Appendix B to Part 171 - Customs Regulations, Guidelines for the Imposition and Mitigation of Penalties for Violations of 19 U.S.C. 1592
19:2.0.1.1.18.9.2.1.6 : Appendix B
Appendix B to Part 171 - Customs Regulations, Guidelines for the
Imposition and Mitigation of Penalties for Violations of 19 U.S.C.
1592
A monetary penalty incurred under section 592 of the Tariff Act
of 1930, as amended (19 U.S.C. 1592; hereinafter referred to as
section 592) may be remitted or mitigated under section 618 of the
Tariff Act of 1930, as amended (19 U.S.C. 1618), if it is
determined that there are mitigating circumstances to justify
remission or mitigation. The guidelines below will be used by the
Customs Service in arriving at a just and reasonable assessment and
disposition of liabilities arising under section 592 within the
stated limitations. It is intended that these guidelines shall be
applied by Customs officers in pre-penalty proceedings and in
determining the monetary penalty assessed in any penalty notice.
The assessed penalty or penalty amount set forth in Customs
administrative disposition determined in accordance with these
guidelines does not limit the penalty amount which the Government
may seek in bringing a civil enforcement action pursuant to section
592(e). It should be understood that any mitigated penalty is
conditioned upon payment of any actual loss of duty as well as a
release by the party that indicates that the mitigation decision
constitutes full accord and satisfaction. Further, mitigation
decisions are not rulings within the meaning of part 177 of the
Customs Regulations (19 CFR part 177). Lastly, these guidelines may
supplement, and are not intended to preclude application of, any
other special guidelines promulgated by Customs.
(A) Violations of Section 592
Without regard to whether the United States is or may be
deprived of all or a portion of any lawful duty, tax or fee
thereby, a violation of section 592 occurs when a person, through
fraud, gross negligence, or negligence, enters, introduces, or
attempts to enter or introduce any merchandise into the commerce of
the United States by means of any document, electronic transmission
of data or information, written or oral statement, or act that is
material and false, or any omission that is material; or when a
person aids or abets any other person in the entry, introduction,
or attempted entry or introduction of merchandise by such means. It
should be noted that the language “entry, introduction, or
attempted entry or introduction” encompasses placing merchandise
in-bond (e.g., filing an immediate transportation application).
There is no violation if the falsity or omission is due solely to
clerical error or mistake of fact, unless the error or mistake is
part of a pattern of negligent conduct. Also, the unintentional
repetition by an electronic system of an initial clerical error
generally will not constitute a pattern of negligent conduct.
Nevertheless, if Customs has drawn the party's attention to the
unintentional repetition by an electronic system of an initial
clerical error, subsequent failure to correct the error could
constitute a violation of section 592. Also, the unintentional
repetition of a clerical mistake over a significant period of time
or involving many entries could indicate a pattern of negligent
conduct and a failure to exercise reasonable care.
(B) Definition of Materiality Under Section 592
A document, statement, act, or omission is material if it has
the natural tendency to influence or is capable of influencing
agency action including, but not limited to a Customs action
regarding: (1) Determination of the classification, appraisement,
or admissibility of merchandise (e.g., whether merchandise is
prohibited or restricted); (2) determination of an importer's
liability for duty (including marking, antidumping, and/or
countervailing duty); (3) collection and reporting of accurate
trade statistics; (4) determination as to the source, origin, or
quality of merchandise; (5) determination of whether an unfair
trade practice has been committed under the anti-dumping or
countervailing duty laws or a similar statute; (6) determination of
whether an unfair act has been committed involving patent,
trademark, or copyright infringement; or (7) the determination of
whether any other unfair trade practice has been committed in
violation of federal law. The “but for” test of materiality is
inapplicable under section 592.
(C) Degrees of Culpability Under Section 592
The three degrees of culpability under section 592 for the
purposes of administrative proceedings are:
(1) Negligence. A violation is determined to be negligent
if it results from an act or acts (of commission or omission) done
through either the failure to exercise the degree of reasonable
care and competence expected from a person in the same
circumstances either: (a) in ascertaining the facts or in drawing
inferences therefrom, in ascertaining the offender's obligations
under the statute; or (b) in communicating information in a manner
so that it may be understood by the recipient. As a general rule, a
violation is negligent if it results from failure to exercise
reasonable care and competence: (a) to ensure that statements made
and information provided in connection with the importation of
merchandise are complete and accurate; or (b) to perform any
material act required by statute or regulation.
