What Every Member of the 

Trade Community Should Know About: 

Mitigation Guidelines: 

Fines, Penalties, 

Forfeitures and 

Liquidated Damages 

AN INFORMED COMPLIANCE PUBLICATION 

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 2002 

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, ORR, is a guideline for the

mitigation of fines, penalties, forfeitures and liquidated damages. “Mitigation Guidelines: 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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INTRODUCTIONS CONTRARY TO LAW - 19 U.S.C. 1595A(C) .............14

I. IN GENERAL........................................................................................14

II. GUIDELINES FOR REMISSION OF SEIZED PROPERTY...............15

A. Scope.................................................................................................................... 15

B. Dispositions........................................................................................................ 16

C. Special Circumstances ...................................................................................... 16

D. Definitions of Factors Utilized Under Normal Dispositions................................. 17

CONVEYANCES (VESSELS, VEHICLES AND AIRCRAFTS).................19

19 U.S.C. 1595a(a); 21 U.S.C. 881; 49 U.S.C. 80302/80303; 19 U.S.C. 1703; 19 

U.S.C. 1590; 19 U.S.C. 1594 ..................................................................................... 19

I. Statutory Authority for Seizure and Forfeiture ...................................................... 19

II. Common Carriers................................................................................................. 24

III. Immediate Administrative Forfeiture Proceedings................................................ 24

IV. General Considerations When Reviewing Petitions for Relief ............................. 25

V. Forfeiture Remission Guidelines - 19 U.S.C. 1595a(a), 21 U.S.C. 881, and 49 

U.S.C. 80303.............................................................................................................. 27

VI. Mitigation Guidelines - 19 U.S.C. 1703, 19 U.S.C. 1590..................................... 29

VII. Mitigation Guidelines - Petitioning for Proceeds of Sale Following Immediate 

Forfeiture.................................................................................................................... 30

VIII.Restoration of Proceeds of Sale (19 U.S.C. 1613; 19 C.F.R. Part 171, Subpart E)

 30

IMITATION FIREARM IMPORTS – 15 U.S.C. 5001(A) ............................31

I. Background .......................................................................................................... 31

II. Seizure................................................................................................................. 31

III. Forfeiture Remission Guidelines.......................................................................... 32

IV. Claims for Liquidated Damages........................................................................... 33

V. Referral of Petitions for Relief .............................................................................. 34

VI. Disposition of Forfeited Merchandise................................................................... 34

DOG AND CAT FUR PRODUCTS - 19 U.S.C. 1308 ................................34

I. In General ............................................................................................................ 34

II. Forfeiture Remission............................................................................................ 34

III. Disposition of Forfeited Merchandise................................................................... 34

AIRCRAFT REGISTRATION AND CERTIFICATION - 49 U.S.C. 46306 .34

I. Violations/Remission Guidelines .......................................................................... 34

II. Presentation of Valid Documentation................................................................... 40

III. Seizures Resulting From Multiple Violations of the Statute.................................. 41

IV. Aggravating and Mitigating Factors...................................................................... 41

V. Advice of FAA...................................................................................................... 41

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PASSENGER FAILURE TO DECLARE - 19 U.S.C. 1497........................42

I. In General ............................................................................................................ 42

II. Declaration Requirements ................................................................................... 42

III. Amendment of Declarations Permitted - 19 C.F.R. 148.16.................................. 42

IV. Elements of the Violation ..................................................................................... 42

V. Violator’s Liability - 19 U.S.C. 1497...................................................................... 43

VI. Minor Violations ................................................................................................... 43

VII. Serious Violations ................................................................................................ 43

VIII.Guidelines for Disposition of Violations of 19 U.S.C. 1497 .................................. 43

CURRENCY OR MONETARY INSTRUMENT REPORT – 31 U.S.C. 5316, 

5317, 5324 .................................................................................................48

I. Background .......................................................................................................... 48

II. Pre-seizure and Seizure Procedures ................................................................... 48

III. Remission Upon Payment of Monetary Penalty................................................... 49

IV. Mitigating Factors................................................................................................. 50

V. No Private Rights Created ................................................................................... 51

VI. Statute Of Limitations For Civil Forfeiture Actions................................................ 51

I. Overview .............................................................................................................. 53

II. Statutory Authorization for Seizure and Underlying Violation Citations................ 53

III. Early Release Procedures ................................................................................... 59

IV. Remission/Mitigation Considerations................................................................... 59

V. Remission/Mitigation Guidelines.......................................................................... 61

VI. Claims for Liquidated Damages........................................................................... 61

VII. Penalties .............................................................................................................. 62

GUIDELINES FOR THE REMISSION OF FORFEITURES AND 

MITIGATION OF PENALTIES FOR VIOLATION OF 19 U.S.C. 1627A, 

FOR STOLEN CONVEYANCES AND PARTS .........................................64

I. 19 U.S.C. 1627a(a) .............................................................................................. 64

MITIGATION OF TRADEMARK, COPYRIGHT AND PATENT 

VIOLATIONS .............................................................................................69

I. Introduction .......................................................................................................... 69

II. Trademark Violations - Seizures.......................................................................... 69

A. Counterfeit – 19 U.S.C. 1526(e); 19 U.S.C. 1595a(c) and 18 U.S.C. 2320 .... 69

B. Confusingly Similar – 19 U.S.C. 1595a(c)(2)(C) for violation of 15 U.S.C. 1124

 69

C. Gray Market – 19 U.S.C. 1526(b)................................................................... 69

III. Trademark Violation – Civil Monetary Fine; 19 U.S.C. 1526(f); T.D. 99-76.......... 69

IV. Copyright Violations ............................................................................................. 73

V. Patent Infringement.............................................................................................. 73

VI. IPR Matrices ........................................................................................................ 74

Recommended Actions, Citations, and Dispositions of Importations....................... 74

Involving Trademark Violations ............................................................................... 74

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Recommended Actions, Citations, and Dispositions of Importations....................... 77

Involving Copyright Violations ................................................................................. 77

Recommended Actions, Citations, and Dispositions of Exportations ...................... 79

Involving Trademark & Copyright Violations............................................................ 79

COMMERCIAL FRAUD – 19 U.S.C. 1592 ................................................83

NEGLIGENCE, GROSS NEGLIGENCE AND FRAUD............................................... 83

Introduction ................................................................................................................ 83

I. Violations of Section 592...................................................................................... 83

II. Definition of Materiality Under Section 592 .......................................................... 84

III. Degrees of Culpability Under Section 592 ........................................................... 84

A. Negligence.......................................................................................................... 84

B. Gross Negligence ............................................................................................... 85

C. Fraud .................................................................................................................. 85

IV. Discussion of Additional Terms............................................................................ 85

1. Duty Loss Violations........................................................................................... 85

2. Non-duty Loss Violations.................................................................................... 85

3. Actual Loss of Duties.......................................................................................... 85

4. Potential Loss of Duties...................................................................................... 85

5. Total Loss of Duty .............................................................................................. 86

6. Reasonable Care ............................................................................................... 86

7. Clerical Error ...................................................................................................... 86

8. Mistake of Fact................................................................................................... 87

V. Penalty Assessment ............................................................................................ 87

VI. Administrative Penalty Disposition....................................................................... 91

VII. Mitigating Factors................................................................................................. 94

VIII.Aggravating Factors............................................................................................. 96

X. Section 592(d) Demands ..................................................................................... 97

XI. Customs Brokers ................................................................................................. 97

XII. Arriving Travelers................................................................................................. 98

XIII.Violations of Laws Administered by Other Federal Agencies............................... 99

XIV. Section 592 Violations by Small Entities ........................................................ 99

CONTROLLED SUBSTANCES - FAILURE TO MANIFEST - 19 U.S.C. 

1584 .........................................................................................................100

I. FAILURE TO MANIFEST ILLEGAL DRUGS - STATUTORY LIABILITY UNDER 19 

U.S.C. 1584(a)(2)..................................................................................................... 100

II. FP&F OFFICER’S AUTHORITY ........................................................................ 104

III. PETITIONS FOR RELIEF.................................................................................. 105

IV. SPECIAL PROCEDURES FOR CARRIERS PARTICIPATING IN CUSTOMS 

INDUSTRY PARTNERSHIP PROGRAMS (IPP)...................................................... 105

V. PENALTY MITIGATION..................................................................................... 107

VI. PENALTY OFFSETS......................................................................................... 107

BROKER PENALTIES - 19 U.S.C. 1641.................................................109

APPENDIX C TO PART 171, CUSTOMS REGULATIONS...................................... 109

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Overview .................................................................................................................. 109

Customs Guidelines for the Imposition and Mitigation of Penalties for Violations of 19 

U.S.C. 1641.............................................................................................................. 110

I. Penalty Assessment Procedures – 19 C.F.R. Part 111, Subpart E.................... 110

II. Penalty Assessment – Conducting Customs Business Without a License (19 

U.S.C. 1641(b)(6)).................................................................................................... 111

III. SECTION 1641(d)(1)(A)—MAKING A FALSE OR MISLEADING STATEMENT 

OR AN OMISSION AS TO MATERIAL FACT WHICH WAS REQUIRED TO BE 

STATED IN ANY APPLICATION FOR A LICENSE OR PERMIT ............................ 114

IV. SECTION 1641(d)(1)(B)—BROKER CONVICTED OF CERTAIN FELONIES OR 

MISDEMEANORS SUBSEQUENT TO FILING LICENSE APPLICATION............... 115

V. SECTION 1641(d)(1)(C)—VIOLATION OF ANY LAW ENFORCED BY THE 

CUSTOMS SERVICE OR THE RULES OR REGULATIONS ISSUED UNDER ANY 

SUCH PROVISION .................................................................................................. 116

VI. SECTION 1641(d)(1)(D)—COUNSELING, COMMANDING, INDUCING, 

PROCURING OR KNOWINGLY AIDING AND ABETTING VIOLATIONS BY ANY 

OTHER PERSON OF ANY LAW ENFORCED BY SERVICE.................................. 119

VII. SECTION 1641(d)(1)(E)—KNOWINGLY EMPLOYING OR CONTINUING TO 

EMPLOY ANY PERSON WHO HAS BEEN CONVICTED OF A FELONY, WITHOUT 

WRITTEN APPROVAL OF SUCH EMPLOYMENT FROM THE SECRETARY OF THE 

TREASURY.............................................................................................................. 120

VIII.SECTION 1641(d)(1)(F)—IN THE COURSE OF CUSTOMS BUSINESS, WITH 

INTENT TO DEFRAUD, KNOWINGLY DECEIVING, MISLEADING OR 

THREATENING ANY CLIENT OR PROSPECTIVE CLIENT ................................... 121

IX. SECTION 1641(b)(5)—THE FAILURE OF A CUSTOMS BROKER THAT IS 

LICENSED AS A CORPORATION, ASSOCIATION OR PARTNERSHIP TO HAVE, 

FOR ANY CONTINUOUS PERIOD OF 120 DAYS, AT LEAST ONE OFFICER OF 

THE CORPORATION OR ASSOCIATION OR ONE MEMBER OF THE 

PARTNERSHIP VALIDLY LICENSED ..................................................................... 122

X. SECTION 1641(c)(3)—FAILURE OF A CUSTOMS BROKER GRANTED A 

PERMIT TO CONDUCT BUSINESS IN A CERTAIN DISTRICT TO EMPLOY, FOR A 

CONTINUOUS PERIOD OF 180 DAYS, AT LEAST ONE INDIVIDUAL WHO IS 

LICENSED WITHIN THE DISTRICT OR REGION................................................... 122

XI. SECTION 1641(b)(4)—FAILURE OF A LICENSED BROKER TO EXERCISE 

RESPONSIBLE SUPERVISION AND CONTROL OVER THE CUSTOMS BUSINESS 

THAT IT CONDUCTS .............................................................................................. 122

XII. LIMITS OF PENALTY ASSESSMENTS ............................................................ 126

XIII.CONSOLIDATION OF CASES.......................................................................... 126

DRAWBACK PENALTIES - 19 U.S.C. 1593A ........................................127

APPENDIX D TO PART 171, CUSTOMS REGULATIONS (T.D. 00-5) ................... 127

Overview .................................................................................................................. 127

Guidelines For The Imposition And Mitigation Of Penalties For Violations Of 19 U.S.C. 

1593a ....................................................................................................................... 127

I. Violations Of Section 593a .............................................................................. 128

II. Degrees Of Culpability ................................................................................. 128

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III. Assessment Of Penalties ............................................................................ 129

IV. Maximum Penalties ..................................................................................... 129

V. Deprivation Of Lawful Revenue.................................................................... 131

VI. Final Disposition Of Penalty Cases When The Drawback Claimant Is Not A 

Certified Participant In The Drawback Compliance Program ................................ 131

VII. Drawback Compliance Program Participants ............................................ 134

VIII. Violations By Small Entities ...................................................................... 136

RECORDKEEPING PENALTIES - 19 U.S.C. 1509 (T.D. 00-63)............137

Overview .................................................................................................................. 137

GUIDELINES FOR THE MITIGATION OF PENALTIES FOR 19 U.S.C. 1509 ........ 138

I. Degrees Of Culpability .................................................................................... 139

II. Procedure For Penalty Assessment ............................................................. 139

III. Administrative Penalty Disposition ............................................................... 140

IV. Mitigating Factors ......................................................................................... 144

V. Aggravating Factors ..................................................................................... 145

VESSEL REPAIR PENALTIES (19 U.S.C. 1466) ...................................147

I. In General .......................................................................................................... 147

II. Statutory/Regulatory Requirements................................................................... 147

III. Elements of Violation/Determination of Liability ................................................. 148

IV. Penalty Assessment Procedures ....................................................................... 149

V. Mitigation Guidelines.......................................................................................... 150

VESSELS AND OTHER CONVEYANCES IN FOREIGN AND DOMESTIC 

TRADE; CARGO DELIVERY; MANIFESTING .......................................152

ARRIVAL AND ENTRY OF VESSELS, VEHICLES AND AIRCRAFT...................... 152

I. Arrival Reporting Requirements ......................................................................... 152

II. Making Entry...................................................................................................... 153

III. Seizures/Penalties ............................................................................................. 155

IV. Penalty Assessment .......................................................................................... 156

V. Recreational Vessel Reporting .......................................................................... 159

VI. Seizures............................................................................................................. 159

VII. Mitigation/Remission Guidelines........................................................................ 160

PASSENGER/CREWMEMBER VIOLATIONS........................................164

I. Specific Violations .............................................................................................. 164

II. Mitigation Guidelines.......................................................................................... 166

MANIFEST AND CARGO DELIVERY VIOLATIONS..............................167

I. Presentation of Manifests................................................................................... 167

II. Inaccuracies or Discrepancies in Manifests ....................................................... 168

III. Delivery of Cargo Without Customs Authorization (19 U.S.C. 1595a(b) for 

Violation of 19 U.S.C. 1448 and/or 19 U.S.C. 1499) ................................................ 173

IV. Other Vessel Penalties ...................................................................................... 176

V. Departure of Vessels; Transportation in Coastwise Trade................................. 181

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VI. International Carrier Bond.................................................................................. 186

LIQUIDATED ...........................................................................................188

DAMAGES...............................................................................................188

I. In General .......................................................................................................... 189

II. Statute of Limitations for Bond Violations-See, 28 U.S.C. 2415 ........................ 191

III. FP&F Officer’s Mitigation Authority .................................................................... 191

IV. Assessment of Claims ....................................................................................... 192

V. Offers in Compromise........................................................................................ 193

VI. Petitions for Relief.............................................................................................. 193

VII. Protests.............................................................................................................. 193

VIII.Providing Copies of Bonds and Entries.............................................................. 194

IX. Defenses............................................................................................................ 194

X. Effect Of Liquidation........................................................................................... 194

XI. Bankruptcy of Principal ...................................................................................... 194

GUIDELINES FOR CANCELLATION OF LIQUIDATED DAMAGES 

CLAIMS REF: T.D. 94-38, T.D. 98-53, T.D. 99-29, T.D. 01-41 AND T.D. 

02-20........................................................................................................195

I. Guidelines for Cancellation of Claims for Liquidated Damages for Failure to File 

Entry Summaries Timely (19 C.F.R. 142.15 and 113.62(b)), Failure to Pay Estimated 

Duties Timely (19 C.F.R. 113.62(a)(1)(i) and 113.62(l)(4)), and Failure to Remit 

Passenger Processing Fees Timely (19 C.F.R. 113.64(a)) (T.D. 94-38).................. 195

II. Guidelines for Cancellation of Claims for Liquidated Damages for Violation of

Temporary Importation Bonds (19 C.F.R. 10.39) (T.D. 94-38)................................. 202

III. Guidelines for Cancellation of Claims Involving Carnets (T.D. 02-20) ............... 204

IV. Guidelines for Cancellation of Claims Involving Failure to Redeliver Merchandise 

into Customs Custody or Failure to Comply With a Notice of Refusal of Admission 

Issued by Another Government Agency (19 C.F.R. 141.113, 113.62(d) or 113.62(e)) 

(T.D. 94-38).............................................................................................................. 207

V. Guidelines for Cancellation of Claims Arising From Failure to Provide Missing 

Documents (19 C.F.R. 113.42) (T.D. 94-38) ............................................................ 213

VI. Guidelines for Cancellation of Claims Arising From Failure to Timely File Shipper’s 

Export Declarations (15 C.F.R. 30.24) and Other Export Documents (19 C.F.R. 

113.64(c)) (T.D. 94-38)............................................................................................. 215

VII. Guidelines for Cancellation of Claims for Shortage, Irregular Delivery, NonDelivery or Delivery Directly to the Consignee of In-bond Merchandise (19 C.F.R. 

18.8) (T.D. 99-29)..................................................................................................... 217

VIII.Guidelines for Cancellation of Claims Arising From Violation of Warehouse 

Proprietor’s Bond (19 C.F.R. PART 19, 19 C.F.R. 113.63) (T.D. 94-38).................. 221

IX. Guidelines for Cancellation of Claims Arising From Violation of Airport Security 

Regulations (19 C.F.R. 122.181 ET.SEQ.) (T.D. 94-38) .......................................... 224

X. Guidelines for Cancellation of Claims Arising From the Failure to Hold 

Merchandise at the Place of Examination (19 C.F.R. 113.62(f)) (T.D. 99-29).......... 226

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XI. Guidelines for Cancellation of Claims Arising From the Failure of a Centralized 

Examination Station (CES) Operator to Deliver Merchandise to or Retain Merchandise

at the CES (19 C.F.R. 151.15, 19 C.F.R. 113.63) (T.D. 99-29)................................ 228

XII. Guidelines for Cancellation of Claims Arising from the Removal of Merchandise 

Without Authorization From a Container Freight Station (CFS) (19 C.F.R. 19.40 

ET.SEQ.) (19 C.F.R. 113.63(b)) (T.D. 99-29)........................................................... 231

XIII.Claims for Liquidated Damages Assessed Against a Bonded Party for Failure to 

Notify Customs of the Presence of Unentered Merchandise (T.D. 99-29)................ 234

XIV. Claims for Liquidated Damages Incurred by the Carrier or Other Party for 

Failure to Notify the Bonded Warehouse of the Presence of Unentered Merchandise 

(T.D. 99-29).............................................................................................................. 235

XV. Claims for Liquidated Damages Against a Bonded Warehouse for Failure to 

Collect Unentered Merchandise For Which Notification Has Been Received (T.D. 99-

29) 236

XVI. Guidelines for Cancellation of Claims Arising From Violation of Foreign Trade 

Zone Regulations (19 C.F.R. Part 146, 19 C.F.R. 113.73) (T.D. 01-41)................... 237

XVII. Guidelines for Cancellation of Claims for Late Filing or Failure to File Softwood 

Lumber Information (19 C.F.R. 12.140, 19 C.F.R. 113.62(k), 19 C.F.R. 113.62(l)(5)) 

(T.D. 98-53).............................................................................................................. 240

XVIII. Guidelines for Cancellation of Claims for Failure to File Reconciliations 

Timely (REF: 64 FR 73121, dated December 29, 1999; 66 FR 14619, dated March 13, 

2001) 242

XIX. Guidelines for Cancellation of Claims for Failure to Redeliver Export 

Merchandise (19 C.F.R. 113.64(f)(1) and (f)(2)) (T.D. 02-20) .................................. 245

XX. Guidelines for Assessment and Cancellation of Claims for Failure or Late Filing of 

NAFTA Duty Deferral Entries (T.D. 02-20)............................................................... 246

XXI. Guidelines for Cancellation of Claims for Violations Arising From Failure to 

Comply With Trade Fair Regulations (T.D. 02-20) ................................................... 247

XXII. Guidelines for Cancellation of Claims When Petitions for Relief Are Filed 

Untimely (T.D. 02-20)............................................................................................... 248

NOTE: FOR PURPOSES OF ALL BOND CANCELLATION 

STANDARDS, THE TERM VALUE SHALL MEAN VALUE AS 

DETERMINED UNDER 19 U.S.C. 1401A. ..............................................249

ADDITIONAL INFORMATION.................................................................250

IX. The Internet ....................................................................................................... 250

Customs Regulations ............................................................................................... 250

Customs Bulletin ...................................................................................................... 250

X. 250

Importing Into the United States............................................................................... 251

XI. Informed Compliance Publications..................................................................... 251

XII. Value Publications ............................................................................................. 252

XIII.“Your Comments are Important” ........................................................................ 254

 

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SEIZURES

13
INTRODUCTIONS CONTRARY TO LAW - 19 U.S.C. 1595A(C) 

I. In General 

Section 1595a(c) is the primary seizure and forfeiture statute Customs uses to enforce a 

myriad of civil laws – both Customs laws and laws and regulations of other agencies.

Many laws define what constitutes prohibited merchandise or behavior but do not 

provide a remedy to be enforced regarding that prohibited merchandise or as a 

consequence of that behavior. Section 1595a(c), on the other hand, actually provides

for the seizure and forfeiture of the violative property. 

Section 1595a(c) can be broken down into two distinct categories. First, 

subsection 1595a(c)(1) describes those instances where seizure is mandatory. It 

requires that Customs seize and subject to forfeiture merchandise that is: 

• Stolen 

• Smuggled 

• Clandestinely imported or introduced 

• A contraband article as defined in section 781 of the Appendix to Title 49 

(which has since been re-codified as section 80302 of Title 49) 

• A plastic explosive as defined in section 841(q) of Title 18. 

In contrast, subsections 1595a(c)(2) and (c)(3), describe those instances where the 

seizing officer is provided authority and discretion in deciding whether seizure is the 

most appropriate enforcement action. Subsection 1595a(c)(2) provides merchandise 

may be seized and forfeited if: 

• its importation or entry is subject to any restriction or prohibition that is 

imposed by law relating to health, safety, or conservation, and the 

merchandise is not in compliance with the applicable rule, regulation or 

statute 

• its importation or entry requires a license, permit or other authorization of

an agency of the United States Government and the merchandise is not 

accompanied by such license or permit 

• it is merchandise or packaging in which copyright, trademark, or trade 

name protection violations are involved 

• it is trade dress merchandise involved in the violation of a court order 

citing 15 U.S.C. 1125 

• it is merchandise which is marked intentionally in violation of 19 U.S.C.

1304 

• it is merchandise for which the importer has received written notices that 

previous importations of identical merchandise from the same supplier 

were found to have been marked in violation of 19 U.S.C. 1304. 

Subsection 1595a(c)(3) provides merchandise may be seized and forfeited if: 

14
• the importation or entry of the merchandise is subject to quantitative 

restrictions requiring a visa, permit, license, or other similar document or 

stamp from the United States Government or from a foreign government

or issuing authority pursuant to a bilateral or multilateral agreement and 

such visa, permit license or similar document or stamp which is presented 

with the importation or entry of the merchandise is counterfeit. 

Pursuant to subsection 1595a(c)(3) and 1595a(c)(4), seizure may not be affected: 

• if the importation or entry of the merchandise is subject to quantitative 

restrictions requiring a visa, permit, license, or other similar document or 

stamp from the United States Government or from a foreign government

or issuing authority pursuant to a bilateral or multilateral agreement and 

that visa, permit, license or other similar document or stamp is not

presented (as opposed to presentation of a counterfeit, as described 

above). The merchandise rather, shall be subject to detention under 19 

U.S.C. 1499 

• if the merchandise is imported or introduced contrary to a provision of law 

which governs the classification or value of merchandise and there are no 

issues as to the admissibility of the merchandise into the United States. 

II. Guidelines for remission of seized property 

A. Scope 

1. These guidelines are applicable only upon the filing of a petition 

pursuant to 19 U.S.C. 1618 for remission of the forfeiture. 

2. Upon granting relief from forfeiture, the following conditions must be 

met: 

• Satisfaction of all costs of seizure (storage and appraisal); and 

• Submission of an executed HOLD HARMLESS AGREEMENT 

NOTE: If required, the party granted relief must bring the 

merchandise into compliance, or export the merchandise under 

Customs supervision. However, exportation or remission for export 

may not be permitted, if that release would adversely affect health,

safety or conservation or be in contravention of a bilateral or 

multilateral agreement or treaty. 

3. The disposition set forth in these guidelines may be applied in 

determining the criteria for early release of merchandise seized under 

19 U.S.C. 1595a(c). The Fines, Penalties and Forfeitures Officer may 

authorize early release for less than the domestic value of the 

15
merchandise, where such does not exceed $100,000. If the domestic 

value exceeds $100,000, such request for early release must be 

approved by the Chief, Penalties Branch. 

4. Extraordinary factors not specified in these guidelines may justify 

deviation from the specific dispositions set forth herein. 

