What Every Member of the 

Trade Community Should Know About: 

Customs Administrative 

Enforcement Process: Fines, 

Penalties, Forfeitures and 

Liquidated Damages 

AN INFORMED COMPLIANCE PUBLICATION 

FEBRUARY 2004 
 Customs Administrative Enforcement Process 

February 2004

NOTICE:

This publication is intended to provide guidance and information to the trade community. 

It reflects the position on or interpretation of the applicable laws or regulations by U.S.

Customs and Border Protection (CBP) as of the date of publication, which is shown on 

the front cover. It does not in any way replace or supersede those laws or regulations.

Only the latest official version of the laws or regulations is authoritative. 

Publication History 

First Published: April 2000 

Revised: February 2004 

PRINTING NOTE: 

This publication was designed for electronic distribution via the CBP website 

(http://www.cbp.gov) and is being distributed in a variety of formats. It was originally set

up in Microsoft Word97®. Pagination and margins in downloaded versions may vary 

depending upon which word processor or printer you use. If you wish to maintain the 

original settings, you may wish to download the .pdf version, which can then be printed 

using the freely available Adobe Acrobat Reader®. 

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PREFACE 

On December 8, 1993, Title VI of the North American Free Trade Agreement Implementation 

Act (Pub. L. 103-182, 107 Stat. 2057), also known as the Customs Modernization or “Mod” Act, 

became effective. These provisions amended many sections of the Tariff Act of 1930 and 

related laws. 

Two new concepts that emerge from the Mod Act are “informed compliance” and “shared 

responsibility,” which are premised on the idea that in order to maximize voluntary compliance 

with laws and regulations of U.S. Customs and Border Protection, the trade community needs to 

be clearly and completely informed of its legal obligations. Accordingly, the Mod Act imposes a

greater obligation on CBP to provide the public with improved information concerning the trade

community's rights and responsibilities under customs regulations and related laws. In addition, 

both the trade and U.S. Customs and Border Protection share responsibility for carrying out

these requirements. For example, under Section 484 of the Tariff Act, as amended (19 U.S.C. 

1484), the importer of record is responsible for using reasonable care to enter, classify and

determine the value of imported merchandise and to provide any other information necessary to

enable U.S. Customs and Border Protection to properly assess duties, collect accurate

statistics, and determine whether other applicable legal requirements, if any, have been met.

CBP is then responsible for fixing the final classification and value of the merchandise. An

importer of record’s failure to exercise reasonable care could delay release of the merchandise

and, in some cases, could result in the imposition of penalties. 

The Office of Regulations and Rulings (ORR) has been given a major role in meeting the 

informed compliance responsibilities of U.S. Customs and Border Protection. In order to

provide information to the public, CBP has issued a series of informed compliance publications, 

and videos, on new or revised requirements, regulations or procedures, and a variety of

classification and valuation issues. 

This publication, prepared by the International Trade Compliance Division, ORR, is a guideline

on the Customs Administrative Enforcement Process. “Customs Administrative Enforcement 

Process: Fines, Penalties, Forfeitures and Liquidated Damages” is part of a series of informed

compliance publications regarding Customs procedures. We sincerely hope that this material,

together with seminars and increased access to rulings of U.S. Customs and Border Protection, 

will help the trade community to improve voluntary compliance with customs laws and to 

understand the relevant administrative processes. 

The material in this publication is provided for general information purposes only. Because 

many complicated factors can be involved in customs issues, an importer may wish to obtain a

ruling under Regulations of U.S. Customs and Border Protection, 19 C.F.R. Part 177, or to

obtain advice from an expert who specializes in customs matters, for example, a licensed

customs broker, attorney or consultant. 

Comments and suggestions are welcomed and should be addressed to the Assistant 

Commissioner at the Office of Regulations and Rulings, U.S. Customs and Border Protection,

1300 Pennsylvania Avenue, NW, (Mint Annex), Washington, D.C. 20229. 

Michael T. Schmitz, 

Assistant Commissioner 

Office of Regulations and Rulings 

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I. INTRODUCTION......................................................................................8 

II. DELEGATION OF AUTHORITY FROM TREASURY OVER 

FUNCTIONS RELATING TO FINES, PENALTIES, FORFEITURES AND 

LIQUIDATED DAMAGES..........................................................................10 

 A. Original Petitions for Relief........................................................................10 

 B. Supplemental Petitions for Relief...............................................................12 

 C. Concept of Accord and Satisfaction.............................................................13 

III. ADMINISTRATIVE PROCESS FOR FORFEITURE CLAIMS IN CASES 

OF SEIZURE OF PROPERTY FOR VIOLATIONS OF CUSTOMS OR 

OTHER LAWS...........................................................................................13 

A. What Is A Seizure And When May It Occur? ......................................................... 13 

B. When May Customs Proceed With A Forfeiture?................................................... 14 

C. When Will Customs Permit Early Release Of Seized Property?............................ 15 

D. The Civil Assets Forfeiture Reform Act of 2000..................................................... 16 

1.CAFRA Seizure and Forfeiture Procedure...............................................16 

 2.Claim under CAFRA...........................................................................17 

 3. Release of Property Pending Resolution of the Case................................18 

E. What Are The Steps To The Petition Process For Remission Of A Forfeiture? ..... 18 

F. What Are Customs Dispositions For Remission Of A Forfeiture And What Action 

May Customs Take If A Petitioner Does Not Comply With Such Relief?.................... 20 

G. Statute of Limitations for Civil Forfeiture Actions............................................23 

IV. ADMINISTRATIVE PROCESS FOR MONETARY PENALTIES 

ASSESSED AGAINST INDIVIDUALS INVOLVED IN A 

VIOLATION..............................................................................25 

A. When Is A Penalty Assessed Against An Individual?............................................. 25 

B. What Are The Steps To The Penalty Process?...................................................... 25 

1. Customs Issues Prepenalty And/Or Penalty Notices........................................... 25 

2. Alleged Violator Responds And/Or Petitions ....................................................... 26 

3. Customs May Refer Claims For Collection Action And/Or Judicial Enforcement 26 

4. Customs Also May Compromise Or “Settle” Claims............................................ 27 

C. What Are The Specific Elements Comprising the Various Monetary Penalties? ... 27 

1. Commercial Fraud and Negligence Penalties (19 U.S.C. 1592).......................... 27 

2. Drawback Penalties (19 U.S.C. 1593a)............................................................... 30 

3. Broker Penalties (19 U.S.C. 1641) ...................................................................... 31 

4. Recordkeeping Penalties (19 U.S.C. 1509)......................................................... 32 

5. Falsity or Lack of Manifest (19 U.S.C. 1584(a)(1)) .............................................. 33 

6. Drug Related Manifest Penalties (19 U.S.C. 1584(a)(2)) .................................... 34 

7.Equipment and Vessel Repairs (19 U.S.C. 1466)..........................................35 

8. Penalties for Aiding Unlawful Importation (19 U.S.C. 1595a(b)).......................... 35 

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9. Counterfeit Trademark Penalties (19 U.S.C. 1526(f)).......................................... 36 

10. Arrival, Reporting, Entry, and Clearance Violations (19 U.S.C. 1436)............... 37 

11. Coastwise Trade (Jones Act) Violations (46 U.S.C. App 883)........................... 37 

V. ADMINISTRATIVE PROCESS FOR LIQUIDATED DAMAGES 

ASSESSED AGAINST PARTIES LIABLE FOR VIOLATION OF BOND 

CONDITIONS.............................................................................................40 

A. What Is A Bond And When May Breach Of A Bond Obligation Give Rise To 

Liquidated Damages Claims? .................................................................................... 40 

B. What Are The Primary Types Of Bonds and What Types Of Infractions Do They 

Cover?........................................................................................................................ 40 

C. What Are The Steps To The Liquidated Damages Process? ................................ 41 

1. Customs May Consider “Option 1” Resolution .................................................... 41 

2. Parties May File Petitions For Relief ................................................................... 42 

3. Customs May Refer Claims For Collection Action And/Or Judicial Enforcement 42 

4. Customs Also May Compromise Or “Settle” Claims............................................ 42 

D. What Are Customs Standards For Mitigation Or Cancellation Of Claims For 

Liquidated Damages? ................................................................................................ 43 

ADDITIONAL INFORMATION...................................................................46 

The Internet................................................................................................................ 46 

Customs Regulations ................................................................................................. 46 

Customs Bulletin ........................................................................................................ 46 

Importing Into the United States................................................................................. 47 

Informed Compliance Publications............................................................................. 47 

Value Publications...................................................................................................... 48 

“Your Comments are Important”................................................................................. 49 

 

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Customs Administrative Enforcement Process: Fines, 

Penalties, Forfeitures & Liquidated Damages 

I. INTRODUCTION 

Enforcement of the Customs, navigation and related laws has been an important 

function of the U. S. Customs Service, since the foundation of the Federal government

under the U.S. Constitution in 1789. The second act of the new Federal government 

was the Act of July 4, 1789, “laying duties on goods, wares and merchandises (sic) 

imported into the United States.” The third act was the Act of July 20, 1789 “imposing 

duties on tonnage” of vessels. These and subsequent tariff acts were to be the major

sources of Federal revenue until the income tax arrived in the early twentieth century. 

In order to administer and enforce these important revenue laws, the fifth act of 

Congress, the Act of July 31, 1789, established a Customs Service, consisting of

collectors, naval officers and surveyors in 59 districts in the eleven states which had

ratified the new Constitution (North Carolina and Rhode Island had not yet ratified the 

Constitution and were treated as foreign countries under the tariff laws). 

The Act of July 31, 1789 also established fines and penalties and subjected 

merchandise to forfeiture for breaches of the various provisions. The authority to make 

seizures and enforce any fines, penalties or bond provisions was vested in the Customs 

field personnel, and the collectors were authorized to institute judicial proceedings to 

perfect any forfeitures and collect any fines or penalties which had accrued. In the early

years, all fines, penalties, and forfeitures required judicial enforcement, and there was

no provision allowing the granting of equitable relief. However, these problems were 

partially remedied in the Act of March 3, 1797, when the authority to grant equitable 

relief from a penalty or forfeiture, by way of remission or mitigation, was vested in the 

Secretary of the Treasury, after a petition seeking such relief had been filed in court and 

a judge had reported the facts to the Secretary. 

The original procedures were very cumbersome. The collector transmitted all 

enforcement actions to the United States district attorney (now renamed the U. S. 

Attorney) who instituted the judicial collection or forfeiture action. A person seeking 

relief had to admit the violation, or await a court judgment finding a violation, and submit

a petition for relief explaining the facts and circumstances that led to the violation. The 

judge then examined the circumstances and reported the facts to the Secretary of the 

Treasury, who could mitigate or remit the fine, penalty or forfeiture and order

discontinuance of the litigation. 

Subsequent legislation, simplified the procedures by allowing petitions for relief to 

be filed directly with the Secretary, prior to commencement of litigation and by

establishing administrative procedures for forfeiture and penalty assessment. Initially, 

these procedures only applied to cases involving low value forfeitures or small monetary

fines or penalties (under $50) but, eventually, these procedures were extended to all 

cases. 

