[Federal Register Volume 73, Number 202 (Friday, October 17, 2008)]
[Notices]
[Pages 61891-61894]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-24696]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Assessment and Mitigation of Claims for Liquidated Damages for 
Nonpayment or Late Payment of Estimated Duties Under the Automated 
Commercial Environment (ACE) Periodic Monthly Statement Payment Process 
Test

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: General notice.

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SUMMARY: This document announces guidelines for the assessment of 
claims for liquidated damages and the mitigation of those claims when 
participants in the National Customs Automation Program (NCAP) test for 
the Periodic Monthly Statement Payment Process fail to pay estimated 
duties in the time period prescribed by law. In addition, CBP may 
exercise the authority to suspend any bond principal (the importer of 
record) from participation in the Periodic Monthly Payment Statement 
test and require that the bond principal pay estimated duties and fees 
on an entry-by-entry basis. Further, CBP may exercise the authority to 
require the bond principal to file entry summary documentation with 
estimated duties and fees attached before merchandise is released from 
any CBP port.

DATES: Effective Date: The guidelines are effective on October 17, 
2008.

ADDRESSES: Comments concerning this Notice should be submitted via e-
mail to Jeremy Baskin at [email protected].

SUPPLEMENTARY INFORMATION: 

Background

    On February 4, 2004, Customs and Border Protection (CBP) published 
a General Notice in the Federal Register (69 FR 5362) announcing the 
National Customs Automation Program (NCAP) test for the Periodic 
Monthly Payment Statement Process. The test, which is part of CBP's 
Automated Commercial Environment (ACE), benefits participants by giving 
them access to operational data through the ACE Secured Data Portal 
(``ACE Portal''), which provides them the capability to interact 
electronically with CBP, and by allowing them to deposit estimated 
duties and fees on a monthly basis based on a Periodic Monthly 
Statement generated by CBP.
    As provided in the February 4, 2004 General Notice announcing the 
test,

[[Page 61892]]

participants in the Periodic Monthly Statement test are required to 
schedule entries for monthly payment. A Periodic Monthly Payment 
Statement will list Periodic Daily Statements that have been designated 
for monthly payment. The Periodic Monthly Statement can be created on a 
national basis by an ABI filer. If an importer chooses to file the 
Periodic Monthly Statement on a national basis, it must use its filer 
code and schedule and pay the monthly statements. The Periodic Monthly 
Statement will be routed under existing CBP procedures. Brokers will 
only view/receive information that they have filed on an importer's 
behalf. ACE will not route a Periodic Monthly Statement to a broker 
through ABI that lists information filed by another broker.
    On August 8, 2005, CBP published a General Notice in the Federal 
Register (70 FR 45736) changing the time period allowed for the deposit 
of the duties and fees from the 15th calendar day to the 15th working 
day of the month following the month in which the goods are either 
entered or released. That change was made in order to comply with the 
provisions of section 2004 of the Miscellaneous Trade and Technical 
Corrections Act of 2004, Public Law 108-429, which extended the time of 
deposit of those estimated duties and fees. On January 20, 2006, CBP 
published a General Notice in the Federal Register clarifying that CBP 
must receive the settlement for the credit by the 15th working day in 
order to have the periodic monthly statement marked paid and treated as 
a timely payment.
    On September 22, 2005, CBP published a General Notice in the 
Federal Register (70 FR 55623) establishing that if the bond principal 
is late with a periodic monthly statement by more than two business 
days, CBP will notify both the bond principal and the surety on the 
affected bond that the merchandise will not be released from any CBP 
port until the entry summary documentation is filed with estimated 
duties and fees attached. The bond principal will only be released from 
such a requirement upon full payment of any unpaid estimated duties and 
fees that have come due under the Periodic Monthly Payment Statement 
Process test. In addition, this Notice eliminated the requirement that 
participants in the Periodic Monthly Statement test provide a bond 
rider covering the periodic payment of estimated duties and fees, but 
in turn allowed sureties to terminate bonds with three business days' 
notice rather than 30 days as required by current regulation. The 
Notice indicated that nonpayment or untimely payment of estimated 
duties and fees, however, may result in action by CBP to impose 
sanctions on the delinquent importer of record.
    The failure to pay estimated duties under Periodic Monthly 
Statement by the 15th working day of the month following the month in 
which the merchandise was entered or released is a breach of the bond 
condition found at 19 CFR 113.62(a)(1)(i) that requires that estimated 
duties be paid in the time period prescribed by law or regulation. The 
breach of this obligation can result in the assessment of liquidated 
damages against the bond principal and surety, jointly and severally.
    In order for estimated duties and fees to be considered to be paid, 
the money must be available in the payor's account for transfer to CBP 
on the date that the statement filer designates for payment (which must 
be on or before the date that the payment is due) and funds must 
transfer to CBP (either pulled from the account by CBP via Automated 
Clearing House (ACH) Debit or pushed to CBP by the payer via ACH 
Credit) with sufficient information for CBP to be able to apply the 
money to the appropriate debt. When insufficient information is given 
and CBP cannot identify the debt to which the payment should be 
applied, the payment will be held by CBP until sufficient information 
is received to allow CBP to apply the payment. Delays resulting from 
lack of sufficient information may result in the payment being 
considered late.