B. Dispositions 

1. First Offense 

No aggravating factors – remission upon payment of: 

10 – 30% of the dutiable value of the seized goods 

2. Second Offense 

No aggravating factors – remission upon payment of: 

30 –50% of the dutiable value of the seized goods 

3. Third or Subsequent Offense 

Remission upon payment of 50 - 80% of the dutiable value of the 

seized goods 

4. First Offense 

Aggravating factors – remission upon payment of: 

30 – 50% of the dutiable value of the goods 

5. Second Offense (and subsequent offenses) 

Aggravating factors – remission upon payment of: 

50 – 80% of the dutiable value of the seized goods 

C. Special Circumstances 

The disposition set forth below shall apply to any seizure under section 

1595a(c) (or penalty under section 1595a(b) for violation of a statute other 

than 19 U.S.C. 1448 or 19 U.S.C. 1499, the guidelines for which are found 

in T.D. 99-29 and the Penalties section of this Handbook), when the 

circumstances prescribed below are found to exist. Thus, when 

applicable, these dispositions will apply instead of the “Normal 

Dispositions” set forth above. 

1. MISTAKE OF FACT OR CLERICAL ERROR (as defined under 19 

C.F.R. 162.71(c), (d)). If the sole cause of the introduction or 

16
attempted introduction contrary to law results from either mistake of 

fact or clerical error, remit the seizure in full. 

2. EXTENUATING CIRCUMSTANCES: Remission may be granted in

full, when justified by the equities relating to the violation for which 

seizure was made. 

3. CRIMINAL CONVICTION OF OWNER OF SEIZED 

MERCHANDISE IN CONNECTION WITH TRANSACTION 

LEADING TO SEIZURE: No remission. Deny petition for relief and 

seek forfeiture of seized merchandise. 

4. PRE-COLUMBIAN ART/ARTIFACTS SEIZURES: Contact the 

Penalties Branch, OR&R, for action to be taken on seizure. This

action is necessary due to the status of such merchandise under 

various treaties with foreign governments or federal law. 

D. Definitions of Factors Utilized Under Normal Dispositions 

1. HOW TO DETERMINE SECOND, THIRD, OR SUBSEQUENT OFFENSES: 

a. The shipment currently under seizure has been imported by or on 

behalf of a person or entity whose merchandise has been seized 

under section 1595a(c) within a 1-year period prior to the instant

seizure, and such prior forfeiture claim was not remitted in full. 

EXAMPLE: 

Larry’s Lingerie introduced, on August 19, 1999, a shipment of

ladies’ braziers that were manufactured in Cambodia. The seizing 

inspector, through conducting a thorough examination, determined

that the visas included in the entry packet were counterfeit.

Accordingly, the shipment was seized under 19 U.S.C. 1595a(c)(3). 

The merchandise was later remitted to Larry, for export only, after 

he complied with the conditions of release set forth by the FP&F

office. 

On December 27, 1999, Larry, thinking lightning could not strike 

twice, attempted to import a shipment of tie-die tee shirts, which he 

intended to sell at the upcoming Neil Diamond concert. An everinquisitive inspector examined the shirts and discovered that they 

were marked “Made In The U.S.A,” although all of the entry 

documents indicated that they were made in India. The inspector 

seized the shipment under 19 U.S.C. 1595a(c)(2)(E). 

17
b. Under these facts, Larry was twice unlucky, and, under the 

mitigation guidelines, the prior offense will cost him dearly. The 

seizure of August 1999, represents the first offense, thus elevating 

the mitigated amount for the latter seizure. 

2. MITIGATING FACTORS 

a. Prior Good Record of the violator

b. Inexperience in importing 

c. Cooperation with Customs (or agency officials) in ascertaining 

the facts establishing the violation 

3. AGGRAVATING FACTORS 

a. Criminal Conviction relating to the subject transaction. The 

criminal violation relating to the transaction resulting in the 

seizure need not have been committed by the petitioner for this 

aggravating factor to exist. 

b. Repetitive violations of the same import restriction involved in 

the seizure. This includes violations for which no seizures had 

been made. 

c. Evidence of intentional importation contrary to law. 

EXAMPLE: 

Importer introduces scarves from India under textile quota 

visa applicable to tablecloths. Evidence established that the 

scarves were introduced under a visa applicable to 

tablecloths because the shipper could not obtain a visa for 

scarves. Thus, Importer directed Shipper to have the 

scarves described in the invoices as tablecloths and 

introduced under the visa applicable for such in order to 

avoid the quota visa restriction applicable to scarves. 

There exists an AGGRAVATING FACTOR since the 

evidence establishes that the introduction of the scarves 

contrary to the laws implementing the Bilateral Textile 

Agreement between the United States and India was

intentional. 

NOTE: 19 U.S.C. 1595a(a) REMISSION OF SEIZED MERCHANDISE USED TO FACILITATE

IMPORTATIONS CONTRARY TO LAW. 

If it is determined that the merchandise was ACTUALLY used to conceal 

violative property, proceed with mitigation under the guidelines applicable to 

1595a(c) seizures. 

18
CONVEYANCES (VESSELS, VEHICLES AND AIRCRAFTS) 

19 U.S.C. 1595a(a); 21 U.S.C. 881; 49 U.S.C. 80302/80303; 19 U.S.C. 

1703; 19 U.S.C. 1590; 19 U.S.C. 1594 

The above-noted statutes provide for the seizure and forfeiture of conveyances 

(vessels, vehicles, and aircrafts), which have been used in the importation or 

transportation of merchandise (including contraband) contrary to law. It also includes

seizure and forfeiture of conveyances which are the proceeds from the sale of

contraband or which have been outfitted for the purpose of smuggling. As a general 

rule, such conveyances are returned to owners who demonstrate lack of complicity in

the violation. Also, in addition to the seizure and forfeiture of conveyances, the 

provisions of 19 U.S.C. 1595a(a) permit the seizure and forfeiture of any thing used to

facilitate the importation contrary to law. 

NOTE: The seizure and forfeiture of any conveyance is subject to the applicability

of any exceptions to seizure of a common carrier as provided for under 19 U.S.C. 

1594 and as noted in subsection II of this section. 

I. Statutory Authority for Seizure and Forfeiture 

A. 19 U.S.C. 1595a(a) – Importations contrary to law

1. Provides for the seizure and forfeiture of vessels, vehicles, and 

aircraft, or other thing used in, to aid in, or to facilitate: 

a. importation or bringing in, 

b. unlading, landing, or removal, 

c. concealing or harboring or, 

d. subsequent transportation, 

2. Of any article which is: 

a. being or has been introduced into the United 

 States contrary to law, or 

b. attempted to be introduced into the United States contrary to 

law. 

3. A conveyance for purposes of this section is not limited to a

traditional conveyance but could include any merchandise used to

transport or conceal merchandise being introduced contrary to law. 

19
B. 21 U.S.C. 881 – Transportation and facilitation of controlled substances; 

proceeds of sale of such substances 

1. Provides for the seizure and forfeiture of vessels, vehicles, and 

aircraft used or intended for use: 

a. to transport, or 

b. to facilitate the transportation, sale, receipt, possession, or

concealment of, 

2. The following: 

a. Controlled substances which have been manufactured, 

dispensed or acquired illegally, or 

b. Raw materials, products, and equipment of any kind which are 

used, or intended for use, in manufacturing, compounding,

processing, delivering, importing, or exporting any controlled 

substance illegally. 

C. 49 U.S.C. 80302 and 49 U.S.C. 80303 – Transportation of contraband

1. 49 U.S.C. 80302 prohibits a person from: 

a. transporting contraband in an aircraft, vehicle or vessel; 

b. concealing or possessing contraband on an aircraft, vehicle or 

vessel; or 

c. using an aircraft, vehicle or vessel to facilitate the transportation,

concealment, receipt, possession, purchase, sale, exchange, or

giving away of any contraband article. 

2. Contraband article means: 

a. Any narcotic drug which 

i. is possessed with intent to sell or offer for sale in 

violation of the laws or regulations of the United States,

or 

ii. is acquired, is possessed, sold, transferred, or offered

for sale in violation of those laws, or 

20
iii. is acquired by theft, robbery, burglary and transported 

within or between states, territories, possessions, or 

D.C., or 

iv. does not bear legally required tax-paid internal revenue 

stamps. 

b. Any firearm with respect to which there has been committed 

any violation of the National Firearms Act. 

c. Any forged, altered, or counterfeit coin or obligation or other 

security of the U.S. or any foreign government, or any

material or apparatus used or intended to make such coin,

etc. 

d. A cigarette involved in a violation of chapter 114 of title 18 or

a regulation prescribed under chapter 114 (regarding 

trafficking in contraband cigarettes, meaning a quantity in 

excess of 60,000 cigarettes which bear no evidence of the 

payment of applicable State cigarette taxes in the state

where such cigarettes are found and which are in the 

possession of a person other than a person holding an IRS 

permit, a common carrier transporting the cigarettes under a 

proper bill of lading, a person who is licensed or authorized 

by the State where the cigarettes are found to account for an 

pay cigarette taxes, or an officer, employee or other agent of 

the U.S. or State Department agency having possession of 

such cigarettes in connection with official duties. 

e. A counterfeit label for a phonograph record, copy of a 

computer program or computer program documentation or 

packaging, or copy of a motion picture or other audio/visual 

work, a phonorecord or copy or a fixation of a sound 

recording or music video of a live musical performance or

any good bearing a counterfeit mark. 

3. 49 U.S.C. 80303 provides for seizure and forfeiture of any

conveyance used to transport, conceal, possess or facilitate the 

transportation, concealment, possession or sale of contraband. 

D. 19 U.S.C. 1703 – Vessels outfitted for smuggling 

1. Provides for the seizure and forfeiture of vessels that have been 

built, purchased, fitted out in whole or in part, or held, in the U.S. or 

elsewhere, for the purpose of being used: 

21
a. to defraud the revenue, or 

b. to smuggle any merchandise into the United States, or 

c. to smuggle any merchandise into a foreign country in 

violation of the laws thereof. 

2. Have been used or attempted to be used within the United States

to defraud the revenue or to smuggle or assist therein. 

3. Note that this statutory provision does not include seizure of

vehicles that are outfitted for smuggling. 

E. 19 U.S.C. 1590 – Aviation Smuggling 

1. It is unlawful for the pilot of any aircraft to transport, or for any 

individual on board any aircraft to possess, merchandise knowing, 

or intending, that the merchandise will be introduced into the United

States contrary to law. 

2. It is unlawful for any person to transfer merchandise between an

aircraft and a vessel on the high seas or in the customs waters of 

the United States if such person has not been authorized by the 

Secretary of the Treasury to make such transfer and the aircraft is 

owned by a citizen of the United States or is registered in the 

United States, or the vessel is a vessel of the United States, or 

(without regard to vessel or aircraft nationality) such transfer is

made under circumstances indicating the intent to make it possible 

for such merchandise or any part thereof to be introduced into the 

United States unlawfully. 

3. Such conveyance is subject to seizure and forfeiture. In addition 

any person who violates this section is liable for a civil penalty 

equal to twice the value of the merchandise involved in the 

violation, but not less than $10,000. 

4. For purposes of this section, “merchandise” means merchandise 

whose importation is prohibited or restricted. 

5. The following acts provide prima facie evidence of a violation under 

this section: 

a. operation of an aircraft or a vessel without appropriate lights 

b. presence on an aircraft of an auxiliary fuel tank not installed 

in accordance with law 

22
c. failure to identify the vessel by name or country of 

registration or aircraft by registration number and country of 

registration 

d. external display of false registration numbers 

e. presence on board of unmanifested restricted or prohibited 

merchandise 

f. presence on board of controlled substances which are not 

manifested 

g. presence of any compartment or equipment which is built or 

fitted out for smuggling 

h. failure of a vessel to stop when hailed by a customs officer 

or other government authority 

6. A vessel or aircraft used in connection with, or in aiding or 

facilitating, any violation of this statute may be seized and forfeited 

in accordance with the customs laws whether or not any person is 

charged in connection with such a violation. 

7. A vessel or aircraft may not be seized and forfeited under this 

statute if it is determined that such vessel or aircraft is a common 

carrier. 

F. 19 U.S.C. 1594 – Seizure of conveyances when any vessel, vehicle or 

aircraft or any owner, operator, master, pilot, conductor, driver or other 

person in charge of a vessel, vehicle or aircraft is subject to a penalty for 

violation of the Customs laws. 

1. Whenever a vessel, vehicle or aircraft or the owner, operator, master, 

pilot, conductor, driver, or other person in charge of the vessel,

vehicle or aircraft is subject to a penalty for violation of the customs

laws, the conveyance shall be held for the payment of such 

penalty. 

a. The claimant to the property shall be afforded a reasonable 

period of time to settle any penalty for purposes of return of 

the conveyance. 

b. If the penalty is not settled in that reasonable period of time, 

the conveyance may be seized subject to forfeiture and sale. 

2. Proceeds of any sale in excess of an assessed penalty and expenses

23
of seizing, maintaining, and selling the conveyance shall be held for 

the account of any interested party. 

3. The seizure and forfeiture of any conveyance under this statute is

conditioned upon the applicability of any exceptions to seizure of a 

common carrier, as provided for under 19 U.S.C. 1594 and as

noted in subsection II. of this section. 

II. Common Carriers 

A. Definition – a carrier owning or operating a railroad, steamship, airline or 

other transportation line or route which undertakes to transport goods or

merchandise for all of the general public who choose to employ him. “The 

salient characteristic of a common carrier is that “[h]e must be engaged in 

the business of carrying goods for others as a public employment, and 

must hold himself out as ready to engage in the transportation of goods for

persons generally.... [and] undertakes for all persons indifferently.” See, 

U.S. v. One (1) Liberian Refrigerator Vessel, 447 F.Supp. 1053 (M.D. Fla.

1977) (quoting, United States v. Stephen Brothers Line, 384 F.2d 118 (5th

Cir. 1967)). 

B. Common carriers are exempted from seizure and forfeiture while being 

used in the transaction of business as a common carrier, unless

1. under the Customs laws, it appears that the owner, at the time of 

the illegal act, either had knowledge of drugs being smuggled 

aboard his conveyance, or was grossly negligent in preventing or 

discovering the drugs, or failed to exercise the highest degree of 

care and diligence in the case of illicit drugs found in unmanifested 

cargo; or 

2. under 49 U.S.C. 80303, the owner, conductor, driver, pilot, or other 

person in charge of the aircraft or vehicle, or the master or owner of 

the vessel, or the owner of the rail car or engine, consents to, or 

knows of the alleged violation when the violation occurs. 

III. Immediate Administrative Forfeiture Proceedings 

A. These are to be used when conveyances are seized for the illegal 

importation or transportation, or the facilitation thereof, of: 

1. Any heroin 

2. One (1) pound or more of cocaine 

3. Five (5) pounds or more of hashish, or 

24
4. Fifty (50) pounds or more of any other controlled substance. 

B. If sufficient controlled substances are found, as noted above (unless the 

conveyance falls within one of the exceptions below) consider petitions for 

relief only with regard to claims for refund of sale proceeds. 

C. Exceptions to the immediate forfeiture procedure: 

1. Common carriers. 

2. Conveyances which have been reported as stolen to any federal, 

state, or local law enforcement agency prior to the time of seizure. 

3. Foreign flag vessels seized beyond the 12-mile limit, unless the 

country of registry has consented to U.S. forfeiture jurisdiction. 

4. Do not forfeit U.S. documented vessels with a preferred ship's 

mortgage granted under title 46, U.S. Code without contacting the 

Penalties Branch, Headquarters (202-927-2344). 

IV. General Considerations When Reviewing Petitions for Relief 

A. A petitioner must demonstrate that he has a petitionable interest in the 

property, (e.g., as owner or lienholder). 

B. The granting of administrative relief is discretionary. Therefore, the 

burden of proving that relief is warranted lies with a petitioner. 

C. Examples of exculpatory evidence that may be submitted when seized 

property is in possession of another at the time of the seizure. 

1. Evidence as to the manner in which the property came into the 

possession of such other person; 

2. That before parting with the property petitioner did not know, or 

have reasonable cause to believe, that the property would be used 

to violate Customs laws or other laws; 

3. That the petitioner did not know, or have reasonable cause to 

believe, that the violator had a criminal record or general reputation 

for commercial crime, and 

4. That the petitioner took reasonable steps to prevent the 

conveyance from being used in violation of Customs or other laws. 

25
D. Evidence to be submitted by petitioner who is holder of chattel mortgage 

or conditional sales contract, lessor who has executed long-term lease, or

one who allows another to use the conveyance without cost. 

1. That petitioner has an interest acquired in good faith, 

2. That petitioner, at no time, had any knowledge or reason to believe

that the property was being or would be used in violation of 

Customs laws or other laws, and 

3. That petitioner at no time had any knowledge or reason to believe

that the owner of the beneficial interest in the property had a 

criminal record or general reputation for commercial crime. 

E. Straw purchase transactions 

1. Definition - purchase property in one's name for another who has a 

criminal record or general reputation for crime. 

2. If lienholder knows or has reason to believe that the purchaser of 

record is not the real purchaser, evidence described in D above 

shall be presented as to both the purchaser of record and the real 

purchaser. 

F. Evidence to be considered in determining if administrative relief is

warranted when property is in possession of another at the time of the 

seizure: 

1. Whether petitioner asked the person in possession if he had a 

criminal record, 

2. Whether petitioner asked for and was provided with business,

financial, personal references, 

3. Whether petitioner contacted references, 

4. Whether there was an agreement that the property would be used 

only in accordance with law, and 

5. Whether petitioner contacted Federal, State or local enforcement 

authorities as to the criminal record or reputation of the person 

taking possession. 

26
V. Forfeiture Remission Guidelines - 19 U.S.C. 1595a(a), 21 U.S.C. 

881, and 49 U.S.C. 80303 

A. NOTE: THESE ARE TO BE USED ONLY WHEN THE IMMEDIATE 

FORFEITURE PROCEEDING DESCRIBED IN SECTION III. ABOVE IS 

NOT APPROPRIATE 

B. Petition Submitted by Conveyance Owner 

1. If owner is in possession at the time of the seizure, presume that he 

had knowledge of the illegal activities, 

a. Deny relief from the forfeiture unless the controlled 

substances are in a small quantity and apparently for 

personal use only. 

b. If it is determined that the controlled substances are for 

personal use, and the immediate forfeiture guidelines above 

do not apply, remit upon the payment of: 

i. Seizure expenses plus 

ii. Any amount shown in Customs Directive 4410-010A, 

dated June 22, 2000 entitled ENFORCEMENT

ACTIONS: PERSONAL USE QUANTITIES OF

CONTROLLED SUBSTANCES. 

2. If conveyance is in possession of an individual other than the 

owner, e.g., a lessee, at the time of the seizure, 

a. Deny relief if owner fails to sustain the burden of proving he 

had neither knowledge nor reason to believe the conveyance 

would be used in violation of Customs or other laws. 

b. If it is determined that the owner had neither knowledge nor 

reason to believe that the conveyance would be used in 

violation of Customs or other laws, but that the owner was 

negligent in that he, for example: 

 

i. Failed to take precautions to prevent a violation; or 

ii. Failed to check references of those employed to drive, 

pilot, master, or otherwise take control of, or assist in the 

control of, the conveyance outside of the owner’s direct

supervision, 

27
iii. Then remit the forfeiture upon the payment of seizure 

expenses plus a baseline of 15 percent of the domestic

value of the conveyance, up to as much as 25 percent if

aggravating factors are found, and down to as low as 5 

percent if mitigating factors are found. 

Examples of aggravating factors are: owner has not

cooperated with Customs in the past; owner’s conveyance(s) 

has been used in previous violation(s); owner has failed to 

periodically monitor use of the conveyance. 

Examples of mitigating factors are: owner has traditionally

cooperated with Customs; first violation involving any 

conveyance of owner; owner carefully checked references;

owner periodically monitored use of the conveyance. 

3. Co-owners

Relief may be granted to a co-owner of a vehicle, whether or not 

subject to a lien or encumbrance, if the co-owner meets the 

requirements for remission described in paragraph 2 above. 

C. Petition Submitted by Lienholder

1. Consider such a petition only if immediate forfeiture is not

appropriate, and owner has not petitioned or owner's petition has 

been denied. 

2. If lienholder submits sufficient evidence that there was no 

knowledge or reason to believe the conveyance would be used

illegally, remit the forfeiture upon the payment of the larger of the 

two following amounts: 

a. Expenses of seizure, or 

b. The amount by which the appraised value exceeds the net 

equity in the conveyance. 

c. If petitioner fails or declines to comply with decision, forfeit and 

sell the conveyance, and reimburse petitioner out of the 

proceeds of sale. 

28
3. If lienholder fails to submit sufficient evidence that there was no 

knowledge or reason to believe the conveyance would be used

illegally, deny relief from the forfeiture and commence appropriate 

forfeiture proceedings. 

VI. Mitigation Guidelines - 19 U.S.C. 1703, 19 U.S.C. 1590 

A. NOTE: THESE ARE TO BE USED WHEN THE IMMEDIATE 

FORFEITURE PROCEEDING DESCRIBED ABOVE IS NOT

APPROPRIATE, OR WHEN A PETITION FOR PROCEEDS OF SALE IS 

BEING CONSIDERED AFTER IMMEDIATE FORFEITURE HAS

OCCURRED. 

B. Petition Submitted by Conveyance Owner 

1. If there is outfitting for smuggling and contraband on board, usually 

in a concealed compartment, deny relief from the forfeiture. 

2. If there is outfitting for smuggling and no contraband on board, 

remit the forfeiture upon the payment of 20 - 30 percent of the value 

of the conveyance, using a baseline of 25 percent and considering 

the extent of any modifications to the conveyance, plus expenses of

seizure. 

3. If the forfeiture is to be remitted, condition remission upon removal 

of any modifications. 

C. Petition Submitted by Lienholder

1. Consider such a petition only if immediate forfeiture is not

appropriate, and owner has not petitioned or owner's petition has 

been denied. 

2. If lienholder submits sufficient evidence that there was no 

knowledge or reason to believe the conveyance would be used

illegally, remit the forfeiture upon the payment of the larger of the 

two following amounts: 

a. Expenses of seizure, or 

b. The amount by which the appraised value exceeds the net

equity in the conveyance. 

c. If petitioner fails or declines to comply with decision, forfeit 

and sell the conveyance, and reimburse petitioner out of the 

proceeds of sale. 

29
3. If lienholder fails to submit sufficient evidence that there was no 

knowledge or reason to believe the conveyance would be used

illegally, deny relief from the forfeiture and commence appropriate 

forfeiture proceedings. 

VII. Mitigation Guidelines - Petitioning for Proceeds of Sale 

Following Immediate Forfeiture 

A. Consider petitions using principles outlined above to arrive at a decision. 

B. When a forfeiture would ordinarily be remitted to a petitioner, reimburse 

that petitioner as follows: 

1. An owner in an amount up to the value of the conveyance. 

2. A lienholder, in an amount up to its equity in the conveyance. 

VIII. Restoration of Proceeds of Sale (19 U.S.C. 1613; 19 C.F.R. Part 

171, Subpart E) 

A. Any person claiming any vessel, vehicle, aircraft, merchandise or baggage 

which has been forfeited and sold, may at any time within 3 months after 

the date of sale apply for remission of the forfeiture and restoration of the 

proceeds of such sale. 

B. Applicant must supply satisfactory proof that he did not know of the seizure 

prior to the declaration of forfeiture and was in such circumstances as 

prevented him from knowing and that the forfeiture was incurred without 

any willful negligence or intention to defraud on the part of the applicant. 

C. If forfeited property which is the subject of a claim under this section has

been authorized for official use, retention or delivery, such action will be 

regarded as a sale for purposes of forfeiture remission under this authority. 

30
IMITATION FIREARM IMPORTS – 15 U.S.C. 5001(A) 

I. Background 

A. Statutory authority 

Pursuant to the provisions of title 15, United States Code, section 5001(a), (15 

U.S.C. 5001(a)), it is unlawful for any person to manufacture, enter into

commerce, ship, transport or receive any toy, look-alike, or imitation firearm 

unless such firearm contains, or has affixed to it, a marking approved by the 

Secretary of Commerce. These firearms shall have, as an integral part or 

permanently affixed, a blaze orange plug inserted in the barrel (as required by 

15 C.F.R. 1150.3(a)) or a blaze orange marking on the barrel (as required by 

15 C.F.R. 1150.3(b)). 

B. Exceptions

As provided in 15 U.S.C. 5001(b)(2), the Secretary of Commerce may waive 

the marking requirement for any toy, look-alike or imitation firearm that will only 

be used in the theatrical, movie or television industry. The provisions of 15 

U.S.C. 5001(c) define the term "lookalike firearm" as any imitation or any

original firearm which was manufactured, designed and produced since 1898. 

It does not include any non-firing collector replica of an antique firearm 

developed prior to 1898 or any traditional BB, paint-ball or pellet firing air gun 

that expels a projectile through the force of air pressure. 

II. Seizure 

A. In general, when a Customs officer discovers the importation or transportation 

subsequent to importation of any toy, look-alike or imitation firearms that are not 

marked in accordance with the above-noted regulations, the firearms shall be 

seized under the provisions of title 19, United States Code, section 1595a(c), 

for violation of the provisions of title 15, United States Code, section 5001(a). 

B. Constructive seizures shall not be permitted unless extraordinary circumstances 

require storage at a place other than that provided by the seized property 

contractor or directly under Customs custody. 

C. Commingled Shipments 

1. When a Customs officer discovers a shipment containing toy, look-alike or 

imitation firearms which are improperly marked commingled with either toy, 

look-alike or imitation firearms which are adequately marked or commingled 

with other merchandise which is not violative of any admissibility laws, the

violative imitation firearms may be segregated from the shipment and 

31
seized, with the cost and expense of such segregation being borne by the 

claimant to such property. 

2. Segregation of the violative merchandise from non-violative merchandise

will only be allowed if, in the opinion of the seizing officer, the non-violative 

merchandise was not being used to conceal or otherwise facilitate the 

importation of the violative merchandise. 

3. If the seizing officer determines that the non-violative merchandise was

packaged in a manner to conceal the importation of the improperly marked 

toy, look-alike or imitation firearms, the non-violative merchandise may be 

seized under the provisions of 19 U.S.C. 1595a(a). The forfeiture of that 

merchandise shall be remitted in accordance with guidelines published 

herein. 