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In the early years, the Secretary of the Treasury, personally, exercised the 

authority to remit or mitigate fines, penalties or forfeitures. Over the years, as the 

country grew and the Secretary’s responsibilities increased the Secretary’s authority to 

remit or mitigate penalties and forfeitures was delegated to subordinate officials in the

Department and the Customs Service. The present remission and mitigation authority 

is contained in 19 U.S.C. 1618 and 19 U.S.C. 1623(c) which provide: 

19 U.S.C. 1618: 

Whenever any person interested in any vessel, vehicle, aircraft, 

merchandise, or baggage seized under the provisions of this chapter, or 

who has incurred, or is alleged to have incurred, any fine or penalty

thereunder, files with the Secretary of the Treasury if under the customs 

laws, and with the Commandant of the Coast Guard or the Commissioner

of Customs, as the case may be, if under the navigation laws, before the 

sale of such vessel, vehicle, aircraft, merchandise, or baggage a petition 

for the remission or mitigation of such fine, penalty, or forfeiture, the 

Secretary of the Treasury, the Commandant of the Coast Guard, or the 

Commissioner of Customs, if he finds that such fine, penalty, or forfeiture 

was incurred without willful negligence or without any intention on the part 

of the petitioner to defraud the revenue or to violate the law, or finds the 

existence of such mitigating circumstances as to justify the remission or

mitigation of such fine, penalty, or forfeiture, may remit or mitigate the 

same upon such terms and conditions as he deems reasonable and just,

or order discontinuance of any prosecution relating thereto. In order to 

enable him to ascertain the facts, the Secretary of the Treasury may issue 

a commission to any customs officer to take testimony upon such petition: 

Provided, That nothing in this section shall be construed to deprive any

person of an award of compensation made before the filing of such

petition. 

19 U.S.C. 1623(c): 

The Secretary of the Treasury may authorize the cancellation of any bond 

provided for in this section, or of any charge that may have been made 

against such bond, in the event of a breach of any condition of the bond,

upon the payment of such lesser amount or penalty or upon such other 

terms and conditions as he may deem sufficient. In order to assure 

uniform, reasonable, and equitable decisions, the Secretary of the 

Treasury shall publish guidelines establishing standards for setting the 

terms and conditions for cancellation of bonds or charges thereunder. 

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The Secretary has also been granted the authority to compromise claims.

This authority is presently contained in 19 U.S.C. 1617, which provides: 

Upon a report by a customs officer, United States attorney, or any special 

attorney, having charge of any claim arising under the customs laws, 

showing the facts upon which such claim is based, the probabilities of a 

recovery and the terms upon which the same may be compromised, the 

Secretary of the Treasury is authorized to compromise such claim, if such 

action shall be recommended by the General Counsel for the Department 

of the Treasury. 

II. DELEGATION OF AUTHORITY FROM TREASURY OVER 

FUNCTIONS RELATING TO FINES, PENALTIES, FORFEITURES 

AND LIQUIDATED DAMAGES 

Customs has full authority to assess penalties and liquidated damages claims

and to seize merchandise for violations of Customs or other laws enforced by the 

Customs Service. Except for certain specific instances where the Treasury Department 

has retained administrative authority to decide petitions and supplemental petitions for

relief, Customs has been delegated broad authority to remit, mitigate, cancel, or 

compromise claims for forfeitures, penalties, and liquidated damages. 

Treasury Decisions 00-57 and 00-58, and other orders or directives, set forth the 

latest delegation of authority to decide petitions and supplemental petitions submitted. 

Such provisions have been incorporated in Parts 171 and 172 of the Customs

Regulations, as follows: 

A. ORIGINAL PETITIONS FOR RELIEF

Fines, Penalties, and Forfeitures Officers (FPFO): Generally, assessments of 

forfeitures, penalties and liquidated damages claims are made by the local FPFOs

throughout Customs. There are currently forty-three (43) FPFOs and four (4) National

Seizure and Penalties Officers (NSPOs), located at the various Customs field offices. 

1. Liquidated damages. The FPFO can decide petitions for relief from all claims for 

liquidated damages arising from breach of the basic importation bond, for failing to 

file or late filing of entry summaries, or failing to pay or late payment of estimated 

duties. The FPFO can decide petitions for relief with regard to any other claim for

liquidated damages, for breach of any Customs bond, or for any other reason, when 

the amount of the claim does not exceed $200,000. 

2. 19 U.S.C. 1592, 19 U.S.C. 1593a. The FPFO can decide petitions for relief from all

claims for any penalties incurred under the provisions of these sections, when the 

total assessed amount of those fines, penalties, or forfeitures, does not exceed 

$50,000. 

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3. 19 U.S.C. 1436, 1453, 1595a(b) and 1641. The FPFO can decide petitions for relief 

from all fines, penalties, or forfeitures incurred under the provisions of sections 1436,

1453 and 1641, and any penalties incurred under section 1595a(b), for delivering 

merchandise from the place of unlading without Customs authorization, or without

appropriate examination in violation of the provisions of section 19 U.S.C. 1448 or

19 U.S.C. 1499, respectively, when the amount of the claim does not exceed 

$200,000. 

4. Except as noted above or where the Secretary of the Treasury has retained 

jurisdiction, the FPFO can decide petitions for relief from any fines, penalties, or

forfeitures incurred under any other law administered by Customs, when the total 

amount of the fines, penalties, and forfeitures does not exceed $100,000. 

Chief, Penalties Branch, International Trade Compliance Division, Office of

Regulations and Rulings. The Chief of the Penalties Branch at Customs Headquarters, 

is delegated authority to decide all initial petitions for relief submitted with regard to 

cases, which are neither enumerated as remaining under the original jurisdiction of the 

Secretary of the Treasury, nor have been delegated to the Fines, Penalties, and 

Forfeitures Officers. 

Assistant Commissioner, Office of Regulations and Rulings. Notwithstanding any

other delegation of authority, the Assistant Commissioner, Office of Regulations and 

Rulings at Customs Headquarters, or his delegate, has authority to remit or mitigate any

penalties assessed against super carriers for failure to manifest narcotic drugs pursuant

to 19 U.S.C. 1584(a)(2). 

Secretary of the Treasury. The Secretary of the Treasury, or his delegate, retains 

jurisdiction over original petitions for relief filed with regard to the following cases: 

1. Certain civil monetary penalties. Full jurisdiction over the remission or 

mitigation of monetary penalties imposed for violation of the provisions of title 

31, United States Code, 5321; 

2. Certain monetary instrument seizures. Seizures, subject to forfeiture under

the provisions of title 31, United States Code, section 5317, of monetary 

instruments for violation of the provisions of title 31, United States Code, 

section 5316, when the value of the monetary instruments exceeds $500,000; 

3. Export control. Seizures of merchandise subject to forfeiture under the 

provisions of title 22, United States Code, section 401, when the value of the 

merchandise exceeds $500,000; 

4. Failure to declare merchandise. All fines, penalties, and forfeitures arising 

from failure to declare merchandise in violation of the provisions of title 19, 

United States Code, section 1497, when total liability exceeds $250,000; and 

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5. Conveyance seizures. Seizures of conveyances for violations other than 

those involving importation or transportation of controlled substances when

the value of the conveyance exceeds $500,000. 

B. SUPPLEMENTAL PETITIONS FOR RELIEF

Decisions of Fines, Penalties, and Forfeitures Officers. Supplemental petitions 

filed on cases, where the original decision was made by the Fines, Penalties, and 

Forfeitures Officer will be initially reviewed by that official. The Fines, Penalties, and 

Forfeitures Officer may choose to grant more relief and issue a decision indicating

additional relief to the petitioner. 

If the Fines, Penalties, and Forfeitures Officer decides to grant no further relief,

the supplemental petition will be forwarded to an NSPO assigned to a field location for 

review and decision, except that supplemental petitions filed in cases involving 

violations of 19 U.S.C. 1641, by Customs brokers, where the amount of the penalty 

assessed exceeds $10,000, will be forwarded to the Chief, Penalties Branch, Office of 

Regulations and Rulings, Customs Headquarters, for review and decision. 

Decisions of the Chief of the Penalties Branch, International Trade Compliance 

Division, Office of Regulations and Rulings. Supplemental petitions filed on cases where 

the original decision was made by the Chief, Penalties Branch, Office of Regulations 

and Rulings, Customs Headquarters, where the Chief, Penalties Branch, believes that

no further relief is warranted, will be forwarded to the Director, International Trade 

Compliance Division, Customs Headquarters, for review and decision. For purposes of 

this document, references to the International Trade Compliance Division, hereinafter 

referred to as “ITC Division”, includes the Chief of the Penalties Branch and the Director 

of the International Trade Compliance Division. 

Decisions of the Assistant Commissioner, Office of Regulations and Rulings. 

Supplemental petitions filed on cases where the original decision was made by the 

Assistant Commissioner, Office of Regulations and Rulings, Customs Headquarters, or 

his delegate, will be retained by the Assistant Commissioner, Office of Regulations and

Rulings, for review and decision, and will not be delegated. Furthermore, any authority

granted to any Headquarters official is also vested in the Assistant Commissioner, or his

designee. 

Decisions of Treasury Department. Supplemental petitions filed on cases where 

the original decision was made in the Treasury Department will be forwarded to the

Chief, Penalties Branch, Office of Regulations and Rulings, Customs Headquarters, 

who will forward the supplemental petition to the Department along with a 

recommendation for disposition by the Department. 

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C. CONCEPT OF ACCORD AND SATISFACTION

By regulation, the payment of a mitigated amount in compliance with an 

administrative decision on a petition for relief acts as an accord and satisfaction of the 

Government claim. See 19 CFR 171.23(b), for unsecured penalties and seizures and 

19 CFR 172.22(b), for secured penalties and claims for liquidated damages. Payment 

of a mitigated amount will never serve as a bar to filing a supplemental petition for relief. 

III. ADMINISTRATIVE PROCESS FOR FORFEITURE CLAIMS IN CASES 

OF SEIZURE OF PROPERTY FOR VIOLATIONS OF CUSTOMS OR 

OTHER LAWS

 A. What Is A Seizure And When May It Occur? 

Property may be “seized” for certain violations of the Customs and related laws. 

In a seizure, a government official takes physical possession of the merchandise or 

other article, such as a vehicle, vessel, or aircraft. 

Under the Customs laws, there are two types of seizures. The first is where a 

law provides for “forfeiture” of the property. In these situations, if the forfeiture is

perfected through appropriate judicial or administrative means, the seized property will 

become the property of the Federal government and the owner and any other claimants 

will lose their interest in the property. In most of these cases, the forfeiture “relates 

back” to the time of the offense and the United States obtains good title from that date. 

In the second type of seizure, the property is seized to secure payment of a monetary

penalty. If the penalty is not paid, the property will be sold to pay the penalty, with the

balance being subject to claims of the owners, lien holders or other lawful claimants. 

To initiate a seizure, Customs must have probable cause to believe that there 

was a violation of a customs law or other law enforced by Customs with respect to 

specific property (e.g., undeclared or smuggled property; counterfeit trademark goods). 

If, pursuant to statutory authority and Customs seizure policy, property is seized, the 

seizure represents enforcement action against the property (i.e., a claim for forfeiture). 

Except in the case of seizures to secure payment of a penalty, the property, not the 

importer, is considered the violator. 

Types of seized merchandise and infractions include: 

• prohibited merchandise (e.g., controlled substances, pornography, counterfeit 

goods, etc.); 

• restricted merchandise (e.g., restrictions imposed by textile quota agreements, 

Consumer Product Safety Commission, Foreign Assets Control, Environmental 

Protection Agency, Food and Drug Administration/USDA, etc.); 

• undeclared, unreported or smuggled merchandise (e.g., goods undeclared by 

passengers entering the U.S., unreported currency over $10,000, etc.); and 

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• goods which aid or facilitate the illegal importation of merchandise (e.g., 

conveyances or merchandise used to hide or conceal illegal goods). 

