Fighting Title 31 Currency Seizures issued by CBP

This article is going to cover a specific subsection of Title 31 currency seizures. These seizures are typically initiated by U.S. Customs and Border Protection (CBP) to travelers who fail to declare currency they are traveling with in excess of $10,000. Additionally, CBP may seize currency when travelers conspire to defeat reporting requirements by structuring the carrying of funds to fall below the reporting threshold (for example, a group of five individuals carrying money for one person and each person holds $9,000 instead of the single owner of the funds carrying $45,000 total).

For those unfamiliar, CBP is a federal agency within the Department of Homeland Security that was formerly the U.S. Customs Service. CBP is charged with securing the country’s borders and preventing dangerous items and individuals from entering the country. CBP enforces a broad range of laws from agricultural laws, to product safety laws, foreign asset control laws, and classic trade laws and that involve collecting duty on foreign imported merchandise.

Title 31 currency-related violations

Title 31 of the United States Code includes various monetary, banking and financial rules. Covering the entirety of Title 31 far exceeds the scope of this article. Instead, we will focus on the two most common Title 31 violations enforced by CBP. Those violations include: 1) failing to report currency when you travel internationally (entering or leaving the United States) and are carrying more than $10,000, and; 2) structuring, wherein you purposefully structure the amount of money individual(s) are carrying to avoid currency reporting requirements.

31 U.S. Code § 5316 – Reports on exporting and importing monetary instruments

This section of Title 31 covers the first scenario discussed above, wherein an international traveler, when leaving or entering the Unite States, fails to declare that they are carrying currency in excess of $10,000 U.S. Dollars. The core of section 5316 follows:

(a)Except as provided in subsection (c) of this section, a person or an agent or bailee of the person shall file a report under subsection (b) of this section when the person, agent, or bailee knowingly—

(1)transports, is about to transport, or has transported, monetary instruments of more than $10,000 at one time—

(A) from a place in the United States to or through a place outside the United States; or
(B) to a place in the United States from or through a place outside the United States;

31 U.S. Code § 5316(a)

The purpose of this statute is to prevent the transport of large amounts of currency without informing the government. It is important to note that carrying more than $10,000 in currency is not illegal. However, it is a violation of law if you fail to report when you are carrying large amounts of currency (> $10,000) internationally. The government has established these reporting requirements for a number of reasons, the most prominent being that it prevents money laundering. Moreover, it is common for illicit activity, like the drug trade, to be transacted in currency outside of the banking system. This reporting requirement attempts to regulate large currency transfers and prevent them from going undetected outside of regular banking institutions.

31 U.S. Code § 5324 – Structuring transactions to evade reporting requirement prohibited

This section of Title 31 relates to structuring banking transactions or the carrying of currency across U.S. border’s to avoid reporting requirements. The relevant part of section 5324, as it relates to section 5316, is reproduced below:

(c)International Monetary Instrument Transactions.—No person shall, for the purpose of evading the reporting requirements of section 5316—

(1) fail to file a report required by section 5316, or cause or attempt to cause a person to fail to file such a report;

(2) file or cause or attempt to cause a person to file a report required under section 5316 that contains a material omission or misstatement of fact; or

(3) structure or assist in structuring, or attempt to structure or assist in structuring, any importation or exportation of monetary instruments.

31 U.S. Code § 5324(c)

This section tries to minimize the circumstances in which parties may evade the reporting requirements of 31 U.S. Code § 5316(a). As mentioned before, a classic example is where multiple people carry a single entity’s currency so that none of them exceed the reporting requirement. Were a group of individuals to do this, they should expect that all of the group’s currency will be seized for violating 31 U.S. Code § 5324.

A less sophisticated example of structuring would be where an non-married couple transit through customs separately but the boyfriend is actually carrying $9,000 of the girlfriend’s money and she is carrying $9,000 of her own money as well. Technically neither of them trigger the reporting requirement, however, the fact that the money is the girlfriends and the fact that they distributed the currency to avoid the $10,000 reporting requirement suggests the money could be seized for structuring in violation of 31 U.S. Code § 5324(c).