(2) Gross Negligence. A violation is deemed to be grossly
negligent if it results from an act or acts (of commission or
omission) done with actual knowledge of or wanton disregard for the
relevant facts and with indifference to or disregard for the
offender's obligations under the statute.
(3) Fraud. A violation is determined to be fraudulent if
a material false statement, omission, or act in connection with the
transaction was committed (or omitted) knowingly, i.e., was
done voluntarily and intentionally, as established by clear and
convincing evidence.
(D) Discussion of Additional Terms
(1) Duty Loss Violations. A section 592 duty loss
violation involves those cases where there has been a loss of duty
including any marking, anti-dumping, or countervailing duties, or
any tax and fee (e.g., merchandise processing and/or harbor
maintenance fees) attributable to an alleged violation.
(2) Non-duty Loss Violations. A section 592 non-duty loss
violation involves cases where the record indicates that an alleged
violation is principally attributable to, for example, evasion of a
prohibition, restriction, or other non-duty related consideration
involving the importation of the merchandise.
(3) Actual Loss of Duties. An actual loss of duty occurs
where there is a loss of duty including any marking, anti-dumping,
or countervailing duties, or any tax and fee (e.g., merchandise
processing and/or harbor maintenance fees) attributable to a
liquidated Customs entry, and the merchandise covered by the entry
has been entered or introduced (or attempted to be entered or
introduced) in violation of section 592.
(4) Potential Loss of Duties. A potential loss of duty
occurs where an entry remains unliquidated and there is a loss of
duty, including any marking, anti-dumping or countervailing duties
or any tax and fee (e.g., merchandise processing and/or harbor
maintenance fees) attributable to a violation of section 592, but
the violation was discovered prior to liquidation. In addition, a
potential loss of duty exists where Customs discovers the violation
and corrects the entry to reflect liquidation at the proper
classification and value. In other words, the potential loss in
such cases equals the amount of duty, tax and fee that would have
occurred had Customs not discovered the violation prior to
liquidation and taken steps to correct the entry.
(5) Total Loss of Duty. The total loss of duty is the sum
of any actual and potential loss of duty attributable to alleged
violations of section 592 in a particular case. Payment of any
actual and/or potential loss of duty shall not affect or reduce the
total loss of duty used for assessing penalties as set forth in
these guidelines. The “multiples” set forth below in paragraph
(F)(2) involving assessment and disposition of cases shall utilize
the “total loss of duty” amount in arriving at the appropriate
assessment or disposition.
(6) Reasonable Care. General Standard: All parties,
including importers of record or their agents, are required to
exercise reasonable care in fulfilling their responsibilities
involving entry of merchandise. These responsibilities include, but
are not limited to: providing a classification and value for the
merchandise; furnishing information sufficient to permit Customs to
determine the final classification and valuation of merchandise;
taking measures that will lead to and assure the preparation of
accurate documentation, and determining whether any applicable
requirements of law with respect to these issues are met. In
addition, all parties, including the importer, must use reasonable
care to provide accurate information or documentation to enable
Customs to determine if the merchandise may be released. Customs
may consider an importer's failure to follow a binding Customs
ruling a lack of reasonable care. In addition, unreasonable
classification will be considered a lack of reasonable care (e.g.,
imported snow skis are classified as water skis). Failure to
exercise reasonable care in connection with the importation of
merchandise may result in imposition of a section 592 penalty for
fraud, gross negligence or negligence.
(7) Clerical Error. A clerical error is an error in the
preparation, assembly or submission of import documentation or
information provided to Customs that results from a mistake in
arithmetic or transcription that is not part of a pattern of
negligence. The mere non-intentional repetition by an electronic
system of an initial clerical error does not constitute a pattern
of negligence. Nevertheless, as stated earlier, if Customs has
drawn a party's attention to the non-intentional repetition by an
electronic system of an initial clerical error, subsequent failure
to correct the error could constitute a violation of section 592.