Description of the Changes

1. Assessment of Liquidated Damages
    Rather than resort to the sole remedy of requiring a bond principal 
who has not paid Periodic Monthly Payment Statement estimated duties in 
a timely fashion to file entry summary documentation with estimated 
duties and fees attached before its merchandise may be released from 
any CBP port, CBP has decided to revise the current procedure. Through 
implementation of these guidelines, CBP is exercising the authority to 
assess liquidated damages against the bond principal and surety, 
jointly and severally, when such a failure to pay or untimely payment 
occurs. This document publishes guidelines for the assessment and 
mitigation of these claims.
    When a Periodic Monthly Statement estimated duty payment is not 
fully paid on or before the 15th working day after the month in which 
the entry or release of the merchandise occurred, CBP has the authority 
to assess liquidated damages against the bond principal and surety, 
jointly and severally, for the failure to pay those duties in a timely 
manner. As a matter of policy, before issuing any claim or claims, CBP 
will notify the statement filer (either the importer principal and/or 
his customs broker) electronically or by paper notice on or before the 
first day of the month following the month that the payment was due 
that those estimated duties and fees have not been paid. The statement 
filer will then have two working days from the date of notification to 
pay the estimated duties and fees or correct the situation. If the 
estimated duties and fees are not paid or the situation corrected after 
this two-working day period, then CBP will issue liquidated damages 
claims to bond principals and sureties, jointly and severally, for non-
payment of the estimated duties and fees. If the estimated duties and 
fees are paid in an untimely manner, then CBP may issue liquidated 
damages claims or a broker penalty claim in a manner consistent with 
the language in the NOTE to section 2.a. under the Assessment and 
Mitigation Guidelines set forth later in this document. Payment of the 
estimated duties and fees within the two-working day period does not 
relieve any charged party from incurring a claim for late payment of 
those estimated duties and fees.
    Notwithstanding the provisions of 19 CFR 172.1 and 172.4, any 
notification of the assessment of claims for liquidated damages for 
non-payment of estimated duties and fees will be considered to be a 
demand on surety for the unpaid estimated duties and fees. Bond 
principals and sureties will share concurrent petitioning time frames 
for this violation.
    For any claim for liquidated damages assessed for untimely payment 
of estimated duties and fees (as opposed to non-payment of estimated 
duties and fees), the petitioning process as provided by current 
regulation will be in effect.
2. Consequences of Non-Payment of Estimated Duties and Fees; Suspension 
From the Test
    Notwithstanding any other General Notice provision relating to 
removal of a party from participation in the ACE test, if estimated 
duties and fees due under the Periodic Monthly Payment Statement test 
are unpaid and a claim for liquidated damages for non-payment of 
estimated duties and fees is assessed, CBP may deny the bond principal 
the privilege of paying estimated duties and fees via the Periodic 
Monthly Payment Statement process. CBP will have the discretion to 
either require the bond principal to pay estimated duties and

