dissipates. In order to provide a district director with more 
administrative discretion, the first, second and third violation 
distinctions are being eliminated. The district director will be able 
to cancel any claim arising from the violative conduct described above 
upon payment of an amount between $250 and $500. A district director 
will always have the discretion to deny relief in these cases based 
upon articulable aggravating factors. Inasmuch as the district director 
will be afforded the noted discretion, old paragraph F of the 
guidelines, which permits greater mitigation to a prior violator who 
does not incur a violation for six months, is being eliminated.
    The guidelines for airport security violations are also being 
amended to permit the district director to apply Option 1 mitigation 
procedures, if the facts of a particular case are undisputed and the 
circumstances surrounding such case so warrant.

Change to Section IX

    As with the guidelines relating to the cancellation of claims 
arising from violation of the warehouse bond, the guidelines for 
cancellation of claims arising from violation of the provisions of the 
Foreign Trade Zone bond also do not reference any cap on the assessment 
of claims for violations which do not involve merchandise. For purposes 
of liquidated damages assessment (as opposed to penalties which are 
assessed under the provisions of 19 U.S.C. 81s), as a matter of policy, 
the guidelines are amended to provide that claims will not be issued 
for any continuing violation in an amount that exceeds $10,000. The 
promulgation of this cap on assessment of the claims will not affect 
guidelines for cancellation currently in effect, but will serve to 
eliminate overly harsh assessments and concomitantly harsh cancellation 
amounts.
    The guidelines are also amended to permit implementation of Option 
1 procedures in all foreign trade zone claims for liquidated damages 
based upon defaults not involving merchandise.
    As with warehouse bond violations, the current guidelines for 
claims arising from defaults involving merchandise do not accurately 
reflect commercial reality. The guidelines include a category of 
defaults arising from clerical error or mistake, that is a non-
negligent, inadvertent error. Under Customs Directives governing 
Foreign Trade Zones issued concerning assessment of these claims, 
district directors are given broad discretion to issue claims when 
breaches of the bond are detected. Issuance of claims for liquidated 
damages for violations arising from clerical error or mistake is not 
always necessary, as a matter of policy, in order to encourage 
compliance. Accordingly, if a claim for liquidated damages is 
established and the Foreign Trade Zone proprietor can show that the 
claim arose from clerical error or mistake and no loss of revenue 
occurred, then the claim will be cancelled without payment. If a loss 
of revenue occurred, that fact shall be prima facie evidence that 
something other than clerical error or mistake occurred and other 
sections of the guidelines should be followed.
    The guidelines for cancellation of claims arising from defaults 
involving merchandise which are based upon negligence do not 
distinguish between those violations involving merchandise that do not 
necessarily involve a threat to the revenue (i.e., manipulation of 
merchandise in the zone without Customs permit or not in accordance 
with the activity described in the permit) and those which do involve a 
threat to the revenue (i.e., removal of merchandise from the zone 
without permit, or failure to locate or account for merchandise in the 
zone). The guidelines are amended to provide for a revenue-based 
distinction in violations involving merchandise. Violations involving 
merchandise which result from negligence but involve no loss of revenue 
shall be cancelled upon payment of an amount between one and fifteen 
percent of the value of the merchandise but not to exceed $10,000. No 
distinction shall be made between violations involving restricted 
merchandise and violations involving merchandise which is not 
restricted; however, if the violation does involve restricted 
merchandise, that shall be considered to be an aggravating factor which 
will result in less generous mitigation. Violations involving 
merchandise which result from negligence but involve a potential loss 
of revenue shall be cancelled upon payment of an amount between one and 
three times the loss of revenue on the merchandise which cannot be 
accounted for, unless that merchandise is restricted, in which case the 
claim shall be cancelled upon payment of an amount between three and 
five times the loss of revenue, but in no case less than 10 percent of 
the value of such merchandise. If the violation is found to be 
intentional in nature, then no relief from the claim shall be granted.

Change to Section X

    The current guidelines for cancellation of claims for liquidated 
damages arising from the failure to hold merchandise at the place of 
examination in violation of the provisions of Sec. 113.62(f) of the 
Regulations (19 CFR 113.62(f)), are based on a standard that involves a 
determination by the deciding officer of a level of culpability 
(clerical error, negligence, intentional violation) of the bond 
principal. This standard is not followed in the guidelines in use for 
other similar misdelivery-type violations. Accordingly, through this 
document, Customs is abandoning the standard of finding a level of 
culpability.
    In order to establish a violation under the provisions of 19 CFR 
113.62(f), Customs must show that the bond principal obtained 
permission from Customs to have his merchandise examined at a place 
which is not in the charge of a Customs officer (e.g., his business 
premises, a Centralized Examination Station) and that the bond 
principal failed to: Hold the merchandise at such place until released 
by Customs; transfer such merchandise to any place directed by Customs; 
or keep all seals and cording intact.
    Through this document, Customs amends the current guidelines so 
that when a party fails to hold the merchandise for examination or 
fails to transfer the merchandise to another place upon instruction 
from Customs obtained before the merchandise was released, the claim 
will be cancelled upon the following terms:
    (1) If either the bond principal or surety files an entry summary 
and pays estimated duties, taxes and fees, Customs will cancel the bond 
claim upon payment of an amount between $100 and $1,000 if the 
merchandise was not suspected by Customs to be restricted or 
prohibited;
    (2) If neither the bond principal nor surety files an entry summary 
and pays estimated duties, taxes and fees, Customs will cancel the bond 
claim upon payment of an amount equal to the estimated duties, taxes 
and fees that would have been due plus an amount between $100 and 
$1,000 if the merchandise was not suspected by Customs to be restricted 
or prohibited;
    (3) If the merchandise not held for examination was suspected of 
being restricted or prohibited, and the bond principal files an entry 
summary, pays estimated duties, taxes and fees and the merchandise was 
deemed admissible with that entry summary, Customs will cancel the bond 
claim upon payment of an amount between $100 and $1,000;
    (4) If the merchandise not held for examination was suspected of 
being restricted or prohibited, and the bond principal does not file an 
entry summary or pay estimated duties or provide a showing that the 
merchandise was deemed admissible, Customs will cancel the bond claim 
upon payment of an amount equal to the estimated duties, taxes and fees 
plus an amount between 25 and 50 percent of the value of the 
merchandise, but not less than $250; and
    (5) If the violation is determined to be intentional in nature, no 
relief will be afforded.
    For a violation which involves the failure to keep any Customs seal 
or cording intact until the merchandise is examined, the claim shall be 
cancelled upon payment of an amount between $100 and $500 if there is 
no evidence to indicate the merchandise in the sealed or corded 
shipment was the subject of tampering. If there is evidence of 
tampering, the claim shall be cancelled upon payment of an amount equal 
to the value of any missing merchandise.
    Finally, an additional sentence shall be added to the guidelines to 
indicate that when the term ``value'' is used in any provision of these 
guidelines it means value as determined under 19 U.S.C. 1401a and not 
domestic value.
    The new Section XI of the bond cancellation standards relating to 
CES operators will employ the same guidelines as those described in the 
changes to Section X with regard to violations involving failure to 
keep merchandise safe or deliver that merchandise to the CES.
    The text of the guidelines, as modified, is set forth below.

    Dated: April 12, 1994.
Samuel H. Banks,
Acting Commissioner of Customs.