What happens once my money is seized for a Title 31 violation?

So, what happens if CBP believes you have violated one of the above listed laws? Most likely they will ask you questions about why you were carrying the money, who you were carrying it for, where you got it, and how you planned to spend it. How you answer those questions could be critical to the determination CBP makes about the legality of your actions and whether you are entitled to any leniency later on if they pursue seizure and forfeiture.

If CBP ultimately determines that a violation has occurred, they will initiate a seizure action. Usually this will involve counting the total amount of currency then issuing a “Custody Receipt for Detained or Seized Property” (CBP Form 6051A). This form will include an accounting of the money seized and a chain of custody for the officers to complete. It is important that you provide accurate contact information to the officers because they will send an official seizure notice to the address you provide them that day. Sometimes the officers will not seize all the money you are transporting and will return some back to you for “humanitarian” reasons. The purpose of this money is to allow you to cover small costs and not leave you destitute if you were planning to fund your travels solely with the cash you were carrying. Usually the humanitarian release is a small percentage of the total money seized, so for a $50,000 currency seizure they may release $500 or $1,000 to the traveler for humanitarian reasons.

After you are released and the money is seized, it will be transferred to CBP’s Fines, Penalties & Forfeitures Office for further processing. This is the office that will issue the official seizure notice which is usually titled “NOTICE OF SEIZURE AND INFORMATION TO CLAIMANTS CAFRA FORM.” CAFRA, in this context, stands for the Civil Asset Forfeiture Reform Act of 2000 which governs the procedure for processing certain seizure and forfeiture actions. It is important that you respond promptly to the seizure notice. Generally, you only have 30 days to file a petition for relief in response to a seizure. See 19 C.F.R. § 171.2(b). The deadline for requesting judicial forfeiture is usually 35-days after mailing of the notice. 18 U.S. Code § 983(a)(2)(B). Every agency and office may vary these deadlines slightly, but the general guidance is that you need to act promptly. Sitting on a seizure notice could lead to you losing the right to challenge the forfeiture of the property, which would result in a total loss of all seized funds.

What is forfeiture?

Seizure is the taking of funds by the government when there is a cognizable theory (probable cause) as to how those funds are connected to some illegal activity. Forfeiture is the next step in the process after seizure, wherein the government initiates the formal process of taking legal title to those funds. This is an important distinction: seized funds, while they may be held by the government they are not legally owned by the government, but once a forfeiture action is completed successfully, title to the forfeited funds formally passes to the federal government. In short, forfeiture transfers title of property from an individual to the government.

31 U.S. Code § 5317 – Search and forfeiture of monetary instruments

The laws we discussed above explain what activity is prohibited and what constitutes a violation of law. This section specifies the actions the government can take to prevent such violations, and what it can do in response to discovered violations. The relevant section follows:

(b)Searches at Border.—
For purposes of ensuring compliance with the requirements of section 5316, a customs officer may stop and search, at the border and without a search warrant, any vehicle, vessel, aircraft, or other conveyance, any envelope or other container, and any person entering or departing from the United States.
(c) Forfeiture.—
(1) Criminal forfeiture.—
(A)In general.—
The court in imposing sentence for any violation of section 5313, 5316, or 5324 of this title, or any conspiracy to commit such violation, shall order the defendant to forfeit all property, real or personal, involved in the offense and any property traceable thereto.
(B)Procedure.—
Forfeitures under this paragraph shall be governed by the procedures established in section 413 of the Controlled Substances Act.
(2)Civil forfeiture.—
Any property involved in a violation of section 5313, 5316, or 5324 of this title, or any conspiracy to commit any such violation, and any property traceable to any such violation or conspiracy, may be seized and forfeited to the United States in accordance with the procedures governing civil forfeitures in money laundering cases pursuant to section 981(a)(1)(A) of title 18, United States Code.