Also, the unintentional repetition of a clerical mistake over a
significant period of time or involving many entries could indicate
a pattern of negligent conduct and a failure to exercise reasonable
care.
(8) Mistake of Fact. A mistake of fact is a false
statement or omission that is based on a bona fide erroneous belief
as to the facts, so long as the belief itself did not result from
negligence in ascertaining the accuracy of the facts.
(E) Penalty Assessment
(1) Case Initiation - Pre-penalty Notice.
(a) Generally. As provided in § 162.77, Customs
Regulations (19 CFR 162.77), if the appropriate Customs field
officer has reasonable cause to believe that a violation of section
592 has occurred and determines that further proceedings are
warranted, the Customs field officer will issue to each person
concerned a notice of intent to issue a claim for a monetary
penalty (i.e., the “pre-penalty notice”). In issuing such a
pre-penalty notice, the Customs field officer will make a tentative
determination of the degree of culpability and the amount of the
proposed claim. Payment of any actual and/or potential loss of duty
will not affect or reduce the total loss of duty used for assessing
penalties as set forth in these guidelines. The “multiples” set
forth in paragraphs (F)(2)(a)(i), (b)(i) and (c)(i) involving
assessment and disposition of duty loss violation cases will use
the amount of total loss of duty in arriving at the appropriate
assessment or disposition. Further, where separate duty loss and
non-duty loss violations occur on the same entry, it is within the
Customs field officer's discretion to assess both duty loss and
non-duty loss penalties, or only one of them. Where only one of the
penalties is assessed, the Customs field officer has the discretion
to select which penalty (duty loss or non-duty loss) shall be
assessed. Also, where there is a violation accompanied by an
incidental or nominal loss of duties, the Customs field officer may
assess a non-duty loss penalty where the incidental or nominal duty
loss resulted from a separate non-duty loss violation. The Customs
field officer will propose a level of culpability in the
pre-penalty notice that conforms to the level of culpability
suggested by the evidence at the time of issuance. Moreover, the
pre-penalty notice will include a statement that it is Customs
practice to base its actions on the earliest point in time that the
statute of limitations may be asserted (i.e., the date of
occurrence of the alleged violation) inasmuch as the final
resolution of a case in court may be less than a finding of fraud.
A pre-penalty notice that is issued to a party in a case where
Customs determines a claimed prior disclosure is not valid - owing
to the disclosing party's knowledge of the commencement of a formal
investigation of a disclosed violation - will include a copy of a
written document that evidences the commencement of a formal
investigation. In addition, a pre-penalty notice is not required if
a violation involves a non-commercial importation or if the
proposed claim does not exceed $1,000. Special guidelines relating
to penalty assessment and dispositions involving “Arriving
Travelers,” are set forth in section (L) below.
(b) Pre-penalty Notice - Proposed Claim Amount
(i) Fraud. In general, if a violation is determined to be
the result of fraud, the proposed claim ordinarily will be assessed
in an amount equal to the domestic value of the merchandise.
Exceptions to assessing the penalty at the domestic value may be
warranted in unusual circumstances such as a case where the
domestic value of the merchandise is disproportionately high in
comparison to the loss of duty attributable to an alleged violation
(e.g., a total loss of duty of $10,000 involving 10 entries with a
total domestic value of $2,000,000). Also, it is incumbent upon the
appropriate Customs field officer to consider whether mitigating
factors are present warranting a reduction in the customary
domestic value assessment. In all section 592 cases of this nature
regardless of the dollar amount of the proposed claim, the Customs
field officer will obtain the approval of the Penalties Branch at
Headquarters prior to issuance of a pre-penalty notice at an amount
less than domestic value.
(ii) Gross Negligence and Negligence. In determining the
amount of the proposed claim in cases involving gross negligence
and negligence, the appropriate Customs field officer will take
into account the gravity of the offense, the amount of loss of
duty, the extent of wrongdoing, mitigating or aggravating factors,
and other factors bearing upon the seriousness of a violation, but
in no case will the assessed penalty exceed the statutory ceilings
prescribed in section 592. In cases involving gross negligence and
negligence, penalties equivalent to the ceilings stated in
paragraphs (F)(2)(b) and (c) regarding disposition of cases may be
appropriate in cases involving serious violations, e.g., violations
involving a high loss of duty or significant evasion of import
prohibitions or restrictions. A “serious” violation need not result
in a loss of duty. The violation may be serious because it affects
the admissibility of merchandise or the enforcement of other laws,
as in the case of quota evasions, false statements made to conceal
the dumping of merchandise, or violations of exclusionary orders of
the International Trade Commission.