Guidelines for Cancellation of Claims for Liquidated Damages

I. Guidelines for Cancellation of Claims for Liquidated Damages for 
Late Filing of Entry Summary Claims (19 CFR 142.15 and 113.62(b)), Late 
Payment of Estimated Duties Claims (19 CFR 113.62(a)(1)(i) and 
113.62(k)(4)), and Late Remission of Collected Passenger Processing 
Fees (19 CFR 113.64(a))

    A. Failure to file entry summaries timely. Pursuant to section 
172.22(d) of the Customs Regulations, claims for liquidated damages for 
failure to file entry summaries timely shall be issued and mitigated as 
follows:
    1. Notification of liquidated damages incurred; modified CF-5955A. 
Notices of liquidated damages incurred shall be issued on a modified 
CF-5955A. The modified form shall specify two options from which the 
petitioner may choose to resolve the demand.
    a. Option 1. He may pay a specified sum within 60 days and the case 
will be closed. By electing this option in lieu of petitioning, he 
waives his right to file a petition. He may, however, file a 
supplemental petition, if he does so in accordance with the Customs 
Regulations and has some new fact or information which merits 
consideration in accordance with these guidelines.
    b. Option 2. Petition for relief. Pursuant to the provisions of 19 
CFR 172.11, the bond principal or surety may file a petition for 
relief. By filing a petition for relief, the petitioner will no longer 
be afforded the Option 1 mitigation amount. The district director shall 
grant full relief when the petitioner demonstrates that the violation 
did not occur or that the violation occurred solely as a result of 
Customs error. If the petitioner fails to demonstrate that the 
violation did not occur or that the violation occurred solely as a 
result of Customs error, the district director may cancel the claim 
upon payment of an amount no less than $100 greater than the Option 1 
amount.
    2. Calculation of mitigated amount; entry summary filed late. The 
amounts to be set forth under Option 1 on the CF 5955A shall be 
calculated as follows:
    a. Dutiable entry summary filed late.
    The bond principal or surety shall be charged an administrative fee 
of $100 plus interest on the withheld duty at the rate of 0.1 percent 
(.001) per calendar day that the withheld duty was late. The interest 
amount shall be rounded up to the next dollar. For purposes of this 
calculation, the withheld duty amount shall be rounded down to the next 
dollar. For purposes of these mitigation guidelines, the term 
``withheld duty'' shall include unpaid duties, merchandise processing 
fees, harbor maintenance fees and any other taxes or charges due and 
owing at the time of filing of the entry summary.
    b. Duty-free entry filed late.
    The bond principal or surety shall be charged an administrative fee 
of $100 plus interest on any withheld fees and taxes calculated at the 
rate of 0.1 percent (.001) per calendar day that the entry summary was 
late.
    c. Dutiable entry rejected and refiled late with no withheld duty, 
fees and taxes.
    The bond principal or surety shall be charged $100.
    d. Dutiable entry filed timely but rejected, refiled late with 
additional duties, fees and taxes owed.
    The bond principal or surety shall be charged an administrative fee 
of $100 plus interest calculated on withheld duties, fees and taxes 
only, calculated at the rate of 0.1 percent (.001) per calendar day 
that the withheld duty was late.
    3. Entry summary not filed.
    a. If at the time the demand for liquidated damages is issued the 
entry summary has not been filed, a claim for liquidated damages for 
non-filing of the entry summary shall be issued. No mitigated amount 
shall be offered under Option 1. As a prerequisite for mitigation, the 
principal must file the entry summary and pay estimated duties, fees 
and taxes or the surety must deposit estimated duties, fees and taxes.
    b. Once the estimated duties, fees and taxes have been paid, a 
notice of claim for liquidated damages shall be issued for late filing 
of the entry summary, replacing the earlier notice of claim for non-
filing of the entry summary. The late filing claim issued as a result 
of a non-filing situation shall be cancelled in accordance with the 
following guidelines once the estimated duties, fees and taxes have 
been deposited.
    i. The bond principal shall be charged an administrative fee of 
$200 plus interest on the withheld duty at the rate of 0.1 percent 
(.001) per calendar day that the entry summary was late. The interest 
amount shall be rounded up to the next dollar. For purposes of this 
calculation, the duty amount shall be rounded down to the next dollar.
    ii. When the surety deposits estimated duties, fees and taxes, the 
surety shall be charged an administrative fee of $200 plus 0.1 percent 
(.001) per calendar day between issuance of the demand on surety and 
payment of the estimated duties, fees and taxes.
    c. If no response from the principal or surety is received within 
60 days from the date of issuance of the non-filing claim, a claim for 
liquidated damages for late filing shall be issued to both the 
principal and surety, but no Option 1 mitigation shall be offered.
    4. Late filing of statement summaries.
    a. If a Customs broker files an entry statement including multiple 
entry summaries for processing in an untimely manner, the district 
director may, in his or her discretion, cancel all claims for 
liquidated damages arising because of the late filing in accordance 
with the following standard:
    The broker shall be charged, as an Option 1 amount, an 
administrative fee of $500 plus interest on the withheld duty at the 
rate of 0.1 percent (.001) per calendar day that the withheld duty was 
late. The interest amount shall be rounded up to the next dollar. For 
purposes of this calculation, the withheld duty amount shall be rounded 
down to the next dollar. For purposes of these mitigation guidelines, 
the term ``withheld duty'' shall include unpaid duties, merchandise 
processing fees, harbor maintenance fees and any other taxes or charges 
due and owing at the time of filing of the entry summary. This 
mitigation shall be afforded with regard to any first violation by a 
broker who is responsible for late submission of a statement summary. 
This mitigation may be afforded with regard to a subsequent violation, 
based upon the discretion of the district director.
    b. Petition for relief.
    i. If the broker files a petition for relief which demonstrates 
that the violation did not occur or occurred as a result of Customs 
error, all claims arising from the late filing should be cancelled 
without payment.
    ii. If the broker files a petition for relief which fails to 
demonstrate that the violation did not occur or occurred as a result of 
Customs error, the claim shall be cancelled upon payment of $700 plus 
interest on any withheld fees and taxes calculated at the rate of 0.1 
percent (.001) per calendar day that the entry statement was late.
    c. Failure to pay Option 1 amount or petition for relief.
    If a broker fails to pay the Option 1 amount or fails to petition 
for relief, Customs shall issue appropriate claims for liquidated 
damages against all bond principals and sureties and the mitigation 
guidelines enumerated in paragraph B. above shall be followed. In no 
case shall the $500 plus interest Option 1 amount afforded to brokers 
in these cases be afforded to principals or sureties.
    5. Suspension of immediate release privileges. If an importer fails 
to meet his obligations with regard to claims for liquidated damages 
for late filing of entry summaries, the district director is always 
empowered to suspend immediate release privileges of the importer. 
Alternatively, the district director may choose to assess liquidated 
damages but not offer an Option 1 alternative.
    B. Late payment of estimated duties. Claims for liquidated damages 
for late payment of estimated duties shall be issued and mitigated as 
follows:
    1. Notification of liquidated damages incurred; estimated duties 
not paid. If at the time the demand for liquidated damages is issued 
the estimated duties, fees and taxes have not been paid, the claim 
shall be issued on a CF-5955A citing 19 CFR 113.62(a)(1)(i) and 19 CFR 
113.62(k)(4) as the bond conditions violated. No mitigated amount shall 
be offered under Option 1. As a prerequisite for mitigation, the 
principal must pay estimated duties, fees and taxes or the surety must 
deposit estimated duties, fees and taxes.
    2. Notification of liquidated damages incurred; estimated duties 
paid late; modified CF 5955A. If at the time of issuance of the demand 
for liquidated damages, estimated duties, fees and taxes have been 
paid, the Notices of Claim for Liquidated Damages incurred shall be 
issued on a modified CF-5955A. The modified form shall specify two 
options from which the petitioner may choose to resolve the demand.
    a. Option 1. He may pay a specified sum within 60 days and the case 
will be closed. By electing this option in lieu of petitioning, he 
waives his right to file a petition. He may, however, file a 
supplemental petition, if he does so in accordance with the Customs 
Regulations and has some new fact or information which merits 
consideration in accordance with these guidelines.
    b. Option 2. Petition for relief. Pursuant to the provisions of 19 
CFR 172.11, the bond principal or surety may file a petition for 
relief. By filing a petition for relief, the petitioner will no longer 
be afforded the Option 1 mitigation amount. The district director shall 
grant full relief when the petitioner demonstrates that the violation 
did not occur or that the violation occurred solely as a result of 
Customs or financial institution error. If the petitioner fails to 
demonstrate that the violation did not occur or that the violation 
occurred solely as a result of Customs or financial institution error, 
the district director may cancel the claim upon payment of an amount no 
less than $100 greater than the Option 1 amount.
    3. Calculation of Option 1 amounts.
    a. If estimated duties, taxes and charges are paid untimely, but 
payment is made before Customs is required to issue a Notice of Claim 
as described in Subparagraph B(1) above, the bond principal or surety 
shall be charged an administrative fee of $100 plus interest on the 
withheld duty at the rate of 0.1 percent (.001) per calendar day that 
the withheld duty was late. The interest amount shall be rounded up to 
the next dollar. For purposes of this calculation, the withheld duty 
amount shall be rounded down to the next dollar. For purposes of these 
mitigation guidelines, the term ``withheld duty'' shall include unpaid 
duties, merchandise processing fees, harbor maintenance fees and any 
other taxes or charges due and owing at the time of filing of the entry 
summary.
    b. If estimated duties, taxes, fees and charges are paid untimely 
by the bond principal after Customs has issued a claim for liquidated 
damages for non-payment of estimated duties in accordance with 
Subparagraph B(1) above, the bond principal shall be charged an 
administrative fee of $200 plus interest on the withheld duty at the 
rate of 0.1 percent (.001) per calendar day that the payment was late. 
The interest amount shall be rounded up to the next dollar. For 
purposes of this calculation, the duty amount shall be rounded down to 
the next dollar.
    c. When the surety deposits estimated duties, fees and taxes, in 
response to a demand made in accordance with Subparagraph B(1) above, 
the surety shall be charged an administrative fee of $200 plus 0.1 
percent (.001) per calendar day between issuance of the demand on 
surety and payment of the estimated duties, fees and taxes.
    C. Failure to remit collected passenger processing fees. Claims for 
liquidated damages for untimely payment to Customs of collected 
passenger processing fees shall be issued and mitigated as follows:
    1. Notification of liquidated damages incurred; passenger 
processing fees not remitted. If at the time the demand for liquidated 
damages is issued the collected fees have not been remitted to Customs, 
the claim shall be issued on a CF-5955A citing 19 CFR 113.64(a) and 19 
CFR 24.22(g) as the bond condition and regulations violated. No 
mitigated amount shall be offered under Option 1. As a prerequisite for 
mitigation, the principal must remit the collected fees or the surety 
must deposit an amount equal to those unremitted fees.
    2. Notification of liquidated damages incurred; estimated duties 
paid late; modified CF 5955A. If at the time of issuance of the demand 
for liquidated damages, the collected fees have been remitted, the 
Notices of Claim for Liquidated Damages incurred shall be issued on a 
modified CF-5955A. The modified form shall specify two options from 
which the petitioner may choose to resolve the demand.
    a. Option 1. He may pay a specified sum within 60 days and the case 
will be closed. By electing this option in lieu of petitioning, he 
waives his right to file a petition. He may, however, file a 
supplemental petition, if he does so in accordance with the Customs 
Regulations and has some new fact or information which merits 
consideration in accordance with these guidelines.
    b. Option 2. Petition for relief. Pursuant to the provisions of 19 
CFR 172.11, the bond principal or surety may file a petition for 
relief. By filing a petition for relief, the petitioner will no longer 
be afforded the Option 1 mitigation amount. The district director shall 
grant full relief when the petitioner demonstrates that the violation 
did not occur or that the violation occurred solely as a result of 
Customs error. If the petitioner fails to demonstrate that the 
violation did not occur or that the violation occurred solely as a 
result of Customs error, the district director may cancel the claim 
upon payment of an amount no less than $100 greater than the Option 1 
amount.
    3. Calculation of Option 1 amounts.
    a. If the collected passenger processing fees are remitted 
untimely, but are remitted so that Customs is not required to issue a 
Notice of Claim as described in Subparagraph C(1) above, the bond 
principal or surety shall be charged an administrative fee of $200 plus 
interest on the unremitted fees at the rate of 0.1 percent (.001) per 
calendar day that the fees were late. The interest amount shall be 
rounded up to the next dollar.
    b. If the collected but unremitted fees are remitted untimely by 
the bond principal after Customs has issued a claim for liquidated 
damages for failure to remit those fees in accordance with Subparagraph 
C(1) above, the bond principal shall be charged an administrative fee 
of $1,000 plus interest on the unremitted fee at the rate of 0.1 
percent (.001) per calendar day that the payment was late. The interest 
amount shall be rounded up to the next dollar.
    c. When the surety deposits an amount equal to the collected but 
unremitted fees, in response to a demand made in accordance with 
Subparagraph C(1) above, the surety shall be charged an administrative 
fee of $1,000 plus 0.1 percent (.001) per calendar day between issuance 
of the demand on surety and payment of an amount equal to the collected 
but unremitted fees.
    D. Referral of petitions to Headquarters. The district director may 
always refer a petition for relief to Customs Headquarters, Penalties 
Branch, for advice or guidance. This referral is at the discretion of 
the district director and shall not be allowed to a petitioner as a 
matter of right.