Customs may consider various alternatives in lieu of, or prior to, seizure. First, 

Customs can reject or deny entry. Second, Customs may detain goods. Detention 

represents a formal Customs procedure, which requires notice to the importer within five 

(5) days from the decision that a restriction applies. Third, if the goods are not 

prohibited, they may be entered into a bonded warehouse or a foreign trade zone (FTZ)

with subsequent withdrawal once the defect or restriction is corrected. Fourth, Customs

may issue a monetary penalty (e.g., 19 U.S.C. 1592 or 1595a(b)) in lieu of seizure if the 

defect or restriction pertaining to the good is corrected. By policy, prospective seizures

of certain property having a domestic value of $100,000, or greater, require advance 

referral to, and approval by Headquarters. 

B. When May Customs Proceed With A Forfeiture? 

Generally, administrative forfeiture pursuant to 19 U.S.C. 1607 is appropriate if

the seized goods are: 

• of a forfeiture value of $500,000 or less; 

• a conveyance used to smuggle drugs; 

• prohibited merchandise; or 

• monetary instruments in any amount. 

However, the claimant also may obtain judicial forfeiture by filing a cost bond in 

the penal sum of the lesser of $5,000 or 10% of the forfeiture value of the claimed 

property, but not less than $250. (See 19 U.S.C. 1608 and 19 CFR 162.47.) 

In almost all other cases, judicial forfeiture pursuant to 19 U.S.C. 1610 is

appropriate. 

In the case of goods or other property subject to administrative forfeiture, a 

Notice of Seizure is sent to known parties having an interest in the seized property, 

which advises them of their options. Generally, these parties may: 

• choose to do nothing, in which case the government will begin forfeiture

proceedings by publishing a notice in a newspaper on the date specified in the 

notice; 

• request that Customs begin forfeiture proceedings sooner than the date specified 

in the notice; 

• file a petition for relief (with a waiver of immediate institution of forfeiture 

proceedings); 

• make an offer in compromise, under 19 U.S.C. 1617, to settle the case; or 

• file a claim and cost bond to initiate immediate referral to the U.S. Attorney for 

the institution of judicial forfeiture. 

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In the case of goods subject to judicial forfeiture, parties known to have an 

interest are sent a Notice of Seizure and a Notice of Election of Proceedings (option to 

petition for administrative relief under 19 U.S.C. 1618, or to request the institution of 

immediate forfeiture). 

In connection with any seizure of property that may be related to a possible 

criminal prosecution, Customs must report the matter to the appropriate U.S. Attorney. 

If requested by the U.S. Attorney, the administrative processing of seizures may be 

delayed to avoid interference with any criminal prosecution. Assuming criminal

prosecution is declined, or, if accepted, Customs has received consent of the U.S.

Attorney to proceed administratively, the notices discussed above will be issued.

Generally, most claimants of seized property waive their rights to immediate 

forfeiture and elect to file a petition for administrative relief from the forfeiture. With the 

exception of certain instances where the Secretary of Treasury specifically has retained

jurisdiction, Customs has been delegated broad authority, pursuant to 19 U.S.C. 1618,

to remit or mitigate claims for forfeitures (i.e., provide administrative relief) through its

petition decisions. 

In cases subject to administrative forfeiture, if no petition for relief is filed, or claim

and bond given pursuant to 19 U.S.C. 1608, Customs will proceed to forfeit the 

conveyance or merchandise by publishing a notice for at least three successive weeks 

in a newspaper circulated at the Customs port and in the judicial district where the 

property was seized. Alternatively, such notice will be posted in the Customhouse 

nearest the place of seizure in a conspicuous place that is accessible to the public, with 

the date of posting noted thereon, and will be kept posted for at least three successive 

weeks, after which the property is deemed forfeited (unless during that time a claim and 

cost bond is filed). (See 19 U.S.C. 1609.) 

C. When Will Customs Permit Early Release Of Seized 

Property? 

Pending a final decision on the section 1618 petition (see discussion below), 

Customs also entertains requests for early release of the seized property, provided: 

• a decision is made that forfeiture is not appropriate; 

• the importation is not prohibited (NOTE: early release may be allowed if 

merchandise is merely restricted and the restriction is remedied); 

• the petitioner deposits a sum that approximates the final amount for remission of

the forfeiture; 

• petitioner agrees to hold the Government harmless and pay administrative (e.g., 

storage) charges and other costs (e.g., liens) in connection with the seizure; and 

• there is no pending criminal investigation or parallel criminal proceeding. 

The local FPFO responsible for the seizure makes the early release decision in 

cases where the forfeiture value of the seized property is less than or equal to

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$100,000. OR&R, ITC Division, must approve the decision where the forfeiture value is

greater than $100,000. 

D. The Civil Assets Forfeiture Reform Act of 2000 

On April 25, 2000, the President signed into Law the Civil Asset Forfeiture Reform 

Act of 2000, Pub. L. No. 106-185, (hereinafter referred to as “CAFRA”). The new rules 

relating to civil forfeiture created by CAFRA, constitute an effort to reform civil asset 

forfeiture laws and are meant to make the procedure more equitable and fair. As 

enacted, CAFRA prospectively amends a myriad of statutes and implements new 

seizure and forfeiture statutory provisions, which streamline, both substantively and 

procedurally, federal seizures and forfeitures occurring on or after August 23, 2000. 

Most CAFRA provisions and requirements are not applicable to forfeitures under

The Tariff Act of 1930, or any other provision of law contained in title 19, United States 

Code, or other traditional Customs forfeitures, such as 19 U.S.C. 1497, (failure to 

declare), §1595a(a) (conveyances facilitating unlawful importations), §1595a(c) 

(importations contrary to law); the Internal Revenue Code of 1986; the Federal Food, 

Drug and Cosmetic Act (F.F.D.C.A.), 21 U.S.C. 301, et seq.; the Trading with the 

Enemy Act, 50 U.S.C. App. 1, et seq.; and the Neutrality Act, 22 U.S.C. 401; (primary

forfeiture provision for exports contrary to law). However, seizures under any other 

statutory provisions including, but not limited to, civil forfeitures for currency/monetary

instrument seizures under the Bank Secrecy Act, 31 U.S.C. 5317(c), money laundering

violations under the Money Laundering Control Act, 18 U.S.C. 981, and the Contraband 

Act, 49 U.S.C. 80302, et seq., are subject to CAFRA’s new requirements. 

Hence, the bulk of the seizures and forfeitures handled by Customs will 

continue to be governed by the standard and more traditional rules described in 

preceding sections A, B, and C of this publication. The CAFRA provisions are 

meant to work in unison with other existing forfeiture provisions to insure fairness to 

individuals whose property may be seized and forfeited, while protecting the needs of

law enforcement. The sweeping changes galvanized by CAFRA have, in some degree, 

impacted every agency, which seizes and forfeits property. 

 1. CAFRA seizure and forfeiture procedure

As a general rule, if the forfeitures are not specifically excluded from the CAFRA 

provisions, Customs must issue a CAFRA notice of seizure within 60 days of the 

seizure to any person with an interest in the property, unless: 

- The seizure was first made by state or local authorities and is adopted by

Customs to complete federal forfeiture. In such instances, the CAFRA 

notice of seizure must be issued within 90 calendar days after the date of 

the seizure by the state or law enforcement agency (not within 90 days 

from referral or adoption). 

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February 2004

- The identity or interest of a claimant is not determined until after the 

seizure, but is determined before forfeiture is complete. In that instance, 

Customs will have 60 calendar days from the date that the identity or

interest is determined to issue a timely notice. 

- The circumstances are such that the Assistant Commissioner of the Office

of Investigations extends the time to issue the notice of seizure by 30 

calendar days (i.e., from 60 to 90 days from the date of the seizure, based 

on investigative interests). Only one 30-day extension may be obtained 

administratively. Hence, any subsequent additional extensions of time 

must be granted by the court. 

- A court order is obtained which allows for issuance of the notice of seizure 

beyond the 60 days (or 90 days with the added administrative extension). 

Generally, if the CAFRA seizure notice is not issued in a timely manner, Customs 

will return the property to the claimant, unless the property is contraband (i.e., 

marijuana, cocaine, etc.) or if the claimant is not legally entitled to possess the property 

(i.e., a convicted felon who may not legally possess a firearm), without prejudice to the 

right of the Government to commence a forfeiture proceeding at a later time. 

For example, if the same property is subsequently used in a different offense, the 

government is not precluded from seizing and forfeiting the property based on the new 

offense. Also, the government may re-seize the property (after release) for purposes of 

initiating criminal forfeiture for the same underlying offense. 

 2. Claim Under CAFRA

Claims for seized property may be filed no later than the deadline set in any notice 

of seizure (and in no case will that be earlier than 35 days after the date of mailing

of the notice of seizure). If such notice of seizure is not received, then the claim may

be filed no later than 30 days after the final publication of the notice of forfeiture of 

the property. 

CAFRA further abolishes the requirement of posting a cost bond for a claim in a 

CAFRA seizure, unlike the claim and cost bond in a regular title 19 or export seizure. 

The claim must include the following requirements: 

1. Must be in writing; 

2. Must be under oath, subject to penalty of perjury; 

3. Must identify the specific property being claimed; and 

4. Must state the claimant’s interest in the property. 

As previously discussed, if a claimant fails to meet the above criteria in filing the claim, 

the submission will be treated as a petition for relief under 19 CFR Part 171. 

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February 2004

 3. Release of Property Pending Resolution of the Case 

Pursuant to CAFRA provisions, if Customs has seized property and the continued 

seizure will result in a substantial hardship to the claimant, he or she may seek 

immediate release of that seized property pending the conclusion of the forfeiture 

process. Even if a request for immediate release of the property, due to a substantial 

hardship has not been made, early release of the property pending final administrative 

decision (as described in Section III C of this publication and per 19 CFR Part 171) may 

still be accomplished. 

However, this does not apply to contraband, currency, and other monetary 

instruments or electronic funds, unless they constitute the assets of a legitimate 

business that has been seized. It also does not apply to property to be used as

evidence of a violation, or to property that by reason of design or other characteristic is 

particularly suited for use in illegal activities (i.e., a vessel with secret compartments) or 

is property that is likely to be used in the commission of criminal acts. 

If a claim (as opposed to a petition) has been filed by a claimant to a seized 

property and such property is of the kind and character that could be subject of a 

hardship petition, a notice must be issued to the claimant advising him or her of the right

to file a hardship petition. The distinctions between a petition and a claim will be further 

discussed in this document. 

The decision to grant or deny the request for immediate release lies within the 

sole discretion of the FP&F Officer. In this regard, a request for release that is not

decided within 15 calendar days of the date of the request will be deemed denied. 

The party seeking the release can then go to court and seek judicial redress. 

E. What Are The Steps To The Petition Process For Remission Of 

A Forfeiture? 

After receiving the Notice of Seizure, a person having an interest in the seized 

property may file a petition for relief with the local FPFO. There is no requirement for 

any specific format for the petition for relief. In this regard, a letter detailing the 

underlying facts and circumstances is sufficient. However, Customs may require that

the petition and any documents submitted in support of the petition be in English or be 

accompanied by an English translation. Pursuant to 19 CFR § 171.1, the petition must

set forth the following: 

1. A description of the property involved (if a seizure); 

2. The date and place of the violation or seizure; 

3. The facts and circumstances relied upon by the petitioner to justify 

remission or mitigation; and 

4. If a seizure case, proof of a petitionable interest in the seized property. 

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February 2004

The petition for remission or mitigation must be signed by the petitioner, his/her 

attorney, or a Customs broker. If the petitioner is a corporation, the petition may be 

signed by an officer or responsible supervisory official of the corporation, or a 

responsible employee representative of such corporation. 

