Penalties for violating U.S. export control regulations and sanctions can apply to individuals, companies and institutions.
Most penalties arise due to improper determination of the classification, valuation, country of origin, or goods that are not invoiced or declared.
Customs may also assess liquidated damages if proper import procedures are not followed, or if goods are released, subsequently found to be inadmissible, and not redelivered to Customs' custody within allowable timeframes. In addition, Customs may assess penalties for false or negligent drawback claims and NAFTA certificates of origin.
Where penalties are imposed, the assessments are noted by Customs in its compliance database. This record reflects the importer's risk designation, and as a result, companies may find themselves subjected to more frequent Customs inspections and longer processing times.
Monetary penalty statute
The primary Customs monetary penalty statute is 19 U.S.C. § 1592 (penalties for fraud, gross negligence and negligence). Under the statute, Customs can assess monetary penalties up to the domestic value of the imported merchandise. In pertinent part, it provides that "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, no person, by fraud, gross negligence, or negligence — (a) may enter, introduce, or attempt to enter or introduce any merchandise into the commerce of the United States by means of (i) any document written or oral statement, or act which is material and false, or (ii) any omission which is material." more +
Fraud is voluntary and intentional. Gross negligence is actual knowledge or wanton disregard. Negligence is failing to exercise reasonable care.
Clerical errors or mistakes of fact are not violations unless they are part of a pattern of negligent conduct. The mere nonintentional repetition by an electronic system of an initial clerical error does not constitute a pattern of negligent conduct.
Falsifying an invoice or a NAFTA Certificate of Origin is an example of falsity that has the potential to alter the classification, appraisement, or admissibility of merchandise.
Certain types of violations require the issuance by CBP of a pre-penalty notice. more +
A pre-penalty notice is a written notice that CBP is "contemplating" issuing a penalty to the named violator. A period of 30 days is offered for the recipient to respond and offer reasons as to why a penalty notice should not be issued. Violations requiring the issuance of a pre-penalty notice include:
- Commercial fraud, gross negligence, or negligence. For example: misrepresenting the value of the imported goods.
- Drawback. For example duty drawback is requested on an incorrect amount.
- Recordkeeping. For example an invoice or other record cannot be produced upon request. (Import-related records must be kept for a minimum of five years.)
CBP requires payment of duties properly due that were underpaid or not paid at all as a result of the violation. In addition, 19 U.S.C. 592 provides for the assessment of penalties at a maximum of: more +
- The domestic value of the merchandise in the case of fraud violations;
- Four times the loss of lawful duties, taxes and fees or the domestic value of the merchandise, whichever is less, or 40% of the appraised value of the merchandise if the violation did not affect the assessment of duty (or no duty was properly due), in the case of gross negligence violations;
- Two times the loss of lawful duties, taxes and fees, or 20% of the appraised value of the merchandise if the violation did not affect the assessment of duty (or no duty was properly due), in the case of negligence violations.
Failure to pay an administrative penalty can result in the initiation of a collection action by the Government in the Court of International Trade.
The Fines, Penalties & Forfeitures Office (FPFO) will permit the recipient of a penalty notice 60 days in which to file a petition for relief, making the argument as to why the penalty should not be imposed. more +
In petitioning for relief from a penalty notice, petitioners are, depending on the law or regulation involved, generally permitted the opportunity to make an oral presentation in addition to their written petition.
Penalties for violations of other regulations
In addition to CBP penalties, there are a host of other government department and agency regulations with which importers must comply. When a violation of these laws is discovered by CBP, in addition to or in lieu of seizure and/or referral for criminal prosecution, CBP has the option of assessing a personal penalty against the alleged violator.
Electronic export reporting
U.S. Customs and Border Protection (CBP) has issued guidelines regarding the imposition and mitigation of penalties for violations of its export reporting regulations. In June 2008, CBP mandated that all required export information must be filed electronically; paper filings of shipper's export declarations would no longer be accepted. more +
Penalties for failing to file electronic export information may be assessed against any and all culpable parties. Such parties include either the U.S. or Foreign 'Principal Party in Interest' (USPPI or FPPI). The PPI is the person or entity that receives the primary benefit (monetary or otherwise) of the export transaction. This party could be the seller (wholesaler/distributor), the manufacturer, the company that placed the order for the merchandise, or the foreign purchaser. Penalties can also be assessed freight forwarders, brokers, and carriers.
CBP has identified four specific areas in which penalties will be assessed:
- Failure to file Electronic Export Information (EEI) in AES
- Late filing of EEI in AES
- Failure to file all information in AES or filing incorrect information in AES
- Failure by the carrier to provide documents or information to CBP
The maximum penalty for violations of the electronic export filing regulations is $10,000, or $1,100 per day in the case of late filings. These penalties may be levied in addition to other applicable penalties that may arise from the export transaction.