II. Guidelines for Cancellation of Claims for Liquidated Damages for 
Violation of Temporary Importation Bonds (19 CFR 10.39)

    A. Cancel the claim without payment if the breach was for the 
benefit of the United States.
    B. Cancel the claim upon payment of an amount equal to the 
merchandise processing fee that would have been due on the merchandise 
had an entry for consumption been filed (but not less than $100) if:
    1. The breach was due wholly to circumstances beyond the importer's 
control and which could not have been reasonably anticipated i.e., 
destruction by accidental fire.
    2. Merchandise which was the subject of the entry would have been 
entitled to free entry as domestic products exported and returned or 
under any other duty-free provision.
    C. If the merchandise was exported or destroyed timely but Customs 
was not notified in a timely manner so as to cancel the bond, cancel 
the claim for liquidated damages upon payment of an amount between 1 
and 5 percent of the claim (depending on aggravating or mitigating 
factors present), but not less than $100.
    D. If the merchandise was exported or destroyed but outside the 
bond period, cancel the claim for liquidated damages upon payment of an 
amount between 5 and 10 percent of the claim (depending on aggravating 
or mitigating factors present), but not less than $200.
    1. Examples of aggravating factors:
    a. Importer is uncooperative, e.g., fails to provide information to 
Customs.
    b. A large number of violations of this type by the importer in 
relation to the total number of transactions engaged in.
    c. Importer's willful disregard of or carelessness toward 
responsibilities under applicable statutes, regulations or bond.
    2. Examples of mitigating factors:
    a. Importer cooperates with Customs personnel in resolution of the 
case.
    b. Importer takes immediate remedial action.
    c. Lack of experience in importing.
    d. A small number of violations of this type in relation to the 
number of transactions engaged in.
    E. If Customs designates a TIB entry for examination upon 
exportation or for supervision of destruction and the importer fails to 
obtain export examination or supervision of destruction, cancel the 
claim upon payment of an amount between 10 and 25 percent of the claim, 
but not less than $300, depending on the presence of aggravating or 
mitigating factors.
    F. If the merchandise is sold, the following guidelines should be 
followed.
    1. Grant relief equal to one times the duty on merchandise which is 
sold but later exported within the bond period.
    2. Grant relief to one and one-half times the duty on merchandise 
which is sold but later exported outside the bond period.
    3. If merchandise is sold but later exported outside the bond 
period, grant no relief if the bond amount represents 110 percent of 
the duties on the merchandise.
    G. Grant no relief from the claim for liquidated damages in the 
following cases:
    1. When the merchandise has entered into the commerce of the United 
States. If a petitioner claims the merchandise has been exported or 
destroyed, but does not present satisfactory proof of such exportation 
or destruction, the merchandise shall be presumed to have entered the 
commerce for purposes of these guidelines.
    2. When the importer requests that a TIB entry be amended to a 
consumption entry after the merchandise has been released from Customs 
custody.
    3. When TIB merchandise is sold, but not exported.