In non-commercial violations, a non-English speaking petitioner (or a petitioner

who has a disability, which may impede the filing of a petition) may assign a 

representative (i.e., a family member) to file a petition on his or her behalf. Proof of

such representation may be required by the deciding Customs officer, prior to 

entertaining such petition. Additionally, it is noteworthy to indicate that under the new 

regulations, electronic signatures are also acceptable. 

Generally, dispositions of petitions adhere to very specific guidelines for granting 

or denying relief based upon mitigating factors (e.g., cooperation by the petitioner with 

the Customs investigation above and beyond that normally expected) or aggravating 

factors (e.g., prior record of a similar violation by the petitioner). If relief is granted, in

lieu of forfeiture the property, Customs collects from the petitioner a monetary amount,

generally, based upon specified percentages of the dutiable value of the seized property 

(e.g., remission upon payment of 30-50 percent of the dutiable value for first time,

intentional importation contrary to law). Normally, dutiable value (the value upon which 

Customs assesses duties) is less than the forfeiture (domestic) value of the seized 

goods. 

The petition period normally is limited to thirty (30) days, unless the FPFO 

extends the period. As previously discussed, subsequent to the issuance of an

administrative decision on the petition for relief, petitioner may file a 

supplemental petition seeking further review of the petition. In cases where the 

violator does not file a petition, the case may be referred to the U.S. Attorney for 

judicial forfeiture, or processed administratively, for summary forfeiture 

disposition. 

A claimant to seized property being processed under CAFRA may file a petition for 

relief under the Customs regulations, if he or she elects to file a petition (rather than file 

a claim) and so indicates on the election of proceedings form. 

Additionally, with regard to jurisdictional amounts and for purposes of deciding a 

petition for relief under CAFRA, the same structure of delegation of authority discussed 

in section II of this document applies. Likewise, all property, which shall be judicially

forfeited because of its value, would still have to be judicially forfeited, whether a 

CAFRA case or not. 

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F. What Are Customs Dispositions For Remission Of A Forfeiture 

And What Action May Customs Take If A Petitioner 

Does Not Comply With Such Relief? 

Customs remits may forfeitures (i.e., returns the property) upon payment of a 

monetary amount and costs associated with the seizure (e.g., storage) as well as upon 

execution of a Hold Harmless Agreement by the petitioner. In many cases, including 

the introduction (or facilitation of the introduction) of merchandise contrary to law under

19 U.S.C. 1595a(c), Customs will release the seized property upon payment of an 

amount within the following ranges: 

• First offense with mitigating, but no aggravating factors: payment of 10-30% of

the dutiable value of the seized goods. 

 

• First offense with aggravating factors or second offense with no aggravating 

factors: payment of 30-50% of the dutiable value of the seized goods. 

 

• Second offense with aggravating factors or third/subsequent offense: payment of 

50-80% of the dutiable value of the seized goods. 

For the remission of goods subject to forfeiture in cases of export control under 

22 U.S.C. 401, if the exporter corrects the violation Customs, generally, will release the 

seized property, upon payment of an amount within the following ranges for violations 

occurring within a three (3) year period: 

• Substantive Violations (i.e., failure to obtain a State or Commerce Department 

license) 

• First offense: $2,500 or the invoiced value of the violative goods, whichever is 

lower. 

• Second offense: $3,500 or the invoiced value of the violative goods, whichever is

lower. 

• Third offense: $5,000 or the invoiced value of the violative goods, whichever is

lower. 

• Fourth offense: $7,000 - $10,000 (depending on mitigating or aggravating factors), 

or the invoiced value of the goods, whichever is lower. 

• Technical Violations (i.e., failure to validate, present, or reference a State or 

Commerce Department license) 

First offense: $500 or invoiced value of violative goods, whichever is lower. 

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February 2004

Second offense: $750 or invoiced value of violative goods, whichever is lower. 

Third offense: $1,500 or invoiced value of violative goods, whichever is lower. 

Fourth and subsequent offenses: $2,000-$4,000 (depending on mitigating or

aggravating factors), or the invoiced value of the violative goods, whichever is 

lower. 

For the remission of liability in cases of the failure to declare merchandise 

under 19 U.S.C. 1497, Customs utilizes the guidelines set forth in 19 CFR Part 171,

App A. Although these guidelines should be consulted for a full explanation of the 

mitigating and aggravating factors, as well as the class of violation, Customs, generally, 

will remit the liability upon payment of an amount within the following ranges: 

• Violations Involving Dutiable Articles: 

If first offense, where there is knowledge of the declaration requirements, the 

undeclared articles are discovered by the Customs officers, and there are no 

mitigating or aggravating factors: Three times duty (but not less than $50), or the 

domestic value, whichever is lower. 

If mitigating factors are present: From one and one-half to three times the duty, 

or the domestic value, whichever is lower. 

If extraordinary mitigating factors are present: Customs may reduce the mitigated 

amount to one times the duty. 

If aggravating factors are present: From three to six times the duty (but not less

than $100), or the domestic value, whichever is lower. 

If extraordinary aggravating factors are present: From six to eight times the duty, 

(but not less than $250), or the domestic value, whichever is lower, in cases 

where the offense is a second or subsequent violation. Denial of relief or 

mitigation to no less than eight times the duty, or the domestic value, whichever 

is lower, in cases where the offense is a second or subsequent violation and 

there are aggravating factors. 

• Violations Involving Absolutely Free (duty free HTSUS provisions) or

Conditionally Free (Generalized System of Preferences [GSP], Chapter 98,

HTSUS, etc.) Articles:

If first offense, involving conditionally free articles: One time the duty that would 

have been due if the articles had not been entitled to the benefit. 

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February 2004

If first offense, involving absolutely duty-free articles: From one to five percent of

the domestic value, but not less than $50 (or the domestic value, whichever, is 

less) nor more than $1,000. 

If mitigating factors are present: Customs may reduce the mitigated amount to a 

lower figure. 

If aggravating factors are present: For conditionally free articles, from one to two 

times the duty (but not less than $100), or the domestic value, whichever is

lower, and for absolutely free articles, from five to ten percent of the domestic 

value (but not less than $100). 

For the remission of goods subject to forfeiture in cases of monetary instrument 

or currency reporting violations under 31 U.S.C. 5316 and 5317, Customs,

generally, will release the monetary instrument or currency transported (where the 

reporting violation has no connection to illegal activity) upon payment of the following 

standard amounts. These standard amounts are based on the amount being 

transported: 

• Transport of $15,000 or less: $500 standard amount; 

• Transport of $15,001 - $25,000: $1,000 standard amount; 

• Transport of $25,001 - $40,000: $2,500 standard amount; 

• Transport of $40,001 - $70,000: $5,000 standard amount; 

• Transport of $70,001 - $120,000: $10,000 standard amount; 

• Transport of $120,001 - $200,000: $20,000 standard amount; 

• Transport of $200,001 - $500,000: $30,000 standard amount; 

• Transport of $500,001 - $1,000,000: $50,000 standard amount; 

 

• Transport of more than $1,000,000: decided in accordance with 

Customs Treasury delegations and policy. 

[Note that Treasury approval is required in cases where the forfeiture value is greater 

than $500,000.] 

With regard to the disposition of any forfeiture case, mitigating factors, when 

applicable, may decrease the penalty amount the petitioner must pay for remission of 

the forfeiture by up to ten (10) percent of the standard amount for each factor present, 

but by no more than thirty (30) percent of the standard amount. Extraordinary mitigating

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February 2004

factors may warrant remission of all, or a significant portion of the standard amount. 

Generally, mitigating factors include: 

• inexperience; 

• cooperation with, or voluntary disclosure of a violation to, Customs officers; 

• contributory Customs negligence; and 

• impaired communication with violator (because of language barrier, mental 

condition, or physical ailment). 

In any cases where either Customs denies the petitioner any relief or the 

petitioner fails to comply with the relief granted by Customs, the case either will be 

referred to the U.S. Attorney for judicial forfeiture or will be processed administratively

by Customs for administrative forfeiture disposition. 

Claims for forfeiture of monetary instruments under 31 U.S.C. §§ 5316 and 5317 

are subject to the provisions of CAFRA. As is the condition for all remissions, the 

claimant for remission of such forfeiture must pay costs of seizure and storage (absent

extraordinary circumstances), as well as paying any remission amount, execute a hold 

harmless agreement, and comply with any terms and conditions that are deemed 

appropriate. 

CAFRA provisions further allow for the granting of attorneys fees, interest and 

costs in any case where a claimant “substantially prevails” in any civil proceeding 

relating to forfeited property. In no case will a remission of the forfeiture be considered 

“substantially prevailing” for purposes of paying attorneys fees, interests or costs. 

Hence, these fees, interests, and costs, will only be granted by a court to a claimant

who has substantially prevailed in a civil judicial proceeding. 

With regard to excessive fines and proportionality review, CAFRA’s amendments

of 18 U.S.C. § 983(g) provide that a claimant may petition the court to determine 

whether the forfeiture was constitutionally excessive. In this regard, CAFRA has

codified the standard set forth in U.S. v.Bajakajian, 524 U.S. 324 (1998). 

G. Statute of Limitations For Civil Forfeiture Actions 

CAFRA modifies 19 U.S.C. § 1621 and provides the time limit in which the 

Government can bring an action for forfeiture. This amendment applies to all Customs

seizures for forfeiture and provides the same five (5) year limitation, from the discovery 

of the violation, but adds a provision requiring the commencement of the proceeding 

within the above-cited five (5) year period, or within two (2) years of discovery of the 

property’s involvement in the crime, whichever is later. 

 [See next page for a chart of the seizure process]

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IV. ADMINISTRATIVE PROCESS FOR MONETARY PENALTIES 

ASSESSED AGAINST INDIVIDUALS INVOLVED IN A VIOLATION 

A. When Is A Penalty Assessed Against An Individual? 

When a violation of Customs laws or laws enforced by Customs is discovered, in 

addition to, or in lieu of, seizure and/or referral for criminal prosecution, Customs usually

has the option of assessing a personal penalty against the alleged violator(s). In some 

cases, commercial violations are first reviewed by a multidiscipline Enforce Evaluation

Team (EET) to determine whether a penalty should be issued or whether another action 

would be more appropriate under the circumstances. The EET may recommend 

actions ranging from compliance improvement plans to referral for criminal prosecution. 

B. What Are The Steps To The Penalty Process? 

1. Customs Issues Prepenalty And/Or Penalty Notices 

 

While the penalty process generally begins with the FPFO’s issuance of the 

Penalty Notice (CF 5955A) to the alleged violator, some statutes require the issuance of

a prepenalty notice and opportunity for response before Customs makes its penalty 

claim (i.e., issues a penalty notice). 

A prepenalty notice is a written notice that Customs is “contemplating” issuance of 

a penalty against a named person and/or entity. At this preliminary stage, the named 

person and/or entity is given information regarding the alleged violation and provided an 

opportunity to present reasons why Customs either should not issue the penalty claim at

all, or should not issue the penalty claim in the contemplated amount. 

Penalties requiring the issuance of a prepenalty notice before issuance of a 

penalty notice include: 

• commercial fraud and negligence (19 U.S.C. 1592); 

• drawback penalties (19 U.S.C. 1593a); 

• customs broker penalties (19 U.S.C.1641); 

• recordkeeping penalties (19 U.S.C. 1509); 

• falsity or lack of manifest (19 U.S.C.1584(a)(1)); and 

• equipment and vessel repairs (19 U.S.C. 1466). 

Generally, the alleged violator has thirty (30) days from the date of mailing of the

prepenalty notice for response. 