D. Detentions

If there is a question as to the adequacy of the marking of a shipment of toy, 

look-alike or imitation firearms, the shipment shall be detained in 

accordance with regulation. See, 19 C.F.R. 151.16. Decisions as to 

adequacy of marking of detained shipments shall be made by the 

Department of Commerce, Chief Counsel for Technology, Room 4824,

Washington, D.C. 20230. 

III. Forfeiture Remission Guidelines 

A. If the petition for relief establishes any of the following:

1. The merchandise was adequately marked, or 

2. The merchandise does not belong to the class or category of merchandise 

that requires marking under 15 U.S.C. 5001, or 

3. The marking has been waived because the imitation firearm will be used 

only in the theatrical, movie or television industries, and such waiver was

received prior to the seizure of the merchandise, then the forfeiture will be

remitted upon the payment of the expenses of seizure and the execution of

a hold harmless agreement. 

B. If the claimant receives a waiver of the marking requirement subsequent to 

seizure of the merchandise, the forfeiture shall be remitted upon payment of an 

amount between one and ten percent of the domestic value of the merchandise, 

but no less than $100, plus the expenses of seizure and execution of a hold 

harmless agreement. 

32
C. If the claimant can show that he or she had no reasonable grounds to believe 

that the importation of the merchandise constituted a violation of law, the district

director may permit the claimant to export the merchandise under Customs 

supervision to a non-contiguous country. This relief would be conditioned upon 

payment of the expenses of seizure and execution of a hold harmless

agreement. 

D. If the claimant can show that it is a first-time violation and that the merchandise 

can be reconditioned under Customs supervision to comply with the provisions

of the statute, the forfeiture may be remitted upon payment of an amount

between 10 and 30 percent of the transaction value of the merchandise and 

reconditioning under Customs supervision. The claimant to the merchandise 

shall bear all the expenses of reconditioning. Remission of the forfeiture is also

conditioned upon execution of a hold harmless agreement. 

E. For second or subsequent violations where the claimant can show that the 

merchandise can be reconditioned under Customs supervision to comply with 

the provisions of the statute, the forfeiture may be remitted upon payment of an 

amount that is no less than 25 percent of the transaction value of the 

merchandise and reconditioning of the merchandise under Customs supervision.

The claimant to the merchandise shall bear all the expenses of reconditioning of

the merchandise. Remission of the forfeiture is also conditioned upon execution 

of a hold harmless agreement. 

F. The forfeiture of any merchandise which is seized under the provisions of 19 

U.S.C. 1595a(a) for concealing, aiding or abetting the importation of toy imitation 

firearms shall be remitted in accordance with the above two paragraphs based 

upon whether the seizure is a first or subsequent violation. 

IV. Claims for Liquidated Damages 

A. If merchandise is released to the importer's premises under a single entry bond 

equal to three times the value of the merchandise and it is later determined that 

the toy imitation firearms are not marked in compliance with law, the importer 

shall be required to recondition such merchandise. If it is discovered that the 

importer distributed the toy imitation firearms into the commerce before 

approval of any reconditioning, a notice of redelivery on a CF-4647 shall be 

issued. If the importer fails deliver that merchandise to customs custody, 

liquidated damages shall be assessed in the full amount of the bond. 

B. All claims for liquidated damages that arise shall be cancelled in accordance 

with guidelines published in T.D. 94-38, relating to claims issued for failing to

redeliver visa-violative merchandise (See, section IV.F. of the guidelines). 

33
V. Referral of Petitions for Relief 

If the petition raises an issue of adequacy of marking, the petition, plus any samples 

from the shipment of seized merchandise, may be forwarded to the Department of 

Commerce, Chief Counsel for Technology, Room 4824, Washington, D.C. 20230, 

for an opinion as to the adequacy of the marking. Customs shall retain all forfeiture 

remission authority for purposes of these seizures. 

VI. Disposition of Forfeited Merchandise 

Toy, either look-alike or imitation as well as firearms which are seized and forfeited 

under these provisions of law shall be summarily destroyed. 

DOG AND CAT FUR PRODUCTS - 19 U.S.C. 1308 

I. In General 

The importation, exportation, transportation, distribution or sale of any product 

consisting or comprised in whole or in part, of any dog fur, cat fur or both, is 

prohibited. Any such product which is so imported, exported, transported, 

distributed or sold will be seized and forfeited. This prohibition does not apply to the 

importation, exportation or transportation, for noncommercial purposes, of a 

personal pet that is deceased, including a pet preserved through taxidermy. 

II. Forfeiture Remission 

There will be no remission of any forfeiture of this product if the product is found to 

be comprised of dog or cat fur. 

III. Disposition of Forfeited Merchandise 

Dog and cat fur products which are seized and forfeited under this provisions of law 

shall be summarily destroyed. 

AIRCRAFT REGISTRATION AND CERTIFICATION - 49 U.S.C. 46306 

Under the provisions of 49 U.S.C. 46306(d), an aircraft which is in violation of the 

provisions of section 46306(b) may be seized by Customs, subject to forfeiture 

under the Customs laws. 

I. Violations/Remission Guidelines 

The following are violations, which may be the basis for seizure of an aircraft. The 

section of law for each violation is provided. Forfeiture remission guidelines for 

each type of violation are also included. It is unlawful for any person to: 

34
A. Knowingly and willfully forge or alter a certificate authorized to be issued under

this part or to knowingly sell, use, attempt to use or possess with the intent to 

use such a certificate (46306(b)(1) and (2)). 

1. Certificates authorized to be issued under the Act include airman's 

certificates, aircraft registration certificates, certificate of modification to 

aircraft, etc.

2. An aircraft is presumed to have been related to a violation of, or to aid or 

facilitate a violation of this paragraph if the registration for the aircraft has 

been forged or altered. See, 46306(d)(2)(A). 

3. Violations involving false aircraft registrations shall result in seizure of the 

falsely registered aircraft. 

4. If a person who is not the owner of an aircraft operates said aircraft on the 

basis of a fraudulent certificate, and the owner has knowledge of the falsity,

the aircraft shall be seized. If the owner does not have knowledge of the 

falsity and the inquiring Customs officer is satisfied that the owner does not

have such knowledge, seizure would not be appropriate. 

5. Forfeiture remission guidelines for violation of this subsection: 

a. If the owner of the aircraft commits a knowing violation of this section,

deny relief. 

b. If the owner of an aircraft permits use of the aircraft by any person who 

has committed a knowing violation of this section and the owner was

negligent in failing to police the registration and use of the aircraft so 

as to avoid the offense, remit the forfeiture upon payment of an amount 

between 1 and 10 percent of the value of the aircraft (not to exceed 

$100,000) depending on the presence of aggravating and mitigating 

factors. 

c. If the owner of the aircraft was grossly negligent, i.e., displayed a 

wanton disregard for the requirements of this section or should have 

known of the violations or the violations were ongoing thereby

permitting a finding of gross negligence, remit the forfeiture upon 

payment of an amount between 15 and 30 percent of the value of the 

aircraft (not to exceed $250,000) depending on the presence of 

aggravating and mitigating factors. 

B. Obtaining a certificate by knowingly and willfully falsifying, concealing or 

covering up a material fact, or making a false, fictitious or fraudulent statement

or representation, or making or using any false writing or document knowing 

35
the writing to contain any false, fictitious or fraudulent statement or entry (See,,

46306(b)(4). 

1. An aircraft shall be presumed to have been used in connection with, or to 

aid or facilitate a violation of this paragraph if: 

a. The aircraft is registered to a fictitious or false person, (See,

46306(d)(2)(C)(i)), or 

b. The application form used to obtain the aircraft registration certificate 

contains a material false statement. (See, 46306(d)(2)(C)(ii). 

2. This violation includes provision of false statements on temporary

registration form (pink slip). 

3. If an airman obtains a certificate in violation of this section, and flies an 

aircraft based on the fraudulently obtained certificate, the aircraft should 

not be seized if the inquiring officer is satisfied that the owner of the aircraft 

did not know nor after reasonable inquiry could have known that the 

certificate was obtained fraudulently. 

4. Forfeiture remission guidelines for violation of this subsection: 

a. If the owner of the aircraft commits a knowing violation of this section,

deny relief. 

b. If the aircraft is registered to a fictitious or false person, deny relief. 

c. If the owner of an aircraft permits use of the aircraft by any person who 

has committed a knowing violation of this section or the owner of the 

aircraft commits a violation with regard to completion of his registration 

or application for registration and the owner was negligent in failing to 

police the registration and use of the aircraft so as to avoid the offense,

remit the forfeiture upon payment of an amount between 1 and 10 

percent of the value of the aircraft (not to exceed $100,000) depending 

on the presence of aggravating and mitigating factors. 

d. If the owner of the aircraft was grossly negligent, i.e., displayed a 

wanton disregard for the requirements of this section or should have 

known of the violations or the violations were ongoing thereby

permitting a finding of gross negligence, remit the forfeiture upon 

payment of an amount between 15 and 30 percent of the value of the 

aircraft (not to exceed $250,000) depending on the presence of 

aggravating and mitigating factors. 

C. As owner of an aircraft which is eligible for registration under 49 U.S.C. 44102, 

to knowingly and willfully operate, attempt to operate or permit any other 

36
person to operate his aircraft if the aircraft is not registered or the certificate is 

suspended or revoked, if the person does not have proper authorization to 

operate the aircraft without registration for a period of time after transfer of 

ownership. See, 46306(b)(6). 

1. Aircraft eligible for registration include any aircraft: 

a. owned by a citizen of the U.S. or by an individual citizen of a foreign 

country who has been admitted lawfully for permanent-resident status in 

U.S., or 

b. owned by a corporation lawfully organized and doing business under the 

laws of the United States or any state thereof so long as such aircraft is 

based and primarily used in the United States, and 

c. the aircraft is not registered under the laws of any foreign country 

 

2. Per 14 C.F.R. 47.3(b), no person may operate on aircraft that is eligible for 

registration under 49 U.S.C. 44102 unless the aircraft: 

a. has been registered by its owner, or 

b. is carrying aboard a temporary authorization required by FAA 

regulation, or 

c. is an aircraft of the armed forces 

3. Domestic operation of aircraft under a temporary authorization is

permitted; however, aircraft are not authorized to be operated outside the 

United States when flying on that temporary authorization. If an owner

has knowledge that his aircraft is being flown outside the U.S. on 

temporary authorization, the aircraft is subject to seizure. 

4. An aircraft shall be presumed to have been used in connection with, or to 

aid or facilitate a violation of this paragraph if the aircraft has been 

operated while it is not registered under 49 U.S.C. 44102. 

5. Forfeiture remission guidelines for violation of this subsection: 

a. If an owner knowingly operates or permits another to operate an 

unregistered aircraft or operates or permits another to operate an 

aircraft whose registration was revoked or suspended in violation of this 

section, deny relief. 

37
b. If an owner is negligent in failing to police the operation of an 

unregistered aircraft, remit the forfeiture upon payment of an amount 

between 1 and 10 percent of the aircraft (not to exceed $100,000). 

c. If the owner displays a wanton disregard to the operation of the aircraft

in violation of his subsection, but actual knowledge of its use cannot be 

shown, remit the forfeiture of the aircraft upon payment of an amount 

between 15 and 30 percent of the aircraft (not to exceed $250,000). 

D. To knowingly and willfully employ for service or use in any capacity as an 

airman an individual without a valid airman certificate authorizing such person 

to serve in such capacity. See, 46306(b)(8). 

1. The element of knowledge for this violation extends to the airman serving 

without a valid airman certificate. If the airman willfully attempts to fly an 

aircraft for which he is not certified, seizure of the aircraft is appropriate. 

2. If the owner either knew or should have known that the airman operating 

the aircraft or assisting in the operation of an aircraft did not have a valid 

airman's certificate, the aircraft is subject to seizure 

3. If the airman operating the aircraft or assisting in the operation of an aircraft

does not have a valid airman's certificate and has operated or assisted in 

the operation of the aircraft on a regular basis, the owner, for purposes of

seizure under this subsection shall be presumed to have known that the 

airman either operated or assisted in the operation of the aircraft in 

violation of law. 

4. If the owner had no knowledge that the airman operating the aircraft or 

assisting in the operation of an aircraft did not possess a valid airman's

certificate and the owner had inquired as to the validity of the certificate 

and received false information so as to lead him to believe the certificate 

was valid, then seizure should not be effected. 

5. Forfeiture remission guidelines for violation of this subsection: 

a. If the owner of the aircraft permits an airman to operate the aircraft 

knowing that the airman does not possess a valid airman's certificate, 

remit the forfeiture upon payment of an amount between 10 and 20 

percent of the value of the aircraft (not to exceed $50,000). 

b. If the owner of the aircraft is negligent in failing to inquire as to whether 

an airman who operates his aircraft possesses a valid airman's 

certificate and said airman operates the aircraft without possessing 

such valid certificate, remit the forfeiture upon payment of an amount 

38
between 1 and 5 percent of the value of the aircraft (not to exceed 

$10,000). 

c. If the owner of an aircraft displays a wanton disregard to the 

requirements of this subsection and permits an airman not possessing 

a valid airman's certificate to operate his aircraft on a regular basis, 

remit the forfeiture upon payment of an amount between 5 and 10 

percent of the value of the aircraft (not to exceed $25,000). 

d. If the owner had no knowledge that the airman operating the aircraft or 

assisting in the operation of an aircraft did not possess a valid airman's

certificate and the owner had inquired as to the validity of the certificate 

and received false information so as to lead him to believe the 

certificate was valid, remit the forfeiture upon payment of the expenses

of seizure. 

E. To operate an aircraft with a fuel tank or fuel system which has been installed 

or modified on the aircraft knowing that such tank or system or the installation 

or modification of such tank or system is not in accordance with regulations and 

requirements of the Administrator of the FAA. (See, 46306(b)(9)) 

1. Violations of this subsection may also be violations of the provisions of 19 

U.S.C. 1590. Per 19 U.S.C. 1590(g)(2) presence of an auxiliary fuel tank

which is not installed in accordance with applicable law is "prima facie 

evidence of aviation smuggling. Seizures notices should cite section 46306 

and 19 U.S.C. 1590 (if applicable). If both 1590 and 46306 violations are 

discovered, the guidelines providing the higher forfeiture remission amount

should be followed. 

2. Per 46306(d)(2)(E), a violation is presumed when, on an aircraft on which a 

fuel tank or fuel system has been installed or modified, a certificate required 

to be issued by the Administrator of the FAA for such installation or 

modification is not carried aboard the aircraft. 

3. Forfeiture remission guidelines for violations of this subsection: 

a. If the owner of the aircraft knew that the fuel tank or fuel system was 

installed or modified without FAA approval and the owner knew that 

such approval was required, deny relief. 

b. If the owner of the aircraft was negligent in failing to obtain the proper 

approval for installation or modification of the fuel tank or fuel system, 

remit the forfeiture upon payment of an amount between 10 and 20 

percent of the value of the aircraft (not to exceed $25,000). 

39
c. If the owner of the aircraft showed a wanton disregard for certification 

requirements for the installation or modification of the fuel tank or fuel 

system, remit the forfeiture upon payment of an amount between 20 

and 30 percent of the value of the aircraft (not to exceed $100,000). 

d. If the violation results solely because the certification documents are 

not present on the aircraft, remit the forfeiture upon payment of an 

amount equal to 1 percent of the value of the aircraft (not to exceed

$1,000). 

F. To knowingly and willfully display or cause to be displayed on any aircraft any 

marks which are false or misleading as to the nationality or registration of the 

aircraft. See, 46306(b)(3). 

1. Violations of this subsection may also be violations of the provisions of 19 

U.S.C. 1590. Per 19 U.S.C. 1590(g)(4) the external display of false 

registration numbers or false country of registration is "prima facie evidence 

of aviation smuggling. Seizure notices should cite both section 46306(b)(3)

and 19 U.S.C. section 1590 (if applicable). If both 1590 and 46306 

violations are discovered, the guidelines providing the higher forfeiture 

remission amount should be followed. 

2. Per 46306(d)(2)(B), an aircraft is presumed to be in violation of the statute if

there is an external display of false or misleading registration numbers or

false or misleading country of registration. 

3. Forfeiture remission guidelines for violation of this subsection are as 

follows: 

a. If the owner knew that the aircraft displayed false marks as to the 

nationality or registration of the aircraft, deny relief. 

b. If the owner was negligent in permitting the aircraft to display false 

marks or numbers remit the forfeiture upon payment of an amount 

between 15 and 30 percent of the value of the aircraft (not to exceed 

$250,000). 

c. If the owner of the aircraft showed wanton disregard for the 

requirements of this subsection, remit the forfeiture upon payment of an 

amount between 35 and 50 percent of the value of the aircraft (not to 

exceed $500,000). 

II. Presentation of Valid Documentation 

No forfeiture shall be remitted unless all documents determined to be false, to 

include registration, are tendered to the FAA and a valid set of documentation is 

40
obtained or other written authorization from the FAA to operate the aircraft is 

granted. 

III. Seizures Resulting From Multiple Violations of the Statute 

Multiple violations shall be considered an aggravating factor for forfeiture remission 

purposes. If a seizure occurs and multiple violations of the statute have occurred, 

then the guidelines providing the higher mitigated amount shall be followed. 

IV. Aggravating and Mitigating Factors 

A. Aggravating Factors. 

1. Multiple violations of section 46306, as noted in Section III. above. 

2. Claimant is uncooperative in resolution of the case, (i.e., fails to provide

documents or other information necessary to conclude case). 

3. Experience in aviation and general knowledge of FAA registration and 

certification requirements. 

4. Any prior violations. 

B. Mitigating Factors. 

1. Inexperience in aviation or lack of knowledge of FAA registration and 

certification requirements. 

2. Cooperation with Customs and FAA in resolution of the case. 

3. Claimant to the property demonstrates that remedial action has been taken 

to avoid future violations of the statute. 

4. Claimant took precautions against possible occurrence of violations of this 

statute (including background checks of airmen, seeking advice from 

Customs, FAA, as to their requirements so as to comply with statute and 

regulations). 

V. Advice of FAA 

The advice of the FAA shall be sought as to any issue involving registration of

aircraft or certification of aircraft or airmen or any necessary interpretation of FAA 

law or regulation. FAA approval need not be sought as to any final remission 

amount. 

41
PASSENGER FAILURE TO DECLARE - 19 U.S.C. 1497 

I. In General 

These provisions and procedures are applicable when passengers, either

residents or non-residents, entering the United States fail to declare merchandise 

to Customs, even though legally required to do so. In the case of merchandise 

being imported from non-contiguous countries, the applicable statute is 19 U.S.C. 

1497, which provides for both forfeiture and penalty liabilities. 

II. Declaration Requirements 

A. Technically, all merchandise brought into the United States must be 

declared (19 C.F.R. 148.18). 

B. For purposes of penalty actions, generally look at merchandise which was

acquired abroad and presume that all other merchandise was declared. 

C. Oral declarations permitted if (19 C.F.R. 148.12): 

1. Returning resident is bringing in no more than $400 in merchandise

($600 in the case of a direct arrival from a Caribbean Basin Initiative 

beneficiary country with not more than $400 of which having been 

acquired elsewhere than in a beneficiary country, $1,200 from 

American Samoa, Guam, VI, Northern Marianas) with nothing in bond 

or for sale. 

2. Non-resident is carrying only duty-exempt merchandise. 

3. Person is carrying small number of easily identifiable articles. 

D. Written declarations required in all other cases. 

III. Amendment of Declarations Permitted - 19 C.F.R. 148.16 

A. Any time before baggage examination starts. 

B. After examination starts, no undeclared article has been found and there 

is no fraudulent intent. 

IV. Elements of the Violation 

A. A failure to declare articles legally required to be declared. 

 B. Intent to violate the statute is not a necessary element. 

42
V. Violator’s Liability - 19 U.S.C. 1497 

A. Forfeiture of undeclared merchandise, and 

B. Personal penalty equal to domestic value of undeclared merchandise. 

VI. Minor Violations 

A. These occur through oversight, misinformation, unintentional act, and 

involve articles of relatively small value. 

B. Concern articles acquired abroad and not declared, which are not 

prohibited or restricted, and 

1. Which would be tax and duty-free if properly declared, or 

 2. Are not tax and duty-free but are valued at less than $100. 

 

C. Action: If no fraudulent intent found, as general rule do not initiate penalty

action. Collect duties due. 

VII. Serious Violations 

A. Several types: 

1. Willful, for example, concealment. 

2. Articles of considerable value involved. 

3. Commercial merchandise involved. 

4. Prohibited or restricted articles involved.

5. False claim about exemptions made, for example, claim that $400 

exemption has not been used within 30 days.

6. Cases in which, because of the circumstances, merely collecting duty 

would not serve law enforcement purposes. 

B. Action: Initiate a penalty action - seize merchandise and assess personal 

penalty in amount of its domestic value. 

VIII. Guidelines for Disposition of Violations of 19 U.S.C. 1497 

See, 19 C.F.R. Part 171, Appendix A 

43
Liabilities incurred under section 497, Tariff Act of 1930 (19 U.S.C. 1497), shall 

be mitigated or remitted in accordance with the following guidelines (See, also 

part 148, Customs Regulations): 

A. Violations Involving Dutiable Articles. For violations involving articles subject to 

duty and for which there is no applicable exemption from duty, the following rules

apply: 

1. Mitigated Penalty for First Offense. For violations which are the first 

offense, where there is knowledge of the declaration requirements, and 

where the undeclared articles are discovered by the Customs officers, the 

liabilities shall be remitted upon payment of Three Times the Duty (but not 

less than $50), or the domestic value, whichever is lower. 

2. Mitigating Factors. When one or more of the following mitigating factors

are present, the deciding officer may, within his discretion, remit the 

liabilities upon payment of Between One and One-Half and Three Times

the Duty or the domestic value, whichever is lower: 

a. Communications with the violator are impaired because of 

language barrier, mental condition, or physical ailment; 

b. Violator cooperates with Customs officers after discovery of the 

violation by providing additional information which facilitates 

conclusion of the case; 

c. Violator is an inexperienced traveler; 

d. There is contributory Customs error (for example, violator

demonstrates he was given incorrect advice by a Customs officer). 

3. Aggravating Factors. When one or more of the following aggravating 

factors are present, the deciding officer may, within his discretion, remit 

the liabilities upon payment of Between Three and Six Times the Duty (but 

not less than $100), or the domestic value, whichever is lower: 

a. Documentary or other evidence discovered establishes violator's

intent; 

b. Informant provides information which tends to establish violator's

intent and leads to discovery of the violation after the violator has 

been given an opportunity to properly declare; 

c. Violator is an experienced traveler; 

d. Undeclared articles are concealed to evade U.S. law; 

44
e. There is behavior, including extreme lack of cooperation, verbal 

or physical abuse, or attempted escape, which tends to 

demonstrate a lack of respect for law and authority. 

4. Commercial Articles. When the undeclared articles are brought in for 

commercial purposes, the liabilities shall be remitted upon the payment of 

Six Times the Duty (but not less than $100), or the domestic value, 

whichever is lower. Mitigating factors may be used to lower this amount to 

as little as Three Times the Duty; aggravating factors may be used to 

increase this amount up to Eight Times the Duty. 

5. Extraordinary Mitigating Factor. 

a. When an individual who has been cleared through Customs

without discovery of any undeclared article returns to the 

examination area and declares that article, the deciding officer may,

within his discretion, remit the liabilities upon payment of One 

Times the Duty. 

b. An individual who declares articles some time later (hours, days, 

weeks, etc.) may be treated similarly. 

6. Extraordinary Aggravating Factors. 

a. When the offense is a second or subsequent violation, the 

deciding officer may, within his discretion, remit the liabilities upon 

payment of Between Six and Eight Times the Duty (but not less 

than $250), or the domestic value, whichever is lower. 

b. When the offense is a second or subsequent violation, and there 

are aggravating factors present, generally there shall either be a 

denial of relief or mitigation to No Less Than Eight Times the Duty

or the domestic value, whichever is lower. 

c. When there is evidence of an ongoing scheme to defraud the 

revenue involving multiple entries without declaration of articles

subject to declaration, the deciding officer shall act in accordance 

with the preceding paragraph. 

B. Violations Involving Absolutely or Conditionally Free Articles. For violations

involving articles either entitled to entry free of duty absolutely (classifiable under 

a duty-free provision in Chapters 1–97, Harmonized Tariff Schedule of the United 

States (HTSUS); (19 U.S.C. 1202)), or entry free of duty conditionally (entitled to 

treatment under the Generalized System of Preferences (See, §§_10.171–

10.178, Customs Regulations) or Chapter 98, HTSUS), the following rules apply: 

45
1. Mitigated Penalty for First Offense 

a. For violations which are first offense, and involve articles entitled 

to the benefit of GSP or Chapter 98, HTSUS, the liabilities shall be 

remitted upon payment of One Times the Duty which would have 

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

b. For violations which are first offense, and involve absolutely

duty-free articles, the liabilities shall be remitted upon payment of 

Between One and Five Percent of the Domestic Value, but not less

than $50 (or the domestic value, whichever is less) nor more than 

$1,000. 

2. Mitigating Factors. When mitigating factors such as those outlined 

above are present, the deciding officer may, in his discretion, reduce the 

mitigated amount to a lower figure. 

3. Aggravating Factors 

a. When aggravating factors such as those outlined above are 

present, the deciding officer may, in his discretion, remit the 

liabilities for conditionally free articles upon the payment of

Between One and Two Times the Duty (but not less than $100), or 

the domestic value, whichever is lower. 

b. For absolutely free articles, the deciding officer may remit the 

liabilities upon payment of Between Five and Ten Percent of the 

Domestic Value, but not less than $100. 

4. Commercial Merchandise. 

The fact that undeclared duty-free articles are imported for commercial 

purposes may be considered an aggravating factor under section B.3. of

these guidelines. 