III. Guidelines for Cancellation of Claims for Shortage, Irregular 
Delivery, Non-Delivery or Delivery Directly to the Consignee of In-Bond 
Merchandise (19 CFR 18.8)

    A. Documents filed late or merchandise delivered late.
    1. Modified CF 5955A. Notices of liquidated damages incurred for 
this violation may be issued on a modified CF-5955A. If a modified form 
is issued, it shall specify two options from which the petitioner may 
choose to resolve the demand.
    a. Option 1. The bond principal or surety may pay a specified sum 
within 60 days and the case will be closed. By electing this option in 
lieu of petitioning, the principal or surety waives his right to file a 
petition. He may, however, file a supplemental petition, if he does so 
in accordance with the Customs Regulations and has some new fact or 
information which merits consideration in accordance with these 
guidelines.
    b. Option 2. Petition for relief. The bond principal or surety may 
file a petition for relief. By filing a petition for relief, the 
petitioner will no longer be afforded the Option 1 mitigation amount. 
The district director shall grant full relief when the petitioner 
demonstrates that the violation did not occur or that the violation 
occurred solely as a result of Customs error. If the petitioner fails 
to demonstrate that the violation did not occur or that the violation 
occurred solely as a result of Customs error, the district director may 
cancel the claim upon payment of an amount no less than $100 greater 
than the Option 1 amount.
    2. If merchandise is delivered untimely to the port of destination 
or exportation (not within 15 days if transported by air, 30 days if 
transported by vehicle, or 60 days if transported by vessel) but is 
otherwise intact, cancel the claim upon payment of an amount between 
$100 or $500, depending on the presence of aggravating or mitigating 
factors.
    3. If merchandise is delivered timely but the documentation is not 
filed with Customs within 2 days of arrival in the port of delivery, 
cancel the claim upon payment of an amount between $100 and $500, 
depending on the presence of aggravating or mitigating factors.
    4. If the bonded carrier consistently fails to deliver paperwork 
timely and Customs business is impeded by these repeated failures, the 
district director may cancel any claim upon payment of a higher amount 
than the guidelines generally permit. The advice of Headquarters, 
Office of Regulations and Rulings, Penalties Branch, may be sought to 
determine appropriate mitigation.
    B. Failure to deliver or shortage.
    1. If the carrier shows that the merchandise was entered and 
duties, fees and taxes were paid (on any Immediate Transportation 
bonded movement) or that the merchandise was exported but not in 
accordance with regulation (on any Transportation and Exportation or 
Direct Exportation bonded movement), the claim may be cancelled upon 
payment of an amount between $100 and $1,000 depending on the presence 
of aggravating or mitigating factors.
    2. If the bonded carrier can prove that the merchandise was never 
received or landed, the claim should be cancelled without payment.
    3. If the carrier cannot prove that the merchandise was entered and 
duties, taxes and fees paid or that it was properly exported or that it 
was never received or landed, the claim may be cancelled upon payment 
of an amount equal to the duties, fees and taxes that would have been 
due on the subject merchandise had it been entered for consumption plus 
an amount between $100 and $1,000.
    4. If the merchandise delivered short is restricted or prohibited, 
and the carrier proves that an entry summary was filed, estimated 
duties were paid and the merchandise was deemed admissible with that 
entry summary, Customs will cancel the bond claim upon payment of an 
amount between $100 and $1,000.
    5. If the merchandise delivered short is restricted or prohibited, 
and the carrier does not prove that an entry summary was filed, 
estimated duties, taxes and fees were paid or provide a showing that 
the merchandise was deemed admissible, Customs will cancel the bond 
claim upon payment of an amount equal to the estimated duties plus an 
amount between 25 and 50 percent of the value of the merchandise, but 
not less than $250.
    6. If the bonded carrier consistently has shortages and failure to 
deliver cases and Customs business is impeded by these repeated 
failures, the district director may cancel any claim upon payment of a 
higher amount than the guidelines generally permit. The advice of 
Headquarters, Office of Regulations and Rulings, Penalties Branch, may 
be sought to determine appropriate mitigation.
    C. Delivery of merchandise directly to the consignee.
    1. If the carrier can show that the merchandise was entered and 
duties, taxes and fees paid, the claim may be cancelled upon payment of 
an amount between $100 and $1,000 depending on the presence of 
aggravating or mitigating factors.
    2. If the carrier can prove that the merchandise was never received 
or landed, the claim should be cancelled without payment.
    3. If the carrier cannot prove that the merchandise was entered and 
duties, taxes and fees paid or or that it was never received or landed, 
the claim should be cancelled upon payment of an amount equal to the 
duties, fees and taxes that would have been due on the subject 
merchandise had it been entered for consumption plus an amount between 
$100 and $1,000.
    4. If the merchandise delivered directly to the consignee is 
restricted or prohibited, and the carrier proves that an entry summary 
was filed, estimated duties, taxes and fees were paid and the 
merchandise was deemed admissible with that entry summary, the claim 
should be cancelled upon payment of an amount between $100 and $1,000.
    5. If the merchandise delivered directly to the consignee is 
restricted or prohibited, and the carrier does not prove that an entry 
summary was filed, estimated duties, taxes and fees were paid or 
provide a showing that the merchandise was deemed admissible, Customs 
will cancel the bond claim upon payment of an amount equal to the 
estimated duties plus an amount between 25 and 50 percent of the value 
of the merchandise, but not less than $250.
    6. If the bonded carrier consistently delivers merchandise directly 
to the consignee, the district director may cancel any claim upon 
payment of a higher amount than the guidelines generally permit. The 
advice of Headquarters, Office of Regulations and Rulings, Penalties 
Branch, may be sought to determine appropriate mitigation.
    7. If merchandise delivered directly to the consignee qualifies for 
entry via the informal entry process, and entry is made and duties, 
fees and taxes are paid on the improperly delivered shipment through 
that informal entry process, then the claim may be cancelled upon 
payment of an amount between $50 and $500, depending on the presence of 
aggravating or mitigating factors.
    8. If merchandise is delivered directly to the consignee, and entry 
is made and duties, fees and taxes are paid on the improperly delivered 
shipment and the carrier brings the violations to the attention of 
Customs, the claims may be cancelled upon payment of $25.
    D. Aggravating and mitigating factors.
    1. Examples of aggravating factors:
    a. Carrier is uncooperative, e.g., fails to provide information to 
Customs.
    b. A large number of violations of this type by the carrier in 
relation to the total number of transactions engaged in.
    c. Carrier's willful disregard of or carelessness toward 
responsibilities under applicable statutes, regulations or bond.
    2. Examples of mitigating factors:
    a. Carrier cooperates with Customs personnel in resolution of the 
case.
    b. Carrier takes immediate remedial action.
    c. Carrier inexperienced in handling in-bond shipments of the type 
in question.
    d. A small number of violations of this type in relation to the 
number of transactions engaged in.
    e. Circumstances intervened that were beyond the carrier's control 
(not negligence or error).

IV. Guidelines for Cancellation of Claims Involving Failure To 
Redeliver Merchandise Into Customs Custody or Failure To Comply With a 
Notice of Refusal of Admission Issued by Another Government Agency (19 
CFR 141.113, 113.62(d) or 113.62(e))