Penalties not requiring the issuance of a prepenalty notice include, but are not

limited to: 

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• penalties for aiding unlawful importation (19 U.S.C. 1595a(b)); 

• drug related manifest penalties (19 U.S.C. 1584(a)(2)); 

• counterfeit trademark penalties (19 U.S.C. 1526(f)); 

• conveyance arrival, reporting, entry, and clearance violations (19 U.S.C. 1436); 

and 

• coastwise trade (Jones Act) violations (46 U.S.C. App. 883). 

2. Alleged Violator Responds And/Or Petitions 

Upon receipt of the alleged violator's prepenalty response, the FPFO either will 

proceed to issue a penalty claim if the violation is substantiated or issue a written 

statement that Customs has chosen not to assess a penalty. 

If the FPFO assesses a penalty, generally, the alleged violator has sixty (60) days 

form the date of mailing the penalty notice to file a petition for relief. If the alleged

violator provides no response (petition), Customs may refer the case for collection 

action. 

Most penalties are assessed at the statutory maximums applicable to the alleged 

violation (e.g., most section 1592 fraud penalties are assessed at the maximum

domestic value amount). However, in most cases, petitions for mitigation are filed 

under 19 U.S.C. 1618. Petitioners may be permitted to make oral presentations to 

Customs officials, depending on the law and regulations involved. 

For instance, when the penalty incurred is for a violation of 19 U.S.C. 1592 or

1593a, petitioner has a legal right to make an oral presentation. In all other violations,

the granting of an opportunity for oral presentation lies within the discretion of the official 

of the Customs Service or Treasury Department, authorized to act on the petition or 

supplemental petition.

Customs decides to grant or deny mitigation of penalties in accordance with 

established guidelines for the particular penalty statute involved. For instance,

guidelines for section 1592 and section 1641 penalties are set forth as Appendices B 

and C, respectively, to Part 171 of the Customs Regulations. 

The alleged violator may file a supplemental petition for further relief from the 

penalty. Generally, the office unit that decided the initial petition may grant further relief. 

However, if the request for further relief is recommended to be denied, a higher-level 

office unit must decide the matter. 

3. Customs May Refer Claims For Collection Action And/Or Judicial Enforcement 

If the assessed or mitigated penalty is not paid within: 

• the time stated in the penalty notice (e.g., cases where a petition for relief is not 

filed in response to Customs penalty claim); or 

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February 2004

• the time stated in the decision on the petition (or supplemental petition), 

the penalty claim will be referred for collection action. 

4. Customs Also May Compromise Or “Settle” Claims 

In addition to the authority to remit and mitigate penalties and forfeitures pursuant

to 19 U.S.C. 1618, the authority delegated by the Secretary of the Treasury to the 

Commissioner of Customs includes the authority to compromise (settle) penalty claims

pursuant to 19 U.S.C. 1617, upon the recommendation of the General Counsel of the 

Treasury Department or his designee (usually the Office of Chief Counsel of Customs). 

The only relevant factors in deciding whether to compromise a claim are: 

• the risks in litigation for the government’s recovery of the assessed penalty 

amount; and 

• the financial inability of the alleged violator to pay the assessed or mitigated 

penalty. 

The alleged violator may make an offer in compromise at any time during the 

course of the penalty proceeding. 

Claims under section 1592(d) for the loss of duties lawfully owed Customs (i.e., duty 

demands) as a result of a commercial fraud, gross negligence or negligence violations,

may be compromised only by the Secretary of the Treasury, or his designee, upon 

approval by the Office of General Counsel, or his designee. The Secretary of the 

Treasury has not delegated his authority to compromise duty claims to Customs. 

C. What Are The Specific Elements Comprising the Various 

Monetary Penalties? 

1. Commercial Fraud and Negligence Penalties (19 U.S.C. 1592) 

19 U.S.C. 1592 provides for penalties against any person who: 

• by fraud (i.e., voluntarily and intentionally), gross negligence (i.e., with actual

knowledge or wanton disregard), or negligence (i.e., fails to exercise reasonable 

care), 

• enters or introduces (or attempts to enter or introduce) any merchandise into the 

commerce of the U.S., 

• by means of any document or electronically transmitted data or information,

written or oral statement, or act which is material and false, or any omission 

which is material (i.e., the falsity has the potential to alter the classification, 

appraisement, or admissibility of merchandise, or the liability for duty or if it tends 

to conceal an unfair trade practice under the antidumping, countervailing duty or

similar statute, or an unfair act involving patent or copyright infringement). 

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February 2004

Section 1592 provides for the assessment of penalties against the alleged 

violator at a maximum of: 

• the domestic value of the merchandise in the case of fraud violations; 

• four times the loss of lawful duties, taxes, and fees deprived the government, or

the domestic value or, if the violation did not affect the assessment of duties 40%

of the dutiable value if the violation did not affect the assessment of duties (but in 

no case to exceed the domestic value of the merchandise), in the case of gross 

negligence violations; and 

• two times the loss of lawful duties, taxes, and fees deprived the government or 

20% of the dutiable value if the violation did not affect the assessment of duties

(but in no case to exceed the domestic value of the merchandise), in the case of

negligence violations. 

Pursuant to 19 U.S.C. 1592(d), Customs also may issue duty demand claims, in 

addition to penalties, for violations of section 19 U.S.C. 1592(a), which have resulted in 

the loss of lawful duties. The FPFO issues notice to any person liable for payment of 

the actual duties (e.g., the violator, the importer or, if unable to pay, the surety). 

Petitions for relief from section 1592 penalties may be filed pursuant to 19 U.S.C. 

1618. All petitions are filed with the FPFO of the port at which the penalty is assessed.

The FPFO and NSPO decide petitions and supplemental petitions in cases where the 

penalty claim is less than or equal to $50,000. OR&R, ITC Division, decides those 

petitions and supplemental petitions in cases where the penalty claim is greater than 

$50,000. 

Customs considers various mitigating and aggravating factors throughout the 

petition stage. 

• Mitigating factors justifying further relief include: contributory Customs error, 

cooperation with the investigation, immediate remedial action, inexperience in 

importing, and prior good record. 

• Extraordinary mitigating factors justifying further relief include: inability to 

obtain jurisdiction or to enforce a judgment against the violator, inability to pay

the mitigated penalty, extraordinary expenses for the alleged violator, and 

Customs knowledge of the violation. 

• Aggravating factors include: obstructing the investigation, withholding evidence,

providing misleading information concerning the violation, textile transshipment,

and prior substantive 1592 violations with a final administrative finding of 

culpability. 

Generally, Customs may mitigate section 1592 penalties to amounts within the 

following ranges: 

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February 2004

• Fraud – from a minimum of 5 times to a maximum of 8 times the total duty loss, or 

50% to 80% of the dutiable value in non-revenue loss cases, but never to exceed 

the domestic value of the merchandise; 

• Gross negligence – from a minimum of 2.5 times to a maximum of 4 times the total 

duty loss, or 25% to 40% of the dutiable value in non-revenue loss cases, but never

to exceed the domestic value of the merchandise; or 

• Negligence – from a minimum of 0.5 times to a maximum of 2 times the total duty 

loss or 5% to 20% of the dutiable value in non-revenue loss cases, but never to 

exceed the domestic value of the merchandise. 

A person who discloses the circumstances of the section 1592 violation, before 

or without knowledge of the commencement of a formal investigation (i.e., makes a prior

disclosure) can receive substantially reduced penalties. 

• In the case of negligence or gross negligence violations, if there is an actual

revenue loss (i.e., loss of duties, taxes or fees after Customs already has

liquidated the entries as final), the reduced penalty is an amount equal to interest 

from the date of liquidation until the duties are paid. 

• In the case of negligence or gross negligence violations, if there is a

potential revenue loss (i.e., loss of duties, taxes or fees prior to Customs 

liquidation of the entries as final), the penalty is remitted in full. 

• In the case of fraud violations, the reduced penalty always equals one times the 

actual and potential revenue loss (or 10% of the dutiable value, if the violation did 

not affect the assessment of duties). 

For further information concerning prior disclosures, consult Customs Informed 

Compliance Publication, What Every Member of the Trade Community Should Know 

About: The ABC’s of Prior Disclosure, dated May, 1998. 

By delegation, the OR&R, ITC Division, and the Office of Chief Counsel both 

must approve all offers in compromise of a section 1592 penalty action, submitted 

pursuant to section 1617. The alleged violator may make an offer in compromise at any

time, regardless as to whether Customs already has issued a prepenalty or penalty

notice. 

Generally, Customs will not seize merchandise subject to a section 1592 penalty 

action. However, Customs will seize such merchandise in cases where it possesses a 

reasonable belief that: 

• the alleged violator is insolvent; 

• the alleged violator is beyond the jurisdiction of the U.S.; 

• the seizure is essential to protect the revenue; or 

• the seizure is essential to prevent the introduction of prohibited or restricted 

merchandise. 

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February 2004

2. Drawback Penalties (19 U.S.C. 1593a) 

Section 1593a provides for penalties against any person who: 

• by fraud or negligence,

• seeks, induces, affects, or attempts to seek, induce, or affect the payment or 

credit to that person or others of any drawback claim 

• by means of any document or electronically transmitted data or information,

written or oral statement, or act which is material and false, or any omission 

which is material. 

Drawback, in pertinent part, is the refund or remission, in whole or in part, of a 

customs duty, fee or internal revenue tax (in connection with the importation of

merchandise) imposed under Federal law. A drawback claim represents the drawback

entry and related documents required by regulation in order to request drawback

payment. (For further information concerning drawback, consult Customs Informed 

Compliance Publication, What Every Member of the Trade Community Should Know 

About: Drawback, dated March, 1998.) 

Customs also may issue claims for duties, in addition to penalties, pursuant to 19 

U.S.C. 1593a(d), for violations of section 1593a(a), which have resulted in a loss of 

revenue to the government. The notice of the duty claim may be issued to any person 

liable for payment of actual duties (e.g., the importer or, if unable to pay, the surety). 

Generally, Customs may mitigate section 1593a penalties to amounts within the 

following ranges: 

• Fraud - three (3) times to one and one-half (1 1/2) times the actual or potential 

loss of revenue; 

• Repeat negligence violation - fifty percent (50%) to twenty five percent (25%) the 

actual or potential loss of revenue; and 

• First negligence violation - twenty percent (20%) to ten percent (10%) the loss of 

revenue. 

The FPFO decides petitions in cases where the assessed penalty is less than or 

equal to $50,000 and OR&R, ITC Division, decides those petitions in cases where the 

assessed penalty is greater than $50,000. The NSPO decides those supplemental

petitions in cases where the assessed penalty is less than or equal to $50,000, and 

OR&R, ITC Division, decides those supplemental petitions in cases where the assessed

penalty is greater than $50,000. 

Similar to the recordkeeping compliance program provided under section 1509 

(discussed below), in the absence of fraud or repetitive negligent violations, participants

of the drawback compliance program may receive a written notice of the violation in lieu 

of their first monetary penalty. 

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February 2004

Customs considers the same mitigating and aggravating factors previously set 

forth for section 1592 penalties. Additionally, prior voluntary disclosures of the 

circumstances of the section 1593a violation also may result in substantially reduced 

penalties. 

As stated earlier with regard to 19 U.S.C. 1592 penalties, the OR&R, ITC 

Division, and the Office of Chief Counsel both must approve all offers in compromise of

a drawback penalty action, pursuant to section 1617. 

Customs promulgated its final drawback penalty regulations in 65 Fed. Reg., 

3803, Jan. 25, 2000. Consistent with these regulations, Customs can assess drawback

penalties against anyone who filed a false drawback claim on or after November 25, 

1998 (i.e., the date of implementation of the automated drawback selectivity program). 