C. Other Applicable Rules. 

1. These guidelines provide a framework and procedure by which 

violations of 19 U.S.C. 1497 are to be analyzed. They are not mandatory 

in the sense that they must be absolutely applied. Customs officers 

varying from these guidelines must provide reasons for doing so in the 

case record. 

46
2. Customs officers shall document mitigating and aggravating factors

found in each case in the case file. There must be a basis shown for 

mitigated amounts. 

3. It is intended that mitigating and aggravating factors shall be considered 

together and used to offset each other where appropriate. 

4. The rate of duty to be used in calculating the mitigated penalty shall be 

the appropriate rate from Chapters 1–97, HTSUS, and not the flat rate 

from Chapter 98, HTSUS. 

5. “Duty” means Customs duties and any internal revenue taxes which 

would have attached upon importation (See, section 101.1(i), Customs 

Regulations). Therefore, multiples will also be applied to internal revenue 

taxes which would have been due. 

6. Customs officers may, within their discretion, consider other factors not

here delineated as aggravating or mitigating and apply the guidelines

accordingly. These additional factors must also be documented in the

case file. 

7. These guidelines are not authority for admitting into the commerce of 

the United States articles, which are conditionally or absolutely prohibited 

from entry. 

8. The presence of one or more extraordinary aggravating factors, 

including but not limited to those set forth in section I.6. of these 

guidelines, may within the discretion of the deciding officer be a basis for 

denial of relief. 

 

47
CURRENCY OR MONETARY INSTRUMENT REPORT – 31 U.S.C. 5316, 5317, 5324 

I. Background

The United States Customs Service enforces compliance with the Currency or 

monetary Instrument Report (CMIR) requirement in the Bank Secrecy Act,

codified at 31 U.S.C. 5316, 5317, 5324. These reports provide information that is

used in a variety of criminal, tax, or regulatory investigations or proceedings that 

are critical to the detection of money laundering and other forms of transnational 

crime. 31 U.S.C. 5311. 

II. Pre-seizure and Seizure Procedures

A. All monetary instruments involved in violation of the CMIR reporting 

requirement are subject to seizure and forfeiture, even if a portion is

reported. 

B. The seizing officer or supervisor shall contact the Office of Investigations 

and provide any relevant information. 

C. If the Office of Investigations determines that no further investigation is

warranted, the Supervisory Customs Inspector shall allow a violator to 

amend a CMIR report (Form 4790) if the amount initially reported before 

verification began differs by five (5) percent or less from the amount

actually possessed by the violator. 

D. If the Office of Investigations determines that no further investigation is

warranted, and the amount transported is $25,000 or less: 

1. At the Service Port Director's discretion, in consultation with the 

Director FP&F/FP&F Officer, Branch Chiefs or Supervisor Customs 

Inspectors may be delegated authority to remit the forfeiture upon 

payment of a monetary amount on the site of the seizure in 

accordance with these guidelines if 

a. no evidence establishes a nexus to illegal activity and 

b. the violator establishes that the monetary instruments 

have a legitimate source and intended use. 

2. The violator must sign a release/hold harmless agreement to obtain 

on-site-mitigation. 

E. If the Office of Investigations determines that further investigation is

warranted, any administrative decision concerning a petition for remission

will be suspended pending the completion of the investigation or a joint

48
determination of the FP&F Officer and Office of Investigations that the 

investigation cannot be completed in a reasonable time (See, III(B)

below). 

III. Remission Upon Payment of Monetary Penalty

A. General Provisions 

1. The FP&F Officer shall refer a petition for remission or mitigation to

the Office of Investigations, if such an investigation is not already 

completed or underway. 

2. The claimant bears the burden of providing credible evidence of 

legitimate source and intended use of the funds. 

3. In all cases (criminal and civil) referred to the U.S. Attorney for 

litigation, the FP&F Officer shall not act on a petition, or 

administratively forfeit the monetary instruments without first

consulting the appropriate Associate or Assistant Chief Counsel. In

such cases, the Associate or Assistant Chief Counsel will also

consult with the Assistant U.S. Attorney handling the case. 

B. At the conclusion of any pending prosecution, open investigation, or upon 

the joint determination of the FP&F Officer and Office of investigations that 

the investigation cannot be concluded in a reasonable time, and following 

the timely submission of a petition, the FP&F or Headquarters Officer may: 

1. Deny relief and initiate administrative forfeiture proceedings on the 

seized funds if (1) the totality of evidence available to Customs

establishes a nexus to illegal activity, or (2) the petitioner fails to 

establish that the monetary instruments have a legitimate source 

and intended use; or 

2. Grant relief as set forth in the table below after reconsideration of 

all the evidence on record (and any additional submissions by the 

claimant), if the officer concludes that the petitioner establishes that 

the funds have a legitimate source and intended use. 

C. 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.

49
D. Claims for forfeiture of monetary instruments under 31 U.S.C. §§ 5316

and 5317 are subject to the provisions of the Civil Asset Forfeiture reform 

Act of 2000, hereinafter referred to as “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. 

CMIR REMISSION & MITIGATION TABLE

Amount transported (with no nexus to 

illegal activity) 

Standard Amount 

$15,000 or less $500 

 $15,001 - $25,000 $1,000 

$25,001 - $40,000 $2,500 

$40,001 - $70,000 $5,000 

$70,001 - $120,000 $10,000 

$120,001 - $200,000 $20,000 

$200,000 - $500,000 $30,000 

$500,001 - $1,000,000 $50,000 

More than $1,000,000 Decided in accordance with Customs and 

Treasury Department delegations and 

policy. 

IV. Mitigating Factors

1. Officers may reduce amount sought 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.

a. Language barrier, physical ailment, or mental condition which would 

inhibit, rather than totally bar, the violator's understanding of the 

requirement; 

b. Inexperience in international travel (inapplicable to mailing or shipping

of monetary instruments); 

50
c. Cooperation with Customs officers after discovery of the violation 

beyond that which normally would be expected of any violator seeking 

to gain remission of forfeiture of the unreported funds 

2. Extraordinary mitigating factors that may warrant remission of all, or a 

significant portion, of the standard amount: 

a. Conduct as a result of clearly established contributory Customs 

error; 

b. After being cleared through Customs, the violator subsequently 

voluntarily returns to the inspection area and reports the transport 

of monetary instruments to Customs; 

c. Other special humanitarian justification. 

V. No Private Rights Created 

These guidelines are intended only to provide guidance for the internal 

operations of the U.S. Customs Service, and are not intended to create nor

confer any rights, privileges, or benefits on any person or party. See, United

States v. Caceres, 440 U.S. 741 (1979). 

VI. Statute Of Limitations For Civil Forfeiture Actions 

Under the provisions of 19 U.S.C. 1621, the statute of limitations in seizure cases

is 5 years from the date of discovery of the violation or 2 years from the date that 

the involvement of the property in the alleged offense was discovered, whichever 

is later. Any time during which the property subject to forfeiture is absent from 

the country is not counted in the statutory period of limitation. This amendment

effectively expands the reach of civil forfeiture of property whose involvement in 

the criminal offense is discovered after the five-year limit. 

51
EXPORT CONTROL 

52
I. Overview 

A. Customs enforces the export/import control laws administered by the

Departments of State and Commerce, DEA, BATF and other government

agencies. Generally, our enforcement authority is exercised through the 

seizure of merchandise that is being or has been exported or imported in

violation of any of the laws or implementing regulations of the other

agencies. 

B. Seizure is proper only if the merchandise may be physically or 

constructively seized, i.e., it is still in Customs, the exporter’s or the carrier’s

possession or control. For example, goods already exported by aircraft, 

which are en route to the foreign country, may be constructively seized 

since they are within the exporting carrier’s possession. If the goods have 

already arrived in the foreign country but have not been delivered into the 

foreign consignee’s control, they may be constructively seized inasmuch as

they are still within the exporting carrier’s control. 

C. If the goods may be constructively seized, Customs may, under appropriate 

circumstances, order the redelivery of the seized merchandise from the 

exporting carrier, pursuant to the provisions of 19 C.F.R. 113.64. If the 

goods are not redelivered, the carrier may be liable for the payment of 

liquidated damages in the amount of 3 times the value of the merchandise 

subject to the redelivery demand, under the provisions of 19 C.F.R. 

113.64(f). 

D. As a matter of either policy or an existing agreement, exportations of 

defense articles which are covered by a valid State license and are 

destined for NATO facilities and exportations of defense articles under the 

FOREIGN MILITARY SALES (FMS) program (U.S. Government to foreign 

government sale) are NOT subject to seizure. However, violations involving 

such exportations will be added to the violator’s export control violation 

history. 

II. Statutory Authorization for Seizure and Underlying Violation 

Citations 

A. Exports in general 

For intended, attempted or completed exportations, 22 U.S.C. 401 

(exportation contrary to law) provides the general seizure authority. 

53
B. Imports in general 

For importations or attempted importations, 19, U.S.C. 1595a(c)(2)(B), 

provides the general seizure authority. 

C. Underlying authorities

In addition to the seizure authority, the underlying violation of a particular 

statute and the applicable section of the statute’s implementing 

regulations, which state the specific nature of the violation, should be cited 

in the seizure notice. The most common underlying statutory violations

and regulatory violations are as follows: 

1. State Department Violations 

a. 22 U.S.C. 2778, the Arms Export Control Act, administered 

by the Department of State, primarily by the Office of 

Defense Trade Controls (ODTC). This Act gives the 

President the power to control the import and export of 

defense articles and services and what will be designated as

such. The items designated as such are found on the U.S. 

Munitions List (USML), set forth in 22, C.F.R., Part 121. In

general, designated defense articles, data or services may

not be exported or imported without a properly issued 

license, unless a license exemption is applicable. 

b. International Traffic in Arms Regulations, commonly referred 

to as the ITAR (22 C.F.R. Part 120 et seq.) The most 

common ITAR regulatory violations, in addition to the allencompassing regulatory violation of 22 C.F.R. 127.1, are as 

follows: 

 i. Substantive ITAR Violations 

• Failure to obtain a DSP-5 permanent export license, a 

DSP-61 temporary import/in-transit license, or a DSP-73 

temporary export license (if no license exemptions are 

applicable) - 22 C.F.R. 123.1 

• Failure to obtain a DSP-5 export license for unclassified 

technical data - 22 C.F.R. 125.2 

• Quantity (not dollar value) of export merchandise is in 

excess of that covered by the license (violation with

respect to the excess merchandise only) – 22 C.F.R.

123.1 

54
ii. Technical ITAR Violations 

• Failure of license applicant or its agent to validate export 

license prior to export or submit an SED for licensable 

merchandise prior to export –22 C.F.R. 123.22 

• Failure of license applicant or its agent to submit SED or 

export license at the port of exit - 22 C.F.R. 123.22. 

HOWEVER, if the license applicant has already validated 

the license and had the SED authenticated by Customs

at a port of exit, and the carrier re-routes the goods to 

another port of exit, the license applicant is not liable for 

an ITAR violation and the goods should not be seized.

The master of the vessel or pilot of the aircraft may be 

liable for a monetary penalty under 19 U.S.C. 1436(d) for 

the failure to properly clear outbound licensable 

merchandise with Customs, in the event that the master 

or pilot fails to present the SED citing the license to 

Customs at the new port of exit, prior to the carrier’s 

departure. The carrier may also be liable for a 19 U.S.C. 

1436 penalty in the event that it filed a false manifest at 

either port, i.e., it manifested the defense articles at the 

first port or failed to manifest the articles at the second 

port from which they were actually exported. 

• Failure to cite an applicable DSP-61 license exemption 

on entry documentation (upon entry) or on SED (upon 

export) -22 C.F.R. 123.4(d) 

• Failure to cite other license exemptions on the SED -22 

C.F.R. 123.22(c) 

• Value of licensable goods is over 10% in excess of value 

stated on the license – 22 C.F.R. 123.23 - Requires an 

amendment to the export license or a new license 

• Failure to present a temporary export license on 

exportation or re-importation - 22 C.F.R. 123.5 and 

123.22 

• Failure to present a temporary import/in-transit license

upon importation or re-exportation -22 C.F.R. 123.22 

• Failure of license applicant to list all freight forwarders 

handling the defense articles -22 C.F.R. 126.13(b). 

Requires an amendment to license by the license 

applicant 

• Expiration of a technical exportation license (DSP-73) 

while the goods are still abroad -22 C.F.R. 123.5(a). 

HOWEVER, a renewal of the license must be obtained in 

order to re-import the goods to the U.S. 

55
 

2. Commerce Department Violations 

a. Since Commerce Department violations occur mostly with 

respect to exportations, the seizure authority usually cited is

22 U.S.C. 401 for violations of the statutes and regulations 

cited below. 

b. Violations of the Export Administration Act (50 U.S.C. 2401-

2420) and the Export Administration Regulations (EAR) - 

(15 C.F.R. Part 730-799); Under the Export Administration 

Act, the Bureau of Export Enforcement (BXA) at the

Department of Commerce has jurisdiction, in general, over 

“dual use” exports and re-exports (i.e., commodities, 

technology and software that can be used for both civil and 

military applications) and over certain activities related to the 

nonproliferation of weapons of mass destruction. These 

commodities are delineated in the Commerce Control List, 

Supplement I to Part 774, EAR. Unless a license exemption 

is applicable, licenses must be obtained from Commerce for 

the export or re-export of the controlled commodity. 

c. Violations of the International Emergency Economic Powers 

Act (IEPPA) 50 U.S.C. 1701-1706). Empowers the President

to regulate U.S. exports for national security, foreign policy, 

non-proliferation and short supply reasons. 

i. Substantive Commerce Violation 

Failure to obtain DOC license (if no exemption is applicable)

- 15 C.F.R. 758.1. 

ii. Technical Commerce Violation (BXA) 

• Failure to cite applicable license or a license exemption 

on an SED – 15 C.F.R. 740.1(d) and 15 C.F.R. 758.3 

iii. Technical Commerce Violations of the Foreign Trade

Statistics Regulations, Bureau of Census (FTSR)(15 

C.F.R. Part 30)- promulgated under the authority of 5 

U.S.C. 301 -provides for the collection of information 

from the exporter for use in the compilation of the 

U.S. balance of trade statistics. Information regarding 

exports from the U.S. is collected by the Commerce 

Department’s Bureau of the Census, mainly via the 

SED requirement. The most frequent FTSR violations,

56
all of which are technical violations, are as follows: 

• Failure of license applicant to submit SED for Commercelicensable merchandise to exporting carrier prior to 

exportation - 15 C.F.R. 30.12 and 15 C.F.R. 30.15 (the 

latter for shipments from an interior port) 

• Failure of exporter to provide the correct information on 

the SED as to U.S. principal party in interest (“USPPI”),

commodities being exported, end-use country, value of 

the export merchandise, etc. -- 15 C.F.R. 30.7 

• Failure of exporter to submit SED for non-licensable 

merchandise, where such SED is required (generally, 

where the value of the export goods intended for a 

consignee is in excess of $2,500) -- 15 C.F.R. 30.1 

• If there is an exception from the filing of an SED for nonlicensable goods, the SED exception statement should 

be made on the air waybill or other loading document, for 

the carrier’s use, unless it is obvious from the value and 

destination as stated on the air waybill, bill of lading or 

other loading document that no SED is required - - See,

15 C.F.R. 30.50 

• Failure of vessel master or aircraft pilot to deliver SEDs 

referencing licenses or license exemptions to Customs at 

the port of exit – Violation of 19 U.S.C. 1436(a)(1)(3),

which subjects the master or pilot to a penalty under 19 

U.S.C. 1436(b) 

3. Bureau of Alcohol, Tobacco and Firearms (BATF) violations 

a. In general these violations occur upon permanent 

importation of regulated items. Therefore, the seizure 

authority is under 19 U.S.C. 1595a(c)(2)(B). 

b. The underlying statutory violation citation is the Arms Export 

Control Act of 1976, sec. 38, as amended (22 U.S.C. 2778).

The regulatory violation citation is the pertinent section of 27 

C.F.R. Part 178 (Commerce in Firearms and Ammunition). 

The most frequently encountered regulatory violations are 

the following: 

i. The failure of a licensed importer to obtain an ATF

Form 6 for the importation of a regulated article -27 

C.F.R. 178.112 

ii. The failure of other licensees to obtain an ATF Form 6 

for the importation of a regulated article -27 C.F.R.

178.113 

57
iii. NOTE: Temporary importations of BATF-regulated 

items, such as weapons and ammunition, are within 

the administrative and licensing jurisdiction of the 

Office of Defense Trade Controls (ODTC), 

Department of State. 

4. Drug Enforcement Administration Violations 

a. Statutory Violations 

i. Chemical Diversion and Trafficking Act of 1988 (“AntiDrug Abuse Act of 1988, Pub. Law 100-690)

ii. Comprehensive Methamphetamine “Speed” Control 

Act of 1996, Pub. L. 104-23 – Both regulate the 

importation and exportation of precursors and 

essential chemicals, which are used in the 

manufacture of narcotics and other controlled 

substances. (citations for these, please) 

b. Regulatory Violations 

i. In general - 21 C.F.R. Part 1313 (“Importation and 

Exportation of Precursors and Essential Chemicals”). 

These regulations require importers and exporters to

obtain DEA’s permission for the importation and 

exportation of controlled chemicals by submitting 

Form 486 to DEA 15 days before an importation or 

exportation. The importation or exportation is 

considered approved unless DEA notifies the importer 

or exporter to the contrary. This 15-day advance

notice period is waived for entities which qualify as

“regular importers” of the listed chemicals or entities

who have an established business relationship with 

the foreign customer, as defined in 21 C.F.R. 1300.02 

(b)(12). Such entities need only notify DEA of the 

importation or exportation before or on the date of

importation or exportation. Further, these regulations

require the importer or exporter to furnish Customs 

with a copy of the DEA Form 486 covering the 

transaction, as part of either the entry or export

documentation. The regulatory citations for violation 

of the foregoing regulatory requirements are as 

follows: 

ii. Failure to submit Form 486 to DEA 15 days in

58
advance of the importation of controlled chemicals or, 

or a regular importer, by or on the date of importation 

- 21 C.F.R. 1313.12. 

iii. Failure to submit Form 486 to DEA 15 days in

advance of an exportation or, for an exporter dealing 

with an established customer, by or on the date of 

exportation -21 C.F.R. 1313.21 

iv. Failure to submit written notification to DEA of the 

intent to transfer or transship “listed chemicals” that 

exceed the threshold reporting requirements in 21 

C.F.R. 1310.04(f). Such notification (NOT on Form

486) must be given to DEA 15 days in advance of the

proposed date the chemicals will transship or transfer 

through the U.S. - 21 C.F.R. 1313.31 

v. Failure to present Form 486 to Customs upon entry of

DEA-controlled chemicals (21 C.F.R. 1313.14(c)) or 

upon exportation of such chemicals (21 C.F.R. 

1313.23) 

III. Early Release Procedures 

With respect to any imports or exports of controlled commodities (controlled by 

any Government agency), where the violation is technical and no license or 

license amendment must be obtained, every effort should be made to 

expeditiously release the goods, pursuant to a written request from the exporter,

importer, or agent. Early release may be requested upon receipt by the importer 

or exporter, or agent thereof, of a Notice of Seizure issued by the FP&F Officer. 

The early release decision may be considered the final decision in the case,

provided that the petitioner does not request further relief. 

IV. Remission/Mitigation Considerations 

A. Seizure history. The prior seizure history of the exporter, importer of record, 

or license holder (for licensable goods) will be considered in he mitigation

decision. Only consider violations that occurred within 3 years prior to the 

date of the violation under consideration. Therefore, if the present violation 

occurred on September 30, 2001, consider only violations that occurred from 

September 30, 1998 to September 30, 2001. 

B. Same nature violation. Also, only consider as priors the same type of 

violation, involving the same agency’s laws and regulations. For example, if 

the violation in the instant case is a substantive State Department violation, 

such as the failure to obtain a State Department license, consider only

59
previous substantive State Department violations that occurred within a 3-

year period. If the violation is a technical State Department violation, such as

the failure to present a State Department license or a failure to cite a license

exemption on the entry documentation or the SED, consider only previous 

technical State Department violations which occurred within a 3-year period. 

The same applies to Department of Commerce, Bureau of the Census, ATF 

and DEA violations. 

C. Corporate divisions are considered as separate entities for violation history. If 

a corporate division incurs a violation, only like-nature priors by that particular

corporate division, within a 3-year period of time, are considered as prior 

violations. For example, if MBW Aerospace Group of the MBW Industries 

Corporation incurs a technical violation, consider only prior technical 

violations by the MBW Aerospace Group within a 3-year period. 

D. Mitigating Factors (these are not exhaustive): 

1. Inexperienced importer or exporter 

2. Importer or exporter makes a voluntary disclosure of a violation to 

Customs and/or the other concerned agency - In certain cases a 

disclosure may serve to remit the forfeiture in full, i.e., without

payment of a forfeiture remission amount 

3. Importer or exporter adheres to all Customs and other agency’s

laws and regulations but a violation occurs due to the actions of 

another party. 

a. For example, an exporter validates a license at the intended 

port of exit, but the carrier re-directs the freight to another 

port of exit. 

b. For a second example, goods are moved in-transit through 

the U.S. without knowledge or consent of foreign exporter. 

E. Aggravating Factors (these are not exhaustive): 

1. Related criminal conviction or other evidence of an intentional 

violation, for example, the exportation of controlled articles without

a required license by a violator who was aware that it would not be 

granted a license for the articles. 

2. A pattern of violations on the violator’s part, which evidences its 

disregard for its obligations under U.S. export control laws and

regulations. 

60
V. Remission/Mitigation Guidelines 

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: 

A. Substantive Violations (e.g., failure to obtain a State or Commerce Department 

license, failure to obtain DEA permission for an in-transit movement of 

controlled chemicals) 

1. First offense: $2,500 or the invoiced value of the violative goods, whichever

is lower. 

2. Second offense: $3,500 or the invoiced value of the violative goods, 

whichever is lower. 

3. Third offense: $5,000 or the invoiced value of the violative goods,

whichever is lower. 

4. Fourth offense: $7,000 - $10,000 (depending on mitigating or aggravating 

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

B. Technical Violations (e.g., failure to validate, present, or reference a State or 

Commerce Department license, failure to provide Customs with a copy of 

DEA Form 486) 

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

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

lower. 

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

4. 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. 

VI. Claims for Liquidated Damages 

A. For vessel and aircraft carrier FTSR (Census) violations, i.e., the failure to 

timely file SEDs for export merchandise, issue a claim for liquidated 

damages against the carrier for a late SED filing and utilize the liquidated

damages mitigation guidelines in Section VI of the LIQUIDATED 

61
DAMAGES section of this Handbook for cancellation of the liquidated 

damages claim. 

B. If the land border carrier has an international carrier’s bond, issue a claim 

for liquidated damages under the bond for a late SED filing and utilize the 

liquidated damages mitigation guidelines in Section VI of the LIQUIDATED 

DAMAGES section of the Handbook for cancellation of the liquidated 

damages claim. 

C. Unlawful disposition of seized or detained export merchandise. 19 C.F.R. 

113.64(f). 

D. Amount of liquidated damages. Pursuant to 19 C.F.R. 113.64(f), a carrier,

which possesses an international carrier’s bond is liable for liquidated 

damages equal to 3 times the value of merchandise which, was not 

redelivered. 

E. For mitigation guidelines for these claims see Section XX of the 

LIQUIDATED DAMAGES Section of this Handbook. 

VII. Penalties 

A. A civil monetary penalty is the appropriate action against a vessel master 

or aircraft pilot for failure to present SEDs for licensable goods prior to

export. The penalty would be assessed under the provisions of 19 U.S.C. 

1436. There does not have to be a seizure of the export goods in order to

assess the penalty. Seizure of the goods should only occur if the 

exporter fails to have the license or other form validated prior to export. 

B. For all civil monetary penalties incurred by a vessel master or aircraft pilot 

involving the failure to present SEDs for licensable merchandise prior to 

the departure of the vessel or aircraft, mitigate the 19 U.S.C. 1436 penalty

consistent with the guidelines set forth in Paragraph V.B. above. 

62
STOLEN 

CONVEYANCES 

AND PARTS 

63
GUIDELINES FOR THE REMISSION OF FORFEITURES AND MITIGATION OF 

PENALTIES FOR VIOLATION OF 19 U.S.C. 1627A, FOR STOLEN CONVEYANCES 

AND PARTS 

I. 19 U.S.C. 1627a(a) 

The provisions of 19 U.S.C. 1627a(a), prohibit the importation, exportation or 

attempted importation or exportation of any self-propelled vehicle, vessel, aircraft 

or part thereof that has been stolen or has had any identification number 

removed, obliterated, tampered with or altered. 

 

A. Knowing violations; altered Vehicle Identification Numbers (VINs) 

1. Under the provisions of title 19, United States Code, section 1627a(a), 

whoever knowingly imports, exports or attempts to import or export: 

a. any stolen self-propelled vehicle, vessel aircraft or part of a 

self-propelled vehicle, vessel or aircraft, or 

b. any self-propelled vehicle or part of a self-propelled vehicle 

from which the identification number has been removed,

obliterated, tampered with, or altered 

shall be subject to a civil penalty in an amount not to exceed 

$10,000 for each violation. Each vehicle constitutes a separate 

violation, e.g., if a party knowingly attempts to import 6 stolen 

vehicles and parts of another stolen vehicle, he would be subject to 

$70,000 in penalties under this statute. 

2. Any violation noted above shall make the self-propelled vehicle,

vessel, aircraft or part thereof subject to seizure and forfeiture. 

3. Both seizure and forfeiture and a monetary penalty may be assessed. 

B. Forfeiture Remission Guidelines

1. No relief from forfeiture shall be afforded any party who knowingly

imported, exported or attempted to import or export any stolen selfpropelled vehicle, vessel, aircraft or part or who has altered,

obliterated, tampered with or removed any VIN. 