31 U.S. Code § 5317 (emphasis added).

As you can see, this law gives CBP the right to search any person entering or departing from the United States. It also allows for the criminal or civil forfeiture of any assets that have been found to violate sections 5316, or 5324.

My money was seized, can you help me get my money or property back?

Yes, we can help if you had money seized under one of the above mentioned statutes. If you were subject to a seizure, it is critical that you avoid any delay and contact an attorney as soon as possible. If you miss a deadline you may lose your right to challenge the seizure and forfeiture administratively and/or judicially.

Our office has extensive experience with the above-listed Title 31 seizures. For seizure actions like this, initial consults are typically free. Sometimes, we will take your case for free and only collect a fee we help you recover any of the seized funds. Please do not hesistate to contact us today, you can call us at the number listed on the sidebar or email us at consults@ivancielaw.com

New executive order on anti-dumping and countervailing duties

In keeping with President Trump’s theme of protecting American industry and tightening potential trade abuses, on March 31, 2017, President Trump issued an executive order titled: “Establishing Enhanced Collection And Enforcement Of Antidumping And Countervailing Duties And Violations Of Trade And Customs Laws.” Here is a link to the full order.

Fine money left on the table, a solution?

That order, notes that “As of May 2015, $2.3 billion in antidumping and countervailing duties owed to the Government remained uncollected, often from importers that lack assets located in the United States.” Having worked at CBP I saw how difficult it was to collect on these penalties, especially actions involving foreign nationals.

Increased AD/CVD Bonds for high-risk importers

To address this issue the new order proposes that DHS increase “bonding requirements, based on risk assessments, on entries of articles subject to antidumping and countervailing duties, when necessary to protect the revenue of the United States.”

The order mandates that within 90 days, so by June 29, 2017, DHS shall develop a risk-based plan related to increased bonds for AD/CVD imports, along with developing other “appropriate enforcement measures.”

New enforcement procedures for inadmissible merchandise?

The order also puts a similar 90-day deadline on DHS to “develop and implement a strategy and plan for combating violations of United States trade and customs laws for goods and for enabling interdiction and disposal, including through methods other than seizure, of inadmissible merchandise entering through any mode of transportation, to the extent authorized by law.” This passage is interesting because seizure is generally the appropriate and lawful way under which merchandise is taken by the government and disposed of. This new approach will have to fit within the due process rights of the importers of seized merchandise.

Improved communications with IP rights holders

The order also addresses Intellectual Property Rights (IPR) and the desire to increase communication with rights holders regarding infringing importations and information regarding importations that have been voluntarily abandoned but would have violated US Trade laws.

Increased federal prosecutorial resources

Most importantly, the order specifies that federal prosecutorial resources will now be devoted to trade cases, which has been missing in the past. In practice, this means that a lot of these customs violations that have gone unenforced in the past may see a large uptick in civil and criminal enforcement from the U.S. Attorney’s Office.

Whats next? Find out on June 29, 2017.

We’ll have to see what June 29, 2017, will hold but for fringe importers this news is unwelcome. It means that more attention and resources will be directed at these trade violations and you can expect increased enforcement and liability. For rights holders, the news should be welcome as CBP has shown a commitment to protecting the rights of domestic IPR holders consistently through its latest actions.

It will be interesting to see the new DHS rules/regulations and enforcement priorities that develop after June 29, 2017.

Roberts v. DHS – A pro se challenge to the Global Entry Program

Below is a 2011 DC federal case wherein a plaintiff unsuccessfully tried to challenge his Global Entry membership denial. It provides a good overview of the legal frameworks potentially available for challenge, and their limits. It also is a good indicator of the large amount of discretion given to DHS/CBP in administration of the Global Entry program. You can read it in the embedded file below or view it directly here: Global Entry Unsuccessful District Court Challenge.

 

You can find more information about the Global Entry program in the comprehensive article we have written.

Q & A with a Merit Systems Protection Board Representative

Q & A with a MSPB Representative

Today we’re going to be doing a question and answer session with a Merit Systems Protection Board, MSPB representative. We will be speaking with attorney, Mike Ivancie, founder of the Ivancie Law Practice.

