Customs Publishes Final Recordkeeping Penalty Mitigation Guidelines

October 2000

The Customs Bulletin of October 4, 2000 publishes the final recordkeeping penalty mitigation guidelines. These mitigation guidelines had been published in proposal form in March 1999. Now that the guidelines have been finalized importers should expect to begin seeing the issuance of pre-penalty and penalty notices for failure to produce information or records that are included in the so-called "(a)(1)(A)" list. The (a)(1)(A) list includes records and documents that are related to the entry process. Documentation such as support for a GSP or Nafta claim, as well as the GSP Declaration or Nafta Certificate of Origin itself, are examples of the kinds of documents or information that are included in the (a)(1)(A) list. An importer can only be excused from the production of (a)(1)(A) list documents if 1) the documents were destroyed or lost because of an "act of god", e.g., flood, pestilence, fire; 2)Customs had received the documents or information previously and had retained it, and the importer has a signed written receipt from Customs to that effect; or, 3) the importer has substantially complied with the request for production.

Customs states that with the publication of these final penalty mitigation guidelines, Customs can now impose monetary penalties for the failure to produce information or records going back to the date that the (a)(1)(A) list was published in the Federal Register of July 15 1996.

Penalties can be imposed for the failure to produce records or information, which are the result of either negligence or willful conduct. Negligence is defined in the guidelines as "a failure to exercise the degree of reasonable care and competence expected from a person in the same circumstances. . ." Willful conduct is defined as conduct which is done "voluntarily and intentionally, as established by a preponderance of the evidence."

The non-production of records or information can result in the imposition of very substantial penalties. In the case of non-production resulting from negligence, Customs can impose a penalty of up to $10, 000 per release (defined as a CF 3461) or 40% of the value on the CF 3461, whichever is less. In the case of non-production based on willful conduct, Customs can impose a penalty of up to $100,000 per CF 3461 or 75% of the CF 3461, whichever is less.

In the event of an issuance of a pre-penalty notice demanding a monetary penalty for non-production of documents, the importer will be given the opportunity to submit a petition requesting mitigation of the penalty. The guidelines set forth mitigation factors that will be considered, as well as aggravating factors. Please note that due to a printing error the section explaining Customs' view of the availability of judicial review was omitted from this publication. We have brought this to Customs attention and have been advised that that section will be printed in a subsequent publication.