2. Relief may be afforded to any claimant to the property who 

obtained an ownership interest in the property in good faith and 

64
was unaware of any theft of the property or of any alteration, 

obliteration, removal or tampering with any VIN. 

3. Any such party described in paragraph 2 found to have a good faith 

interest in the property will be required to pay any costs of storage 

and seizure and to execute a hold harmless agreement in 

accordance with general forfeiture remission policy. 

C. Penalty mitigation guidelines 

No mitigation will be afforded from any penalty incurred by any party for 

violation of the provisions of 19 U.S.C. 1627a(a). 

II. 19 U.S.C. 1627a(b) 

The provisions of 19 U.S.C. 1627a(b) require any person attempting to export a 

used self-propelled vehicle to present, pursuant to regulation, to the appropriate 

Customs officer, both the vehicle and documentation describing such vehicle 

which includes the vehicle identification number, before lading if the vehicle is to 

be transported by vessel or aircraft or before export if the vehicle is to be 

transported by rail, highway, or under its own power. Failure to comply with the 

regulations shall subject such person to a penalty of not more than $500 for each 

violation. 

A. The regulations governing the procedures for the exportation of used selfpropelled vehicles are found at 19 C.F.R. Part 192. By regulation, these 

penalties have been set at $500. 

B. “Self-propelled vehicle” includes any automobile, truck, tractor, bus, 

motorcycle, motor home, self-propelled agricultural machinery, 

construction equipment, special use equipment and any other selfpropelled vehicle used or designed for running on land but not on rail. 

1. Inasmuch as the documentation to be presented must include a 

vehicle identification number, certain vehicles which are designed 

for running on land which do not have vehicle identification 

numbers (such as go-karts, golf carts, etc.) would not be included 

under the Part 192 export requirements. 

2. If penalties are assessed against parties for failing to meet 

requirements of Part 192 regarding vehicles not falling under the 

jurisdiction of that Part, they shall be mitigated without payment. 

C. “Used” refers to any self-propelled vehicle the equitable or legal title to 

which has been transferred by a manufacturer, distributor or dealer to an 

ultimate purchaser. 

65
D. “Ultimate purchaser” means the first person, other than a dealer, who in 

good faith purchases a self-propelled vehicle for purposes other than 

resale. 

E. The provisions of 19 U.S.C. 1646c require all persons exporting used 

automobiles, including automobiles for personal use, by air or ship to 

provide to Customs at least 72 hours before export the vehicle 

identification number and proof of ownership of such automobile. 19 

U.S.C. 1646c does not contain a penalty provision therein, but its 

requirements are also included in 19 C.F.R. Part 192. While there is no 

such statutory requirement for vehicles exported by rail, highway or under 

their own power, the Part 192 regulations impose such a requirement. 

1. For exportation by air or ship, both the vehicle and the required 

documentation must be presented to Customs at least 72 hours 

prior to departure. See, 19 C.F.R. 192.2(c)(1). 

2. For vehicles exported by rail, highway or under their own power, 

the required documentation must be presented to Customs at least 

72 hours prior to export, but the vehicle only must be presented to 

Customs at the time of exportation. See, 19 C.F.R. 192.2(c)(2). 

3. In the land border environment, if the documentation is presented 

to Customs less than 72 hours prior to exportation, a monetary 

penalty, subject to any appropriate mitigation in accordance with 

these guidelines, may be assessed. If Customs completes its 

examination and certifies that the documentation presented is 

authentic in less than 72 hours, the party exporting the vehicles 

may complete exportation. Customs need not require the vehicle to 

remain in the United States waiting for 72 hours if all appropriate 

checks have been completed. 

F. If a penalty is assessed and the violator is a non-resident or there is other 

reason to believe that the penalty might not be collected, the vehicle may

be detained under the provisions of 19 U.S.C. 1594 to guarantee payment 

of any penalty. Detention is not mandatory. 

G. The penalty may be assessed against an exporter attempting to export a 

vehicle or an exporter who has exported a vehicle without complying with 

the regulations governing vehicle exportation. See, 19 C.F.R. 192.3. 

H. The $500 penalty under this section of law shall be assessed per each 

vehicle, not each violation of the regulations governing the exportation of

that vehicle. If a person violates two or more regulatory provisions in Part 

66
192 regarding the exportation of a particular vehicle, the penalty would be 

$500 for the vehicle, not $500 for each regulatory breach. 

I. Mitigation Guidelines

1. Personal exportation; includes any vehicle exported by a person 

and which is intended for his or her own individual or family use. 

a. For failure to present appropriate documentation in a manner 

prescribed by regulation the penalty may be mitigated upon 

payment of an amount between $50 and $250 depending on 

the facts and circumstances surrounding the violation. 

b. Authority to mitigate these penalties on-site may be 

delegated by the Fines, Penalties and Forfeitures Officer 

with the concurrence of the Port Director. 

2. Commercial exportations; includes any vehicles or vehicles

exported by a person or persons and which are intended for resale, 

commercial use or personal use by parties other than the exporting 

persons. 

a. For failure to present appropriate documentation in a 

manner prescribed by regulation the penalty may be 

mitigated to an amount no less than $250 depending on the 

facts and circumstances surrounding the violation. 

b. Authority to mitigate these penalties on-site may be 

delegated by the Fines, Penalties and Forfeitures Officer 

with the concurrence of the Port Director. 

67
TRADEMARK, 

COPYRIGHT 

AND PATENT 

VIOLATIONS 

68
MITIGATION OF TRADEMARK, COPYRIGHT AND PATENT VIOLATIONS 

I. Introduction 

This section includes extensive background information and a number of 

matrices that will help in the processing of trademark, copyright and patent 

violations. 

II. Trademark Violations - Seizures 

A. Counterfeit – 19 U.S.C. 1526(e); 19 U.S.C. 1595a(c) and 18 U.S.C. 2320 

If the mark on the merchandise is identical with, or substantially indistinguishable 

from, the genuine trademark in question, it is then deemed counterfeit (i.e., “Ray 

Ban” vs. “Ray Ban”). See, sections 1-4, Trademark Matrix (this chapter) for 

correct citations, Customs action, and mitigation disposition. 

B. Confusingly Similar – 19 U.S.C. 1595a(c)(2)(C) for violation of 15 U.S.C. 1124 

If the trademark is not identical to, or indistinguishable from the genuine mark, 

but is likely to cause confusion or mistake by the average consumer, then it is 

confusingly similar (i.e., a “Ray Bane” mark on sunglasses would be considered 

confusingly similar to the genuine mark “Ray Ban”). See, sections 5-8, 

Trademark Matrix (this chapter) for correct citations, Customs action and 

mitigation disposition. 

C. Gray Market – 19 U.S.C. 1526(b) 

[If the mark is identical to the genuine mark, it may be because the mark is 

genuine, and as such, it may or may not be entitled to gray market protection 

(which is the prohibition of the importation of genuine trademarked merchandise

by any person other than the trademark owner). The IPR module will tell you if 

the mark is entitled to gray market protection. The IPR Branch at headquarters 

can also assist in the determination of counterfeit versus gray market issues.] 

replacement language from GFM. 

III. Trademark Violation – Civil Monetary Fine; 19 U.S.C. 1526(f); T.D. 

99-76 

 A. In General 

The Anticounterfeiting Consumer Protection Act provides authority to 

impose civil fines pursuant to 19 U.S.C. 1526(f) in addition to the seizure 

and forfeiture of imported merchandise bearing counterfeit trademarks. 

69
Once merchandise is found to contain a counterfeit trademark and is

seized and forfeited and destroyed or otherwise disposed of pursuant to 

19 U.S.C. 1526(e), then a civil fine also may be imposed under 19 U.S.C. 

1526(f). See also, Section 7 regarding sample retention. Forfeiture must

be perfected before a 1526(f) fine may be imposed.

 B. Administrative Process 

1. After forfeiture under 19 U.S.C. 1526(e) is completed, Notice of 

Penalty citing 19 U.S.C. 1526(f) as penalty authority should be issued 

consistent with provisions of 19 C.F.R. 162.31. 

2. Petition mitigation permitted pursuant to 19 U.S.C. 1618 (see Section 

E below), if appropriate. 

3. If the assessed or mitigated fine is not paid, refer the case to the 

appropriate Associate or Assistant Chief Counsel’s Office for referral 

to the Department of Justice for collection. 

C. Parties Subject to Fines 

19 U.S.C. 1526(f)(1) specifically allows assessment against "any person 

who directs, assists financially or otherwise, or aids and abets the 

importation of merchandise...." This statutory language subjects all parties 

who exercise control over the import transaction to its application. These 

individuals may be named individually or jointly and severally in penalty

notices. 

 D. Amount of Fine 

1. For any penalty that arises subsequent to a first violation incurred per 

19 U.S.C. 1526(e), the fine assessed should be value of the 

merchandise as if it had been genuine, based on the MSRP of the 

genuine merchandise at the time of seizure. 

2. For the penalty assessed following a second or subsequent seizure 

(that is, where there has been a prior seizure under 19 U.S.C. 1526(e) 

and fine under 19 U.S.C. 1526(f)), the fine assessed shall be twice the 

value of the merchandise as if it had been genuine, based on the 

MSRP of the genuine merchandise at the time of seizure. 

 

70
E. Mitigation 

1. In General 

Customs may consider aggravating and mitigating factors. While a 

lack of intent or knowledge as to the counterfeit nature of the 

importation(s) in question may be considered a mitigating factor in 

determining the mitigated amount of the fine, it does not shield the 

involved party from initial assessment of the fine. 

2. Dispositions 

a. First offense (under 19 U.S.C. 1526(f)), with mitigating, and no 

aggravating factor(s): 

10-30% of the applicable MSRP of the genuine good (the assessed 

fine amount). 

b. First offense (under 19 U.S.C. 1526(f)), with aggravating 

actor(s): 

30-50% of the MSRP of the genuine good. 

c. First offense (under 19 U.S.C. 1526(f)), with evidence of

knowledge as to the counterfeit nature of the goods, with no 

aggravating factors: 

50-80% of the MSRP of the genuine good. 

d. Second offense (under 19 U.S.C. 1526(f)), with mitigating, and 

no aggravating factor(s): 

10-30% of twice the MSRP of the genuine good. 

e. Second offense (under 19 U.S.C. 1526(f)), with aggravating 

factor(s), or third or subsequent offense (under 19 U.S.C. 1526(f)): 

50-80% of twice the MSRP of the genuine good. 

f. Second offense (under 19 U.S.C. 1526(f)), with evidence of 

knowledge as to the counterfeit nature of the goods: 

no mitigation. 

 3. Mitigating Factors 

71
a. Lack of knowledge of the counterfeit nature of the trademark. 

b. Prior good record of importation under 19 U.S.C. 1526. 

c. Inexperience in importing. 

d. Cooperation with Customs officers in ascertaining the facts 

establishing the violation. 

e. Inability to pay the fine (demonstrated by documentary

evidence including, but not limited to, income tax returns for 

the prior three years). 

 4. Aggravating Factors 

a. More than two prior importations of merchandise seized and 

forfeited under 19 U.S.C. 1526(e). 

b. Criminal violation relating to the subject transaction. 

c. Submission of falsified documentation (i.e., false description,

false country of origin, etc.), or other deceptive practices in 

connection with the subject importation. 

Note that these fines are in addition to the seizure and forfeiture of merchandise 

under 19 U.S.C. 1526(e). 

 F. Personal Use 

The statute authorizes fines only against persons (including domestic and foreign 

corporations) involved with the importation of merchandise “for sale or public

distribution" that has been seized under 19 U.S.C. 1526(e). Therefore, fines

shall not be assessed under 19 U.S.C. 1526(f) in the case of personal use 

importations (see also 19 C.F.R. 148.55). However, any separately imported 

merchandise bearing a counterfeit trademark and not covered by an exemption 

will still be seized, forfeited, and destroyed or otherwise disposed of under 19 

U.S.C. 1526(e). 

 G. Sample Retention 

A sample of the merchandise seized under 19 U.S.C. 1526(e) will be retained by

the seizing Customs Officer, or Import Specialist, until the fine under 19 U.S.C. 

1526(f) is finally resolved, insofar as the fine under 19 U.S.C. 1526(f) may 

become the subject of litigation after the seized merchandise has been forfeited 

and disposed of under 19 U.S.C. 1526(e). Any and all samples retained will be 

72
disposed of pursuant to 19 U.S.C. 1526(e) upon entry of final judgment and 

completion of any appeals regarding the assessed fine(s). 

IV. Copyright Violations 

A. In general. 

Copyright violations typically pertain to movies, books, CDs, video games, etc. 

The issue to be determined is if there has been an unauthorized reproduction of 

material that is substantially similar to the copyrighted work. Many 

determinations are easy to make, such as badly reproduced movies on 

videotape. But other determinations are more difficult, such as falling “Brick” 

style video games, which have similarities to Nintendo’s “Tetris.” Any questions

concerning determinations of piracy should be sent to the IPR Branch, ORR,

202-927-2330. 

B. Determination of piracy. 

Once you have made a determination whether the merchandise is “Clearly 

Piratical,” or “Possibly Piratical,” and you have consulted the IPR module to 

determine if the copyright in question has been recorded with Customs or not, 

you may proceed to the attached Copyright Matrix which will instruct you as to 

Customs action, correct citations, and mitigation disposition. 

V. Patent Infringement 

Customs enforcement actions relating to patents are limited insofar as Customs

is without legal authority to determine patent infringement. Customs does, 

however, enforce exclusion orders and seizure orders issued by the U.S.

International Trade Commission (“ITC”), and we conduct patent surveys (for a 

fee ranging from $1,000 to $2,000 for a period of two to six months). Pursuant to 

19 C.F.R. 12.39(c), seizure of merchandise is permitted under an ITC seizure 

order where the owner, importer or consignee has previously attempted to import 

the article, the article was previously denied entry, and written notice was

provided to the importer that further attempts to enter the article would result in 

seizure and forfeiture. No relief shall be afforded from the seizure of any articles

found to be within the scope of an ITC seizure order. 

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VI. IPR Matrices 

Recommended Actions, Citations, and Dispositions of Importations 

Involving Trademark Violations 

(DATED: 10/10/00)* (*DESTROY ALL PREVIOUS VERSIONS THAT PRE-DATE THIS DOCUMENT) 

STATUS CUSTOMS ACTION CITATION RECOMMENDED 

DISPOSITION 

1. COUNTERFEIT MARK

 Registered Patent & 

Trademark Office (PTO) 

trademark 

 Recorded with Customs 

 No consent from U.S. 

trademark holder 

 Includes T&E/IE1 with 

no valid foreign 

registration 

SEIZE AS COUNTERFEIT 

PROCEED TO FORFEIT 

ISSUE FINE 

19 U.S.C. §1526(e) 

 

19 U.S.C.§1526(f) 

NO REMISSION OF 

FORFEITURE: 

19 C.F.R. §133.52(c) 

2. COUNTERFEIT MARK

 Registered PTO 

trademark 

 Not recorded with 

Customs 

 No consent of 

trademark holder 

SEIZE AS COUNTERFEIT 

PROCEED TO FORFEIT 

DO NOT ISSUE FINE 

SEIZE: 

19 U.S.C. §1595a(c)(2)(C) 

for violation of 18 U.S.C. 

§ 2320 

 

NO REMISSION OF 

FORFEITURE: 

19 C.F.R. §133.52(c) 

3. COUNTERFEIT MARK

 Registered PTO 

trademark 

 Recorded with Customs

 Consent of trademark 

holder, obtained after

seizure, prior to forfeiture

SEIZE AS COUNTERFEIT 19 U.S.C. §1526(e) 

19 U.S.C. §1595(c)(2)(C) 

If consent is obtained prior to 

forfeiture, 

MITIGATE based on 

1595a(c) to 2% of dutiable 

value, plus seizure costs, 

and hold harmless 

agreement. 19 C.F.R. 

§133.51(b) 

4. COUNTERFEIT MARK

 Registered PTO 

trademark 

 Recorded with Customs 

 Consent of trademark 

holder at time of 

importation, 

 

 DO NOT SEIZE 

AS MATTER OF POLICY 
Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages 

February 2004

Recommended Actions, Citations, and Dispositions of Importations 

Involving Trademark Violations 

(DATED: 10/10/00)* (*DESTROY ALL PREVIOUS VERSIONS THAT PRE-DATE THIS DOCUMENT) 

STATUS CUSTOMS ACTION CITATION RECOMMENDED 

DISPOSITION 

5. CONFUSINGLY SIMILAR

MARK

 Registered PTO 

trademark 

 Recorded with Customs 

 No consent of trademark 

holder 

INITIALLY DETAIN, 

SEIZE, UNLESS 

EXEMPTIONS APPLY 

UNDER 19 CFR §133.22(c)

DETAIN: 19 C.F.R. §133.25 

SEIZE: 

19 U.S.C. §1595a(c)(2)(c) 

FOR VIOLATION OF: 

15 U.S.C. §1124 

REMIT FORFEITURE 

UPON: standard 1595a(c) 

mitigation guidelines of 10% 

–30% for first violation, and 

export to country of origin 

under Customs supervision, 

and removal or obliteration of

the offending mark [19 

C.F.R. §133.51(b)] 

Detention and Seizure 

includes T&E and IE 

shipments. 

6. CONFUSINGLY SIMILAR

MARK

 Registered PTO 

trademark 

 Recorded with Customs 

 Consent, at time of 

importation, of trademark 

holder 

DO NOT SEIZE AS A 

MATTER OF POLICY 

7. CONFUSINGLY SIMILAR

MARK

 Registered PTO 

trademark 

 Recorded with Customs 

 No Consent, at time of 

importation, of trademark 

holder, but consent 

obtained during detention

If NO consent is given 

at time of importation, 

INITIALLY DETAIN, 

(30 days to obtain consent)

If no consent is obtained, 

SEIZE, UNLESS 

EXEMPTIONS APPLY 

UNDER 19 CFR §133.22(c)

DETAIN: 19 C.F.R. §133.25 

SEIZE: 

19 U.S.C. §1595a(c)(2)(c) 

FOR VIOLATION OF: 

15 U.S.C. §1124 

[Not 19U.S.C.§1526(e) or (f)] 

REMIT FORFEITURE 

UPON: mitigation of 

1595a(c) to 2% of dutiable 

value, plus seizure costs, 

and hold harmless 

agreement. 19 C.F.R. 

§133.51(b) 

8. CONFUSINGLY SIMILAR

MARK

 Registered PTO 

trademark 

 Not recorded with 

Customs 

DO NOT SEIZE AS A 

MATTER OF POLICY 

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Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages 

February 2004

Recommended Actions, Citations, and Dispositions of Importations 

Involving Trademark Violations 

(DATED: 10/10/00)* (*DESTROY ALL PREVIOUS VERSIONS THAT PRE-DATE THIS DOCUMENT) 

STATUS CUSTOMS ACTION CITATION RECOMMENDED 

DISPOSITION 

9. GRAY MARKET

 Registered PTO 

trademark 

 Not recorded with 

Customs 

 No Gray Market 

protection 

(Lack of gray market 

protection indicated 

by “N” in IPR module)

DO NOT SEIZE AS 

MATTER OF POLICY 

1. GRAY MARKET

 Registered PTO 

trademark 

 Recorded with Customs, 

 Gray Market protection 

 (indicated by “Y” in IPR 

module)

INITIALLY DETAIN, 

19 U.S.C. §133.25 

Do not detain Gray Market 

T&E and IE 

Even if protected. 

DETAIN: 19 C.F.R. §133.25 

Seize: 19 U.S.C. §1526(b) 

and 19 C.F.R. §133.23(f) 

IF PETITION FILED, REMIT 

FORFEITURE UPON: 

payment of 10% of the 

dutiable value for first 

violation, hold harmless 

agreement, and export to 

country of original 

exportation under Customs 

supervision. 

 

 

NOTES:

1) Detention and Seizure provisions apply to Transportation and Exportation (T&E) and 

Importation and Exportation (IE) entries (except Gray Market goods which should NOT be 

detained or seized when entered under T&E or IE provisions). When goods are seized traveling 

under T&E and IE, and proof of valid foreign registration is made (either pre-dating U.S. 

registration, or a well established foreign registration), refer case to ORR, Penalties Branch for 

disposition. 

- If the only document filed is a permit to unlade (i.e., no in-bond entry has been made), 

contact ORR, IPR Branch before making a seizure. 

- If goods are diverted, the standard seizure and penalty provisions will apply. Contact 

ORR, Penalties Branch for guidance, if needed. 

2) The above-recommended dispositions apply only to first violations. If there is a prior violation, 

call ORR, Penalties Branch for guidance. A “2nd violation” would be the second violation 

involving same mark, regardless of what type of merchandise the mark appears on. 

3) See, the regulations regarding “personal use” exemption at 19 C.F.R. §148.55 (usually 

applying to only “one article of the type bearing a protected trademark”). 

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Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages 

February 2004

4) Under 19 U.S.C. §1526(f), the fine, and the mitigation thereof, are based upon the 

Manufacturers Suggested Retail Price (MSRP) of the goods, if it were genuine. Please refer to 

Section III.D., above. 

5) Do not separate the packaging from the goods. If there is a violation under 19 U.S.C. 

§1526(e), both should be seized and forfeited. 

Recommended Actions, Citations, and Dispositions of Importations 

Involving Copyright Violations 

(Dated: 10/10/2000)* (*Destroy ALL Previous Versions that Pre-date this Document.) 

STATUS CUSTOMS ACTION CITATION RECOMMENDED 

DISPOSITION 

1. Clearly Piratical copy of 

U.S. registered (U.S. 

Copyright Office) and 

recorded (USCS) copyright 

 SEIZE AND FORFEIT 

(pursuant to Customs 

Regulations)

19 U.S.C. §1595a(c)(2)(C) 

for violation of 17 U.S.C. 

§602 

No Remission of Forfeiture 

2. Clearly Piratical copy of 

U.S. registered copyright 

that is not recorded with 

USCS 

 SEIZE AND 

 FORFEIT 

19 U.S.C. §1595a(c)(2)(C) 

for violation of 17 U.S.C. 

§501 in civil cases, or for 

violation of 17 U.S.C. §506 

and §509 in criminal cases. 

No Remission of Forfeiture 

3. Clearly Piratical copy of 

U.S. registered copyright, 

recorded or not recorded 

with USCS, with consent of

copyright owner after 

seizure 

 SEIZE, 

(if no consent given prior to 

time of seizure) 

If recorded with USCS: 19 

U.S.C. §1595a(c)(2)(C) for 

violation of 17 U.S.C. §602 

and 19 C.F.R. §133.42 

If not recorded with USCS:

19 U.S.C. §1595a(c)(2)(C) 

for violation of 17 U.S.C. 

§501 in civil cases, or for 

violation of 17 U.S.C. §506 

and §509 in criminal cases. 

REMIT FORFEITURE 

UPON: consent of copyright 

owner, mitigation of 

1595a(c) to 2% of dutiable 

value, seizure costs, and 

hold harmless agreement, 

for first violation. 

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Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages 

February 2004

Recommended Actions, Citations, and Dispositions of Importations 

Involving Copyright Violations 

(Dated: 10/10/2000)* (*Destroy ALL Previous Versions that Pre-date this Document.) 

STATUS CUSTOMS ACTION CITATION RECOMMENDED 

DISPOSITION 

4. Possibly piratical copy of

registered and recorded 

copyright (with no consent 

from copyright owner) 

-DETAIN [follow 19 C.F.R. 

§133.43. No need for 

exchange of briefs if HQ 

IPR Branch advice obtained 

and seizure made within

first 5 days of merchandise

being presented (see 

Customs Directive No.

2310-005A, dated April 7, 

2000)]. 

-SEIZE if determined to be

infringing copy after 

exchange of briefs and HQ 

decision pursuant to 19 

C.F.R. §133.43 

-DETAIN: 19 C.F.R. 

§133.43

-SEIZE: 19 U.S.C. 

§1595a(c)(2)(C) for 

violation of 17 U.S.C. §602. 

-If determined to be noninfringing, release pursuant 

to 19 C.F.R. 133.44(b) and 

transmit the copyright 

owner’s bond to the 

importer 

-If infringing, no remission 

of forfeiture, and return 

bond to the copyright owner 

5. Possibly piratical copy of

registered copyright, which

has not been recorded with

U.S. Customs 

DO NOT SEIZE AS A 

MATTER OF POLICY 

1) The importation of lawfully made copies (gray market) is not a violation (see 19 

C.F.R. §133.42(b)). 

2.) T&E and IE: Detention and Seizure recommendations apply to T&E and IE 

shipments. 

3.) The above-recommended dispositions apply only to first violations. If there is a prior 

violation, call HQ penalties branch for guidance. A “2nd violation” would be the second 

violation involving same copyright, in entries which are not closely related in time (i.e. 90 

days). 

4.) Copyright infringement applies to the good in its entirety, and not just the packaging

or exterior surface. Do not separate the packaging from the goods! 

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Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages 

February 2004

Recommended Actions, Citations, and Dispositions of Exportations

Involving Trademark & Copyright Violations

Status Customs Action Citation Recommended 

Disposition 

Trademark: Counterfeit 

Mark 

Registered Patent & 

Trademark Office (“PTO”) 

trademark. 

Regardless of recordation 

with Customs.

No consent from U.S. 

trademark holder. 

T&E and I.E. violations are

 Treated as importation 

violations.1

SEIZE AS COUNTERFEIT 

PROCEED TO FORFEIT 

NO FINE IS ISSUED 

22 U.S.C. §401(a) for 

violation of 18 U.S.C. 

§2320 (need intent). 

No remission of forfeiture. 

Trademark: Counterfeit 

Mark

Registered PTO trademark. 

Regardless of recordation 

with Customs.

Consent of U.S. trademark 

holder, obtained after 

seizure, prior to forfeiture. 

SEIZE AS COUNTERFEIT 22 U.S.C. §401(a) for 

violation of 18 U.S.C. 

§2320 (need intent). 