(c) Technical Violations. Violations where the loss of
duty is nonexistent or minimal and/or that have an insignificant
impact on enforcement of the laws of the United States may justify
a proposed penalty in a fixed amount not related to the value of
merchandise, but an amount believed sufficient to have a deterrent
effect: e.g., violations involving the subsequent sale of
merchandise or vehicles entered for personal use; violations
involving failure to comply with declaration or entry requirements
that do not change the admissibility or entry status of merchandise
or its appraised value or classification; violations involving the
illegal diversion to domestic use of instruments of international
traffic; and local point-to-point traffic violations. Generally, a
penalty in a fixed amount ranging from $1,000 to $2,000 is
appropriate in cases where there are no prior violations of the
same kind. However, fixed sums ranging from $2,000 to $10,000 may
be appropriate in the case of multiple or repeated violations.
Fixed sum penalty amounts are not subject to further mitigation and
may not exceed the maximum amounts stated in section 592 and in
these guidelines.
(d) Statute of Limitations Considerations - Waivers.
Prior to issuance of any section 592 pre-penalty notice, the
appropriate Customs field officer will calculate the statute of
limitations attributable to an alleged violation. Inasmuch as
section 592 cases are reviewed de novo by the Court of
International Trade, the statute of limitations calculation in
cases alleging fraud should assume a level of culpability of gross
negligence or negligence, i.e., ordinarily applying a
shorter period of time for statute of limitations purposes. In
accordance with section 162.78 of the Customs Regulations (19 CFR
162.78), if less than 1 year remains before the statute of
limitations may be raised as a defense, a shortened response time
may be specified in the notice - but in no case, less than 7
business days from the date of mailing. In cases of shortened
response times, the Customs field officer should notify alleged
violators by telephone and use all reasonable means (e.g.,
facsimile transmission of a copy of the notice) to expedite receipt
of the notice by the alleged violators. Also in such cases, the
appropriate Customs field officer should advise the alleged
violator that additional time to respond to the pre-penalty notice
will be granted only if an acceptable waiver of the statute of
limitations is submitted to Customs. With regard to waivers of the
statute of limitations, it is Customs practice to request waivers
concurrently both from all potential alleged violators and their
sureties.
(2) Closure of Case or Issuance of Penalty Notice.
(a) Case Closure. The appropriate Customs field officer
may find, after consideration of the record in the case, including
any pre-penalty response/oral presentation, that issuance of a
penalty notice is not warranted. In such cases, the Customs field
officer will provide written notification to the alleged violator
who received the subject pre-penalty notice that the case is
closed.
(b) Issuance of Penalty Notice. In the event that
circumstances warrant issuance of a notice of penalty pursuant to §
162.79 of the Customs Regulations (19 CFR 162.79), the appropriate
Customs field officer will give consideration to all available
evidence with respect to the existence of material false statements
or omissions (including evidence presented by an alleged violator),
the degree of culpability, the existence of a prior disclosure, the
seriousness of the violation, and the existence of mitigating or
aggravating factors. In cases involving fraud, the penalty notice
will be in the amount of the domestic value of the merchandise
unless a lesser amount is warranted as described in paragraph
(E)(1)(b)(i). In general, the degree of culpability or proposed
penalty amount stated in a pre-penalty notice will not be increased
in the penalty notice. If, subsequent to the issuance of a
pre-penalty notice and upon further review of the record, the
appropriate Customs field officer determines that a higher degree
of culpability exists, the original pre-penalty notice should be
rescinded and a new pre-penalty notice issued that indicates the
higher degree of culpability and increased proposed penalty amount.
However, if less than 9 months remain before expiration of the
statute of limitations or any waiver thereof by the party named in
the pre-penalty notice, the higher degree of culpability and higher
penalty amount may be indicated in the notice of penalty without
rescinding the earlier pre-penalty notice. In such cases, the
Customs field officer will consider whether a lower degree of
culpability is appropriate or whether to change the information
contained in the pre-penalty notice.