3. Broker Penalties (19 U.S.C. 1641) 

Generally, Customs will assess penalties against customs brokers (i.e., those 

licensed to transact customs business on behalf of others, pursuant to 19 CFR Part 

111) up to a maximum of $30,000 for the violations included in any one penalty notice.

Customs may issue penalties or may revoke or suspend a broker's license or permit for 

violations of the broker’s statutory or regulatory responsibility. (See our publication, 

What Every Member of the Trade Community Should Know About: Customs Brokers 

(March, 2000) for more detail. These include: 

• failure of a broker to exercise responsible supervision and control over customs 

business. See 19 U.S.C. 1641(b)(4); 

• cases in which a customs broker: 

• made a material false or misleading statement or omitted a material fact in 

connection with any license or permit application or report filed with 

Customs; 

• at any time after the filing of a license or permit application, was convicted 

of certain enumerated felonies or misdemeanors; 

• has violated any provision of any laws enforced by Customs, or the rules

or regulations issued under any such provision; 

• has counseled, induced, knowingly aided or abetted another person's

violations of any law enforced by Customs, or the rules or regulations

issued under any such provision;

• without written approval of the Secretary of the Treasury, has knowingly

employed, or continues to employ, any person convicted of a felony; and 

• has, in the course of Customs business, with intent to defraud, willfully and 

knowingly deceived, misled, or threatened any client or prospective client. 

(See 19 U.S.C. 1641(d)(1) and (d)(2)(A)). 

In addition, pursuant to 19 U.S.C. 1641(b)(6), Customs may issue penalties (not 

to exceed $10,000 for each transaction) against any person who intentionally transacts 

31
 Customs Administrative Enforcement Process 

February 2004

customs business, other than solely on its own behalf, without holding a valid customs

broker’s license. 

In cases where the broker allegedly has violated any of the laws, rules or 

regulations enforced by Customs (i.e., 19 U.S.C. 1641(d)(1)(C)), in a fraudulent manner, 

it is appropriate for Customs to impose additional penalties under 19 U.S.C. 1592. It is 

Customs policy, in cases of negligence or gross negligence, to impose additional 

penalties under 19 U.S.C. 1592, only where the broker shared in the financial benefits 

to an extent over and above the prevailing brokerage fees. 

The FPFO decides all initial petitions in broker penalty cases. The NSPO

decides supplemental petitions in cases where the penalty claim is less than or equal to 

$10,000. OR&R, ITC Division, decides supplemental petitions in cases where the 

penalty claim is greater than $10,000. 

OR&R, ITC Division, and the Office of Chief Counsel both must approve all offers

in compromise of a broker penalty action, submitted pursuant to section 1617. 

4. Recordkeeping Penalties (19 U.S.C. 1509) 

Certain persons who fail to produce, upon demand, an entry record enumerated 

in the Customs Regulations pursuant to 19 U.S.C. 1509(a)(1)(A), commonly known as 

the “(a)(1)(A) list,” may be subject to recordkeeping penalties. The (a)(1)(A) list refers to 

records required by law or regulation for the entry of merchandise (whether or not

Customs required their presentation at the time of entry). See 19 CFR Part 163 App. 

The parties potentially liable for recordkeeping penalties include, but are not 

limited to, 

• owners, 

• importers, 

• consignees, 

• importers of record or entry filers. 

Customs may assess a recordkeeping penalty against these parties, or their 

agents (including customs brokers), when they: import merchandise into the U.S., file 

drawback claims, transport or store merchandise carried or held under bond, or 

knowingly cause the importation or transportation or storage of merchandise carried or

held under bond into or from the U.S. Customs also may assess recordkeeping 

penalties against those parties who engage in activities which require the filing of a 

declaration and/or entry, as well as against those parties who complete and sign a

NAFTA Certificate of Origin. 

Customs imposes recordkeeping penalties based on one of two possible levels

of culpability. These two levels of culpability are willful failure and negligence. If a

party’s failure to comply with Customs demand for an entry record resulted from a willful

32
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February 2004

failure to produce that record, Customs may penalize that party for each release (i.e., 

per C.F. 3461) of merchandise in an amount not to exceed $100,000, or an amount 

equal to seventy five percent (75%) of the appraised value of the merchandise, 

whichever is less. If a party’s failure to comply with Customs demand for an entry 

record is due to negligence, Customs may penalize that party for each release of

merchandise in an amount not to exceed $10,000 or an amount equal to forty percent 

(40%) of the appraised value of the merchandise, whichever is less. 

A recordkeeper may be certified as a participant in the recordkeeping compliance 

program after meeting the general recordkeeping requirements. The recordkeeping 

requirements are established either under the recordkeeping compliance program or an 

alternative program negotiated to suit the needs of the recordkeeper and Customs. 

Participants of the recordkeeping compliance program, in the absence of willful or

repetitive negligent violations, may receive from Customs a written notice of a violation 

in lieu of a monetary penalty. However, repetitive negligent violations by the 

recordkeeper may result in Customs issuance of penalties and removal of certification 

under the program until corrective action is taken to Customs satisfaction. 

Customs commenced the imposition of section 1509 recordkeeping penalties, for 

the failure to provide entry records lawfully demanded from July 15, 1996, the date the 

“(a)(1)(A) list” was published in the Federal Register. Prior to the FPFO’s issuance of a 

recordkeeping prepenalty notice, it is necessary for the local Customs office 

contemplating the issuance of the prepenalty first to obtain review and approval from 

OR&R, ITC Division. This review procedure has been in effect from the time Customs 

could begin to issue recordkeeping penalties (i.e., July 15, 1996) and will remain in 

effect until one year from the implementation date of the final recordkeeping guidelines

(until November 8, 2001). After this time, OR&R, ITC Division, may review any

recordkeeping prepenalty notice, in its own discretion, if warranted by the 

circumstances. 

In deciding petitions for relief from a recordkeeping penalty, Customs considers

mitigating and aggravating factors similar to those set forth above for section 1592 

penalties. (For further information concerning recordkeeping, consult Customs Informed 

Compliance Publication, What Every Member of the Trade Community Should Know 

About: Records and Recordkeeping Requirements, dated June, 1998.) 

5. Falsity or Lack of Manifest (19 U.S.C. 1584(a)(1)) 

Any vessel master or person in charge of any vehicle bound to the U.S. who fails

to produce a manifest to the demanding Customs officer is liable for a penalty of $1,000. 

Additionally, in cases where Customs finds that the vessel master or responsible party 

has failed to manifest any merchandise on board the vessel, aircraft, or vehicle (an 

overage), the vessel master or responsible party is liable for a penalty equal to the 

lesser of $10,000 or the domestic value of the merchandise. Where merchandise is 

manifested, but not found, a penalty of $1,000, may be assessed for the shortage. 

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February 2004

An importing carrier, bonded carrier, container freight station operator, bonded 

cartman, bonded warehouse or foreign trade zone proprietor, importer or broker that 

detects any manifest discrepancy must report the discrepancy. Such parties should file 

a manifest discrepancy report, or MDR, to report and correct discrepancies in

manifested quantities or data elements. 

Only section 1584(a)(1) penalties over $1,000 require the FPFO’s issuance of a 

prepenalty notice. Section 1584 penalties may be secured by the international carrier's

bond (i.e., a contract between a carrier or his agent, and a surety, with Customs as the 

beneficiary, under which Customs can collect a penalty or liquidated damages).

Because section 1584(a)(1) penalties may only be assessed up to $10,000, the FPFO

has been delegated the authority to decide all petitions and the NSPO has the 

delegated authority to decide all supplemental petitions. 

6. Drug Related Manifest Penalties (19 U.S.C. 1584(a)(2)) 

If any unmanifested merchandise (as provided for in 19 U.S.C. 1584(a)(1)), 

consists of certain controlled substances (illegal drugs such as marijuana, cocaine or

smoking opium), Customs assesses penalties against the vessel master, person in 

charge of the vehicle, owner of the vessel or vehicle, or any other responsible party 

based on the quantity. For example, $500 per ounce of marijuana or $1,000 per ounce 

of heroin or cocaine. Section 1584 penalties are secured by the international carrier's 

bond. 

The FPFO decides petitions, and the NSPO decides supplemental petitions, in 

cases where the penalty liability is less than or equal to $100,000. OR&R, ITC Division, 

decides those petitions and supplemental petitions in cases where the penalty liability is

greater than $100,000. However, in all such cases involving Super Carrier Initiative

Program signatories, regardless of the penalty liability, the Assistant Commissioner for

OR&R decides the petitions. 

The two main elements of a section 1584(a)(2) Carrier Initiative claim are: a) 

knowledge and b) highest degree of care and diligence. If Customs finds the carrier 

knew drugs were placed on the shipment or conveyance (i.e., knowledge), there will be 

no mitigation of penalty assessed. If there is no such knowledge and the carrier 

exercised the highest degree of care and diligence, Customs will provide full mitigation 

of the penalty. In all other cases, the amount of relief depends upon the level of

culpability. 

Generally, OR&R will mitigate penalties for unmanifested drugs as follows: 

• In cases of negligence, penalties will be mitigated from ten (10) to twenty-five

(25) percent of the original penalty assessment; and 

• In cases of gross negligence, penalties will be mitigated from twenty-five (25) to 

fifty (50) percent of the original penalty assessment. 

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 Customs Administrative Enforcement Process 

February 2004

7. Equipment and Vessel Repairs (19 U.S.C. 1466)

The owners or masters of vessels documented under U.S. laws to engage in 

foreign or coasting trade are liable for entry and payment of a 50 percent ad valorem

duty on the costs incurred in any foreign country for: 

• equipment purchased for the vessel; 

• repair parts or materials to be used in connection with the vessel; and 

• repair expenses. 

If the vessel owner or master willfully or knowingly neglects or fails to report, 

make entry, and pay duties, or makes any false statement regarding such purchases or 

repairs without having reasonable cause to believe the truth of such statements or aids 

or procures the making of any false statement as to any material matter without 

reasonable cause to believe the truth of such statement, Customs may assess a penalty

up to the value of the vessel or seize and forfeit the vessel. 

Under current guidelines, the FPFO issues all pre-penalty notices concerning 

equipment and vessel repair violations at the lower of four (4) times the loss of revenue 

(duty) or the value of the vessel. If the violation only consists of the late filing of

documents, the FPFO will issue the pre-penalty notice at two (2) times the loss of 

revenue. Section 1466 penalties are secured by international carrier's bond. 

The FPFO and NSPO decide petitions and supplemental petitions, in cases

where the penalty amount is less than or equal to $100,000. OR&R, ITC Division,

decides those petitions and supplemental petitions in cases where the penalty amount

is greater than $100,000. 

8. Penalties for Aiding Unlawful Importation (19 U.S.C. 1595a(b)) 

Under 19 U.S.C. 1595a(b), Customs may assess penalties equal to the domestic

value of any articles introduced or attempted to be introduced into the U.S. contrary to 

law. Any person who directs, assists financially or otherwise, or is any way concerned 

in any unlawful activity provided for in 19 U.S.C. 1595a(a), is liable to a penalty equal to 

the domestic value of the article or articles introduced or attempted to have been 

introduced. Section 1595a(a) concerns the importation, bringing in, unlading, landing, 

removal, concealing, harboring, or subsequent transportation of any article which is

being or has been introduced, or attempted to be introduced, into the U.S. contrary to 

law. Introduction of prohibited merchandise and restricted merchandise, are common 

examples of the cases where Customs may issue a section 1595a(b) penalty. Some 

specific violations for which Customs issues section 1595a(b) penalties include: 19

U.S.C. 1304 (improper country of origin marking), 19 U.S.C. 1448 (removal from

Customs custody without authorization), 19 U.S.C. 1499 (delivery of merchandise 

without Customs examination) and 21 U.S.C. 331 (introduction of adulterated or 

misbranded food). 