If consent is obtained prior 

to forfeiture, MITIGATION/

REMISSION of seizure is

made pursuant to 19 

U.S.C. §1618 to 2% of 

dutiable value, plus seizure 

costs, and hold harmless 

agreement. 

Trademark: Confusingly 

Similar

Registered PTO trademark 

Recorded with Customs 

No consent from U.S. 

trademark holder. 

Evidence of sufficient effect 

on U.S. commerce. 

INITIALLY DETAIN, SEIZE

provided that intended 

sales of infringing exports 

in a foreign country have a

sufficient effect on U.S. 

commerce.

22 U.S.C. §401(a) for 

violation of 15 U.S.C. 

§1125. 

Proceed with forfeiture. 

Penalties Branch will grant 

substantial, if not full, 

mitigation or remission in 

cases where referring office 

has not provided 

evidentiary support for 

sufficient effect on U.S. 

commerce.

Trademark: Confusingly 

Similar

Registered PTO trademark 

Recorded with Customs 

No consent from U.S. 

trademark holder. 

Insufficient effect on U.S. 

commerce. 

DO NOT DETAIN AND/OR

SEIZE 

 1

 See Chart titled “Recommended Actions, Citations, and Dispositions of Importations Involving

Trademark Violations”. 

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Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages 

February 2004

Recommended Actions, Citations, and Dispositions of Exportations

Involving Trademark & Copyright Violations

Status Customs Action Citation Recommended 

Disposition 

Trademark: Confusingly 

Similar

Registered PTO trademark. 

Not recorded with 

Customs.

DO NOT DETAIN AND/OR

SEIZE 

Trademark: Gray Market

Not applicable to 

exportations. 

DO NOT DETAIN AND/OR

SEIZE 

Copyright: Clearly Piratical

Registered (U.S. Copyright 

office). 

Recorded copyright with 

Customs.

No consent of copyright 

owner. 

SEIZE AND FORFEIT 22 U.S.C. §401(a) for 

violation of 17 U.S.C. §506 

and 17 U.S.C. §509. 

No remission of Forfeiture. 

Copyright: Clearly Piratical

Registered (U.S. Copyright 

office). 

Recorded copyright with 

Customs. 

Consent of copyright owner 

after seizure. 

SEIZE (if no consent given 

prior to time of seizure) 

22 U.S.C. §401(a) for 

violation of 17 U.S.C. §506 

and 17 U.S.C. §509. 

If consent is obtained prior 

to forfeiture, MITIGATION/

REMISSION of seizure is

made pursuant to 19 

U.S.C. §1618 to 2% of 

dutiable value, plus seizure 

costs, and hold harmless 

agreement. 

Copyright: Clearly Piratical

Registered (U.S. Copyright 

office). 

Copyright NOT recorded 

with Customs.

No consent of copyright 

owner. 

SEIZE AND FORFEIT 22 U.S.C. §401(a) for 

violation of 17 U.S.C. §506 

and 17 U.S.C. §509. 

No remission of Forfeiture. 

Copyright: Clearly Piratical

Registered (U.S. Copyright 

office). 

Copyright NOT recorded 

with Customs.

Consent of copyright owner 

after seizure. 

SEIZE (if no consent given 

prior to time of seizure) 

22 U.S.C. §401(a) for 

violation of 17 U.S.C. §506 

and 17 U.S.C. §509. 

If consent is obtained prior 

to forfeiture, MITIGATION/

REMISSION of seizure is

made pursuant to 19 

U.S.C. §1618 to 2% of 

dutiable value, plus seizure 

costs, and hold harmless 

agreement. 

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Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages 

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Recommended Actions, Citations, and Dispositions of Exportations

Involving Trademark & Copyright Violations

Status Customs Action Citation Recommended 

Disposition 

Copyright: Possibly 

Piratical

Registered (U.S. Copyright 

office). 

Recorded copyright with 

Customs.

SEIZE AND FORFEIT 22 U.S.C. §401(a) for 

violation of 17 U.S.C. §506 

and 17 U.S.C. §509. 

No remission of Forfeiture. 

Copyright: Possibly 

Piratical

Registered (U.S. Copyright 

office). 

Copyright NOT recorded 

with Customs.

DO NOT DETAIN AND/OR

SEIZE 

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PENALTIES

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COMMERCIAL FRAUD – 19 U.S.C. 1592 

NEGLIGENCE, GROSS NEGLIGENCE AND FRAUD 

Appendix B to Part 171—Customs Regulations, Revised Penalty Guidelines, 

19 U.S.C. 1592 

Appendix B to Part 171--Customs Regulations, Guidelines for the Imposition and 

Mitigation of Penalties for Violations of 19 U.S.C. 1592. 

Introduction 

A monetary penalty incurred under section 592 of the Tariff Act of 1930, as 

amended (19 U.S.C. 1592; hereinafter referred to as section 592) may be remitted 

or mitigated under section 618 of the Tariff Act of 1930, as amended (19 U.S.C.

1618), if it is determined that there are mitigating circumstances to justify remission 

or mitigation. The guidelines below will be used by the Customs Service in arriving 

at a just and reasonable assessment and disposition of liabilities arising under

section 592 within the stated limitations. It is intended that these guidelines shall be 

applied by Customs officers in prepenalty proceedings and in determining the 

monetary penalty assessed in any penalty notice. The assessed penalty or penalty 

amount set forth in Customs administrative disposition determined in accordance 

with these guidelines does not limit the penalty amount which the Government may 

seek in bringing a civil enforcement action pursuant to section 592(e). It should be 

understood that any mitigated penalty is conditioned upon payment of any actual 

loss of duty as well as a release by the party that indicates that the mitigation 

decision constitutes full accord and satisfaction. Further, mitigation decisions are 

not rulings within the meaning of part 177 of the Customs Regulations (19 C.F.R.

part 177). Lastly, these guidelines may supplement, and are not intended to 

preclude application of, any other special guidelines promulgated by Customs. 

I. Violations of Section 592 

Without regard to whether the United States is or may be deprived of all or a portion 

of any lawful duty, tax or fee thereby, a violation of section 592 occurs when a 

person, through fraud, gross negligence, or negligence, enters, introduces, or 

attempts to enter or introduce any merchandise into the commerce of the United 

States by means of any document, electronic transmission of data or information,

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

material; or when a person aids or abets any other person in the entry, introduction,

or attempted entry or introduction of merchandise by such means. It should be

noted that the language ``entry, introduction, or attempted entry or introduction''

encompasses placing merchandise in-bond (e.g., filing an immediate transportation 

application). There is no violation if the falsity or omission is due solely to clerical 

error or mistake of fact, unless the error or mistake is part of a pattern of negligent

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conduct. Also, the unintentional repetition by an electronic system of an initial 

clerical error generally will not constitute a pattern of negligent conduct.

Nevertheless, if Customs has drawn the party's attention to the unintentional 

repetition by an electronic system of an initial clerical error, subsequent failure to

correct the error could constitute a violation of section 592. Also, the unintentional 

repetition of a clerical mistake over a significant period of time or involving many

entries could indicate a pattern of negligent conduct and a failure to exercise 

reasonable care. 

II. Definition of Materiality Under Section 592 

A document, statement, act, or omission is material if it has the natural tendency to 

influence or is capable of influencing agency action including, but not limited to a 

Customs action regarding: (1) Determination of the classification, appraisement, or

admissibility of merchandise (e.g., whether merchandise is prohibited or restricted); 

(2) determination of an importer's liability for duty (including marking, antidumping, 

and/or countervailing duty); (3) collection and reporting of accurate trade statistics; 

(4) determination as to the source, origin, or quality of merchandise; (5) 

determination of whether an unfair trade practice has been committed under the 

anti-dumping or countervailing duty laws or a similar statute; (6) determination of

whether an unfair act has been committed involving patent, trademark, or copyright 

infringement; or (7) the determination of whether any other unfair trade practice has

been committed in violation of federal law. The ``but for'' test of materiality is 

inapplicable under section 592. 

III. Degrees of Culpability Under Section 592 

The three degrees of culpability under section 592 for the purposes of

administrative proceedings are: 

A. Negligence 

A violation is determined to be negligent if it results from an act or acts (of

commission or omission) done through either the failure to exercise the degree of

reasonable care and competence expected from a person in the same 

circumstances either: (a) in ascertaining the facts or in drawing inferences

therefrom, in ascertaining the offender's obligations under the statute; or (b) in 

communicating information in a manner so that it may be understood by the 

recipient. As a general rule, a violation is negligent if it results from failure to 

exercise reasonable care and competence: (a) to ensure that statements made 

and information provided in connection with the importation of merchandise are 

complete and accurate; or (b) to perform any material act required by statute or

regulation.

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B. Gross Negligence 

A violation is deemed to be grossly negligent if it results from an act or acts (of 

commission or omission) done with actual knowledge of or wanton disregard for 

the relevant facts and with indifference to or disregard for the offender's 

obligations under the statute. 

C. Fraud 

A violation is determined to be fraudulent if a material false statement, omission,

or act in connection with the transaction was committed (or omitted) knowingly, 

i.e., was done voluntarily and intentionally, as established by clear and 

convincing evidence. 

IV. Discussion of Additional Terms 

1. Duty Loss Violations 

A section 592 duty loss violation involves those cases where there has been a 

loss of duty including any marking, anti-dumping, or countervailing duties, or any

tax and fee (e.g., merchandise processing and/or harbor maintenance fees) 

attributable to an alleged violation. 

2. Non-duty Loss Violations 

A section 592 non-duty loss violation involves cases where the record indicates 

that an alleged violation is principally attributable to, for example, evasion of a 

prohibition, restriction, or other non-duty related consideration involving the 

importation of the merchandise. 

3. Actual Loss of Duties 

An actual loss of duty occurs where there is a loss of duty including any marking, 

anti-dumping, or countervailing duties, or any tax and fee (e.g., merchandise 

processing and/or harbor maintenance fees) attributable to a liquidated Customs 

entry, and the merchandise covered by the entry has been entered or introduced 

(or attempted to be entered or introduced) in violation of section 592. 

4. Potential Loss of Duties 

A potential loss of duty occurs where an entry remains unliquidated and there is 

a loss of duty, including any marking, anti-dumping or countervailing duties or 

any tax and fee (e.g., merchandise processing and/or harbor maintenance fees)

attributable to a violation of section 592, but the violation was discovered prior to 

liquidation. In addition, a potential loss of duty exists where Customs discovers 

the violation and corrects the entry to reflect liquidation at the proper 

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classification and value. In other words, the potential loss in such cases equals

the amount of duty, tax and fee that would have occurred had Customs not 

discovered the violation prior to liquidation and taken steps to correct the entry. 

5. Total Loss of Duty 

The total loss of duty is the sum of any actual and potential loss of duty

attributable to alleged violations of section 592 in a particular case. Payment of 

any actual and/or potential loss of duty shall not affect or reduce the total loss of 

duty used for assessing penalties as set forth in these guidelines. The “multiples''

set forth below in paragraph (F)(2) involving assessment and disposition of cases

shall utilize the “total loss of duty'' amount in arriving at the appropriate 

assessment or disposition. 

6. Reasonable Care 

General Standard: All parties, including importers of record or their agents, are 

required to exercise reasonable care in fulfilling their responsibilities involving 

entry of merchandise. These responsibilities include, but are not limited to: 

providing a classification and value for the merchandise; furnishing information 

sufficient to permit Customs to determine the final classification and valuation of

merchandise; taking measures that will lead to and assure the preparation of 

accurate documentation, and determining whether any applicable requirements

of law with respect to these issues are met. In addition, all parties, including the 

importer, must use reasonable care to provide accurate information or 

documentation to enable Customs to determine if the merchandise may be 

released. Customs may consider an importer's failure to follow a binding 

Customs ruling a lack of reasonable care. In addition, unreasonable classification 

will be considered a lack of reasonable care (e.g., imported snow skis are 

classified as water skis). Failure to exercise reasonable care in connection with 

the importation of merchandise may result in imposition of a section 592 penalty

for fraud, gross negligence or negligence. 

7. Clerical Error 

A clerical error is an error in the preparation, assembly or submission of import 

documentation or information provided to Customs that results from a mistake in 

arithmetic or transcription that is not part of a pattern of negligence. The mere 

non-intentional repetition by an electronic system of an initial clerical error does

not constitute a pattern of negligence. Nevertheless, as stated earlier, if 

Customs has drawn a party's attention to the non-intentional repetition by an 

electronic system of an initial clerical error, subsequent failure to correct the error 

could constitute a violation of section 592. Also, the unintentional repetition of a 

clerical mistake over a significant period of time or involving many entries could 

indicate a pattern of negligent conduct and a failure to exercise reasonable care. 

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8. Mistake of Fact 

A mistake of fact is a false statement or omission that is based on a bona fide 

erroneous belief as to the facts, so long as the belief itself did not result from 

negligence in ascertaining the accuracy of the facts. 

V. Penalty Assessment 

(1) Case Initiation--Prepenalty Notice. 

(a) Generally. 

As provided in Sec. 162.77, Customs Regulations (19 C.F.R. 162.77), if

the appropriate Customs field officer has reasonable cause to believe that

a violation of section 592 has occurred and determines that further 

proceedings are warranted, the Customs field officer will issue to each 

person concerned a notice of intent to issue a claim for a monetary 

penalty (i.e., the “prepenalty notice”). In issuing such a prepenalty notice, 

the Customs field officer will make a tentative determination of the degree 

of culpability and the amount of the proposed claim. Payment of any 

actual and/or potential loss of duty will not affect or reduce the total loss of

duty used for assessing penalties as set forth in these guidelines. The 

“multiples” set forth in paragraphs (F)(2)(a)(i), (b)(i) and (c)(i) involving 

assessment and disposition of duty loss violation cases will use the 

amount of total loss of duty in arriving at the appropriate assessment or 

disposition. Further, where separate duty loss and non-duty loss violations 

occur on the same entry, it is within the Customs field officer's discretion to 

assess both duty loss and non-duty loss penalties, or only one of them. 

Where only one of the penalties is assessed, the Customs field officer has

the discretion to select which penalty (duty loss or non-duty loss) shall be 

assessed. Also, where there is a violation accompanied by an incidental or

nominal loss of duties, the Customs field officer may assess a non-duty 

loss penalty where the incidental or nominal duty loss resulted from a 

separate non-duty loss violation. The Customs field officer will propose a 

level of culpability in the prepenalty notice that conforms to the level of 

culpability suggested by the evidence at the time of issuance. Moreover, 

the prepenalty notice will include a statement that it is Customs practice to 

base its actions on the earliest point in time that the statute of limitations

may be asserted (i.e., the date of occurrence of the alleged violation) 

inasmuch as the final resolution of a case in court may be less than a 

finding of fraud. A prepenalty notice that is issued to a party in a case 

where Customs determines a claimed prior disclosure is not valid--owing

to the disclosing party's knowledge of the commencement of a formal

investigation of a disclosed violation--will include a copy of a written 

document that evidences the commencement of a formal investigation. In 

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commercial importation or if the proposed claim does not exceed $1,000. 

Special guidelines relating to penalty assessment and dispositions

involving ``Arriving Travelers’’ are set forth in section (L) below. 

(b) Prepenalty Notice--Proposed Claim Amount 

(i) Fraud. In general, if a violation is determined to be the result of fraud, 

the proposed claim ordinarily will be assessed in an amount equal to the 

domestic value of the merchandise. Exceptions to assessing the penalty

at the domestic value may be warranted in unusual circumstances such as

a case where the domestic value of the merchandise is disproportionately

high in comparison to the loss of duty attributable to an alleged violation 

(e.g., a total loss of duty of $10,000 involving 10 entries with a total

domestic value of $2,000,000). Also, it is incumbent upon the appropriate 

Customs field officer to consider whether mitigating factors are present

warranting a reduction in the customary domestic value assessment. In all 

section 592 cases of this nature regardless of the dollar amount of the 

proposed claim, the Customs field officer will obtain the approval of the 

Penalties Branch at Headquarters prior to issuance of a prepenalty notice

at an amount less than domestic value. 

(ii) Gross Negligence and Negligence. In determining the amount of the 

proposed claim in cases involving gross negligence and negligence, the 

appropriate Customs field officer will take into account the gravity of the 

offense, the amount of loss of duty, the extent of wrongdoing, mitigating or

aggravating factors, and other factors bearing upon the seriousness of a 

violation, but in no case will the assessed penalty exceed the statutory 

ceilings prescribed in section 592. In cases involving gross negligence and 

negligence, penalties equivalent to the ceilings stated in paragraphs

(F)(2)(b) and (c) regarding disposition of cases may be appropriate in 

cases involving serious violations, e.g., violations involving a high loss of

duty or significant evasion of import prohibitions or restrictions. A 

``serious'' violation need not result in a loss of duty. The violation may be 

serious because it affects the admissibility of merchandise or the 

enforcement of other laws, as in the case of quota evasions, false 

statements made to conceal the dumping of merchandise, or violations of

exclusionary orders of the International Trade Commission. 

(c) Technical Violations. 

Violations where the loss of duty is nonexistent or minimal and/or that 

have an insignificant impact on enforcement of the laws of the United 

States may justify a proposed penalty in a fixed amount not related to the 

value of merchandise, but an amount believed sufficient to have a 

deterrent effect: e.g., violations involving the subsequent sale of

merchandise or vehicles entered for personal use; violations involving 

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failure to comply with declaration or entry requirements that do not change 

the admissibility or entry status of merchandise or its appraised value or

classification; violations involving the illegal diversion to domestic use of 

instruments of international traffic; and local point-to-point traffic violations.

Generally, a penalty in a fixed amount ranging from $1,000 to $2,000 is

appropriate in cases where there are no prior violations of the same kind.

However, fixed sums ranging from $2,000 to $10,000 may be appropriate 

in the case of multiple or repeated violations. Fixed sum penalty amounts 

are not subject to further mitigation and may not exceed the maximum 

amounts stated in section 592 and in these guidelines. 

(d) Statute of Limitations Considerations--Waivers. 

Prior to issuance of any section 592 prepenalty notice, the appropriate 

Customs field officer will calculate the statute of limitations attributable to

an alleged violation. Inasmuch as section 592 cases are reviewed de novo 

by the Court of International Trade, the statute of limitations calculation in 

cases alleging fraud should assume a level of culpability of gross 

negligence or negligence, i.e., ordinarily applying a shorter period of time 

for statute of limitations purposes. In accordance with section 162.78 of

the Customs Regulations (19 C.F.R. 162.78), if less than 1 year remains

before the statute of limitations may be raised as a defense, a shortened 

response time may be specified in the notice--but in no case, less than 7 

business days from the date of mailing. In cases of shortened response

times, the Customs field officer should notify alleged violators by 

telephone and use all reasonable means (e.g., facsimile transmission of a 

copy of the notice) to expedite receipt of the notice by the alleged 

violators. Also in such cases, the appropriate Customs field officer should 

advise the alleged violator that additional time to respond to the prepenalty

notice will be granted only if an acceptable waiver of the statute of 

limitations is submitted to Customs. With regard to waivers of the statute

of limitations, it is Customs practice to request waivers concurrently both 

from all potential alleged violators and their sureties. 

(2) Closure of Case or Issuance of Penalty Notice. 

(a) Case Closure. 

The appropriate Customs field officer may find, after consideration of the 

record in the case, including any prepenalty response/oral presentation, 

that issuance of a penalty notice is not warranted. In such cases, the 

Customs field officer will provide written notification to the alleged violator 

who received the subject prepenalty notice that the case is closed. 

(b) Issuance of Penalty Notice. 

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In the event that circumstances warrant issuance of a notice of penalty

pursuant to Sec. 162.79 of the Customs Regulations (19 C.F.R. 162.79), 

the appropriate Customs field officer will give consideration to all available 

evidence with respect to the existence of material false statements or 

omissions (including evidence presented by an alleged violator), the 

degree of culpability, the existence of a prior disclosure, the seriousness

of the violation, and the existence of mitigating or aggravating factors. In 

cases involving fraud, the penalty notice will be in the amount of the 

domestic value of the merchandise unless a lesser amount is warranted 

as described in paragraph (E)(1)(b)(i). In general, the degree of culpability 

or proposed penalty amount stated in a prepenalty notice will not be 

increased in the penalty notice. If, subsequent to the issuance of a 

prepenalty notice and upon further review of the record, the appropriate 

Customs field officer determines that a higher degree of culpability exists,

the original prepenalty notice should be rescinded and a new prepenalty

notice issued that indicates the higher degree of culpability and increased 

proposed penalty amount. However, if less than 9 months remain before 

expiration of the statute of limitations or any waiver thereof by the party

named in the prepenalty notice, the higher degree of culpability and higher 

penalty amount may be indicated in the notice of penalty without 

rescinding the earlier prepenalty notice. In such cases, the Customs field 

officer will consider whether a lower degree of culpability is appropriate or

whether to change the information contained in the prepenalty notice. 

(c) Statute of Limitations Considerations. 

Prior to issuance of any section 592 penalty notice, the appropriate 

Customs field officer again shall calculate the statute of limitations 

attributable to the alleged violation and request a waiver(s) of the statute, 

if necessary. In accordance with part 171 of the Customs Regulations (19 

C.F.R. part 171), if less than 180 days remain before the statute of

limitations may be raised as a defense, a shortened response time may be 

specified in the notice--but in no case less than 7 business days from the 

date of mailing. In such cases, the Customs field officer should notify an 

alleged violator by telephone and use all reasonable means (e.g., 

facsimile transmission of a copy) to expedite receipt of the penalty notice 

by the alleged violator. Also, in such cases, the Customs field officer 

should advise an alleged violator that, if an acceptable waiver of the 

statute of limitations is provided, additional time to respond to the penalty

notice may be granted. 

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VI. Administrative Penalty Disposition 

(1) Generally. 

It is the policy of the Department of the Treasury and the Customs Service 

to grant mitigation in appropriate circumstances. In certain cases, based 

upon criteria to be developed by Customs, mitigation may take an 

alternative form, whereby a violator may eliminate or reduce his or her 

section 592 penalty liability by taking action(s) to correct problems that 

caused the violation. In any case, in determining the administrative section 

592 penalty disposition, the appropriate Customs field officer will consider

the entire case record--taking into account the presence of any mitigating 

or aggravating factors. All such factors should be set forth in the written 

administrative section 592 penalty decision. Once again, Customs 

emphasizes that any penalty liability which is mitigated is conditioned 

upon payment of any actual loss of duty in addition to that penalty as well 

as a release by the party that indicates that the mitigation decision 

constitutes full accord and satisfaction. Finally, section 592 penalty

dispositions in duty-loss and non-duty-loss cases will proceed in the

manner set forth below. 

(2) Dispositions. 

(a) Fraudulent Violation. 

Penalty dispositions for a fraudulent violation will be calculated as

follows: 

(i) Duty Loss Violation. An amount ranging from a minimum 

of 5 times the total loss of duty to a maximum of 8 times the 

total loss of duty--but in any such case the amount may not 

exceed the domestic value of the merchandise. A penalty

disposition greater than 8 times the total loss of duty may be 

imposed in a case involving an egregious violation, or a 

public health and safety violation, or due to the presence of

aggravating factors, but again, the amount may not exceed 

the domestic value of the merchandise. 

(ii) Non-Duty Loss Violation. An amount ranging from a 

minimum of 50 percent of the dutiable value to a maximum

of 80 percent of the dutiable value of the merchandise. A 

penalty disposition greater than 80 percent of the dutiable 

value may be imposed in a case involving an egregious 

violation, or a public health and safety violation, or due to the 

presence of aggravating factors, but the amount may not

exceed the domestic value of the merchandise. 

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(b) Grossly Negligent Violation. 

Penalty dispositions for a grossly negligent violation shall be 

calculated as follows:

(i) Duty Loss Violation. An amount ranging from a minimum 

of 2.5 times the total loss of duty to a maximum of 4 times 

the total loss of duty--but in any such case, the amount may 

not exceed the domestic value of the merchandise. 

(ii) Non-Duty Loss Violation. An amount ranging from a 

minimum of 25 percent of the dutiable value to a maximum

of 40 percent of the dutiable value of the merchandise--but in 

any such case, the amount may not exceed the domestic

value of the merchandise. 

(c) Negligent Violation. 

Penalty dispositions for a negligent violation shall be calculated as

follows: 

(i) Duty Loss Violation. An amount ranging from a minimum 

of 0.5 times the total loss of duty to a maximum of 2 times 

the total loss of duty but, in any such case, the amount may 

not exceed the domestic value of the merchandise. 

(ii) Non-Duty Loss Violation. An amount ranging from a 

minimum of 5 percent of the dutiable value to a maximum of 

20 percent of the dutiable value of the merchandise, but, in 

any such case, the amount may not exceed the domestic

value of the merchandise. 

(d) Authority to Cancel Claim. 

Upon issuance of a penalty notice, Customs has set forth its formal

monetary penalty claim. Except as provided in 19 C.F.R. part 171,

in those section 592 cases within the administrative jurisdiction of

the concerned Customs field office, the appropriate Customs field 

officer will cancel any such formal claim whenever it is determined

that an essential element of the alleged violation is not established 

by the agency record, including prepenalty and penalty responses 

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provided by the alleged violator. Except as provided in 19 C.F.R. 

part 171, in those section 592 cases within Customs Headquarters 

jurisdiction, the appropriate Customs field officer will cancel any

such formal claim whenever it is determined that an essential 

element of the alleged violation is not established by the agency 

record, and such cancellation action precedes the date of the 

Customs field officer's receipt of the alleged violator's petition 

responding to the penalty notice. On and after the date of Customs 

receipt of the petition responding to the penalty notice, jurisdiction 

over the action rests with Customs Headquarters including the 

authority to cancel the claim. 

(e) Remission of Claim. 

If the Customs field officer believes that a claim for monetary 

penalty should be remitted for a reason not set forth in these 

guidelines, the Customs field officer should first seek approval from 

the Chief, Penalties Branch, Customs Service Headquarters. 

(f) Prior Disclosure Dispositions. 