(c) Statute of Limitations Considerations. Prior to
issuance of any section 592 penalty notice, the appropriate Customs
field officer again shall calculate the statute of limitations
attributable to the alleged violation and request a waiver(s) of
the statute, if necessary. In accordance with part 171 of the
Customs Regulations (19 CFR part 171), if less than 180 days remain
before the statute of limitations may be raised as a defense, a
shortened response time may be specified in the notice - but in no
case less than 7 business days from the date of mailing. In such
cases, the Customs field officer should notify an alleged violator
by telephone and use all reasonable means (e.g., facsimile
transmission of a copy) to expedite receipt of the penalty notice
by the alleged violator. Also, in such cases, the Customs field
officer should advise an alleged violator that, if an acceptable
waiver of the statute of limitations is provided, additional time
to respond to the penalty notice may be granted.
(F) Administrative Penalty Disposition
(1) Generally. It is the policy of the Department of the
Treasury and the Customs Service to grant mitigation in appropriate
circumstances. In certain cases, based upon criteria to be
developed by Customs, mitigation may take an alternative form,
whereby a violator may eliminate or reduce his or her section 592
penalty liability by taking action(s) to correct problems that
caused the violation. In any case, in determining the
administrative section 592 penalty disposition, the appropriate
Customs field officer will consider the entire case record - taking
into account the presence of any mitigating or aggravating factors.
All such factors should be set forth in the written administrative
section 592 penalty decision. Once again, Customs emphasizes that
any penalty liability which is mitigated is conditioned upon
payment of any actual loss of duty in addition to that penalty as
well as a release by the party that indicates that the mitigation
decision constitutes full accord and satisfaction. Finally, section
592 penalty dispositions in duty-loss and non-duty-loss cases will
proceed in the manner set forth below.
(2) Dispositions.
(a) Fraudulent Violation. Penalty dispositions for a
fraudulent violation will be calculated as follows:
(i) Duty Loss Violation. An amount ranging from a minimum
of 5 times the total loss of duty to a maximum of 8 times the total
loss of duty - but in any such case the amount may not exceed the
domestic value of the merchandise. A penalty disposition greater
than 8 times the total loss of duty may be imposed in a case
involving an egregious violation, or a public health and safety
violation, or due to the presence of aggravating factors, but
again, the amount may not exceed the domestic value of the
merchandise.
(ii) Non-Duty Loss Violation. An amount ranging from a
minimum of 50 percent of the dutiable value to a maximum of 80
percent of the dutiable value of the merchandise. A penalty
disposition greater than 80 percent of the dutiable value may be
imposed in a case involving an egregious violation, or a public
health and safety violation, or due to the presence of aggravating
factors, but the amount may not exceed the domestic value of the
merchandise.
(b) Grossly Negligent Violation. Penalty dispositions for
a grossly negligent violation shall be calculated as follows:
(i) Duty Loss Violation. An amount ranging from a minimum
of 2.5 times the total loss of duty to a maximum of 4 times the
total loss of duty - but in any such case, the amount may not
exceed the domestic value of the merchandise.
(ii) Non-Duty Loss Violation. An amount ranging from a
minimum of 25 percent of the dutiable value to a maximum of 40
percent of the dutiable value of the merchandise - but in any such
case, the amount may not exceed the domestic value of the
merchandise.
(c) Negligent Violation. Penalty dispositions for a
negligent violation shall be calculated as follows:
(i) Duty Loss Violation. An amount ranging from a minimum
of 0.5 times the total loss of duty to a maximum of 2 times the
total loss of duty but, in any such case, the amount may not exceed
the domestic value of the merchandise.
(ii) Non-Duty Loss Violation. An amount ranging from a
minimum of 5 percent of the dutiable value to a maximum of 20
percent of the dutiable value of the merchandise, but, in any such
case, the amount may not exceed the domestic value of the
merchandise.
(d) Authority to Cancel Claim. Upon issuance of a penalty
notice, Customs has set forth its formal monetary penalty claim.