    A. Statutes and regulations enforced on behalf of the Food and Drug 
Administration (FDA) and the Consumer Product Safety Commission (CPSC).
    1. The provisions of 21 CFR 1.97 (FDA Regulations) and 16 CFR 
1500.271 (CPSC Regulations) require that the district director of 
Customs and the district director of the other agency be in agreement 
as to the amount to be accepted in cancellation of the claim for 
liquidated damages. All petitions for relief received in FDA and CPSC 
cases must be referred to those agencies for recommendation. By 
regulation Customs must follow the recommendation of FDA or CPSC.
    2. EXCEPTION: When the sole requirement which has been imposed by 
FDA on refused merchandise is exportation or destruction under Customs 
supervision, apply guidelines to be used in the case of other Customs 
statutes or regulations in Subparagraph K below. See 21 CFR 1.97 and HQ 
Ruling 617367.
    3. If any merchandise which is requested for examination by the 
other agency is available for examination at the place designated by 
such other agency but is not examined for any reason, Customs will not 
issue liquidated damages with regard to such merchandise or will cancel 
any claim related to such merchandise without payment.
    4. If there is a compelling reason to depart from the 
recommendation of the other agency, state such reason in a referral 
memorandum and forward the case record to Customs Headquarters, Office 
of Regulations and Rulings, Penalties Branch.
    B. Statutes and regulations enforced on behalf of other agencies 
(not FDA or CPSC).
    1. Any petition received should be forwarded to the other agency 
for recommendation. As a rule, the recommendation of the other agency 
as to appropriate mitigation will be followed.
    2. Customs is not required by regulation to follow the 
recommendation of agencies other than FDA and CPSC. If the district 
director of Customs finds the recommendation of the other agency to be 
arbitrary and capricious, he may modify the recommendation to be 
consistent with Customs guidelines.
    C. Country of origin marking cases--merchandise marked with the 
country of origin after liquidation of the entry and outside the 30-day 
marking period.
    1. If the merchandise is marked outside the 30-day marking period 
and after liquidation of the entry, the entry should be reliquidated if 
liquidation has not become final, and marking duties should be assessed 
and collected.
    2. If marking duties have been assessed and collected, cancel the 
claim upon payment of one percent of the value of the merchandise, but 
not less than $100 for a first-time violation. Cancel upon payment of 
between one and five percent but not less than $250 for a subsequent 
violation.
    3. Grant no relief in any case until marking duties are assessed 
and collected; however, if liquidation is final and marking duties 
cannot be assessed, cancel upon payment of an amount equal to 11 
percent of the value of the merchandise but not less than $100 for a 
first violation and between 11 and 15 percent but not less than $250 
for a subsequent violation.
    D. Country of origin marking cases--merchandise marked outside the 
30-day period, but before liquidation.
    1. If the merchandise is properly marked with the country of origin 
outside the 30-day period but before liquidation of the entry, 
liquidated damages are appropriate, but marking duties are not due.
    2. For a first time violation, if the merchandise has been marked 
under Customs supervision outside the 30-day period, cancel the claim 
upon payment of an amount equal to one percent of the value of the 
merchandise, but not less than $100.
    3. For subsequent violations, cancel upon payment of an amount 
between one and five percent of the value of the merchandise but not 
less than $250 depending upon the number of violations and the presence 
of aggravating and mitigating factors.
    E. Marking cases--merchandise not marked with the country of 
origin.
    1. Relief from liquidated damages incurred is contingent upon 
deposit of marking duties. See 19 CFR 134.54(c).
    2. For a first-time violation, where marking duties have been 
assessed and collected, cancel the claim upon payment of an amount 
between 10 and 25 percent of the value depending on the presence of 
aggravating or mitigating factors.
    3. If it is a subsequent violation and marking duties have been 
assessed and collected, cancel the claim upon payment of an amount 
between 25 and 50 percent of the value of the merchandise.
    4. If marking duties have been assessed but not collected, grant no 
relief. If liquidation of the entry has become final, thereby barring 
the assessment of marking duties, cancel as follows:
    a. If it is a first-time violation, cancel the claim for liquidated 
damages upon payment of an amount between 20 and 35 percent of the 
value.
    b. If it is a second or subsequent violation, cancel the claim for 
liquidated damages upon payment of an amount between 35 and 60 percent 
of the value.
    5. Examples of aggravating factors:
    a. Offender is uncooperative, e.g., fails to provide information to 
Customs when requested.
    b. A large number of violations of this type by the offender in 
relation to the total number of transactions engaged in.
    c. Offender's experience in importing.
    d. Offender's willful disregard or carelessness toward 
responsibilities under the applicable statutes or regulations.
    6. Examples of mitigating factors:
    a. Contributory Customs error, e.g., offender demonstrates that he 
acted in accordance with instructions given by Customs personnel.
    b. Offender cooperates with Customs personnel in resolution of the 
case.
    c. Offender takes immediate remedial action.
    d. Offender's lack of importing experience.
    e. A small number of violations of this type by the offender in 
relation to the number of transactions engaged in.
    F. False designation of origin cases.
    1. When merchandise is marked with a false designation of origin, 
and a claim for liquidated damages for failure to redeliver that 
merchandise results and the offender can demonstrate that the 
merchandise was marked with the correct country of origin outside the 
30-day redelivery period, the claim should be cancelled upon payment of 
an amount equal to one percent of the value of the merchandise, but not 
less than $100 for a first violation. For subsequent violations of this 
type, the claim should be cancelled upon payment of an amount equal to 
one to five percent of the value of the merchandise, but not less than 
$250.
    2. When merchandise is marked with a false designation of origin 
and the merchandise is not properly marked with the true country of 
origin and a first violation is involved, the claim should be cancelled 
upon payment of an amount between 25 and 50 percent of the value of the 
merchandise.
    3. For a subsequent violation where the merchandise is not properly 
marked with the true country of origin, the claim should be cancelled 
upon payment of an amount equal to no less than 50 percent of the value 
of the merchandise.
    G. Quota/visa violative merchandise.
    1. If the importer fails to redelivery visa-violative merchandise, 
but subsequent to the assessment of the claim produces a valid visa or 
visa waiver, cancel the claim upon payment of an amount between one and 
five percent of the value of the merchandise, but not less than $100, 
depending on the presence of aggravating or mitigating factors.
    2. If no visa is ever produced, and it is a first-time violation, 
cancel the claim upon payment of an amount between 20 and 30 percent of 
the value of the merchandise, depending on the presence of aggravating 
or mitigating factors.
    3. If no visa is ever produced, and it is a subsequent violation, 
cancel the claim upon payment of no less than 40 percent of the value 
of the merchandise.
    4. If the importer fails to redeliver quota merchandise, and it is 
a first-time violation, cancel the claim upon payment of an amount 
between 25 and 50 percent of the value of the merchandise, depending on 
the presence of aggravating or mitigating circumstances.
    5. For subsequent quota redelivery violations, cancel the claim 
upon payment of no less than 50 percent of the value of the 
merchandise.
    6. For merchandise that is not redelivered which is subject to both 
quota and visa restrictions, follow guidelines for cancellation of 
claims relating to quota-violative merchandise.
    H. Copyright-violative merchandise.
    1. If the importer fails to redeliver copyright-violative 
merchandise, but after assessment of liquidated damages receives a 
retroactive licensing of the merchandise from the copyright holder, 
cancel the claim upon payment of an amount between one and five percent 
of the value of the merchandise, but not less than $100.
    2. If no authorization is received from the copyright holder, 
cancel a first-time violation upon payment of an amount between 20 and 
50 percent of the value of the merchandise, depending on the presence 
of aggravating or mitigating factors.
    3. For subsequent violations where no authorization of the 
copyright holder is received, cancel the claim upon payment of an 
amount equal to no less than 50 percent of the value of the 
merchandise. In order to receive any relief, extraordinary mitigating 
factors must be shown.
    I. Trademark-violative merchandise.
    1. If the importer fails to redeliver trademark-violative 
merchandise, but after assessment of liquidated damages receives a 
retroactive licensing of the merchandise from the trademark holder, 
cancel the claim upon payment of an amount between one and five percent 
of the value of the merchandise, but not less than $100.
    2. If no authorization is received from the trademark holder, 
cancel a first-time violation upon payment of an amount between 20 and 
50 percent of the value of the merchandise, depending on the presence 
of aggravating or mitigating factors.
    3. For subsequent violations where no authorization of the 
trademark holder is received, cancel the claim upon payment of an 
amount equal to no less than 50 percent of the value of the 
merchandise. In order to receive any relief, extraordinary mitigating 
factors must be shown.
    4. As a general rule, if the merchandise is counterfeit, no relief 
shall be granted. If the merchandise is genuine, that fact shall be 
considered as a mitigating factor in accordance with the above 
guidelines.
    J. Failure to provide a sample.
    1. If the importer fails to provide a sample within the time period 
prescribed, but then does provide the sample subsequent to the issuance 
of liquidated damages and can prove to the satisfaction of the import 
specialist that the sample is, in fact, from the shipment in question 
and the merchandise is not violative of any provision of law regarding 
its admissibility, the claim for liquidated damages may be cancelled 
upon payment of an amount between one and five percent of the value of 
the merchandise in the shipment, but not less than $100.
    2. If the importer fails to provide a sample, cancel the claim 
consistent with guidelines for the violation which the sample was being 
examined. For example, if a sample is sought to determine whether 
merchandise is copyright-violative, and the importer fails to provide a 
sample, cancel the claim consistent with guidelines for failure to 
redeliver copyright-violative merchandise where no retroactive license 
is given.
    K. Other Customs-enforced statutes and regulations.
    1. If the merchandise is not redelivered for any reason not 
enumerated above, the claim may be cancelled upon payment of between 1 
and 10 percent of the value of the merchandise depending upon the 
presence of aggravating or mitigating factors.
    2. For subsequent violations, cancel the claim upon payment of an 
amount between 10 and 50 percent of the value of the merchandise, 
depending upon the presence of aggravating or mitigating factors.
    3. If the issue is Customs supervision of exportation or 
destruction of merchandise which is the subject of a notice of refusal 
of admission issued by FDA or CPSC, and such exportation or destruction 
occurs, but not under supervision, cancel the claim in accordance with 
guidelines enumerated in subparagraphs K(1) or K(2) directly above.
    4. If exportation or destruction (when ordered) never occurs, grant 
no relief.
    5. Claims for liquidated damages arising for failure to comply with 
special marking for watch and clock movements, cases and dials as 
required by Chapter 91, Additional U.S. Note 4, United States Tariff 
Schedule (19 U.S.C. 1202) shall be cancelled in accordance with the 
guidelines promulgated subparagraphs K(1) or K(2) directly above.