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February 2004

Generally, the FPFO decides petitions, and the NSPO decides supplemental 

petitions, in cases where the domestic value of the merchandise is less than or equal to

$100,000. OR&R, ITC Division, decides petitions and supplemental petitions in those 

cases where the domestic value is greater than $100,000. The mitigation guidelines for

remission of section 1595a(c) seizures apply to mitigation of 1595a(b) penalties. Except

that for 1595a(b) penalties, assessed for delivery of merchandise from the place of

unlading without Customs authorization in violation of the provisions of 19 U.S.C. 1448, 

or delivered without Customs examination in violation of 19 U.S.C. 1499, the mitigation 

guidelines appear in T.D. 99-29. 

9. Counterfeit Trademark Penalties (19 U.S.C. 1526(f)) 

Section 1526(f) provides for fines against anyone who directs or assists 

(financially or otherwise) the importation of merchandise, for sale or public distribution, 

that is seized pursuant to 19 U.S.C. 1526(e). Section 1526(e) provides for the seizure 

of merchandise bearing a counterfeit mark, imported in violation of 15 U.S.C. 1124 and 

the forfeiture of such merchandise in the absence of written consent of the trademark 

owner. [A counterfeit trademark is a spurious trademark that is identical to, or

substantially indistinguishable from, a registered trademark. 19 CFR 133.21(a).] (For 

further information concerning counterfeit goods, consult Customs Informed Compliance

Publication, What Every Member of the Trade Community Should Know About: 

Customs Enforcement of Intellectual Property Rights, dated June, 1999.) 

Customs will assess section 1526(f) penalties as follows: 

• First seizure – penalties up to the value of the genuine merchandise based on 

the manufacturer's suggested retail price (MSRP). 

• Subsequent seizures – penalties up to twice the value of the genuine 

merchandise based on the MSRP. 

The FPFO and the NSPO decide petitions and supplemental petitions, in cases where 

the fine is less than or equal to $100,000. OR&R, ITC Division, decides those petitions 

and supplemental petitions in cases where the fine is greater than $100,000. 

Customs may mitigate the section 1526(f) penalties to amounts within the 

following ranges: 

 

• First offense with mitigating, but no aggravating factors: 10-30% of the MSRP of 

the seized goods. 

• First offense with aggravating factors or second offense with no aggravating 

factors: 30-50% of the MSRP of the seized goods. 

• Second offense with aggravating factors or third/subsequent offense: 50-80% of 

the MSRP of the seized goods. 

Customs applies the same mitigating and aggravating factors previously set forth 

concerning the mitigation of forfeitures, under section 1526(e). 

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February 2004

10. Arrival, Reporting, Entry, and Clearance Violations (19 U.S.C. 1436) 

Any master of a vessel, person in charge of a vehicle, or aircraft pilot who 

commits any of the following violations is liable for a $5,000 penalty for the first violation 

and a $10,000 penalty for each subsequent violation for: 

 

• failure to comply with 19 U.S.C. 1431 (i.e., presenting manifests), 19 U.S.C. 1433 

(i.e., reporting vessel, vehicle and aircraft arrival), 19 U.S.C. 1434 (i.e., filing 

vessel entry), or 46 U.S.C. App. 91 (i.e., obtaining vessel clearance); 

• presenting or transmitting any forged, altered or false document, information or 

manifest to Customs, without revealing the facts, under 19 U.S.C. 1431, 19 

U.S.C. 1433(d), 19 U.S.C. 1434, or 46 U.S.C. App. 91; or 

• failure to make entry or to obtain clearance as required by 19 U.S.C. 1434, 19 

U.S.C. 1644 (i.e., civil air navigation laws and vessel entry and clearance 

regulations), or 46 U.S.C. App. 91. 

 

Additionally, any conveyance used in connection with such violation is subject to 

seizure and forfeiture. Generally, Customs does not seize a conveyance unless

aggravating factors are present or another violation of law is in evidence. 

Section 1436 penalties may be secured by international carrier's bond. 

The FPFO and NSPO decide petitions and supplemental petitions, in cases

where the penalty liability is less than or equal to $200,000. OR&R, ITC Division,

decides those petitions and supplemental petitions in cases where the penalty liability is

greater than $200,000. 

11. Coastwise Trade (Jones Act) Violations (46 U.S.C. App 883) 

Section 46 U.S.C. App. 883 prohibits foreign flag vessels from transporting 

merchandise laden at a coastwise port to any other coastwise port (whether directly or 

via a foreign port). Section 883 provides for seizure and forfeiture of improperly

transported merchandise or assessment of a monetary penalty equal to the domestic

value of such merchandise. Customs may assess a penalty against the master, owner, 

or any party responsible for the improper transportation. 

Section 883 penalties may be assessed in amounts up to the value of the 

merchandise moved coastwise in a nonqualified vessel or the cost of the transportation, 

whichever is greater. If the violation arose because of an emergency to the vessel that 

required, for reasons of safety or other humanitarian cause, that coastwise 

transportation occur, the penalty should not exceed $100,000. If the violation occurred 

for commercial expediency, Customs does not limit the penalty amount. Section 883 

penalties generally are secured by international carrier's bond. 

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 Customs Administrative Enforcement Process 

February 2004

The FPFO and NSPO decide petitions and supplemental petitions, in cases

where the penalty liability is less than or equal to $100,000. OR&R, ITC Division,

decides those petitions and supplemental petitions in cases where the penalty liability is

greater than $100,000. 

If the petition for relief establishes that the violation occurred as a direct result of 

an arrival of the transporting vessel in distress, such that the vessel was in peril or due

to an act of God (e.g., hurricane) full mitigation is appropriate. If the vessel was not in 

distress, but the transportation occurred because of some other humanitarian reason 

(e.g., disembarkation of crewman with life threatening injuries), the claim may be 

mitigated in full. If the violation resulted because of commercial expediency, Customs 

may mitigate the penalty to an amount between 35 and 50 percent of that assessed. 

[See next page for a chart of the penalties process] 

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 Customs Administrative Enforcement Process 

February 2004

39
 Customs Administrative Enforcement Process 

February 2004

V. ADMINISTRATIVE PROCESS FOR LIQUIDATED DAMAGES 

ASSESSED AGAINST PARTIES LIABLE FOR VIOLATION OF BOND 

CONDITIONS 

A. What Is A Bond And When May Breach Of A Bond Obligation 

Give Rise To Liquidated Damages Claims? 

Customs laws and regulations require bonds to be filed by the importer of 

record, warehouseman, and other custodians of merchandise, and in bond and 

international carriers of merchandise, to ensure compliance with a variety of obligations, 

relating to the entry, transportation, and storage of imported goods, into and through, 

the United States. The bond is a contract between the principal (e.g., importer, carrier, 

warehouseman, etc.) and the surety with Customs as the beneficiary on the bond. 

If there is a breach of an obligation under a bond (e.g., failure of the importer to 

comply with a proper request to redeliver merchandise to Customs custody), Customs 

may issue a claim for liquidated damages at an amount prescribed under the regulation 

for the type of breach involved. (As an example, for failure to redeliver FDA rejected 

foods, Customs currently assesses liquidated damages against the importer at an 

amount equal to three times the appraised value of the goods involved in the breach.) 

As the guaranteeing party, the surety is legally liable, or “stands in the shoes” of the 

bond principal, if the principal fails to pay a liquidated damages claim. 

Normally, penalties are not secured by bonds. There is one exception, the 

International Carrier Bond. Although Customs may assess and collect a penalty

amount against the party responsible for the breach (the principal) up to the amount 

provided for by law, Customs is limited to the amount provided for by the bond in a 

collection action against the surety. 

B. What Are The Primary Types Of Bonds And What Types Of 

Infractions Do They Cover? 

The three primary types of bonds are importation bonds, custodial bonds, and 

international carrier bonds. 

First, parties such as importers and customs brokers, file importation bonds with 

Customs. Some examples of the types of infractions that may constitute a breach of an 

importation (or entry) bond include: 

• late filing or non-filing of entry summaries; 

• late payment or non-payment of estimated duties; 

• temporary importation violations; and 

• failure to redeliver merchandise into customs custody 

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 Customs Administrative Enforcement Process 

February 2004

See 19 CFR 113.62 for basic importation and entry bond conditions. 

Second, parties such as in-bond carriers, as well as operators of warehouses, 

container freight stations (CFS), centralized examination stations (CES), and duty free 

stores, file custodial bonds with Customs. Some examples of the types of infractions

that may constitute a breach of a custodial bond include cases where: 

• merchandise cannot be located or accounted for in a duty-free store, or bonded 

warehouse; or 

• merchandise has been removed without permit or inconsistent with regulation; or 

• merchandise has been deposited, manipulated, manufactured, or destroyed 

without permit or inconsistent with the activity described in the permit; or 

• merchandise that is misdelivered or irregularly delivered by an in-bond carrier. 

See 19 CFR 113.63, for basic custodial bond conditions and 19 CFR 113.73, for

foreign trade zone operator bond conditions. 

Third, parties such as carriers responsible for manifests and cargo delivery, file 

international carrier bonds with Customs. Some examples of the types of infractions

that may constitute a breach of an international carrier bond are: 

• conveyance arrival or reporting violations (e.g., failure to immediately report a 

vessel arrival to Customs); 

• manifest penalties (e.g., failure to have a manifest, deliver a manifest upon 

arrival, possess an adequate manifest, or file a manifest discrepancy report to 

Customs); and 

• cargo delivery or unlading violations (e.g., failure to deliver merchandise to a 

CES, delivery of merchandise without Customs authorization, unlading without a 

permit, failure to timely notify Customs of unentered or unclaimed general order

merchandise, or coastwise trade violations.) 

C. What Are The Steps To The Liquidated Damages Process? 

1. Customs May Consider “Option 1” Resolution 

When a bond breach or infraction occurs, depending on the kind and character of 

the violation, Customs first will consider whether “Option 1” resolution may be 

possible. Option 1 resolution can be described as a “parking ticket” approach insofar as 

it involves the payment of a pre-set amount to eliminate petitioning and, therefore, settle 

cases quickly. Of note, Customs still assesses the liquidated damages claim at the 

normal amount (i.e., an amount provided by regulation not to exceed that for which the 

bond is written) even when the Option 1 procedure is available. 

Option 1 settlement only applies to those cases where all facts are known to

Customs at the time of initial review and the harm to the government is readily 

quantifiable and understood. The most common examples of liquidated damages 

41
 Customs Administrative Enforcement Process 

February 2004

claims which may be resolved through the Option 1 procedure are claims relating to the 

late filing of an entry summary, invoice or other entry document. 

Option 1 settlement would not be available for those cases where the 

merchandise was not held for Customs examination and the facts surrounding the 

release of the merchandise are unknown. Similarly problematic, are cases involving 

temporary import bonds (TIBs) where Customs only has an open entry. In this case, 

Customs does not know whether the merchandise either continues to remain in the 

U.S., has been exported outside the bond period, or has been exported timely but 

without the required Customs supervision. Insofar as Customs would learn the facts 

only after presentation of a petition for relief, Option 1 would not be feasible and it would 

be necessary to resolve the matter through the petition process. 

If Option 1 resolution is unavailable, or when offered to the violator the Option 1 

amount is not paid, Customs will notify the principal of its liability for liquidated damages 

along with a demand for payment. The sureties on the bond, simultaneously, will be 

advised of the liability incurred by the principal, and will be given the opportunity to pay 

the Option 1 amount in cases where the principal does not pay. 