Except as provided in 19 CFR part 171, in those section 592 cases
within the administrative jurisdiction of the concerned Customs
field office, the appropriate Customs field officer will cancel any
such formal claim whenever it is determined that an essential
element of the alleged violation is not established by the agency
record, including pre-penalty and penalty responses provided by the
alleged violator. Except as provided in 19 CFR part 171, in those
section 592 cases within Customs Headquarters jurisdiction, the
appropriate Customs field officer will cancel any such formal claim
whenever it is determined that an essential element of the alleged
violation is not established by the agency record, and such
cancellation action precedes the date of the Customs field
officer's receipt of the alleged violator's petition responding to
the penalty notice. On and after the date of Customs receipt of the
petition responding to the penalty notice, jurisdiction over the
action rests with Customs Headquarters including the authority to
cancel the claim.
(e) Remission of Claim. If the Customs field officer
believes that a claim for monetary penalty should be remitted for a
reason not set forth in these guidelines, the Customs field officer
should first seek approval from the Chief, Penalties Branch,
Customs Service Headquarters.
(f) Prior Disclosure Dispositions. It is the policy of
the Department of the Treasury and the Customs Service to encourage
the submission of valid prior disclosures that comport with the
laws, regulations, and policies governing this provision of section
592. Customs will determine the validity of the prior disclosure
including whether or not the prior disclosure sets forth all the
required elements of a violation of section 592. A valid prior
disclosure warrants the imposition of the reduced Customs civil
penalties set forth below:
(1) Fraudulent Violation.
(a) Duty Loss Violation. The claim for monetary penalty
shall be equal to 100 percent of the total loss of duty
(i.e., actual + potential) resulting from the violation. No
mitigation will be afforded.
(b) Non-Duty Loss Violation. The claim for monetary
penalty shall be equal to 10 percent of the dutiable value of the
merchandise in question. No mitigation will be afforded.
(2) Gross Negligence and Negligence Violation.
(a) Duty Loss Violation. The claim for monetary penalty
shall be equal to the interest on the actual loss of duty computed
from the date of liquidation to the date of the party's tender of
the actual loss of duty resulting from the violation. Customs notes
that there is no monetary penalty in these cases if the duty loss
is potential in nature. Absent extraordinary circumstances, no
mitigation will be afforded.
(b) Non-Duty Loss Violation. There is no monetary penalty
in such cases and any claim for monetary penalty which had been
issued prior to the decision granting prior disclosure will be
remitted in full.
(G) Mitigating Factors
The following factors will be considered in mitigation of the
proposed or assessed penalty claim or the amount of the
administrative penalty decision, provided that the case record
sufficiently establishes their existence. The list is not
all-inclusive.
(1) Contributory Customs Error. This factor includes
misleading or erroneous advice given by a Customs official in
writing to the alleged violator, or established by a
contemporaneously created written Customs record, only if it
appears that the alleged violator reasonably relied upon the
information and the alleged violator fully and accurately informed
Customs of all relevant facts. The concept of comparative
negligence may be utilized in determining the weight to be assigned
to this factor. If it is determined that the Customs error was the
sole cause of the violation, the proposed or assessed penalty claim
shall be canceled. If the Customs error contributed to the
violation, but the violator also is culpable, the Customs error
will be considered as a mitigating factor.
(2) Cooperation with the Investigation. To obtain the
benefits of this factor, the violator must exhibit extraordinary
cooperation beyond that expected from a person under investigation
for a Customs violation. Some examples of the cooperation
contemplated include assisting Customs officers to an unusual
degree in auditing the books and records of the violator (e.g.,
incurring extraordinary expenses in providing computer runs solely
for submission to Customs to assist the agency in cases involving
an unusually large number of entries and/or complex issues).
Another example consists of assisting Customs in obtaining
additional information relating to the subject violation or other
violations. Merely providing the books and records of the violator
should not be considered cooperation justifying mitigation inasmuch
as Customs has the right to examine an importer's books and records
pursuant to 19 U.S.C. 1508-1509.
(3) Immediate Remedial Action. This factor includes the
payment of the actual loss of duty prior to the issuance of a
penalty notice and within 30 days after Customs notifies the
alleged violator of the actual loss of duties attributable to the
alleged violation. In appropriate cases, where the violator
provides evidence that immediately after learning of the violation,
substantial remedial action was taken to correct organizational or
procedural defects, immediate remedial action may be granted as a
mitigating factor. Customs encourages immediate remedial action to
ensure against future incidents of non-compliance.