V. Guidelines for Cancellation of Claims Arising From Failure To 
Provide Missing Documents (19 CFR 113.42)

    A. Discretionary application of $25 provision. The regulatory 
provisions which permit cancellation of the bond upon payment of $25 
are discretionary. In lieu of following such provision, the following 
guidelines should be used.
    B. Issuance of modified CF-5955A. A modified CF5955A similar to 
that issued in cases involving late filing of entry summaries shall be 
issued in missing document cases.
    1. Option 1.
    a. Petitioner may pay a specified sum within 60 days and the case 
will be closed.
    b. Such payment shall act as a waiver of his right to file a 
petition.
    2. Option 2.
    a. Normal petitioning procedures are in effect.
    b. Mitigation shall not be permitted to an amount less than $100 
greater than that afforded under Option 1 unless extraordinary 
mitigating factors can be shown.
    c. Petitions shall be limited to the following issues:
    i. Circumstances causing the delay in filing of the document.
    ii. Extent of the lateness.
    iii. Past record of the importer.
    iv. Lack of intent to file documents untimely.
    C. Missing documents not provided. When a claim for liquidated 
damages is issued and the missing documents have not been provided (as 
opposed to being provided untimely), a modified CF-5955A should not be 
issued.
    D. Calculation of mitigated amount.
    1. Document other than invoice filed late--cancel upon payment of 
$100.
    2. Invoice filed late:
    a. No resulting duty advance--cancel upon payment of $100.
    b. Resulting duty advance--cancel upon payment of $100 plus 0.1 
percent of amount of duty advance for each calendar day late.
    3. Document not filed:
    a. If absence of document will not affect duty due, cancel upon 
payment of $200.
    b. If absence of document impedes Customs ability to appraise 
merchandise, cancel upon payment of $200 plus further duties determined 
by Customs to be owing after a reasonable appraisal of merchandise is 
made.
    4. Document upon which a claim of conditionally free or reduced 
duty entry is based:
    a. Filed late--Cancel upon payment of $100 plus 0.1 percent per 
calendar day late of duty that would have been due had the entry been 
liquidated as fully dutiable. This mitigation is not affected by the 
fact that the late-filed documents substantiated the conditionally free 
or reduced duty claim.
    b. Non-filing.
    i. For the first violation cancel upon payment of $200 plus 
liquidation of the entry as fully dutiable.
    ii. For second or subsequent violation, cancel upon payment of $400 
plus liquidation of the entry as fully dutiable.
    E. Continuous course of conduct.
    1. By an importer. If there is a continuing course of conduct by an 
importer where conditionally free entry is claimed, but documents 
supporting such claim are regularly missing from the entry and are not 
provided, the presumption after the fourth violation shall be one of 
bad faith in the filing of the entry as conditionally free. No relief 
from the claim should be afforded.
    2. By a customs broker. If the violator is a Customs broker, a 
civil monetary penalty for violation of the provisions of title 19, 
United States Code, section 1641, may be appropriate.
    F. Second or subsequent offenses.
    Except as noted in subparagraph E above, second or subsequent 
offenses will not be considered in cancellation of claims other than as 
relating to importers' past record in consideration of petitions for 
relief.

VI. Guidelines for Cancellation of Claims Arising From Failure To 
Timely File Shipper's Export Declarations (15 CFR 30.24)

    A. Notification of liquidated damages; modified CF-5955A. Notices 
of liquidated damages incurred may be issued on a modified CF-5955A. 
The modified form shall specify two options from which the petitioner 
may choose to resolve the demand.
    1. Option 1. He may pay a specified sum within 60 days and the case 
will be closed. By electing this option in lieu of petitioning, he 
waives his right to file a petition. He may, however, file a 
supplemental petition, if he does so in accordance with the Customs 
Regulations and has some new fact or information which merits 
consideration in accordance with these guidelines.
    2. Option 2. Petition for relief. The bond principal or surety may 
file a petition for relief. By filing a petition for relief, the 
petitioner will no longer be afforded the Option 1 mitigation amount. 
The district director shall grant full relief when the petitioner 
demonstrates that the violation did not occur or that the violation 
occurred solely as a result of Customs error. If the petitioner fails 
to demonstrate that the violation did not occur or that the violation 
occurred solely as a result of Customs error, the district director may 
cancel the claim upon payment of an amount no less than $100 greater 
than the Option 1 amount; however, in no case can the amount afforded 
in mitigation exceed the amount of the original claim.
    B. Assessment amounts.
    1. $50 per day for each of first three days late.
    2. $100 per day for each day late beyond three.
    3. Maximum assessment is $1,000.
    C. Mitigation guidelines.
    1. For each offense, the claim for liquidated damages may be 
canceled upon payment of an amount between 25 and 50 percent of the 
claim, but not less than $100.
    2. Note: All claims assessed for $50 or $100 (1 or 2 days late) 
will receive no mitigation.
    3. If a carrier has a poor record of compliance with shipper's 
export declaration filing requirements as compared to other carriers in 
a district, and mitigation in accordance with subparagraph (B)(1) above 
has had no deterrent effect, relief from the claim for liquidated 
damages may be denied.

VII. Guidelines for Cancellation of Claims Arising From Violation of 
Warehouse Proprietor's Bond (19 CFR Part 19, 19 CFR 113.63)

    The following guidelines apply to violations involving bonded 
warehouse proprietors and duty-free store operators.
    A. Defaults Involving Merchandise. Defaults involving merchandise 
include violations involving merchandise which:
    1. Cannot be located or accounted for in a bonded warehouse.
    2. Has been removed from a bonded warehouse without a Customs 
permit.
    3. Has been deposited, manipulated, manufactured, or destroyed in a 
bonded warehouse:
    a. Without proper Customs permit;
    b. Not in accordance with the description of the activity in the 
permit; or
    c. In the case of Class 6 warehouses, not manufactured in 
accordance with the formula specified in section 19.13(e) of the 
Customs Regulations (19 CFR 19.13(e)).
    B. Defaults Not Involving Merchandise. Defaults not involving 
merchandise include those instances of failure, other than those 
involving merchandise, to comply with Customs laws and regulations. The 
same act shall not be regarded as both a default involving merchandise 
and a default not involving merchandise.
    C. Defaults Involving Merchandise; Petitions. Petitions received in 
cases arising from defaults involving merchandise should be processed 
in accordance with the following.
    1. If the breach resulted from clerical error or mistake (a non-
negligent inadvertent error), the claim should be cancelled without 
payment.
    2. If the breach resulted from negligence but no threat to the 
revenue occurred (e.g., the merchandise was not manipulated in 
accordance with the permit to manipulate) the claim should be cancelled 
upon payment of an amount between one and 15 percent of the value of 
the merchandise involved in the breach, but not less than $100 nor more 
than $10,000. If the merchandise involved in the breach is restricted 
merchandise, that shall be considered an aggravating factor which shall 
result in mitigation on the higher end of the range.
    3. If the breach resulted from negligence and a potential loss of 
revenue resulted (e.g., merchandise cannot be located in the warehouse, 
merchandise is removed from the warehouse without a permit), the claim 
shall be cancelled upon payment of an amount between one and three 
times the loss of revenue (loss of revenue to include duties, fees and 
taxes), but not less than $100. If the merchandise involved in the 
breach is restricted merchandise, the claim shall be cancelled upon 
payment of an amount between three and five times the loss revenue but 
in no case less than 10 percent of the value of such merchandise.
    4. If the breach is intentional (e.g., the warehouse proprietor 
conspires to remove merchandise from the warehouse without proper 
entry), there will be no relief granted from liquidated damages.
    5. Aggravating factors.
    a. Principal's failure or refusal to cooperate with Customs.
    b. Large number of violations compared to number of transactions 
handled.
    c. Experience of principal.
    d. Principal's carelessness or willful disregard toward its 
responsibilities.
    6. Mitigating factors.
    a. Contributory error by Customs.
    b. Small number of violations compared to number of transactions 
handled.
    c. Remedial action taken by principal.
    d. Cooperation with Customs.
    e. Lack of experience of principal.
    f. Merchandise which cannot be located or released without permit 
is returned to Customs custody.
    D. Defaults Not Involving Merchandise; Modified CF 5955A. Defaults 
not involving merchandise shall be processed in accordance with the 
following guidelines.
    1. Modified CF 5955A. Notices of liquidated damages incurred may be 
issued on a modified CF-5955A. The modified form shall specify two 
options from which the petitioner may choose to resolve the demand.
    a. Option 1. He may pay a specified sum within 60 days and the case 
will be closed. By electing this option in lieu of petitioning, he 
waives his right to file a petition. He may, however, file a 
supplemental petition, if he does so in accordance with the Customs 
Regulations and has some new fact or information which merits 
consideration in accordance with these guidelines.
    b. Option 2. Petition for relief. The bond principal or surety may 
file a petition for relief. By filing a petition for relief, the 
petitioner will no longer be afforded the Option 1 mitigation amount. 
The district director shall grant full relief when the petitioner 
demonstrates that the violation did not occur. If the petitioner fails 
to demonstrate that the violation did not occur, the district director 
may cancel the claim upon payment of an amount no less than $100 
greater than the Option 1 amount.
    2. Maximum Assessments. In cases involving violations which do not 
involve merchandise which are assessed at $1,000 for each business day 
that the violation continues, a maximum of $10,000 shall be assessed 
for any one such continuing violation unless the district director can 
articulate a legitimate enforcement purpose for exceeding said limit. 
These claims shall be cancelled in conformance with the terms of these 
guidelines.
    3. Clerical Error. If the breach resulted from clerical error, the 
claim may be cancelled without payment.
    4. Negligence. If the breach resulted from negligence, the claim 
may be cancelled upon payment of an amount between $100 and $250 per 
default actually assessed, depending on the presence of aggravating or 
mitigating factors. For example, if a document is filed 100 days late, 
Customs, by policy, will generally limit the assessment to $10,000. 
Mitigation will be based on the $10,000 actual assessment and not 
relate to the $100,000 potential assessment.
    5. Intentional violation. If the breach was intentional, no relief 
shall be granted.