Q: So, for starters, what is the Merit Systems Protection Board or MSPB?

The Merit Systems Protection Board (wiki) is a little-known administrative judicial agency in the federal government that is responsible for primarily adjudicating the disciplinary cases of federal employees. The MSPB handles other issues as well, but the bulk of its work is related to disciplinary actions of federal employees, more commonly referred to as adverse actions. An adverse action is a reduction in payer grade, a suspension of more than 14 days, and furloughs of 30 days or less.

Q: Who can represent a federal employee at the MSPB?

Interestingly, there’s no limitation on who can represent a federal employee at the Merit Systems Protection Board. If a federal employee wanted, they could have their brother or sister, anyone, any non-attorney or attorney represent them. This doesn’t mean that an employee should necessarily have a union steward who’s not an attorney or someone not versed in MSPB and federal employment law represent them. Generally, an attorney that has experience litigating these kinds of cases is best situated to represent a federal employee before the MSPB.

Q: How do I file an MSPB appeal?

So, if you’re a federal employee and you think you want to file an MSPB appeal, it really depends on the kind of case that you have. As I mentioned earlier, typically a federal employee encounters the MSPB through challenging a disciplinary action that they’ve received on the job. Most commonly, what will happen is an employee will be served with a proposal letter notifying them of the discipline that the agency is seeking against them and the basis for that discipline. Following the proposal letter, the employee will have the opportunity to respond and give a written or oral reply to the responsible agency official, most often referred to as the deciding official, for that disciplinary action.  After submitting a reply, or not submitting a reply, typically within 30 to 60 days, the agency will then issue a final decision on the disciplinary action. Following that decision letter, it should include notification of appeal rights and typically within that, if your disciplinary action meets the level of adverse action qualification, which we talked about earlier; suspension of more than 14 days, or removal or reduction in grade or pay, then you can appeal your case to the MSPB. Generally, you only have 30 days to appeal the case to the MSPB and your appeal rights will generally be listed in that final decision letter that you receive from the agency.

You can also watch our video on completing the appeal form here:

 

Q: What other kind of cases are heard at the MSPB?

As mentioned earlier, disciplinary cases are the most common kind of case heard at the MSPB, but additionally, the MSPB can review Office of Personnel Management (OPM) decisions, adjudicate cases related to the re-employment rights of veterans and other employees, whistleblower appeals, and in rare or limited circumstances, adjudicate probationary terminations.

Q: Is it better for my case to go to the MSPB or the EEOC?

Well, again, unfortunately, it depends. It depends first on whether or not your case can properly be before the MSPB and the EEOC. Certainly, if you’re raising allegations of discrimination under Title VII or some other law that is in enforced by the Equal Employment Opportunity Commission, then you can take your case there, however, jurisdiction at the MSPB is very limited. You can’t bring a pure discrimination case to the MSPB, such as a hostile work environment claim. It has to have some sort of other jurisdictional hook to give the MSPB jurisdiction over your case. So, let’s say for example, you’re issued a 30 day suspension. Well, that would be properly before the MSPB. They would have jurisdiction over your case as an adverse action. Further, let’s say you believe that the 30 day suspension was a result of discrimination. Well, then you could raise that issue at the MSPB as well, but you could also raise it at the EEOC.

So, what are the advantages and disadvantages of the two venues? Well a large advantage of the MSPB is that cases are decided, generally very quickly. As discussed earlier, a case will usually be adjudicated within 120 to 220 days, whereas depending upon what region you’re in, an EEOC case can take years, multiple years, to decide. There’s not as hard or fast limitation for case processing at the EEOC, whereas the MSPB tries to honor the 120 day deadline as much as it can. The EEOC also has a much larger caseload, especially in some of the regional offices, like the Los Angeles regional office. So, if you’re seeking a quick redress, then the MSPB may be a better venue for you. However, a lot of federal employees think that the MSPB is not as favorable to them and maybe with some good reason, since the MSPB released statistics in 2014 suggesting that federal employees typically lose their cases more than 70% of the time. This may be a function of the board not being that favorable to employees or that federal employees are not hiring savvy federal employment law attorneys, or possibly fighting cases that lack merit all the way through decision. And generally, as we discussed earlier, only the most serious cases of misconduct really generally reach its way to the MSPB.

