Presentation on theme: "19 U.S.C. 1592 Penalties for Fraud, Gross Negligence, and Negligence."— Presentation transcript:
19 U.S.C Penalties for Fraud, Gross Negligence, and Negligence
Section U.S.C (or, as it is commonly known, “section 1592” or “section 592) is Customs’ principal enforcement tool to curtail unlawful import practices, such as incomplete or false import documentation, omission of material, or aiding and abetting an unlawful import practice. Customs uses section 1592 to to recover lost revenues/duties as well as impose monetary penalties on violators. Applies to negligent, gross negligent, and fraudulent conduct. Has broad application – under the “aiding and abetting” provision, may apply not only to importers, but also to foreign sellers, consignees, and customs brokers.
19 U.S.C. Section 1592 (a)Prohibition (1) General rule 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 or electronically transmitted data or information, written or oral statement, or act which is material and false, or (ii) any omission which is material, or (B) may aid or abet any other person to violate subparagraph (A).
Elements of a Section 1592 Violation 1. False Statement, Omission or Act 2. Materiality 3. Culpability – Fraud, Gross Negligence or Negligence If all 3 of the above elements are present and the transaction involves an entry, attempted entry, introduction or attempted introduction, the violation may be pursued against: 1.Any person (including foreign parties) 2.Any aiders and abettors 4
Elements of a Section 1592 Violation 1.Entry - occurs when goods are actually released into the commerce of the U.S. Acts occurring after entry can also be violative if they were intended at the time of entry. 2.Attempted Entry – occurs when there is evidence of the person’s intent to enter the goods into the commerce of the U.S. Importer cannot “undo” violation by deciding not to import. 3.Introduction – occurs when goods are consigned to a person in the U.S. and are presented at the U.S. port. 4.Attempted Introduction – occurs when goods are consigned to a person in the US. and the violation is discovered before the goods are presented at the Customs port. 5
Elements of a Section 1592 Violation False Statement, Omission or Act must have the potential to alter: 1.Classification, appraisement or admissibility of the imported goods, or 2.The liability for duty, or 3.Tend to conceal an unfair trade practice, or 4.Influence Customs in any determination required to be made in enforcing U.S. laws. Even if no duty consequences, the false information can be considered to be material if it impacts trade statistics. 6
Culpability 1.Fraud – A false statement, omission or act done knowingly (willful and knowing). 2.Gross Negligence – A false statement, omission or act done with actual knowledge of, or wanton disregard for, the relevant facts and with indifference or disregard for the offender’s obligations under Customs’ or other laws. 3.Negligence – failure to exercise reasonable care expected from a person in the same circumstances. 7
Statute of Limitations 19 USC §1621 Time period in which judicial action may be brought to enforce a claim for a section 1592 penalty. Fraud – action must be filed within 5 years from date of discovery. Gross Negligence/Negligence – action must be filed within 5 years from date of commission or occurrence for the alleged violation. Generally this is five years from the date of entry. 8
Prior Disclosure What is it? 1.The disclosure of the circumstances of a violation of section 1592; 2.Before the commencement of a formal investigation; 3.Or after the commencement of a formal investigation, but before the disclosing party has notice of the investigation. 9
Prior Disclosure For a prior disclosure to be valid, the disclosing party must disclose the circumstances of a violation, which is defined as including: A description of the merchandise involved in the violation; Identification of the importations subject to the disclosure by entry number, or by indicating the Customs port of entry and the approximate dates of entry; A description of the false statements, omissions or acts, including an explanation as to how and when they occurred; Statements as to the true and accurate information that should have been provided in the entry, to the best of the disclosing party’s knowledge; and An agreement to provide any information or data unknown at the time of disclosure within 30 days of the initial disclosure date. 10
Prior Disclosure Benefits of a valid Prior Disclosure: Limits the amount of the penalty: – If fraud, the penalty is reduced from the domestic value of the merchandise to 1 times the loss of revenue or 10% of the dutiable value; – If negligence or gross negligence, the penalty is reduced to interest on the actual loss of revenue.
Reasonable Care A party may avoid section 1592 civil penalties if it can be demonstrated that the party acted with “reasonable care” in connection with the importation of merchandise. 12