It is the policy of the Department of the Treasury and the Customs 

Service to encourage the submission of valid prior disclosures that 

comport with the laws, regulations, and policies governing this

provision of section 592. Customs will determine the validity of the

prior disclosure including whether or not the prior disclosure sets

forth all the required elements of a violation of section 592. A valid 

prior disclosure warrants the imposition of the reduced Customs 

civil penalties set forth below: 

(1) Fraudulent Violation. 

(a) Duty Loss Violation. The claim for monetary penalty shall 

be equal to 100 percent of the total loss of duty (i.e., actual + 

potential) resulting from the violation. No mitigation will be

afforded. 

(b) Non-Duty Loss Violation. The claim for monetary penalty

shall be equal to 10 percent of the dutiable value of the 

merchandise in question. No mitigation will be afforded. 

(2) Gross Negligence and Negligence Violation. 

(a) Duty Loss Violation. The claim for monetary penalty shall 

be equal to the interest on the actual loss of duty computed 

from the date of liquidation to the date of the party's tender of 

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the actual loss of duty resulting from the violation. Customs 

notes that there is no monetary penalty in these cases if the 

duty loss is potential in nature. Absent extraordinary 

circumstances, no mitigation will be afforded. 

(b) Non-Duty Loss Violation. There is no monetary penalty in 

such cases and any claim for monetary penalty which had 

been issued prior to the decision granting prior disclosure 

will be remitted in full. 

VII. Mitigating Factors 

The following factors will be considered in mitigation of the proposed or assessed 

penalty claim or the amount of the administrative penalty decision, provided that 

the case record sufficiently establishes their existence. The list is not allinclusive. 

(1) Contributory Customs Error. 

This factor includes misleading or erroneous advice given by a Customs 

official in writing to the alleged violator, or established by a 

contemporaneously created written Customs record, only if it appears that 

the alleged violator reasonably relied upon the information and the alleged 

violator fully and accurately informed Customs of all relevant facts. The 

concept of comparative negligence may be utilized in determining the 

weight to be assigned to this factor. If it is determined that the Customs 

error was the sole cause of the violation, the proposed or assessed 

penalty claim shall be canceled. If the Customs error contributed to the 

violation, but the violator also is culpable, the Customs error will be

considered as a mitigating factor. 

 

(2) Cooperation with the Investigation. 

To obtain the benefits of this factor, the violator must exhibit extraordinary

cooperation beyond that expected from a person under investigation for a 

Customs violation. Some examples of the cooperation contemplated 

include assisting Customs officers to an unusual degree in auditing the 

books and records of the violator (e.g., incurring extraordinary expenses in 

providing computer runs solely for submission to Customs to assist the 

agency in cases involving an unusually large number of entries and/or

complex issues). Another example consists of assisting Customs in 

obtaining additional information relating to the subject violation or other 

violations. Merely providing the books and records of the violator should 

not be considered cooperation justifying mitigation inasmuch as Customs 

has the right to examine an importer's books and records pursuant to 19 

U.S.C. 1508-1509. 

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(3) Immediate Remedial Action. 

This factor includes the payment of the actual loss of duty prior to the 

issuance of a penalty notice and within 30 days after Customs notifies the 

alleged violator of the actual loss of duties attributable to the alleged 

violation. In appropriate cases, where the violator provides evidence that

immediately after learning of the violation, substantial remedial action was

taken to correct organizational or procedural defects, immediate remedial

action may be granted as a mitigating factor. Customs encourages

immediate remedial action to ensure against future incidents of noncompliance. 

 

(4) Inexperience in Importing. 

Inexperience is a factor only if it contributes to the violation and the 

violation is not due to fraud or gross negligence. 

 

(5) Prior Good Record. 

Prior good record is a factor only if the alleged violator is able to 

demonstrate a consistent pattern of importations without violation of

section 592, or any other statute prohibiting false or fraudulent importation 

practices. This factor will not be considered in alleged fraudulent violations

of section 592. 

 

(6) Inability to Pay the Customs Penalty. 

The party claiming the existence of this factor must present documentary 

evidence in support thereof, including copies of income tax returns for the 

previous 3 years, and an audited financial statement for the most recent

fiscal quarter. In certain cases, Customs may waive the production of an

audited financial statement or may request alternative or additional 

financial data in order to facilitate an analysis of a claim of inability to pay

(e.g., examination of the financial records of a foreign entity related to the 

U.S. company claiming inability to pay). 

 

(7) Customs Knowledge. 

Additional relief in non-fraud cases (which also are not the subject of a

criminal investigation) will be granted if it is determined that Customs had 

actual knowledge of a violation and, without justification, failed to inform 

the violator so that it could have taken earlier corrective action. In such 

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cases, if a penalty is to be assessed involving repeated violations of the 

same kind, the maximum penalty amount for violations occurring after the 

date on which actual knowledge was obtained by Customs will be limited 

to two times the loss of duty in duty-loss cases or twenty percent of the 

dutiable value in non-duty-loss cases if the continuing violations were the 

result of gross negligence, or the lesser of one time the loss of duty in 

duty-loss cases or ten percent of dutiable value in non-duty-loss cases if

the violations were the result of negligence. This factor will not be 

applicable when a substantial delay in the investigation is attributable to

the alleged violator. 

VIII. Aggravating Factors 

Certain factors may be determined to be aggravating factors in calculating the 

amount of the proposed or assessed penalty claim or the amount of the 

administrative penalty decision. The presence of one or more aggravating factors 

may not be used to raise the level of culpability attributable to the alleged 

violations, but may be utilized to offset the presence of mitigating factors. The 

following factors will be considered ``aggravating factors,'' provided that the case

record sufficiently establishes their existence. The list is not exclusive. 

(1) Obstructing an investigation or audit, 

(2) Withholding evidence, 

(3) Providing misleading information concerning the violation, 

(4) Prior substantive violations of section 592 for which a final 

administrative finding of culpability has been made, 

(5) Textile imports that have been the subject of illegal transshipment (i.e., 

false country of origin declaration), whether or not the merchandise bears

false country of origin markings, 

(6) Evidence of a motive to evade a prohibition or restriction on the 

admissibility of the merchandise (e.g., evading a quota restriction), 

(7) Failure to comply with a lawful demand for records or a Customs

summons. 

IX. Offers in Compromise (“Settlement Offers”) 

Parties who wish to submit a civil offer in compromise pursuant to 19 U.S.C. 

1617 (also known as a ``settlement offer'') in connection with any section 592 

claim or potential section 592 claim should follow the procedures outlined in Sec. 

161.5 of the Customs Regulations (19 C.F.R. 161.5). Settlement offers do not 

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involve ``mitigation'' of a claim or potential claim, but rather ``compromise'' an 

action or potential action where Customs evaluation of potential litigation risks, or 

the alleged violator's financial position, justifies such a disposition. In any case 

where a portion of the offered amount represents a tender of unpaid duties, taxes

and fees, Customs letter of acceptance may identify the portion representing any 

such duty, tax and fee. The offered amount should be deposited at the Customs 

field office responsible for handling the section 592 claim or potential section 592 

claim. The offered amount will be held in a suspense account pending 

acceptance or rejection of the offer in compromise. In the event the offer is 

rejected, the concerned Customs field office will promptly initiate a refund of the

money deposited in the suspense account to the offeror. 

X. Section 592(d) Demands 

Section 592(d) demands for actual losses of duty ordinarily are issued in 

connection with a penalty action, or as a separate demand without an associated 

penalty action. In either case, information must be present establishing a 

violation of section 592(a). In those cases where the appropriate Customs field 

officer determines that issuance of a penalty under section 592 is not warranted 

(notwithstanding the presence of information establishing a violation of section 

592(a)), but that circumstances do warrant issuance of a demand for payment of 

an actual loss of duty pursuant to section 592(d), the Customs field officer shall 

follow the procedures set forth in section 162.79b of the Customs Regulations

(19 C.F.R. 162.79b). Except in cases where less than one year remains before 

the statute of limitations may be raised as a defense, information copies of all 

section 592(d) demands should be sent to all concerned sureties and the 

importer of record if such party is not an alleged violator. Also, except in cases 

where less than one year remains before the statute of limitations may be raised 

as a defense, Customs will endeavor to issue all section 592(d) demands to

concerned sureties and non-violator importers of record only after default by

principals. 

XI. Customs Brokers 

If a customs broker commits a section 592 violation and the violation involves

fraud, or the broker commits a grossly negligent or negligent violation and shares 

in the benefits of the violation to an extent over and above customary brokerage 

fees, the customs broker will be subject to these guidelines. However, if the 

customs broker commits either a grossly negligent or negligent violation of 

section 592 (without sharing in the benefits of the violation as described above),

the concerned Customs field officer may proceed against the customs broker 

pursuant to the remedies provided under 19 U.S.C. 1641. 

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XII. Arriving Travelers 

(1) Liability. Except as set forth below, proposed and assessed penalties for 

violations by an arriving traveler must be determined in accordance with these 

guidelines. 

 

(2) Limitations on Liability on Non-commercial Violations. In the absence of a 

referral for criminal prosecution, monetary penalties assessed in the case of an 

alleged first-offense, non-commercial, fraudulent violation by an arriving traveler 

will generally be limited as follows: 

(a) Fraud--Duty Loss Violation. An amount ranging from a minimum of 

three times the loss of duty to a maximum of five times the loss of duty, 

provided the loss of duty is also paid; 

(b) Fraud--Non-duty Loss Violation. An amount ranging from a minimum of 

30 percent of the dutiable value of the merchandise to a maximum of 50 

percent of its dutiable value; 

 

(c) Gross Negligence--Duty Loss Violation. An amount ranging from a 

minimum of 1.5 times the loss of duty to a maximum of 2.5 times the loss

of duty provided the loss of duty is also paid;

(d) Gross Negligence--Non-duty Loss Violation. An amount ranging from a 

minimum of 15 percent of the dutiable value of the merchandise to a 

maximum of 25 percent of its dutiable value; 

 

(e) Negligence--Duty Loss Violation. An amount ranging from a minimum

of .25 times the loss of duty to a maximum of 1.25 times the loss of duty 

provided that the loss of duty is also paid; 

 

(f) Negligence--Non-duty Loss Violation. An amount ranging from a 

minimum of 2.5 percent of the dutiable value of the merchandise to a 

maximum of 12.5 percent of its dutiable value; 

 

(g) Special Assessments/Dispositions. No penalty action under section 

592 will be initiated against an arriving traveler if the violation is not

fraudulent or commercial, the loss of duty is $100.00 or less, and there are 

no other concurrent or prior violations of section 592 or other statutes 

prohibiting false or fraudulent importation practices. However, all lawful 

duties, taxes and fees will be collected. Also, no penalty under section 592 

will be initiated against an arriving traveler if the violation is not fraudulent

or commercial, there are no other concurrent or prior violations of section 

592, and a penalty is not believed necessary to deter future violations or to 

serve a law enforcement purpose. 

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XIII. Violations of Laws Administered by Other Federal Agencies. 

Violations of laws administered by other federal agencies (such as the Food and 

Drug Administration, Consumer Product Safety Commission, Office of Foreign 

Assets Control, Department of Agriculture, Fish and Wildlife Service) should be 

referred to the appropriate agency for its recommendation. If promptly tendered,

such recommendation will be granted due consideration and may be followed,

provided such recommendation does not result in a disposition inconsistent with 

these guidelines. 

XIV. Section 592 Violations by Small Entities 

In compliance with the mandate of the Small Business Regulatory Enforcement 

Fairness Act of 1996, under appropriate circumstances, the issuance of a penalty 

under section 592 may be waived for businesses qualifying as small business

entities. 

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CONTROLLED SUBSTANCES - FAILURE TO MANIFEST - 19 U.S.C. 1584 

I. FAILURE TO MANIFEST ILLEGAL DRUGS - STATUTORY 

LIABILITY UNDER 19 U.S.C. 1584(a)(2) 

A. Pursuant to 19 U.S.C. 1584(a)(2), as amended, as implemented by 19 

C.F.R. 162.65(b), the master, person in charge, or owner of a vessel,

vehicle, or aircraft, any person directly or indirectly responsible for the

failure to manifest heroin, morphine, cocaine, isonipecaine, or opiate is 

liable for a penalty of $1,000 per ounce. Such party is also liable for a 

penalty of $500 per ounce for unmanifested smoking opium, opium 

prepared for smoking, or marijuana, and $200 per ounce for crude opium. 

B. 19 U.S.C. 1584 has been in effect since 1930. However, pursuant to The 

Anti-Drug Abuse Act of 1986, Congress amended subsection (a)(2) by

increasing the drug manifesting penalties 2000% (penalties increased 

from $25 to $500 per ounce of marijuana and $50 to $1,000 per ounce of 

cocaine). For example: 

1. Customs seizes 100 pounds of cocaine that carrier failed to manifest. 

Assess penalty for $1,600,000 (100 pounds x 16 ounces for each 

pound x $1,000 per each ounce of cocaine). 

2. Customs seizes 100 pounds of marijuana that carrier failed to manifest. 

Assess penalty for $800,000 (100 pounds x 16 ounces for each pound 

x $500 per each ounce of marijuana). 

C. Customs is not required to issue a prepenalty notice. (See, 19 C.F.R.

162.65(c); ARCA Airlines, LTDA v. United States, et al., 726 F. Supp. 827 

(S.D. Fla. 1989); aff’d., 945 F.2d 413 (11th Cir. 1991). See also, 19 

U.S.C. 1584(b)(1). 

D. A written penalty notice and demand for payment of the penalty for a 19 

U.S.C. 1584(a)(2) violation is issued to one of the following parties: the 

master of the vessel, commander of the aircraft, person in charge of the 

vehicle; the owner of the vessel, aircraft, or vehicle; or any person directly 

or indirectly responsible. In the case of a vessel, if an international 

carrier’s bond has been given, also send the notice to the surety. 19 

C.F.R. 162.65(c). 

E. If the vessel, vehicle, or aircraft was being operated as a common carrier,

there is a violation if there was either knowledge that narcotic drugs were 

on board or a failure to exercise the highest degree of care and diligence 

in preventing drugs from being placed on board.

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1. Knowledge: In order to find knowledge, Customs must have evidence 

the master, person in charge, owner, or any person directly or 

indirectly responsible knew that narcotic drugs were on board. For

example: 

a. Customs finds 1,755 pounds of cocaine on a vessel by 

discovering a manhole cover underneath a freshly painted, false 

plaster floor. The manhole cover leads to a water tank 

containing the cocaine. Customs investigative records show 

that the owner had participated in concealing and loading the 

cocaine onto the vessel. Thus, the knowledge requirement is 

met and a violation has occurred. Customs should issue a 

penalty in the amount of $28,080,000. 

b. Customs discovers 500 pounds of marijuana inside an 

unmanifested box in the cargo belly of an aircraft. Although the 

owner of the aircraft didn’t participate in the drug smuggling 

incident himself, Customs has sufficient evidence that the owner

knew that crewmembers were involved and failed to intervene. 

Again, the knowledge requirement is met and a violation has

occurred. Customs should issue a penalty in the amount of

$4,000,000. 

2. Highest Degree of Care and Diligence: if Customs does not find 

knowledge, then the master, person in charge, owner, or any person 

directly or indirectly responsible must demonstrate that it could not, by

the exercise of the highest degree of care and diligence, have known,

that narcotic drugs were on board.

a. There is no statutory or regulatory definition of the highest 

degree of care and diligence. There is little case law on the 

subject, other than general guidance such as “[i]f the owner

would escape a fine, he must prove that he left no stone 

unturned to prevent the carrying of opium.” (Emphasis added.) 

See, Lancashire Shipping Co., Limited, v. United States, 17 F. 

Supp. 573 (S.D.N.Y. 1936). 

b. Customs has administratively developed standards on a caseby-case basis. Customs will review the totality of the facts and

circumstances of each case, looking for evidence that a carrier 

took affirmative measures to discover narcotics on board its 

vessel, vehicle, or aircraft. (See, ARCA Airlines, LTDA v. United

States, et al., supra.)

c. The Carrier Initiative Program Agreements and the managers of 

the Carrier Initiative Programs in the Anti-Smuggling Division,

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Office of Field Operations at Headquarters provide guidance on 

the security measures carriers should take. Also review 19 

C.F.R. 123.72 for particular guidance regarding land border

situations. 

3. Example of carrier exercising the highest degree of care and diligence: 

a. An air carrier has followed all mandatory and recommended 

security measures as set forth in the Air Carrier Initiative

Program Agreement. However, a drug smuggler invents a 

novel and sophisticated approach to container seal tampering. 

Since the carrier has no prior experience with this new 

smuggling method, its standard operating procedures do not

address it. In this instance, Customs will find that the carrier 

exercised the highest degree of care and diligence. Customs 

therefore will not issue a penalty, with the caveat that the carrier 

should refine its standard operating procedures to address this

new threat. 

NOTE: If Customs seizes drugs from the same air carrier in a 

second incident involving the same type of container seal

tampering, a penalty should be issued since Customs gave the 

carrier prior notice that it should reexamine its standard 

operating procedures in this regard. 

4. Examples of a carrier’s failure to exercise the highest degree of care 

and diligence: 

a. Customs examines an unsealed refrigerator container on a sea 

vessel. The carrier has manifested the container as empty, when in 

fact, it contains 1,576 pounds of cocaine. The cocaine is packaged 

in metal boxes of different sizes and concealed beneath the 

container floor. Access to the narcotics is available through a hole 

cut into the floor. The hole is clearly visible since no attempt was 

made to cover it. In this scenario, the carrier clearly did not 

exercise the highest degree of care and diligence for several 

reasons: 1) a carrier should inspect the interior of all empty 

containers prior to being loaded onto a vessel since they are highly

susceptible to drug smuggling; 2) the hole in the floor is clearly 

visible and could have been easily detected by a visual inspection; 

and 3) there is no container seal. Customs should issue a penalty

in the amount of $25,216,000. 

b. While inspecting baggage on a bus arriving from Mexico, Customs 

discovers an unclaimed suitcase without a baggage tag affixed to it. 

The suitcase contains 75 pounds of marijuana. By failing to have in 

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place adequate baggage handling and tag control procedures, the 

bus carrier failed to exercise the highest degree of care and 

diligence. Customs should issue a penalty in the amount of 

$600,000. 

F. Strict liability and non-common carriers: 

If Customs finds unmanifested drugs on board or inside the merchandise

of a vessel, vehicle, or aircraft being operated as a non-common carrier, 

then the master, person in charge, owner, or any person directly or 

indirectly responsible is strictly liable for the violation (i.e., no need to 

perform the “knowledge/highest degree of care and diligence” analysis – 

proceed with issuing the penalty.) 

G. What is a common carrier? 

1. The initial determination of whether a vessel, vehicle, or aircraft is a 

common carrier depends upon the nature and character of the 

trade engaged in by the owner.

2. The salient characteristic of a common carrier is that “[h]e must be 

engaged in the business of carrying goods for others as a public 

employment, and must hold himself out as ready to engage in the 

transportation of goods for persons generally....[and] undertakes for 

all persons indifferently.” U.S. v. One (1) Liberian Refrigerator 

Vessel, 447 F. Supp. 1053 (M.D. Fla. 1977) (quoting, United States

v. Stephen Brothers Line, 384 F.2d 118 (5th Cir. 1967)). 

3. The general rule is, if a vessel, vehicle, or aircraft is being used to 

transport cargo or passengers for the public at large (e.g., dozens 

or hundreds of shipments of a wide variety of cargo), it is being 

operated as a common carrier and the “knowledge/highest degree 

of care and diligence” analysis described above should be used. 

However, if the carrier is transporting goods for private carriage 

only (e.g., time charterer or wet lease), then it is considered a noncommon carrier and strict liability applies. 

4. The rationale for this distinction is that courts have reasoned it is 

easier for a carrier engaged in private carriage to control the 

security of its conveyance and cargo than it is for a carrier engaged

in public carriage. 

5. The carrier has the burden of proving common carrier status.

Customs, however, may confer common carrier status on a carrier 

based on its own analysis of an individual case. 

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H. Examples of non-common carrier and strict liability: 

1. Customs discovers 150 pounds of unmanifested cocaine inside plastic 

trash bags on a sea vessel that arrived at Miami Customs Port. The 

evidence shows that at the time of arrival, the vessel was being 

operated under a time-charter agreement, i.e., a private contract 

between two parties. The vessel master does not provide any

evidence that the vessel was arriving in the U.S. to transport cargo for 

the public at large. Thus, the carrier is strictly liable for the penalty

since it was not operating as a common carrier at the time of the 

incident. 

2. A freight truck arrives in the United States from Mexico. Customs 

inspectors inspect the truck and find a few boxes that are of a different 

color and shape than most of the cargo. At this point, the Customs 

inspectors bring in a narcotic detector dog to examine the cargo. The 

dog alerts to the different-shaped boxes. Upon further inspection of 

the different-shaped boxes, the inspectors discover wrapped packages

containing a total of 458 pounds of marijuana. Since the truck was

being used to haul cargo only for the company that owned the truck,

and was not transporting goods for persons generally, it is not a 

common carrier. Therefore, the carrier is strictly liable for the penalty. 

Customs should issue a penalty in the amount of $3,664,000. 

 

I. Section 584(a)(2) penalties constitute a lien upon a vessel, vehicle, or 

aircraft which may be enforced by a libel in rem except that the master or 

owner of a vessel, vehicle, or aircraft used by any person as a common

carrier is not subject to the lien if Customs does not find either knowledge 

or the failure to exercise the highest degree of care. 

J. Clearance of any vessel, vehicle, or aircraft may be withheld until section 

584 drug penalties are paid or until a bond, satisfactory to the Customs 

Service, is given for the payment thereof. 19 U.S.C. 1584(a)(2); 19 C.F.R.

162.65(e).

K. The statute of limitations is five years and begins to run on the date of the 

violation (i.e., date of drug seizure). 19 U.S.C. 1621. 

II. FP&F OFFICER’S AUTHORITY 

A. All 19 U.S.C. 1584(a)(2) failure to manifest narcotic drug cases involving 

claims of $100,000 or less (except as noted in B. below). 

B. Exception: Refer all 19 U.S.C. 1584(a)(2) petitions involving members of 

the Air or Sea Super Carrier Programs to the Penalties Branch, Office of 

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Regulations & Rulings at Headquarters for decision. 

NOTE: Refer all narcotic drug seizures involving Air or Sea Super

Carriers to the appropriate program manager in the Anti-Smuggling 

Division, Office of Field Operations at Headquarters for approval to issue a 

penalty. (See, subsection IV., A., infra). 

III. PETITIONS FOR RELIEF 

A. Follow the usual petitioning procedures as set forth in 19 C.F.R., Part 171. 

B. Exception: Penalty Offset Program (See, subsection VI., infra). 

IV. SPECIAL PROCEDURES FOR CARRIERS PARTICIPATING IN

CUSTOMS INDUSTRY PARTNERSHIP PROGRAMS (IPP) 

A. Cases involving members of the Air Super Carrier Initiative Program (Air 

SCIP) and the Sea Super Carrier Initiative Program (Sea SCIP), upon 

referral to the appropriate Program Manager in the Anti-Smuggling 

Division of the Office of Field Operations (as noted in subsection II. B. 

above), will be reviewed by the National Accounts Board (NAB; also

known as National Accounts Review Board) and then referred to the 

Executive Oversight Committee (EOC). 

NOTE: Cases involving Air and Sea carriers that are not formally 

designated as “Super Carriers” by the Anti-Smuggling Division are not 

eligible for National Accounts review. 

1. The EOC and NAB are the established authorities to, among 

other things, review, determine assessment, and mitigate 

National Accounts cases. 

2. The NAB will periodically review National Accounts cases to

determine if individual cases involving a Super Carrier should be 

assessed and make such recommendations to the EOC. 

3. For those cases that will be assessed with the final approval of

the EOC, the following formula will be used: 

Total Incidents = Assists + Foreign Intercepts + Culpable 

Incidents. 

The resulting number will constitute the Performance Standard by 

which the assessment will be determined. Example: 

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Statutory Liability = $1,000,000.00 

Performance Standard = 75.5% 

Penalty assessment will = 24.5% 

Actual penalty amount = $245,000.00 

B. Penalties involving members of Air CIP and Sea CIP that are not

members of the SCIP, and penalties involving members of the LBCIP or

Rail CIP will be either assessed or mitigated as follows:

1. Penalties that represent the first culpable incident of 19 U.S.C. 

1584(a)(2) within a two-year period for a member of either the Air CIP 

or Sea CIP will be assessed at no more than 50% of the statutory 

amount in accordance with the Air Carrier Initiative Agreement and 

Sea Carrier Initiative Agreement, respectively. 

2. Penalties that represent the second or more culpable incident of 19 

U.S.C. 1584(a)(2) within a two-year period for a member of either the 

Air CIP and Sea CIP will be assessed at the full statutory amount in 

accordance with the Air Carrier Initiative Agreement and Sea Carrier 

Initiative Agreement, respectively. 

3. Penalties that represent the first culpable incident of 19 U.S.C. 

1584(a)(2) within a two-year period for a member of the LBCIP and 

Rail CIP will be preliminarily mitigated (before a Penalty Notice is

issued) to no more than 50% of the statutory amount in accordance 

with the Land Border Carrier Initiative Agreement and Rail Carrier 

Initiative Agreement, respectively. 

4. Penalties that represent the second or more culpable incident of 19 

U.S.C. 1584(a)(2) within a two-year period for a member of the LBCIP 

and Rail CIP will be assessed at the full statutory amount in 

accordance with the Land Border Carrier Initiative Agreement and Rail 

Carrier Initiative Agreement, respectively. 

5. If at least two years have elapsed since the last culpable incident for 

either an Air CIP, Sea CIP, LBCIP, or Rail CIP member, the next

culpable incident will be considered the first for the purposes of 

determining penalty assessment under this subsection. 

C. Mitigation of 19 U.S.C. 1584(a)(2) penalties is to be done in accordance 

with the guidelines as delineated in the subsection entitled, “PENALTY 

MITIGATION.” 