Q: How long does it take a typical MSPB case from start to finish?

Well, the MSPB has a general rule that cases should be adjudicated within 120 days of them being docketed with the local regional office. In practice, this rule is not hard and fast, so some cases go over the 120 days. Actually more often than not they do go over the 120 days. Additionally, complicated federal employment cases before the MSPB typically have an extension granted at least once or twice. A judge has the ability to grant up to two 30 day case suspensions to allow the parties more time to engage in discovery, settle the case, or just to accommodate various working schedules.

After a case is docketed with a MSPB regional office, for example, San Francisco, the case will be assigned to a administrative judge (AJ). This AJ will then  issue what is called an acknowledgment order. This order basically acknowledges the beginning of this new case and notifies the parties, the federal employee, and the federal agency of their rights and obligations going forward related to this case. An acknowledgment order is probably the most important document in an MSPB case because it lays out deadlines for discovery. The judge’s expectations for the parties going forward and it provides notice to the appellant, the federal employee that they need to declare a representative, if they’d like to have one. As discussed above, a federal employee can designate any representative they want.

Q: Can am employee change their representative after starting a case at the MSPB?

The answer to that is yes, absolutely they can. A federal employee has the absolute right to select who represents them. It’s not compulsory that they have the same representative from the start to the finish of the case. Nor do they have to choose the union to represent them. Generally, it’s advisable and it’s a good idea to stick with the same representative, but there is no requirement or rule that you’re locked in once you hire someone. Indeed, I’ve taken over for other attorneys and non-attorney’s as the representative after a case has been docketed and the acknowledgment order has been issued.

Q: What is the purpose of the acknowledgment order?

Well, I address this question briefly above, but an acknowledgment order lays out the framework of the case and the expectations of the judge. Once you have an acknowledgment order, your case has been docketed and it’s time to take it very seriously. The deadlines that a judge gives you in the acknowledgment order are ironclad and you can expect that if you miss deadlines, you will not necessarily be punished, but there will be repercussions that can affect your case dramatically. One of those big deadlines is the deadline for discovery.

Q: What is discovery?

Discovery is the opportunity for the parties involved in  litigation, for example here at the MSPB to seek out relevant evidence, such as memos, letters, emails and other evidence the opposing party already has in their possession.

Discovery is very important because generally, disciplinary actions are required to follow a certain procedure and the action must comport with the Douglas factors. Accordingly, you can use discovery to gather information to find out if the agency’s disciplinary action was consistent with these required procedures. Additionally, you can find information in discovery about comparator employees, other employees that were potentially treated better than the employee-appellant at the MSPB and you can use discovery to find information about potential bias, discrimination, and other case-specific issues.

To give an example, let’s say an employee is terminated for AWOL, and let’s say there’s a dispute as to whether or not an employee was consistently tardy. Well, discovery allows you to gather information from the agency to find out whether or not that employee really was tardy, whether the agency documented that tardiness, whether there were access logs showing when that employee logged into their computer every day or swiped through security every day. These are very relevant documents and pieces of information that would help prove or disprove a theory in the case.

That turns me to what the idea of what discovery is all about: it’s really meant to find documents that are relevant to a specific case that tend to prove or disprove a specific fact that is relevant to that case. So, as an employee that’s representing himself, they need to keep in mind that discovery is not to be abused. It needs to be used to ask for information relevant to your case. So, discovery requests like, I want the tax returns of my former supervisor for the last decade, unless that has any connection to your disciplinary case, which it’s highly unlikely that it does have any connection, that would be an inappropriate discovery request . The judge would deny it and it’d be likely that the judge would warn an unrepresented appellant not to make requests of that nature. In some instances there could be sanctions or some sort of order from the judge that would affect the appellants case going forward if they really try to abuse the discovery process.