2. Parties May File Petitions For Relief 

The FPFO and NSPO decide petitions and supplemental petitions in caseswhere 

the liquidated damages claim is less than or equal to $200,000. In addition, the FPFO

maintains jurisdiction regardless of the amount of the liquidated damages claim, in all 

non-filing and late filing of entry summary cases and non-payment or late payment of

estimated duty cases. With the exception of the foregoing cases, OR&R, ITC Division,

decides petitions and supplemental petitions in cases where the liquidated damages 

claim is greater than $200,000. The Department of the Treasury does not review any 

liquidated damages cases. 

3. Customs May Refer Claims For Collection Action And/Or Judicial 

Enforcement 

If Customs issues a petition decision and any party liable for liquidated damages

fails to file a supplemental petition for relief or to pay the liquidated damages within sixty

(60) days (or such additional time as the FPFO may grant) from the date of mailing the

notice of the decision, the FPFO will refer the claim to the appropriate office of the Chief 

Counsel for preparation for referrals of the claim to the Department of Justice for 

collection. 

4. Customs Also May Compromise Or “Settle” Claims 

By delegation, the FPFO may approve all offers in compromise upon the 

recommendation of the Associate Chief Counsel, Indianapolis/Account Services

Division, for settlement of liquidated damages claims or any penalty secured by bond, 

pursuant to section 1617, in any case where he or she has original petition jurisdiction. 

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 Customs Administrative Enforcement Process 

February 2004

The Chief, Penalties Branch, OR&R, ITC Division, with the recommendation of the 

Office of Chief Counsel (or his delegate) approves all offers in compromise in which he 

has jurisdiction to decide a petition for relief. 

D. What Are Customs Standards For Mitigation Or Cancellation 

Of Claims For Liquidated Damages? 

Pursuant to 19 U.S.C. 1623, Customs may cancel any bond or any claims for 

liquidated damages made against such a bond, upon payment of a lesser amount or 

penalty or upon such other terms and conditions as Customs deems sufficient. All 

guidelines for bond cancellation are published. Current guidelines appear in: 

• Treasury Decision (T.D.) 99-29, which covers claims relating to General Order 

notification, misdelivery of inbond cargo and delivery of merchandise from 

Container Freight Stations or Centralized Examination Stations without Customs

authorization; 

• T.D. 98-53, which covers claims relating to the presentation of permits for 

softwood lumber; 

• T.D. 94-38, which covers claims relating to late filing of entry summaries, TIBs,

failure to redeliver merchandise to Customs custody, bonded warehouses,

foreign trade zones, Shipper’s Export Declaration (SED) and outbound (export) 

violations, and airport security; 

• T.D. 94-38, which covers claims relating to late filing of entry summaries, TIBs,

failure to redeliver merchandise to Customs custody, bonded warehouses,

foreign trade zones, Shipper’s Export Declaration (SED) and outbound (export) 

violations, and airport security; and 

• T.D. 01-41, which covers claims arising from violation of foreign trade zone 

regulations. 

Customs made recent changes under T.D. 99-29 to the cargo misdelivery 

guidelines, raising mitigation amounts significantly. Particularly, when Customs 

examination was required for the shipment involved in the breach. 

Under the 1994 revisions (T.D. 94-38) to bonded warehouse and foreign trade 

zone guidelines (T.D. 01-41) Customs adjusted amounts to correlate more accurately to 

the harm suffered. For example, for breaches involving loss of merchandise, Customs 

now bases its disposition amount upon a multiple of the revenue loss involved. On the 

other hand, Customs disposition amounts for breaches not involving merchandise (e.g., 

document filing, file folder updating) involve flat sums. Customs also revised the TIB 

guidelines to account for the severity of the breach (e.g., document-filing breaches 

involve less harsh guidelines than breaches involving exportation without supervision). 

While these cited Treasury Decisions should be consulted for a full explanation,

some mitigation ranges for liquidated damages claims include the following: 

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 Customs Administrative Enforcement Process 

February 2004

• Non-filing or late filing of entry summary: $100 or $200 plus payment of all 

estimated duties due plus interest. 

• Temporary Importation Bond breaches: From one to five percent (1 to 5%) of the 

claim but no lower than $100 (late filing of export documents), to no relief (double

the duties, taxes and fees if the merchandise is not exported or destroyed). 

• Failure to redeliver to Customs custody: From one to five percent (1 to 5%) of the 

claim but no lower than $100 (merchandise redelivered beyond the permissible 

time period), to no relief (up to three (3) times the value of the goods) for 

restricted or prohibited merchandise. 

• In-bond misdelivery: From $100-$500 for late delivery of documents or 

merchandise to Customs, to no relief (up to three (3) times the value of the 

goods) for misdelivery of restricted merchandise. 

• Warehouse/Foreign Trade Zone bond breaches: 

 

• Violations involving merchandise – From one to six (1 to 6) times the loss

of revenue in lost merchandise cases; no relief (three (3) times value) for 

restricted merchandise. 

• Violations not involving merchandise (generally document related) – $100 

per breach. 

• Airport security bond breaches: From $100 for document violations, to no relief 

($1,000 per violation) for failing to relinquish badges, unauthorized presence in a

secured area or failing to follow the orders of a Customs officer.

• Late filing of export documents (SEDs/bills of lading): From $50 for one day late 

(per regulation), to no relief ($1,000) for non-filing. 

• General Order eligibility notifications (per bill of lading): From $100 (late 

notification), to no relief ($1,000) for failure to notify. 

Note that Customs maintains the authority to deviate from these guidelines

based on the particular facts and circumstances surrounding any case. 

[See next page for chart of the liquidated damages process]

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February 2004

45
 Customs Administrative Enforcement Process 

February 2004

ADDITIONAL INFORMATION 

The Internet 

The home page of U.S. Customs and Border Protection on the Internet’s World Wide 

Web, provides the trade community with current, relevant information regarding CBP 

operations and items of special interest. The site posts information -- which includes 

proposed regulations, news releases, publications and notices, etc. -- that can be 

searched, read on-line, printed or downloaded to your personal computer. The web site 

was established as a trade-friendly mechanism to assist the importing and exporting

community. The web site also links to the home pages of many other agencies whose 

importing or exporting regulations that U.S. Customs and Border Protection helps to 

enforce. The web site also contains a wealth of information of interest to a broader 

public than the trade community. For instance, on June 20, 2001, CBP launched the 

“Know Before You Go” publication and traveler awareness campaign designed to help 

educate international travelers. 

 

The web address of U.S. Customs and Border Protection is http://www.cbp.gov

Customs Regulations 

The current edition of Customs Regulations of the United States is a loose-leaf, 

subscription publication available from the Superintendent of Documents, U.S. 

Government Printing Office, Washington, DC 20402; telephone (202) 512-1800. A 

bound, 2003 edition of Title 19, Code of Federal Regulations, which incorporates all 

changes to the Regulations as of April 1, 2003, is also available for sale from the same 

address. All proposed and final regulations are published in the Federal Register, which 

is published daily by the Office of the Federal Register, National Archives and Records 

Administration, and distributed by the Superintendent of Documents. Information about

on-line access to the Federal Register may be obtained by calling (202) 512-1530 

between 7 a.m. and 5 p.m. Eastern time. These notices are also published in the 

weekly Customs Bulletin described below. 

Customs Bulletin 

The Customs Bulletin and Decisions (“Customs Bulletin”) is a weekly publication that 

contains decisions, rulings, regulatory proposals, notices and other information of 

interest to the trade community. It also contains decisions issued by the U.S. Court of 

International Trade, as well as customs-related decisions of the U.S. Court of Appeals

for the Federal Circuit. Each year, the Government Printing Office publishes bound 

volumes of the Customs Bulletin. Subscriptions may be purchased from the 

Superintendent of Documents at the address and phone number listed above. 

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February 2004

Importing Into the United States 

This publication provides an overview of the importing process and contains general 

information about import requirements. The February 2002 edition of Importing Into the 

United States contains much new and revised material brought about pursuant to the 

Customs Modernization Act (“Mod Act”). The Mod Act has fundamentally altered the 

relationship between importers and U.S. Customs and Border Protection by shifting to 

the importer the legal responsibility for declaring the value, classification, and rate of 

duty applicable to entered merchandise. 

The February 2002 edition contains a section entitled "Informed Compliance." A key 

component of informed compliance is the shared responsibility between U.S. Customs 

and Border Protection and the import community, wherein CBP communicates its 

requirements to the importer, and the importer, in turn, uses reasonable care to assure 

that CBP is provided accurate and timely data pertaining to his or her importation. 

Single copies may be obtained from local offices of U.S. Customs and Border

Protection, or from the Office of Public Affairs, U.S. Customs and Border Protection, 

1300 Pennsylvania Avenue NW, Washington, DC 20229. An on-line version is 

available at the CBP web site. Importing Into the United States is also available for 

sale, in single copies or bulk orders, from the Superintendent of Documents by calling 

(202) 512-1800, or by mail from the Superintendent of Documents, Government Printing

Office, P.O. Box 371954, Pittsburgh, PA 15250-7054. 

Informed Compliance Publications 

U.S. Customs and Border Protection has prepared a number of Informed Compliance 

publications in the “What Every Member of the Trade Community Should Know 

About:...” series. Check the Internet web site http://www.cbp.gov for current 

publications. 

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February 2004

Value Publications 

Customs Valuation under the Trade Agreements Act of 1979 is a 96-page book 

containing a detailed narrative description of the customs valuation system, the customs 

valuation title of the Trade Agreements Act (§402 of the Tariff Act of 1930, as amended 

by the Trade Agreements Act of 1979 (19 U.S.C. §1401a)), the Statement of 

Administrative Action which was sent to the U.S. Congress in conjunction with the TAA,

regulations (19 C.F.R. §§152.000-152.108) implementing the valuation system (a few 

sections of the regulations have been amended subsequent to the publication of the 

book) and questions and answers concerning the valuation system. A copy may be 

obtained from U.S. Customs and Border Protection, Office of Regulations and Rulings, 

Value Branch, 1300 Pennsylvania Avenue, NW, (Mint Annex), Washington, D.C. 20229. 

Customs Valuation Encyclopedia (with updates) is comprised of relevant statutory

provisions, CBP Regulations implementing the statute, portions of the Customs 

Valuation Code, judicial precedent, and administrative rulings involving application of 

valuation law. A copy may be purchased for a nominal charge from the Superintendent

of Documents, Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-

7054. This publication is also available on the Internet web site of U.S. Customs and 

Border Protection. 

The information provided in this publication is for general information 

purposes only. Recognizing that many complicated factors may be 

involved in customs issues, an importer may wish to obtain a ruling under

CBP Regulations, 19 C.F.R. Part 177, or obtain advice from an expert

(such as a licensed Customs Broker, attorney or consultant) who 

specializes in customs matters. Reliance solely on the general 

information in this pamphlet may not be considered reasonable care.

Additional information may also be obtained from U.S. Customs and Border Protection 

ports of entry. Please consult your telephone directory for an office near you. The 

listing will be found under U.S. Government, Department of Homeland Security. 

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February 2004

49

“Your Comments are Important” 

The Small Business and Regulatory Enforcement Ombudsman and 10 regional 

Fairness Boards were established to receive comments from small businesses about

Federal agency enforcement activities and rate each agency’s responsiveness to small 

business. If you wish to comment on the enforcement actions of U.S. Customs and

Border Protection, call 1-888-REG-FAIR (1-888-734-3247). 

REPORT SMUGGLING 1-800-BE-ALERT OR 1-800-NO-DROGA 

Visit our Internet web site: http://www.cbp.gov