VIII. Guidelines for Cancellation of Claims Arising From Violation of 
Airport Security Regulations (19 CFR 122.181 et. seq.)

    A. Assessment of claims for liquidated damages; Modified CF 5955A. 
Notices of liquidated damages incurred may be issued on a modified CF-
5955A if the violation is of a type that warrants mitigation. The 
modified form shall specify two options from which the petitioner may 
choose to resolve the demand. The modified form should not be offered 
in any situation where the district director anticipates that 
substantial factual or legal issues may be raised.
    1. Option 1. He may pay a specified sum within 60 days and the case 
will be closed. By electing this option in lieu of petitioning, he 
waives his right to file a petition. He may, however, file a 
supplemental petition, if he does so in accordance with the Customs 
Regulations and has some new fact or information which merits 
consideration in accordance with these guidelines.
    2. Option 2. Petition for relief. Pursuant to the provisions of 19 
CFR 172.11, the bond principal or surety may file a petition for 
relief. By filing a petition for relief, the petitioner will no longer 
be afforded the Option 1 mitigation amount. The district director shall 
grant full relief when the petitioner demonstrates that the violation 
did not occur or that the violation occurred solely as a result of 
Customs error. If the petitioner fails to demonstrate that the 
violation did not occur or that the violation occurred solely as a 
result of Customs error, the district director may cancel the claim 
upon payment of an amount no less than $100 greater than the Option 1 
amount.
    B. Mitigation Guidelines.
    1. Failure to conduct a background investigation or failure to 
retain background investigation records:
    a. No mitigation unless extraordinary mitigating circumstances 
exist.
    b. An example of an extraordinary mitigating circumstance would be 
destruction of records by accidental fire or act of God.
    2. Unauthorized entry in secured area, failure to openly display or 
possess identification card, strip or seal or failure to surrender 
identification upon demand by an authorized Customs officer, cancel the 
claim upon payment of an amount between $250 and $500.
    3. Failure to return, failure to report loss or theft of 
identification card, strip or seal or failure to notify district 
director that employee no longer requires access to a secured area:
    a. First violation--cancel upon payment of $500.
    b. Second or subsequent violation--grant no relief.
    4. Presentation of an identification card, strip or seal by a 
person other than to whom it was issued:
    a. For a first violation, cancel without payment if the bond 
principal can show that it was unaware that its employee, agent or 
contractor used the card, strip or seal in an improper manner and it 
had given warnings about such conduct to all its employees, agents or 
contractors.
    b. For a subsequent violation against a bond principal who has 
received full cancellation of a claim as described in (B)(4)(a) above, 
cancel the claim upon payment of $200.
    c. For any violation where the bond principal was aware that its 
employees, agents or contractors were acting in this improper manner, 
no relief shall be granted.
    5. Refusal of an employee, agent or contractor to obey any proper 
order of a Customs officer or any Customs order, rule or regulation.
    a. For a first violation, cancel without payment if the bond 
principal can show that it was unaware that its employee, agent or 
contractor had acted contrary to proper order, rule or regulation and 
it had given warnings about such conduct to all its employees, agents 
and contractors.
    b. For a subsequent violation against a bond principal who has 
received full cancellation of a claim as described in subparagraph 
(B)(5)(a) above, cancel upon payment of between $200 and $500.
    c. For any violation where the bond principal was aware that its 
employees, agents or contractors were acting in this improper manner, 
no relief shall be granted.

IX. Guidelines for Cancellation of Claims Arising From Violation of 
Foreign Trade Zone Regulations (19 CFR Part 146, 19 CFR 113.73)

    A. Defaults Involving Merchandise. Defaults involving merchandise 
include those violations relating to merchandise which:
    1. Cannot be located or accounted for in the activated area of a 
foreign trade zone;
    2. Has been removed from the activated area of the zone without a 
proper Customs permit; or
     3. Has been admitted, manipulated, manufactured, exhibited, or 
destroyed in the activated area of a zone:
    a. Without proper Customs permit; or
    b. Not in accordance with the description of the activity in the 
Customs permit.
    B. Defaults Not Involving Merchandise. Default not involving 
merchandise means any instance of failure, other than one involving 
merchandise or late payment of the annual fee, to comply with the laws 
or regulations governing foreign trade zones. A default involving one 
zone lot or unique identifier may not be combined with a default under 
another lot or unique identifier.
    C. Defaults Involving Merchandise; Petitions. Claims arising from 
defaults involving merchandise should be processed in accordance with 
the following:
    1. If the breach resulted from clerical error or mistake (a non-
negligent inadvertent error), the claim should be cancelled without 
payment.
    2. If the breach resulted from negligence but no threat to the 
revenue occurred (e.g., the merchandise was not manipulated in 
accordance with the permit to manipulate) the claim should be cancelled 
upon payment of an amount between one and 15 percent of the value of 
the merchandise involved in the breach, but not less than $100 nor more 
than $10,000. If the merchandise involved in the breach is restricted 
merchandise, that shall be considered an aggravating factor which shall 
result in mitigation on the higher end of the range. If the merchandise 
involved in the breach is domestic status merchandise, that shall be 
considered a mitigating factor which shall result in mitigation on the 
lower end of the range.
    3. If the breach resulted from negligence and a potential loss of 
revenue resulted (e.g., merchandise cannot be located in the zone, 
merchandise is removed from the zone without a permit), the claim shall 
be cancelled upon payment of an amount between one and three times the 
loss of revenue (loss of revenue to include duties, fees and taxes). If 
the merchandise involved in the breach is restricted merchandise, the 
claim shall be cancelled upon payment of an amount between three and 
five times the loss revenue but in no case less than 10 percent of the 
value of such merchandise.
    4. If the breach is intentional (e.g., the foreign trade zone 
operator conspires to remove merchandise from the warehouse zone 
without proper entry being made), there will be no relief granted from 
liquidated damages.
    5. Aggravating factors.
    a. Principal's failure or refusal to cooperate with Customs.
    b. Large number of violations compared to number of transactions 
handled.
    c. Experience of principal.
    d. Principal's carelessness or willful disregard toward its 
responsibilities.
    6. Mitigating factors.
    a. Contributory error by Customs.
    b. Small number of violations compared to number of transactions 
handled.
    c. Remedial action taken by principal.
    d. Cooperation with Customs.
    e. Lack of experience of principal.
    f. Merchandise which cannot be located or which has been removed 
without permit is returned to Customs custody.
    g. The merchandise involved in the breach is domestic status 
merchandise.
    D. Defaults Not Involving Merchandise; Modified CF 5955A. Defaults 
not involving merchandise shall be processed in accordance with the 
following guidelines.
    1. Modified CF 5955A. Notices of liquidated damages incurred may be 
issued on a modified CF-5955A. The modified form shall specify two 
options from which the petitioner may choose to resolve the demand.
    a. Option 1. He may pay a specified sum within 60 days and the case 
will be closed. By electing this option in lieu of petitioning, he 
waives his right to file a petition. He may, however, file a 
supplemental petition, if he does so in accordance with the Customs 
Regulations and has some new fact or information which merits 
consideration in accordance with these guidelines.
    b. Option 2. Petition for relief. The bond principal or surety may 
file a petition for relief. By filing a petition for relief, the 
petitioner will no longer be afforded the Option 1 mitigation amount. 
The district director shall grant full relief when the petitioner 
demonstrates that the violation did not occur. If the petitioner fails 
to demonstrate that the violation did not occur, the district director 
may cancel the claim upon payment of an amount no less than $100 
greater than the Option 1 amount.
    2. Maximum Assessments. In cases involving violations which do not 
involve merchandise which are assessed at $1,000 for each business day 
that the violation continues, a maximum of $10,000 shall be assessed 
for any one such continuing violation unless the district director can 
articulate a legitimate enforcement purpose for exceeding said limit. 
These claims shall be cancelled in conformance with the terms of these 
guidelines.
    3. Clerical Error. If the breach resulted from clerical error, the 
claim may be cancelled without payment.
    4. Negligence. If the breach resulted from negligence, the claim 
may be cancelled upon payment of an amount between $100 and $250 per 
default actually assessed, depending on the presence of aggravating or 
mitigating factors. For example, if a document is filed 100 days late, 
Customs, by policy, will generally limit the assessment to $10,000. 
Mitigation will be based on the $10,000 actual assessment and not 
relate to the $100,000 potential assessment.
    5. Intentional Breach. If the breach was intentional, no relief 
shall be granted.
    E. Cancellation of claims for late payment of the annual fee.
    1. If the late payment resulted from clerical error or mistake, the 
claim may be cancelled upon payment of the amount due but not paid.
    2. If the late payment resulted from negligence, cancel upon 
payment of the amount due but not paid plus the following percent of 
that amount for each day payment is in arrears:
    a. First seven calendar days--not less than one-third of one 
percent nor more than three-fourths of one percent per day.
    b. Second seven calendar days--not less than one and one-third 
percent nor more than one and three-fourths percent per day.
    c. After the fourteenth calendar day--not less than two and one-
third nor more than two and three-fourths percent per day.
    3. If the late payment was intentional, no relief shall be granted.