One more thing about discovery I’d like to add is that it really is a critical part in the case of a federal employee related to disciplinary action. Generally you only have 20 to 45 days to initiate discovery (depending on the AJ) and if you fail to initiate discovery within that time line, you waive your right entirely. If you cannot conduct discovery in a case, it’s kind of like fighting a case with one arm tied behind your back. It’s greatly limiting if you cannot engage in discovery. I’ve had clients come to me before where they’re seeking representation after discovery is closed or the window to initiate it has since lapsed and I tell them ‘discovery is an extremely important phase for the case and by not taking advantage of it, you have really hurt your case.’

Discovery typically begins shortly after an acknowledgment order is issued and finishes generally within 60-90 days of the case being docketed (depending on how complex the case is). If there are discovery disputes, parties can go to a judge and request that the judge issue an order requiring the party to produce the requested documentation. This typically is referred to as a motion to compel.  Generally, appellants will not have very much discoverable information in an MSPB disciplinary case since the agency is obligated to provide all the evidence to support the disciplinary action. Although, that’s not to say that sometimes appellants are not served with discovery requests. It’s just a question of whether or not the information the agency is requested is relevant or not.

Q: Shifting gears, what are the Douglas factors?

Well, you can look on our website and we have an extensive article discussing the Douglas Factors. But, in short, the Douglas Factors are 12 different factors that a deciding official must look to when they’re determining the appropriate level of discipline for a federal employee in a disciplinary case. These factors were created in a seminal decision by the Merit Systems Protection Board, where one of the parties’ names was Douglas, hence the name Douglas Factors. These factors include your length of service with the federal government, the severity of the misconduct and things like that. So, the purpose of these factors is to encourage these deciding officials to look at a case cohesively or review the totality of the circumstances and determine whether or not the proposed discipline is reasonable or not. Now, the Douglas Factors are also extremely relevant at the MSPB, because judges will also evaluate a case independently and make sure the deciding official properly applied the Douglas Factors. If a deciding official does not properly apply the Douglas Factors, that could be grounds to mitigate or overturn the disciplinary action.

Q: Is it hard to win a case at the MSPB?

It really depends on the case that you have personally and the individual merits of your case.

One of the big questions is, have you been subject to discipline before? If you’re someone who has been subject to three or four prior disciplinary actions and then finally now you’re faced with a 30 day suspension or removal, your case is probably going to be difficult to win at the MSPB.

Now if you’re a model employee, who has worked for the government for 25 years and your agency’s trying to fire you for taking a pen home, or showing up five minutes late to work one time, that is a strong case.

Again, it really depends on the merit of your case but in all candor, MSPB cases are challenging and more often than not, appellants lose at the MSPB. Now that’s a function of multiple things. One, it’s a function of highly educated and sophisticated federal management and advisory structure. Management can consult labor and employment relation specialists, and attorneys, who know all the rules for disciplining federal employees and they make sure to follow them. This structure is in place because a common way for disciplinary actions to be overturned, is if something is procedurally unsound. Why procedure is so important, relates back to the Constitution and federal employment being a property right and the need of the government to uphold the rule of law and the Constitution. Now, because there are all these experts on the agency side, typically these procedural issues do not arise. Additionally, smaller or less serious matters are typically resolved more informally within management structures. A good manager, instead of going straight to a 15 day suspension of an employee, will counsel them and work with them informally to try and change their behavior.

So, generally the cases that actually end up making it to the MSPB are cases where the conduct is fairly serious or misconduct is really egregious; Employees assaulting other employees at work or stealing valuable property or destroying property or failing to follow orders consistently. Generally it’s a pattern of behavior over and over and over that will lead to the most trouble for federal employees and greater likelihood of a sustained removal or a long suspension at the MSPB.

Q: How long does a hearing last at the MSPB?