[[Page 61893]]

fees on an entry-by-entry basis or require the bond principal to file 
entry summary documentation with estimated duties and fees attached 
before its merchandise may be released from any CBP port. Any bond 
principal that is denied the privilege of paying estimated duties and 
fees via the Periodic Monthly Payment Statement process will be so 
denied for a minimum of three months. If during that three-month period 
the bond principal establishes a record of timely payment of estimated 
duties and fees on an entry-by-entry basis, it may petition CBP to 
participate again in the periodic monthly statement test. CBP will 
notify the surety of any bond principals removed or reinstated to the 
periodic monthly statement test.
    Any Customs broker who is responsible for repeated incidents of 
late or non-payment of estimated duties under the Periodic Monthly 
Payment Statement test may be subject to penalties for violation of the 
provisions of 19 U.S.C 1641. In the most serious cases of repeat non-
compliance, license revocation or suspension actions may be brought.

Assessment and Mitigation Guidelines

1. Periodic Monthly Statement Failure To Pay Estimated Duties

a. Assessment
    When duties and fees due under a periodic monthly statement payment 
are not paid, liquidated damages in an amount equal to two times the 
unpaid estimated duties and fees or $1,000 (whichever is greater) may 
be assessed for violation of 19 U.S.C 1505, 19 CFR 113.62(a)(1)(i), and 
19 CFR 113.62(l)(4). No claim for liquidated damages can be issued for 
an amount in excess of the bond obligated to guarantee payment of these 
estimated duties and fees. CBP will provide notification of claims for 
liquidated damages to the bond principal and surety.

    Note: The importer/bond principal is responsible for payment of 
estimated duties and fees and the bond amount does not limit his 
liability for payment of those duties and fees.

b. Petition for Relief
    A petition for relief may be filed in accordance with the 
provisions of 19 CFR 172.2 and 172.3, except that the time period to 
submit the petition when estimated duties have not been paid shall be 
10 days from the date of notification.
c. Mitigation of Claim
    Unless a petition for relief shows that the duties and fees were 
not owed or that the duties and fees were paid, there will be no relief 
afforded from a claim for liquidated damages for failure to pay 
estimated duties and fees due under the Periodic Monthly Statement 
until the estimated duties and fees owed are paid. Once estimated 
duties and fees are paid, CBP will re-issue liquidated damages as a 
claim for untimely payment of estimated duties and fees in accordance 
with paragraph 2 below. Failure to pay rightfully owed estimated duties 
and fees will result in removal of the bond principal from the Periodic 
Monthly Statement test and may result in the requirement that the bond 
principal file entry summary documentation with estimated duties and 
fees attached before its merchandise may be released from any CBP port.

2. Periodic Monthly Statement Untimely Payment of Estimated Duties and 
Fees

a. Assessment
    When duties and fees due under a periodic monthly statement payment 
are paid in an untimely manner, liquidated damages in an amount equal 
to two times the unpaid estimated duties and fees or $1,000 (whichever 
is greater) may be assessed for violation of 19 U.S.C. 1505, 19 CFR 
113.62(a)(1)(i), and 19 CFR 113.62(l)(4). No claim can be issued for an 
amount in excess of the bond obligated to guarantee payment of these 
estimated duties and fees. Notification of the claim by CBP will be 
provided to the bond principal and surety. An Option 1 mitigation may 
be offered on the face of the notification of the claim, with Option 1 
amount being calculated in accordance with these guidelines.