(4) Inexperience in Importing. Inexperience is a factor
only if it contributes to the violation and the violation is not
due to fraud or gross negligence.
(5) Prior Good Record. Prior good record is a factor only
if the alleged violator is able to demonstrate a consistent pattern
of importations without violation of section 592, or any other
statute prohibiting false or fraudulent importation practices. This
factor will not be considered in alleged fraudulent violations of
section 592.
(6) Inability to Pay the Customs Penalty. The party
claiming the existence of this factor must present documentary
evidence in support thereof, including copies of income tax returns
for the previous 3 years, and an audited financial statement for
the most recent fiscal quarter. In certain cases, Customs may waive
the production of an audited financial statement or may request
alternative or additional financial data in order to facilitate an
analysis of a claim of inability to pay (e.g., examination of the
financial records of a foreign entity related to the U.S. company
claiming inability to pay).
(7) Customs Knowledge. Additional relief in non-fraud
cases (which also are not the subject of a criminal investigation)
will be granted if it is determined that Customs had actual
knowledge of a violation and, without justification, failed to
inform the violator so that it could have taken earlier corrective
action. In such cases, if a penalty is to be assessed involving
repeated violations of the same kind, the maximum penalty amount
for violations occurring after the date on which actual knowledge
was obtained by Customs will be limited to two times the loss of
duty in duty-loss cases or twenty percent of the dutiable value in
non-duty-loss cases if the continuing violations were the result of
gross negligence, or the lesser of one time the loss of duty in
duty-loss cases or ten percent of dutiable value in non-duty-loss
cases if the violations were the result of negligence. This factor
will not be applicable when a substantial delay in the
investigation is attributable to the alleged violator.
(H) Aggravating Factors
Certain factors may be determined to be aggravating factors in
calculating the amount of the proposed or assessed penalty claim or
the amount of the administrative penalty decision. The presence of
one or more aggravating factors may not be used to raise the level
of culpability attributable to the alleged violations, but may be
utilized to offset the presence of mitigating factors. The
following factors will be considered “aggravating factors,”
provided that the case record sufficiently establishes their
existence. The list is not exclusive.
(1) Obstructing an investigation or audit,
(2) Withholding evidence,
(3) Providing misleading information concerning the
violation,
(4) Prior substantive violations of section 592 for which a
final administrative finding of culpability has been made,
(5) Textile imports that have been the subject of illegal
transshipment (i.e., false country of origin declaration),
whether or not the merchandise bears false country of origin
markings,
(6) Evidence of a motive to evade a prohibition or restriction
on the admissibility of the merchandise (e.g., evading a quota
restriction),
(7) Failure to comply with a lawful demand for records or a
Customs summons.
(I) Offers in Compromise (“Settlement Offers”)
Parties who wish to submit a civil offer in compromise pursuant
to 19 U.S.C. 1617 (also known as a “settlement offer”) in
connection with any section 592 claim or potential section 592
claim should follow the procedures outlined in § 161.5 of the
Customs Regulations (19 CFR 161.5). Settlement offers do not
involve “mitigation” of a claim or potential claim, but rather
“compromise” an action or potential action where Customs evaluation
of potential litigation risks, or the alleged violator's financial
position, justifies such a disposition. In any case where a portion
of the offered amount represents a tender of unpaid duties, taxes
and fees, Customs letter of acceptance may identify the portion
representing any such duty, tax and fee. The offered amount should
be deposited at the Customs field office responsible for handling
the section 592 claim or potential section 592 claim. The offered
amount will be held in a suspense account pending acceptance or
rejection of the offer in compromise. In the event the offer is
rejected, the concerned Customs field office will promptly initiate
a refund of the money deposited in the suspense account to the
offeror.