Speaker 1: Well, typically you can expect it to take around 120 days or more. Realistically an expectation is about a little less than a year. It really depends on your case specifically, how complicated it is, if it’s a multi-day hearing and how long it takes the judge to issue a decision in your case. MSPB has a rule, generally, that tries to get a case decided within 120 days, as we discussed earlier. That is not a hard and fast rule to the extent that if the judge takes more than 120 days, an employee automatically wins his case . It simply doesn’t work like that, but you can expect around 180 to 220 days. I’d say is a fair estimation of start to finish, given that there will likely be one or two case suspensions in your case, where the case is suspended or deadlines are continued for 30 days and just to account for the judge dealing with scheduling issues and the time to write a well thought out opinion for your case.

Q: Can I appeal if I lose my MSPB hearing?

So let’s say you go through a hearing, the judge issues a decision and he sides with the agency and sustains your discipline. What sort of redress do you have? Well, again, it depends to specifics of your case, but typically you have a right to request reconsideration by the full board. The Full Board are the three members that are appointed by the president and these three board members, will review your case and see if there is anything deficient by the judge, or make a decision about new evidence that was unavailable previously and decide whether or not you’re entitled to a new hearing or something that was so plainly wrong or a law that was clearly misapplied then they may overturn the prior decision. Also, sometimes you can take your appeal to the federal circuit, and in cases where there’s a discrimination component, commonly referred to as a EEOC or Equal Employment Opportunity Commission component, you can appeal that to federal district court.

Hopefully you found this discussion with a MSPB Representative helpful. If you have more questions, feel free to contact us if you have a pending case you need help with or would like to suggest a new question for our next Q&A session.

Thank you.

 

Fighting a Failure to Declare Penalty (19 USC 1497) issued by CBP

Today I am going to talk about failure to declare penalties issued by the federal government. Failure to declare penalties occur when goods entering the United States are entered without a declaration, typically to avoid duty enforcement or because the goods may otherwise be inadmissible. Sometimes a failure to declare, however, is simply the result of negligence or misinformation.

There are two common contexts under which failure to declare penalties arise. The first is when travelers enter the United States from abroad and fail to declare merchandise they have purchased or acquired overseas. U.S. Customs and Border Protection (CBP, formerly called the Customs Service) will then seize and sometimes forfeit the merchandise, and may issue a penalty. The other context is commercial importations, where a container of merchandise arrives at a port of entry and the importer does not declare all the merchandise within the container. A classic example would be a container that contains hidden merchandise, where only the merchandise near the doors of the containers is declared.

The basics of a 19 USC § 1497 enforcement action (penalty and/or seizure)

For the purposes of this article, I’ll be focusing on the the individual context for failure to declare violations. If you’d like to read more about commercial violations you can do so here. As mentioned above, individuals are most commonly issued failure to declare penalties pursuant to 19 USC § 1497 when they return to the United States from an international trip and fail to declare their purchase of valuable merchandise abroad.

During a baggage inspection CBP often discovers the merchandise and sometimes seizes that merchandise and issues a penalty up to the value of the article. You read that right, the law says CBP can seize and forfeit the article you failed to declare and issue a penalty equal to the value of the article they are taking from you! For valuable merchandise, a failure to declare violation can be extremely costly. 

CBP’s official YouTube channel also discusses Failure to Declare penalties starting around 2:30 of the video below:

What does the law say about failure to declare penalties?

In relevant part, 19 USC § 1497, provides that:

19 USC § 1497. Penalties for failure to declare

(a) In general

(1) Any article which—

(A) is not included in the declaration and entry as made or transmitted; and

(B) is not mentioned before examination of the baggage begins—

(i) in writing by such person, if written declaration and entry was required, or

(ii) orally, if written declaration and entry was not required;

shall be subject to forfeiture and such person shall be liable for a penalty determined under paragraph (2) with respect to such article.

(2) The amount of the penalty imposed under paragraph (1) with respect to any article is equal to—

(A) if the article is a controlled substance, either $500 or an amount equal to 1,000 percent of the value of the article, whichever amount is greater; and

(B) if the article is not a controlled substance, the value of the article.

What is the purpose of this law?