    Note: When estimated duties and fees are paid untimely but prior 
to the expiration of the two-working day period afforded to ensure 
that appropriate monies are paid, in lieu of liquidated damages, CBP 
may issue a $30,000 broker penalty against a broker for failing to 
exercise responsible supervision and control over the customs 
business it conducts in violation of the provisions of 19 U.S.C. 
1641(d)(1)(c) and 19 U.S.C. 1641(b)(4). If such a claim is issued, 
an Option 1 amount consistent with the provisions of section 2.c. 
may be authorized.

b. Petition for Relief
    A petition for relief may be filed in accordance with the 
provisions of 19 CFR 172.2 and 172.3. In lieu of filing a petition for 
relief, an Option 1 amount, described below, may be paid in settlement 
of any claim resulting from the untimely payment of a periodic monthly 
statement payment.
c. Mitigation of Claim
i. Option 1 Offer of Payment
    An offer of payment of the Option 1 amount in settlement of the 
claim will be authorized only after payment of estimated duties and 
fees.
ii. Calculation of Option 1 Payment if a Failure To Pay Claim Has Not 
Been Issued
    If a claim for liquidated damages for failure to pay estimated 
duties under periodic monthly statement has not been issued to the bond 
principal and surety with regard to the untimely payment, the Option 1 
amount will be calculated at one percent (1%) of the untimely paid 
duties and fees (but not less than $1,000 nor more than $4,000) plus an 
amount equal to interest that would have accumulated had it been 
calculated at the Internal Revenue Service rate beginning the time the 
payment was due until it is paid. The amount equal to interest charge 
will accrue against both the principal and surety from the date the 
payment was due until the date of payment.
iii. Calculation of Option 1 Payment When a Failure To Pay Claim Has 
Been Issued
    When a failure to pay estimated duties under periodic monthly 
statement has been issued to the bond principal and surety with regard 
to the particular claim, the Option 1 amount will be calculated at one 
and one-half percent (1\1/2\%) of the untimely paid duties and fees 
(but not less than $1,500 nor more than $6,000) plus an amount equal to 
interest that would have accumulated had it been calculated at the 
Internal Revenue Service rate beginning the time the payment was due 
until it is paid. The amount equal to interest charge will accrue for 
both the principal and surety from the date the payment was due until 
the date of payment.
iv. Filing a Petition (Option II)
    A petition may be filed in accordance with the provisions of 19 CFR 
part 172. CBP may remit or mitigate any claim to an amount that exceeds 
the Option 1 amount if the facts and circumstances so warrant.
v. Failure To Pay/Customs Brokers
    If in the time period prescribed in the notice, a customs broker 
fails to pay the Option 1 amount or petition for relief in a 1641 
assessment described in the NOTE above, liquidated damages claims will 
be issued against all bond principals and sureties whose bonds were 
breached.

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3. Extraordinary Relief

    In recognition that as new participants join the test that 
electronic system malfunctions may occur, CBP is not precluded from 
considering petitions for relief and granting extraordinary relief when 
system failure is determined to be the cause of a nonpayment or late 
payment.

4. Enforcement Discretion

    CBP always retains the right to exercise enforcement discretion and 
refrain from issuing a claim for liquidated damages or penalty if 
circumstances warrant. These situations will be considered on a case-
by-case basis.

5. Termination of Bonds

    Nothing in this Notice changes any procedures or authorities 
regarding termination of bonds described in the Notice of September 22, 
2005 (70 FR 55623).

6. Delegation of Authority

    For purposes of the test, the authority to assess claims for 
liquidated damages resides with the Office of Finance, Revenue 
Division, Indianapolis, Indiana. The authority to mitigate or cancel 
any claim for liquidated damages arising for failure to pay or the 
untimely payment of estimated duties and fees under the Periodic 
Monthly Payment Statement test or to refrain from issuing such a claim 
shall reside with CBP Headquarters, Office of International Trade. 
Petitions for relief should be addressed to officials designated on the 
CF-5955A.

    Dated: October 10, 2008.
Daniel Baldwin,
Assistant Commissioner, Office of International Trade.
 [FR Doc. E8-24696 Filed 10-16-08; 8:45 am]
BILLING CODE 9111-14-P