Chapter 11. Customs and Border Protection's Authority to Assess Monetary Penalties and to Seize an Importer's Merchandise

• Author: Robert Pisani, Stuart Seidel
• Pages: 201-231

CHAPTER 11

Customs and Border Protection’s

Authority to Assess Monetary

Penalties and to Seize an

Importer’s Merchandise

ROBERT PISANI

STUART SEIDEL

CIVIL PENALTIES (19 U.S.C. § 1592) H

Background

Anyone who imports items into the United States needs to be aware that U.S.

Customs and Border Protection (CBP) has a powerful statutory enforcement

tool (9 U.S.C. § 592, or, as more commonly known, “section 592”) to assess

monetary penalties and recover lost revenue or duties in cases where required

import documentation is false or incomplete or the transaction parties engage in

false acts. Section 592 is CBP’s principal enforcement vehicle to combat customs

infractions, and its use has resulted in millions of dollars in penalties and revenue

recoveries.

The statute has a broad sweep—while the importer is held principally respon-

sible for the truth and accuracy of the information provided on customs entry

documents, CBP can also pursue any party who aids and abets in the transac-

tion, including foreign sellers, consignees, and customs brokers. CBP has to estab-

lish that the infraction is “material” and that the party being charged acted with

culpability (i.e., fraud, gross negligence, or simple negligence, or a combination

thereof ). The dollar amounts of the penalties are based on the level of culpability

established by the evidence in each case.

A common (and serious) misconception regarding CBP’s section 592 penalty

authority is that if imported goods are duty-free or if the alleged wrongdoing

has no impact on duties assessed, section 592 does not apply. Nothing could be

further from the truth. The penalty statute itself provides authority for CBP to

issue monetary penalties in cases where there is no “loss of revenue” (i.e., duties,

taxes, and fees) as well as those cases where there is a duty loss.

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The table on page 26 sets forth the monetary penalty amounts associated

with each level of culpability in both revenue-loss and non-revenue-loss situations

as well as the reduced penalties associated with prior disclosure (discussed in the

section “Prior Disclosure”).

The following sections explore section 592 in greater detail and are intended

to provide a basic understanding of how CBP utilizes the potent section 592

provision.

Elements of a Section 1592 Violation

Section 592 applies to the entry, attempted entry, introduction, or attempted

introduction of merchandise into the commerce of the United States by any party.

CBP has used this aspect of the statute to assess penalties against parties other

than the importer (e.g., the foreign supplier, customs broker, and/or consignee).

Also, “aiders and abettors” may be held liable under section 592.

There are three basic elements of a section 592 violation:

1. A false statement, omission, or act that is

2. Material and

3. Is due to the fraud, gross negligence, or negligence (i.e., “culpability”) of the

alleged violator or violators.

To establish a violation of section 592, all three of these elements must

be present. If any one of the three elements is missing, no violation of section

592 can be established. Clerical errors and mistakes of fact, however, are not

violations.

Important Definitions

Keeping in mind the three elements outlined above, in order to determine

whether an import transaction involves a violation of section 592, the following

definitions should be helpful guidance:

False statement: Any false statement that appears on a customs entry document

presented to CBP. Examples include incorrect merchandise description, false value,

classi cation, quantity, or country of origin. Essentially, any assertion on a customs

entry document that is not correct is a “false statement.”

Omission: An omission constitutes a failure to provide information or undertake

an act required under the customs laws or regulations. Be careful, as this concept

is broader than one might think. For example, a failure to follow a CBP tari clas-

si cation ruling that you obtained is considered an “omission” because 19 C.F.R.

§ 177.8(a)(2) legally requires you to follow that ruling.

False act: A false act encompasses conduct that generally does not involve a falsity

or omission on entry documents, but rather concerns the violator’s conduct relat-

ing to the import transaction(s) in question. Probably the most common example

of a section 1592 f alse act involves the unlawful removal of the required country

of orig in marking2 from the imported merchandise. In these cases, the entry docu-

mentation is usually accurate (thus no false statement or omission), but the “act”

of removal is deemed to be “false” and within the ambit of section 1592.

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