This law attempts to ensure that parties declare valuable merchandise they have purchased abroad. This is important for many reasons, including tax evasion, money laundering, and the development of trade and commerce statistics. Low value items sometimes fall under CBP’s personal exemption rules and do not have to be declared. These rules vary depending on the traveler’s country of residence and where they are traveling from. CBP lays out some of its exemption rules on their website.

Generally, merchandise worth a few hundred dollars isn’t going to get you in trouble, its when you have merchandise valued in the $1,000s or more that you should make certain you are not setting yourself up for a big failure to declare penalty or forfeiture.

Do I still have to declare items purchased from a duty-free store? Will I owe duty?

Yes, you should declare even duty-free items, and yes you may still owe duty if the value of the merchandise exceeds your personal exemption limit despite any duty-free status. This can be a serious hangup for many individuals as they think duty free = I do not have to declare. This is not true!

CBP is clear on this point:

Items purchased in “duty-free” shops are eligible for the duty-free exemption but duty will be owed if the value exceeds the duty-free exemption for the country you are returning from. Gifts acquired abroad for your personal use or for someone else may also be included in your personal exemption as long as they are not intended for business, promotional or other commercial purposes. Keep in mind some commodities are not subject to duty (i.e. original paintings or antiques over 100 years old) or may originate in countries eligible for a special trade program (i.e. GSP, NAFTA, etc.). If you are bringing products that originate in a country eligible for a special trade program, you may automatically bring the goods into the U.S. duty-free. However, you should have proof of the goods country of origin. For example, the goods should be marked made in the country it was produced or manufactured in and the country of origin should be indicated on the invoice or receipt.

CBP Exemption rules (emphasis added).

It is also worth noting that if you apply for VAT tax refunds in Europe CBP will likely be informed of all the merchandise you request a tax refund on. So, make sure you declare any merchandise you buy abroad, especially if you file for VAT tax refunds in your foreign-departure airport prior to returning to the United States.

How does a failure to declare violation occur?

A classic example would be someone travels abroad and finds a watch they have been coveting priced very attractively thanks to a favorable exchange rate and lower sales tax. Faced with this great bargain, they decide to make the big purchase. For simplicity sake, lets assume the total cost of the watch was $20,000 in US equivalent dollars. A week later the watch buyer flies back home to the United States. When they are clearing customs at the airport they don’t tell the officers that they spent $20,000 abroad and purchased a new watch. Then, they get randomly selected for secondary inspection and after CBP Officers open their checked baggage, officers discover the watch box and the purchase receipt that shows it was bought just a few days ago at a foreign stores and exactly shows what the traveler paid.

In this instance, assuming the traveler never disclosed the watch purchase, they would be in violation of 19 USC § 1497, for, you guessed it, failure to declare. The CBP Officers at the airport would then be able to seize the watch and could initiate a $20,000 penalty to the traveler. See 19 USC § 1497(a)(1)-(2). The CBP Officers do not necessarily have to issue a penalty and seize the watch, they have the discretion to do nothing or do everything the law allows. However, generally you can expect them to seize when the property has significant value. After the seizure, CBP will send notice to the property holder and you will have a chance to challenge the seizure, and seek mitigation if you wish.

What can I do if CBP issues me a 19 USC § 1497 failure to declare penalty?

You should contact an attorney that specializes in trade and customs law. I formerly worked at CBP and have extensive experience related to these types of cases. In some instances, CBP may be willing to mitigate the penalty issued to you, cancel the penalty entirely and sometimes return all of the seized property. Each case is different and it depends on the specifics of your case whether you may be eligible for mitigation, but you should contact an attorney promptly. Typically you only have between 30-60 days to challenge a penalty or seizure (depending on which). Failure to take prompt action can lead to you losing the right to challenge CBP’s action and being stuck with whatever penalty or enforcement action they have taken against you.

In some instances, we may even take your penalty case on a contingency basis, meaning we only get paid if you get money back from the government (typically for seizures valued more than $10,000)Contact us now for a free consultation.