If you have a Customs compliance issue, or are facing an enforcement action, we can help.
The founder of Ivancie Law Practice, J. Mike Ivancie, Esq., formerly served as a staff attorney for Customs and Border Protection (CBP). CBP is an agency within the Department of Homeland Security that is charged with securing the borders of the United States and enforcing all trade and customs laws.
As a staff attorney for CBP, Mr. Ivancie gained valuable experienced related to customs and international trade compliance. He handled 8-figure trade penalty cases and was involved in the administration and processing of cases involving both large and small importers. Mr. Ivancie also gained valuable insight into the internal administrative and bureaucratic processes within CBP. He can leverage this knowledge to help get you a better result with your trade and customs compliance issues. Below we cover some of the more common trade and compliance issues.
- 1 CBP Enforcement Actions and Trade Issues
- 2 Common Title 19 (Customs Law) Violations explained
- 3 Mitigation
- 4 Beyond Title 19 – enforcement of other laws and involvement of other federal agencies
- 5 Avoiding Penalties and Compliance actions – Proactive Advisory Representation
- 6 Conclusion
CBP Enforcement Actions and Trade Issues
Typically, importers deal with a few recurring issues. We provide an overview of common enforcement actions taken by CBP and ways to deal with them. Note that every case is different and that you should consult with an attorney before taking any action that could prejudice your individual case.
The law – Title 19 of the United States Code
Customs law is found at Title 19 of the U.S. Code. However, that is not the only source of law on this topic. CBP and DHS have promulgated a vast amount of regulations as well. The regulations are typically cited as 19 C.F.R. ### and the U.S. Code is typically cited as 19 U.S.C. ####. As discussed further below, not only does CBP enforce Title 19 but it also enforces all laws in relation to merchandise entering the country.
Common Title 19 (Customs Law) Violations explained
While there are numerous types of enforcement actions CBP can take these are some of the more common and most significant actions that importers face.
19 U.S.C. § 1526(e) – Seizure of Goods Bearing Counterfeit Trademark
Absent written consent of a mark holder, merchandise imported into the United States bearing a counterfeit mark can be seized and forfeited by CBP. Generally, the infringing merchandise will be destroyed or put to some charitable use. In simple terms, violation of this law results in the loss of all offending merchandise.
19 U.S.C. § 1526(f) – Counterfeit Trademark Penalties
Individuals who assist in or direct the importation of counterfeit merchandise can be civilly penalized individually. The penalty amount depends on whether the individual has any past violations. However, even for a first-time offense, the penalty can be up to the value of the merchandise had it been genuine. This means the penalty can be extremely high. Take for example a shipment of counterfeit Louis Vuitton hand bags. The retail value of those items would be extremely high, which would result in a substantial civil penalty. The civil fine doubles to twice the retail price for subsequent offenses.
19 U.S.C. § 1592 – Commercial Fraud and Negligence Penalties
These penalties are typically issued when an individual submits false or misleading statements to avoid a duty, tax, or fee. The most common scenario leading to a 1592 penalty occurs when an importer misrepresents and undervalues merchandise to avoid paying more duty to CBP. The problem with 1592 penalties is that they can be extremely large and cover a long period of time. So if an importer has been undervaluing their merchandise for the last 3 years, the government will be able to collect, not only the lost duty, but assess a penalty on that duty as well. The amount of the penalty depends on the intent or culpability of the offending party. If it is clear the party fraudulently undervalued their goods the penalty can be up to the entire domestic value of all offending goods! If the error was caused by gross negligence the importer may be on the hook for four times (4x) the lost duties and fees or 40% of the dutiable value of the merchandise. For negligent violations the importer will owe two times (2x) the lost duties and fees or 20% of the dutiable value of the merchandise.
These penalties can become unbearably large very quickly. Indeed, if you asked any importer whether they could pay a penalty amounting to the domestic value of all the goods they imported in the last year they would laugh in your face. These are the kind of penalties that can shut a business down.
19 C.F.R. §§ 113.62(d), 141.113 – failure to redeliver merchandise into customs custody
In some instances, CBP requires that merchandise be redelivered to its custody. Failure to do so results in a liquidated damages penalty that is assessed against your import bond. These penalties are easy for CBP to collect since there is a liquid bond in place. Ultimately, the bond may be paid and you may face a lawsuit from the bond company. Therefore, importers should pay special attention to any notices from CBP related to the redlelivery of merchandise. These types of penalties can be difficult to overcome but I have had some success getting them overturned for clients.
CBP in general is a flexible agency. If importers act in good faith with CBP and the penalty was the result of some administrative error, or the violation was a first time offense, CBO will likely mitigate the penalty. The degree of mitigation is governed by the CBP Mitigation Guidelines. Mitigation is a complex and intricate process and you should likely consult with a trade professional if you want to get one of your penalties mitigated. We have extensive experience applying the mitigation guidelines and advocating for outcomes in these types of cases.
Beyond Title 19 – enforcement of other laws and involvement of other federal agencies
Because CBP is charged with enforcing the laws of the United States in relation to all goods entering the country, many other laws and regulations may be relevant in your case. Just a few examples include Federal Drug Administration’s (FDA) laws & regulations related to the import of cosmetics and drugs and the U.S. Fish and Wildlife Service’s laws & regulations for the importation of certain plant and animal materials. Every shipment entering the country must not only comply with import laws generally, but also must not violate any other law, including agency-specific laws. This means that any given trade case can require complex analysis of not only Title 19 Customs Laws but also the laws & regulations enforced by other federal agencies.
Avoiding Penalties and Compliance actions – Proactive Advisory Representation
Obviously, the best practice is to avoid penalties, seizures, and other enforcement actions altogether. This is done by having a robust in-house trade compliance program. The Ivancie Law Practice can act as a consultant to aid companies that are reviewing their internal practices. Ultimately, the cost of this service can be much less than actually fighting or paying a penalty in the future.
General Compliance Program
Every importer should have a compliance program in place to assure they are properly classifying and valuing the goods they are entering into the country. Simple policies related to document retention and data entry validation to avoid administrative errors can go a long way. Failure to maintain proper internal compliance may lead to CBP taking an enforcement action against an importer or simply subjecting their shipments to more scrutiny, which in some instances can be more costly than a penalty action.
19 U.S.C. § 1592(c)(4) – Prior disclosures
If an importer becomes aware of an ongoing compliance issue before CBP does, they can self-report that violation to CBP in the form of a prior disclosure. A valid prior disclosure avoids the significant penalties for fraud, gross-negligence and negligence allowed for in 19 U.S.C. § 1592. Instead the importer pays a significantly reduced penalty. The timing of the disclosure along with other administrative criteria are critical to whether CBP will accept the disclosure or not. If you discover an internal violation prior to CBP you should consult with an attorney immediately to determine whether making a prior disclosure is the right approach for your company.
C-TPAT: Customs-Trade Partnership Against Terrorism
C-TPAT is a program created by CBP to protect the homeland and encourage the smooth flow of trade. Much like the trusted traveler program for individual travelers, C-TPAT requires initial work upfront on the behalf of companies and importers but generally assures that your shipments move swiftly through customs and enter the flow of commerce. Entering the C-TPAT program typically proves beneficial for larger importers as it helps speed the supply chain, and it is beneficial for the government because the importer takes additional steps and provides extra information to ensure the security of shipments.
If your company has been subject to enforcement action by CBP you should consult with an attorney promptly. There are important administrative deadlines related to the processing of cases. Failure to meet these deadlines can prove prejudicial. The Ivancie Law Practice provides free consultations to all new clients.