[Federal Register Volume 62, Number 106 (Tuesday, June 3, 1997)]
[Notices]
[Page 30378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14411]



[[Page 30378]]

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DEPARTMENT OF THE TREASURY

Customs Service
[T.D. 97-46]


Policy Statement Regarding Violations of 19 U.S.C. 1592 by Small 
Entities

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

ACTION: General notice.

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SUMMARY: On March 29, 1996, the President signed the Small Business 
Regulatory Enforcement Fairness Act of 1996. Section 223 of that law 
requires an agency to establish a policy or program which reduces, and 
under appropriate circumstances, waives civil penalties for violations 
of a statutory or regulatory requirement by a small entity. As a first 
step in implementing this law, we are setting forth in this document 
the circumstances and procedures whereby the assessment of a civil 
penalty under the provisions of 19 U.S.C. 1592 will be waived for 
violations committed by small entities.

FOR FURTHER INFORMATION CONTACT: Alan Cohen, Penalties Branch, Office 
of Regulations and Rulings, 202-482-6950.

SUPPLEMENTARY INFORMATION: On March 29, 1996, the President signed the 
Small Business Regulatory Enforcement Fairness Act of 1996, Pub. L. 
104-121, 101 Stat. 847. Section 223 of that law requires an agency to 
establish a policy or program which reduces, and under appropriate 
circumstances, waives civil penalties for violations of a statutory or 
regulatory requirement by a small entity.

Customs Policy Statement Regarding Violations of 19 U.S.C. 1592 by 
Small Entities

    Section 592 of the Tariff Act of 1930 (19 U.S.C. 1592) prohibits 
persons, by fraud, gross negligence or negligence, from entering or 
introducing, attempting to enter or introduce, or aiding and abetting 
the entry or introduction of merchandise into the commerce of the 
United States, by means of statements or acts that are material and 
false, or by means of omissions which are material. Under Customs 
discretionary authority pursuant to sections 592(b)(2) and 618, Tariff 
Act of 1930, as amended (19 U.S.C. 1592(b)(2) and 1618), Customs has 
published national guidelines applicable to its statutory authority to 
assess civil penalties against persons who violate 19 U.S.C. 1592. 
These guidelines provide for a reduction in the initial assessment of 
civil penalties, and a reduction in the penalties amount found to be 
ultimately due, because of the presence of specified mitigating 
factors.
    In considering petitions filed pursuant to sections 592(b)(2) and 
618, mitigating factors which apply to small entities include: (1) 
Reasonable reliance on misleading or erroneous advice given by a 
Customs official; (2) cooperation with the investigation beyond that 
expected for an entity under investigation; (3) immediate remedial 
action, including the payment of the actual loss of duties prior to the 
issuance of a penalty notice and within 30 days of the determination of 
the duties owed; (4) inexperience in importing, provided the violation 
is not due to fraud or gross negligence; (5) prior good record, 
provided that the violation is not due to fraud; (6) the inability of 
the alleged violator to pay the penalty claim; (7) extraordinary 
expenses incurred by the violator in cooperating with the investigation 
or in undertaking immediate remedial action; and (8) actual knowledge 
by Customs of a violation not due to fraud, where Customs failed to 
inform the entity so that it could have taken earlier corrective 
action. This list of factors is not exclusive.
    In compliance with the mandate of the Small Business Regulatory 
Enforcement Fairness Act of 1996, the Customs Service is implementing a 
procedure whereby, under appropriate circumstances, the issuance of a 
penalty notice under 19 U.S.C. 1592(b)(2) will be waived for businesses 
qualifying as small business entities. Specifically, an alleged 
violator which has been issued a prepenalty notice under 19 U.S.C. 
1592(b)(1) may assert in its response to the prepenalty notice that it 
is a small business entity, as defined in section 221(1) of the Small 
Business Regulatory Enforcement Fairness Act of 1996, and in 5 U.S.C. 
601, and that all of the following circumstances are present: (1) The 
small entity has taken corrective action within a reasonable correction 
period, including the payment of all duties, fees and taxes owed as a 
result of the violation within 30 days of the determination of the 
amount owed; (2) the small entity has not been subject to other 
enforcement actions by Customs; (3) the violation did not involve 
criminal or willful conduct, and did not involve fraud or gross 
negligence; (4) the violation did not pose a serious health, safety or 
environmental threat, and (5) the violation occurred despite the small 
entity's good faith effort to comply with the law.
    The alleged violator will have the burden of establishing, to the 
satisfaction of the Customs officer issuing the prepenalty notice, that 
it qualifies as a small entity as defined in section 221(3) of the 
Small Business Regulatory Enforcement Fairness Act of 1996, and that 
all five of the above circumstances are present. In establishing that 
it qualifies as a small entity, the alleged violator should provide 
evidence that it is independently owned and operated; that is, there 
are no related parties (domestic or foreign) as defined in 19 U.S.C. 
1401a(g)(1), that would disqualify the business as a small business 
entity. Furthermore, the alleged violator must establish that it is not 
dominant in its field of operation. Finally, the alleged violator must 
provide evidence, including tax returns for the previous three years 
and a current financial statement from an independent auditor, of its 
annual average gross receipts over the past three years, and its 
average number of employees over the previous twelve months.
    Each claim by an alleged violator that it qualifies as a small 
business entity will be considered on a case by case basis. In 
considering such claims, the Customs Service will consult the size 
standards set by the Small Business Administration, 13 CFR 
Sec. 121.201, for guidance in determining whether the alleged violator 
qualifies as a small business. If the alleged violator's claims for a 
waiver of the penalty under the Small Business Regulatory Enforcement 
Fairness Act of 1996 are not accepted and a penalty notice is issued, 
or if the alleged violator fails to assert a claim for a waiver of the 
penalty under this Act when the prepenalty notice is issued, the 
alleged violator may pursue its claim for a waiver of the penalty in a 
petition filed pursuant to 19 U.S.C. 1592(b)(2).
    The policies set forth in this notice are issued pursuant to the 
discretionary authority granted to the Secretary of the Treasury under 
19 U.S.C. 1618 to remit and mitigate penalties, and do not limit the 
government's right to initiate a civil enforcement action under 19 
U.S.C. 1592(e), nor do they limit the penalty amount which the 
government may seek in such an enforcement act, nor do they confer upon 
the alleged violator any substantive rights in such an enforcement 
action.

    Dated: May 21, 1997.
Samuel H. Banks,
Acting Commissioner of Customs.
[FR Doc. 97-14411 Filed 6-2-97; 8:45 am]
BILLING CODE 4820-02-P