(J) Section 592(d) Demands
Section 592(d) demands for actual losses of duty ordinarily are
issued in connection with a penalty action, or as a separate demand
without an associated penalty action. In either case, information
must be present establishing a violation of section 592(a). In
those cases where the appropriate Customs field officer determines
that issuance of a penalty under section 592 is not warranted
(notwithstanding the presence of information establishing a
violation of section 592(a)), but that circumstances do warrant
issuance of a demand for payment of an actual loss of duty pursuant
to section 592(d), the Customs field officer shall follow the
procedures set forth in section 162.79b of the Customs Regulations
(19 CFR 162.79b). Except in cases where less than one year remains
before the statute of limitations may be raised as a defense,
information copies of all section 592(d) demands should be sent to
all concerned sureties and the importer of record if such party is
not an alleged violator. Also, except in cases where less than one
year remains before the statute of limitations may be raised as a
defense, Customs will endeavor to issue all section 592(d) demands
to concerned sureties and non-violator importers of record only
after default by principals.
(K) Customs Brokers
If a customs broker commits a section 592 violation and the
violation involves fraud, or the broker commits a grossly negligent
or negligent violation and shares in the benefits of the violation
to an extent over and above customary brokerage fees, the customs
broker will be subject to these guidelines. However, if the customs
broker commits either a grossly negligent or negligent violation of
section 592 (without sharing in the benefits of the violation as
described above), the concerned Customs field officer may proceed
against the customs broker pursuant to the remedies provided under
19 U.S.C. 1641.
(L) Arriving Travelers
(1) Liability. Except as set forth below, proposed and
assessed penalties for violations by an arriving traveler must be
determined in accordance with these guidelines.
(2) Limitations on Liability on Non-commercial
Violations. In the absence of a referral for criminal
prosecution, monetary penalties assessed in the case of an alleged
first-offense, non-commercial, fraudulent violation by an arriving
traveler will generally be limited as follows:
(a) Fraud - Duty Loss Violation. An amount ranging from a
minimum of three times the loss of duty to a maximum of five times
the loss of duty, provided the loss of duty is also paid;
(b) Fraud - Non-duty Loss Violation. An amount ranging
from a minimum of 30 percent of the dutiable value of the
merchandise to a maximum of 50 percent of its dutiable value;
(c) Gross Negligence - Duty Loss Violation. An amount
ranging from a minimum of 1.5 times the loss of duty to a maximum
of 2.5 times the loss of duty provided the loss of duty is also
paid;
(d) Gross Negligence - Non-duty Loss Violation. An amount
ranging from a minimum of 15 percent of the dutiable value of the
merchandise to a maximum of 25 percent of its dutiable value;
(e) Negligence - Duty Loss Violation. An amount ranging
from a minimum of .25 times the loss of duty to a maximum of 1.25
times the loss of duty provided that the loss of duty is also
paid;
(f) Negligence - Non-duty Loss Violation. An amount
ranging from a minimum of 2.5 percent of the dutiable value of the
merchandise to a maximum of 12.5 percent of its dutiable value;
(g) Special Assessments/Dispositions. No penalty action
under section 592 will be initiated against an arriving traveler if
the violation is not fraudulent or commercial, the loss of duty is
$100.00 or less, and there are no other concurrent or prior
violations of section 592 or other statutes prohibiting false or
fraudulent importation practices. However, all lawful duties, taxes
and fees will be collected. Also, no penalty under section 592 will
be initiated against an arriving traveler if the violation is not
fraudulent or commercial, there are no other concurrent or prior
violations of section 592, and a penalty is not believed necessary
to deter future violations or to serve a law enforcement
purpose.
(M) Violations of Laws Administered by Other Federal Agencies.
Violations of laws administered by other federal agencies (such
as the Food and Drug Administration, Consumer Product Safety
Commission, Office of Foreign Assets Control, Department of
Agriculture, Fish and Wildlife Service) should be referred to the
appropriate agency for its recommendation. Such recommendation, if
promptly tendered, will be given due consideration, and may be
followed provided the recommendation would not result in a
disposition inconsistent with these guidelines.
(N) Section 592 Violations by Small Entities
In compliance with the mandate of the Small Business Regulatory
Enforcement Fairness Act of 1996, under appropriate circumstances,
the issuance of a penalty under section 592 may be waived for
businesses qualifying as small business entities.
Procedures established for small business entities regarding
violations of 19 U.S.C. 1592 were published as Treasury Decision
97-46 in the Federal Register (62 FR 30378) on June 3, 1997.
[T.D. 00-41, 65 FR 39093, June 23, 2000]