X. Guidelines for Cancellation of Claims Arising From the Failure To 
Hold Merchandise at the Place of Examination (19 CFR 113.62(f))

    A. Failure to Hold or Transfer Merchandise. If the principal seeks 
and obtains permission from Customs to have merchandise examined at a 
place other than at a wharf or other place in the charge of a Customs 
officer and fails to hold merchandise at the place of examination or 
fails to transfer the merchandise to another place upon instruction 
from Customs obtained before the merchandise was released, the claim 
will be cancelled upon the following terms.
    1. If either the bond principal or surety files an entry summary 
and pays estimated duties, taxes and fees on the merchandise, Customs 
may cancel the bond claim upon payment of an amount between $100 and 
$1,000 if the merchandise was not suspected by Customs to be restricted 
or prohibited.
    2. If neither the bond principal nor surety files an entry summary 
and pays estimated duties, taxes and fees on the merchandise, Customs 
will cancel the bond claim upon payment of an amount equal to the 
estimated duties that would have been due plus an amount between $100 
and $1,000 if the merchandise was not suspected by Customs to be 
restricted or prohibited.
    3. If the merchandise not delivered to or retained at the 
examination site is restricted or prohibited, and the bond principal or 
surety proves that an entry summary was filed, estimated duties, taxes 
and fees were paid and the merchandise was deemed admissible with that 
entry summary, Customs will cancel the bond claim upon payment of an 
amount between $100 and $1,000.
    4. If the merchandise not delivered to or retained at the 
examination site is restricted or prohibited, and the bond principal or 
surety does not prove that an entry summary was filed, estimated duties 
were paid or provide a showing that the merchandise was deemed 
admissible, Customs will cancel the bond claim upon payment of an 
amount equal to the estimated duties plus an amount between 15 and 25 
percent of the value of the merchandise but not less than $250.
    5. If the violation is determined to be intentional in nature, no 
relief should be afforded.
    B. Failure to Keep Customs Seal or Cording Intact. For a violation 
which involves the failure to keep any Customs seal or cording intact 
until the merchandise is examined, the claim shall be cancelled upon 
payment of an amount between $100 and $500 if there is no evidence to 
indicate the merchandise in the sealed or corded shipment was tampered 
with. If there is evidence of tampering, the claim shall be cancelled 
upon payment of an amount equal to the value of any missing 
merchandise.

XI. Guidelines for Cancellation of Claims Arising From the Failure of a 
Centralized Examination Station (CES) Operator To Retain Merchandise at 
the CES (19 CFR Part 118, 19 CFR 113.63)

    A. Merchandise not delivered to or retained at a Centralized 
Examination Station (CES) by the CES operator.
    1. If an entry summary is filed on the merchandise and estimated 
duties, taxes and fees are paid, Customs may cancel the bond claim upon 
payment of an amount between $100 and $1,000 if the merchandise was not 
suspected by Customs to be restricted or prohibited.
    2. If an entry summary is not filed or estimated duties, taxes and 
fees are not paid on the merchandise, Customs will cancel the bond 
claim upon payment of an amount equal to the estimated duties that 
would have been due plus an amount between $100 and $1,000 if the 
merchandise was not suspected by Customs to be restricted or 
prohibited.
    3. If the merchandise not delivered to or retained at the CES is 
restricted or prohibited, and the bond principal or surety proves that 
an entry summary was filed, estimated duties, taxes and fees were paid 
and the merchandise was deemed admissible with that entry summary, 
Customs will cancel the bond claim upon payment of an amount between 
$100 and $1,000.
    4. If the merchandise not delivered to or retained at the CES is 
restricted or prohibited, and the bond principal or surety does not 
prove that an entry summary was filed, estimated duties, taxes and fees 
were paid or provide a showing that the merchandise was deemed 
admissible, Customs will cancel the bond claim upon payment of an 
amount equal to the estimated duties, taxes and fees plus an amount 
between 25 and 50 percent of the value of the merchandise, but not less 
than $250.
    5. If the violation is determined to be intentional in nature, no 
relief should be afforded.
    B. Failure to maintain records as required by regulation.
    1. If a Centralized Examination Station operator fails to maintain 
records as required by Customs, claims for liquidated damages not 
involving merchandise shall result.
    2. If the breach resulted from clerical error, the claim may be 
cancelled without payment.
    3. If the breach resulted from negligence, the claim may be 
cancelled upon payment of an amount between $100 and $250 per default, 
depending on the presence of aggravating or mitigating factors.
    4. If the breach was intentional, no relief shall be granted.
    5. Aggravating and mitigating factors shall be those enumerated in 
Section VII of these Standards.

XII. Guidelines for Cancellation of Claims When Petitions for Relief 
Are Filed Untimely

    A. Petitions may be accepted at the discretion of the district 
director at any time prior to commencement of any sanctioning action 
against a bond principal or the issuance of any notice to show cause 
against a surety.
    B. If a petition is received untimely, Customs shall first consider 
the petition as though it had been filed timely and shall determine the 
amount of mitigation that would have been afforded in the case had the 
petition been filed timely. For purposes of these guidelines, this 
determination shall be known as the base amount.
    C. Once the base amount has been determined, Customs shall 
calculate the number of calendar days that the petition is late and 
charge an additional mitigation amount of 0.1 percent (.001) per day. 
In no case shall the additional amount be less than $100.
    D. If the bond principal fails to file a petition during the time 
period provided by regulation, but then files a petition during the 
period in which the surety, by regulation, could file a petition, that 
petition will be considered as a late petition. The number of days late 
shall be calculated from the end of the 60-day petitioning period 
afforded to the principal.

    Note: For purposes of all bond cancellation standards (Sections 
I-XII), the term value shall mean value as determined under 19 
U.S.C. 1401a.

[FR Doc. 94-9118 Filed 4-12-94; 12:28 pm]
BILLING CODE 4820-02-P