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V. PENALTY MITIGATION

A. If there is sufficient evidence that any carrier had knowledge of the 

narcotics being smuggled onboard the conveyance or inside the cargo,

then no mitigation is allowed. 

B. If a common carrier lacked knowledge of the smuggled narcotics, but 

failed to exercise the highest degree of care and diligence, or a noncommon carrier is found strictly liable, then the following mitigation 

guidelines apply: 

1. Negligence: mitigate to 10-25% of assessed penalty; 

2. Gross Negligence: mitigate to 25-50% of assessed penalty. 

C. The actual mitigation amount within the above ranges depends upon the 

presence of mitigating and aggravating factors. Please note that the 

following are not exhaustive lists; other factors may be considered. 

1. Mitigating Factors: 1st violation within a two-year period; immediately

undertakes a thorough post-seizure analysis and implements remedial

measures; active member in one of the Industry Partnership Programs; 

proven record of security practices and procedures; history of 

extraordinary cooperation with Customs. 

2. Aggravating Factors: numerous violations; delayed or incomplete postseizure analysis and fails to implement remedial measures; nonmember or inactive member in one of the Industry Partnership 

Programs; lacks basic security practices and procedures; history of

non-cooperation with Customs. 

D. NOTE: if a common carrier lacks knowledge and exercised the highest

degree of care and diligence, then there is no penalty liability (see

subsection I., E., 2. and 3., supra).

VI. PENALTY OFFSETS 

A. Subsequent to an initial petition penalty decision letter issued by either the 

port or Headquarters, any carrier (including both members and nonmembers of the Industry Partnership Programs) is eligible to participate in 

Customs “Penalty Offset Program.” In effect, a carrier may receive 

monetary credit towards its penalty liability or recoup some or all of the 

penalty already paid to Customs when it purchases and installs what

Customs believes to be “extraordinary security equipment.” 

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B. The amount of the penalty offset (or refund) is equal to the cost of the 

security equipment (“dollar-for-dollar” match), plus 10% of that cost for 

administrative overhead. 

C. Examples of “extraordinary security equipment” include: remote cameras, 

X-ray equipment, closed-circuit television (CCTV), etc. 

D. The policy behind the penalty offset program is that Customs prefers to 

prevent drug smuggling instead of making seizures and issuing penalties. 

E. Advise carrier to submit a “Request for Penalty Offsets.” Forward the 

request to the appropriate program manager in the Anti-Smuggling 

Division, Office of Field Operations at Headquarters for decision. 

F. The appropriate program manager will issue a penalty offset decision,

either approving or denying (in whole or in part) the offset request. The 

program manager will then send a copy of the decision to the originating 

FP&F Officer, who in turn should forward a copy to the carrier. 

G. Refer to “Industry Partnership Handbook” to be published by the AntiSmuggling Division, Office of Field Operations, for further details of the 

penalty offset program. 

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BROKER PENALTIES - 19 U.S.C. 1641 

APPENDIX C TO PART 171, CUSTOMS REGULATIONS 

Overview 

Per 19 U.S.C. 1641(a)(2), “Customs business” means those activities involving 

transactions concerning the entry and admissibility of merchandise, its classification 

and valuation, the payment of duties, taxes, or other charges assessed or collected 

by Customs on the merchandise by reason of its importation, or the refund, rebate 

or drawback thereof. It also includes the preparation of documents or forms in any

format and the electronic transmission of documents, invoices, bills, or parts

thereof, intended to be filed with the Customs Service in furtherance of such 

activities, whether or not signed or filed by the preparer, or activities relating to such 

preparation, but does not include the mere electronic transmission of data received 

for transmission to Customs. In order to conduct such business, an individual or

corporation must be a licensed Customs broker. 

All licensed brokers must exercise responsible supervision and control over the 

Customs business that they conduct. Brokers also are required to maintain certain 

standards of conduct. The violation of those standards results in sanctions, which 

include license revocation or suspension or assessment of monetary penalties. 

Under title 19, United States Code, section 1641(d)(2)(A) (19 U.S.C. 1641(d)(2)(A)), 

Customs may assess monetary penalties against brokers who violate the specific

provisions of the statute. Customs has published guidelines as Appendix C to Part 

171, Customs Regulations (19 C.F.R. Part 171, App. C). 

Pursuant to 19 C.F.R. 111.92(a), Customs first will issue a written prepenalty notice 

that advises the broker or other person of the allegations or complaints against

them. It also will explain that a person has a right to respond to allegations or 

complaints in writing within 30 days of the date of mailing of the notice. If the 

broker or other person files a timely response to the prepenalty notice, the FP&F

Officer will review the response and either cancel the claim, issue a notice of 

penalty in an amount which is lower than that provided for in the written prepenalty

notice or issue a penalty notice in the same amount. See, 19 C.F.R. 111.92(b). 

19 U.S.C. 1641(b)(4) provides that a broker shall exercise responsible supervision 

and control over customs business it conducts. 19 U.S.C. 1641(b)(6) provides that 

anyone who intentionally transacts customs business, other than for their own 

behalf, without holding a valid license, is liable for a penalty not to exceed $10,000 

for each transaction as well as for each violation of any other provision. Finally, 19

U.S.C. 1641(d)(2)(A) provides that Customs may impose a monetary penalty, not to 

exceed $30,000 total. This penalty is in lieu of any license revocation or suspension 

action that might be undertaken under 19 U.S.C. 1641(d)(2)(B). The provisions of

19 U.S.C. 1641(d)(1) allow for imposition of a monetary penalty if it is shown that a 

broker: 

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(A) made or caused to be 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; 

(B) at any time after the filing of a license or permit application, has been

convicted of any felony or misdemeanor which: involved the importation/ 

exportation of merchandise; arose out of the conduct of its customs business; or 

involved larceny, theft, robbery, extortion, embezzlement, etc.; 

(C) has violated any provision of any law, or attendant rules or regulations, 

enforced by Customs; 

(D) has counseled, commanded, induced, procured, knowingly aided or abetted 

another person's violations of any provision of any law, or attendant rules or

regulations, enforced by Customs; 

(E) has knowingly employed, or continues to employ, any person convicted of a 

felony without Customs' written approval; and 

(F) has in the course of Customs business, with intent to defraud, willfully and

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

The monetary penalties are subject to mitigation under normal petitioning 

procedures. 

For recordkeeping violations, consistent with 19 U.S.C. 1509(g)(4)(B), Customs will 

not impose penalties, under 1509, but rather 1641. 

Customs Guidelines for the Imposition and Mitigation of Penalties for 

Violations of 19 U.S.C. 1641 

The Trade and Tariff Act of 1984 promulgated numerous changes to the current 

statute relating to Customs brokers. The following document attempts to define that 

conduct which is to be proscribed and to suggest penalty amounts to be assessed 

for such violations. It also chronicles procedures to be followed in assessment and 

mitigation of penalties. 

NOTE: Assessment of a monetary penalty is an alternative sanction to revocation 

or suspension of the broker's license or permit. 

I. Penalty Assessment Procedures – 19 C.F.R. Part 111, Subpart E 

A. When a penalty against a broker is contemplated, the “appropriate Customs 

officer”, (i.e., the Fines, Penalties, and Forfeitures Officer) shall issue a written 

notice which advises the violator of the allegations which would warrant 

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imposition of a penalty. The written notice shall be in a format similar to a 

prepenalty notice that would be issued in contemplation of assessment of a 

penalty under section 1592 or 1584. 

B. The written notice shall inform the violator that he has 30 days to respond as 

to why a penalty should not be issued. See, 19 C.F.R. 111.92. 

C. If no response is received from the violator, or, if after receipt of the response, 

it is determined that the penalty should be issued as stated in the prepenalty 

notice, a notice of penalty CF–5955A shall be issued formally assessing a 

monetary penalty against the broker. 

D. The Fines, Penalties, and Forfeitures Officer may reduce the amount of the 

contemplated penalty or cancel its issuance altogether if, after review of the 

violator's submission in response to the prepenalty notice, he is satisfied that the 

acts which are the basis for the penalty did not occur as charged or occurred in a 

manner that would permit a reduction in the contemplated penalty. 

E. After issuance of a penalty notice, the petitioning provisions of part 171 of the 

Customs Regulations are in effect. 

F. If the broker does not comply with a final mitigation decision within 60 days, 

the matter shall be referred to the Department of Justice for commencement of 

judicial action. 

II. Penalty Assessment – Conducting Customs Business Without a 

License (19 U.S.C. 1641(b)(6)) 

A. No person may conduct Customs business, other than solely on behalf of that 

person, without a broker's license. 

B. Penalty amount: 

1. The maximum penalty for any one incident of conducting Customs 

business without a license is $10,000. 

2. Total aggregate penalties for violation of this or any other section of the 

broker penalty statute is $30,000. As a general rule, $10,000 will be the 

maximum assessment for a violation solely involving conducting Customs 

business without a license, without regard to the frequency of violations. In 

particularly aggravated circumstances, this rule shall be suspended. 

C. Customs business includes: 

1. Classification and valuation. 

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2. Payment of duties, taxes or other charges. 

3. Drawback or refund of duties. 

4. Filing of entries or other documents relating to issues covered by 1–3. 

D. Customs business does not include: 

1. Marine transactions.

2. In-bond movement or transportation of merchandise.

3. Foreign Trade Zone admissions. See, C.S.D. 84–23. 

E. Penalty amounts to be imposed for transacting Customs business without a 

license are as follows:

1. No penalty action when importation is conducted on behalf of a family 

member. For purposes of this subsection, “family member” is defined as a 

parent, child, spouse, sibling, grandparent or grandchild. 

2. No penalty action against an individual who has a power of attorney to 

act as an unpaid agent on a non-commercial shipment. See, 19 C.F.R. 

141.33. 

3. A $250 penalty for: 

a. First violation when transaction is non-commercial but is

conducted on behalf of any business entity, or 

b. First violation where the importation is commercial in nature (i.e., 

imported merchandise is for resale) or where the violator is

compensated for his action, e.g., an importation of raw material or 

parts of merchandise that is to be manufactured, refined or 

assembled here before resale would be a commercial entry 

because the merchandise eventually would be resold, albeit in 

another form than that which it was entered. 

4. A $1,000 penalty for repeat violation involving: 

a. Commercial importation. 

b. Non-commercial importation made on behalf of a business entity. 

c. Non-commercial importation for which compensation is received 

by the violator. 

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5. A $10,000 penalty when: 

a. Violator falsely holds himself out as being a licensed Customs 

broker. 

b. A continuing course of conduct can be shown (determined by 

frequency of violations or number of entries involved) which would 

indicate that the violator is entering merchandise for others on a 

regular commercial basis, e.g., if the violator has incurred 

numerous penalties under subsections (3) and (4) above, but the 

smaller penalties have had no deterrent effect, the $10,000 penalty

under this subsection should be assessed in an action separate 

from those smaller penalties. 

F. Mitigation—No mitigation will be afforded for any violation involving conducting 

Customs business without a license unless the violator can show an inability to 

pay such penalty. 

G. IMPORTANT: As a general rule, a separate penalty should not be imposed for 

each unlawful Customs business transaction if numerous transactions occur 

contemporaneously. For example: 

1. If an unlicensed individual files six commercial entries at one time, that

should be treated as one violation. It should not be treated as six 

violations because the entries were presented contemporaneously. 

2. If Customs discovers that an individual has conducted Customs

business without a license on numerous occasions, but such individual 

acted without knowledge of the prohibition on such conduct, those 

numerous transactions should be treated as one violation for purposes of 

imposition of any penalty. 

H. NOTE: Conducting Customs business without a license is not the same 

violation as conducting Customs business without a permit. The latter violation is

discussed later in this appendix in the section involving Violation of Other Laws

or Regulations Enforced by Customs. 

I. Intent to violate the law is not an element of this violation. Reference to 

“intentionally transacts Customs business” in subsection 1641(b)(6) relates to the 

intentional transaction of the business itself, not to any intentional attempt to 

violate the terms of the statute. 

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III. SECTION 1641(d)(1)(A)—MAKING A FALSE OR MISLEADING 

STATEMENT OR AN OMISSION AS TO MATERIAL FACT WHICH 

WAS REQUIRED TO BE STATED IN ANY APPLICATION FOR A 

LICENSE OR PERMIT 

A. If the license would not have been issued but for the false statement, the 

proper sanction would be suspension or revocation of the license. If the false or 

misleading statement would not have absolutely resulted in the denial, revocation 

or suspension of a license, then penalty sanctions are proper. 

B. Material facts include but are not limited to: 

1. Facts as to identity. 

2. Facts as to citizenship status of an individual. 

3. Facts as to moral character of an individual which relate to his fitness to 

conduct Customs business. 

4. The organization of any corporation, association or partnership. 

5. The status of the license of a license holder who is a corporate officer or 

partner. 

C. Penalty Amount—$5,000 for each false statement, to a maximum of $30,000. 

D. Examples of situations where revocation of the license is appropriate. 

1. An applicant states that he is 21 years old (as required by 19 C.F.R.

111.11) and he is not. But for the false statement, the applicant could not

meet the age requirement for a license. 

2. An applicant provides an alias in the application which is a material

false statement as to identity. 

E. Mitigation guidelines. 

1. Violation due to clerical error (clerical error as defined by 19 U.S.C.

1520(c)(1)), mitigated without payment. 

2. Violation due to negligence. 

a. This is defined as more than clerical error, but not an intentional 

violation. Examples include: 

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i. Failing to list a new corporate office because corporate 

records have not been kept current. 

ii. Listing an incorrect address for a reference because 

applicant has failed to update his records. 

b. Mitigate to $500 for each $5,000 penalty assessed. 

c. This category excludes cases of harmless error, i.e., a mistake 

which could not possibly harm the government's interests. Cases 

falling in this category should be mitigated in full. 

3. Intentional violations—Revocation of a license which has been 

granted is the preferred sanction. If no license has been granted, no 

mitigation. 

IV. SECTION 1641(d)(1)(B)—BROKER CONVICTED OF CERTAIN 

FELONIES OR MISDEMEANORS SUBSEQUENT TO FILING 

LICENSE APPLICATION 

A. As a general rule, license revocation is the standard sanction for these 

violations. If the conviction occurs subsequent to the filing of an application,

monetary penalties may be assessed according to the following criteria. 

B. Unlawful conduct must relate to: 

1. Importation or exportation of merchandise. 

2. Conduct of Customs business (this shall include violations relating to 

taxes and duties and documents required to be filed with regard to such

taxes and duties). 

3. Relevant convictions would include: 

a. 18 U.S.C. 1001—making a false statement to Customs or any

other agency with regard to any relevant transaction. 

b. 18 U.S.C. 545—unlawful importation of merchandise. 

c. 18 U.S.C. 542—unlawful importation by means of a fraudulent

act or omission. 

d. 22 U.S.C. 2778—illegal exportation of munitions. 

C. Monetary penalties may not be imposed in connection with convictions

relating to conduct described in subsection 1641(d)(1)(B)(iii) including larceny, 

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theft, robbery, extortion, counterfeiting, fraudulent concealment or conversion, 

embezzlement or misappropriation of funds. Either suspension or revocation is

the appropriate penalty for these infractions. 

D. Penalty amounts. 

1. $15,000 for a misdemeanor conviction. 

2. $30,000 for a felony conviction. 

E. Mitigation. 

1. For a misdemeanor conviction, mitigation to a lesser amount is 

permitted if the conviction related to Customs business and the domestic 

value of the merchandise involved is less than $15,000. In such case,

mitigation to an amount equal to the domestic value of the merchandise is

appropriate. 

2. For other misdemeanor convictions, no relief. 

3. Felony convictions, no relief. 

V. SECTION 1641(d)(1)(C)—VIOLATION OF ANY LAW ENFORCED 

BY THE CUSTOMS SERVICE OR THE RULES OR REGULATIONS 

ISSUED UNDER ANY SUCH PROVISION 

A. Penalties under this section may be imposed in addition to any penalty 

provided for under the law enforced by Customs. Exception: Penalties imposed 

against a broker under 19 U.S.C. 1592 at a culpability level of less than fraud or 

under 19 U.S.C. 1595a(b) shall not be imposed in addition to a broker's penalty. 

B. Additional penalties under this section shall also be imposed against any

broker where the other statute violated only moves against property, or the 

violator has demonstrated a continuing course of illegal conduct or evidence

exists which indicates repeated violations of other statutes or regulations. 

C. Conducting Customs business without a permit penalties should be assessed 

under this section. 

1. The penalty notice should also cite 19 C.F.R. 111.19 as the regulation 

violated. A party operating without a permit is required to apply for one 

under the above-noted regulation.

2. Assessment amount—$1,000 per transaction conducted without a 

permit. 

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3. Mitigation. 

a. Negligence, mitigate to $250–$500 per transaction depending on 

the presence of mitigating factors (lack of knowledge of permit 

requirement). 

b. Intentional, grant no relief. 

c. No mitigation if permit revoked by operation of law. 

4. Generally, a separate penalty should not be assessed for each 

non-permitted transaction if numerous transactions occurred 

contemporaneously. For example, if a broker files 30 entries the day after

a permit expires, the 30 filings should be treated as one violation, not 30 

separate violations. 

D. Penalties for failure to exercise due diligence in payment, refund or deposit of 

monies received from clients in connection with clients’ Customs business also 

should be assessed under this section. This includes failure to pay over to a 

client, or file a written statement to a client accounting for, funds received. 

1. The penalty notice should also cite 19 C.F.R. 111.29 as the regulation 

violated. 

2. Assessment amount—an amount equal to the value of any monies up 

to a maximum of $30,000, to be deposited with Customs or refunded or 

accounted for to a client. 

3. No mitigation shall be afforded until the monies are properly paid to 

Customs or refunded or accounted for to the clients. 

4. If any claims for liquidated damages result against the client's bond 

from the failure to pay monies to Customs, no mitigation from the penalty 

shall be granted until the claim for liquidated damages is settled by the 

violating broker either through payment of the full claim or a mitigated 

amount. 

5. After monies are paid or accounted for and/or liquidated damages

claims are settled as stated in 3. and 4. above, mitigation may be afforded. 

If the violator is found to be negligent, the penalty may be mitigated to an 

amount between 25 and 50 percent of the assessed amount, but no lower

than $250. No mitigation from an intentional violation. 

E. Penalties for failure to retain powers of attorney from clients to act in their 

names. 

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1. The penalty notice should also cite 19 C.F.R. 141.46 as the regulation 

violated. 

2. Assessment amount—$1,000 for each power of attorney not on file. 

3. Mitigation—for a first offense, mitigate to an amount between $250 and 

$500 unless extraordinary mitigating factors are present, in which case full 

mitigation should be afforded. An extraordinary mitigating factor would be 

a fire, theft or other destruction of records beyond broker control. 

Subsequent offenses—no mitigation unless extraordinary mitigating 

factors are present. 

4. Penalty should be mitigated in full if it can be established that a valid 

power of attorney had been issued to the broker, but it was misplaced or 

destroyed through clerical error or mistake. 

F. If the other statute violated moves only against property, the violator shall incur

a monetary penalty equal to the domestic value of such property or $30,000,

whichever is less. For example, a violation of 22 U.S.C. 401 for unlawful 

exportation of merchandise results in seizure and forfeiture of the violative 

merchandise. There are no penalty provisions, which Customs enforces against 

parties responsible for the offense. If brokers are recalcitrant and are constantly 

responsible for offenses, which result in seizure of merchandise, a penalty equal 

to the domestic value of such merchandise (in no case to exceed $30,000) 

should be imposed. 

G. Use of a broker's importation bond to aid an importer who has had his

immediate delivery privileges revoked. 

1. The broker has aided his client in avoiding the immediate delivery 

sanctions. The penalty notice should cite 19 C.F.R. 142.25(c) as the 

regulation violated. Before assessment of this penalty, the broker should 

be shown to have known or been negligent in not knowing of the client's

sanction. 

2. A penalty equal to the value of the merchandise, not to exceed $30,000,

should be assessed. 

3. Mitigation—The penalty shall be mitigated to an amount between 25 

and 50 percent of that assessed for a first violation where negligence is

shown. Any knowing violation or a subsequent negligent violation (not 

necessarily involving the same client) will result in no mitigation. 

H. If the other statute violated provides for a personal penalty, the violator shall 

incur an additional monetary penalty under this section equal to such personal 

penalty or $30,000, whichever is less. 

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I. Penalties assessed under this provision are not limited to violations just 

involving Customs business as defined in the statute. 

J. Mitigation guidelines. 

1. If the other law violated moves only against property, mitigate the 

penalty using guidelines in effect for the other statute violated. For 

example, if the broker is responsible for a § 401 seizure of merchandise 

valued at $45,000, he incurs a penalty of $30,000. The guidelines for

remission of the § 401 forfeiture are applicable to mitigation of the broker 

penalty. Thus, if the forfeiture is remitted upon payment of 5 percent of the 

merchandise's value, the penalty will be mitigated upon payment of a like 

amount. 

2. If the other law violated provides for a personal penalty, mitigate the 

broker penalty using guidelines in effect for the other statute violated. For 

example, a broker incurs a $40,000 penalty under § 1592. The penalty

amount represents eight times the loss of revenue because a preliminary

finding of fraud is made (See, section V.A. of this appendix). A penalty of

$30,000, in addition to the $40,000 penalty issued under § 1592, may be 

assessed. The 1592 penalty is later mitigated to $25,000, an amount 

equal to five times the loss of revenue, as the finding of fraud is upheld 

and it is also determined that the broker shared in the financial benefits of 

the violation. The broker penalty also should be mitigated to that $25,000 

figure, for a total collection of $50,000. 

VI. SECTION 1641(d)(1)(D)—COUNSELING, COMMANDING, 

INDUCING, PROCURING OR KNOWINGLY AIDING AND 

ABETTING VIOLATIONS BY ANY OTHER PERSON OF ANY LAW 

ENFORCED BY SERVICE 

A. If the law violated by another moves only against property, a monetary penalty 

equal to the domestic value of such property or $30,000 whichever is less, may 

be imposed against the broker who counsels, commands or knowingly aids and 

abets such violation. 

B. If the law violated provides for only a personal penalty against the actual 

violator, a penalty may be imposed against the broker in an amount equal to that 

assessed against the violator, but in no case can the penalty exceed $30,000. 

C. If the broker is assessed a penalty under the statute violated by the other 

person, he may be assessed a penalty under this section in addition to any other 

penalties. 

D. Examples of violations of this subsection:

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1. A broker counsels a client that certain gemstones are absolutely free of 

duty and need not be declared upon entry into the United States. The 

client arrives in the United States and fails to declare a quantity of 

gemstones worth $45,000. A penalty of $30,000 may be imposed against

the broker for such counseling. The client would incur a personal penalty

of $45,000 under the provisions of title 19, United States Code, section 

1497, but the penalty against the broker cannot exceed $30,000. 

2. A client imports $15,000 worth of merchandise by vessel. The 

merchandise is unladen at the wharf but Customs has not appraised or 

released it. Customs informs the broker that the shipment must be held for 

an intensive examination. The broker informs the client that the 

merchandise can be moved and delivered to the consignee. The broker

assures his client that he will handle all the necessary paperwork. The 

merchandise is moved from the wharf. The broker is subject to a $15,000 

penalty for counseling and inducing his client to violate the provisions of

title 19, United States Code, section 1448 and title 19, United States

Code, section 1595a(b). 

E. Mitigation—Follow guidelines applicable to the other penalty or forfeiture 

statute involved. 

VII. SECTION 1641(d)(1)(E)—KNOWINGLY EMPLOYING OR 

CONTINUING TO EMPLOY ANY PERSON WHO HAS BEEN 

CONVICTED OF A FELONY, WITHOUT WRITTEN APPROVAL OF 

SUCH EMPLOYMENT FROM THE SECRETARY OF THE 

TREASURY 

A. A broker has 30 days to seek approval of the Secretary for such employment. 

If he seeks the approval within such time, no penalty will be assessed. 

B. A $5,000 penalty for knowingly employing any convicted felon and failing to 

make application with the Secretary approving such employment within 30 days

of the date of discovery of the felony conviction. 

C. A $25,000 penalty for knowingly employing any convicted felon without 

seeking approval for employment. 

D. A $30,000 penalty for knowingly employing any convicted felon and continuing 

to employ the same (or him/her) after approval has been denied (generally

revocation or suspension of the license would be appropriate under this 

circumstance). 

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E. Example: If a broker unknowingly employs a convicted felon and 1 year after

employment discovers the existence of such a conviction, the following actions 

would dictate imposition of a penalty: 

1. If he seeks approval of the Secretary within 30 days after discovery of 

the existence of the conviction, no penalty will be assessed. 

2. If he seeks approval at some time after 30 days from the date of 

discovery, a $5,000 penalty would lie. 

3. If he does not seek approval until after Customs becomes aware of the 

violation, a $25,000 penalty would lie. 

4. If he seeks approval, but is denied, and continues to employ the 

convicted felon, a $30,000 penalty would lie. 

F. Customs discovery of a felony conviction. If Customs discovers the felony

conviction and there is no indication that the employer is aware of same,

Customs may inform the employer of such conviction. Discretion should be used 

in divulging this information. 

G. Mitigation will only be permitted from the $5,000 penalty as follows: 

1. If the application for approval is submitted within 60 days, but after 30 

days, mitigate to $2,000. 

2. If there is no application beyond the 60-day period, no mitigation shall 

be granted. Continued employment will result in further penalties as

described above in sections E.3 and E.4. 

VIII. SECTION 1641(d)(1)(F)—IN THE COURSE OF CUSTOMS 

BUSINESS, WITH INTENT TO DEFRAUD, KNOWINGLY 

DECEIVING, MISLEADING OR THREATENING ANY CLIENT OR 

PROSPECTIVE CLIENT 

A. An unsubstantiated accusation by a client is inadequate basis to assess any 

penalty under this section of law. 

B. A $30,000 penalty should be imposed for any violation of this section. 

C. Mitigation—Inasmuch as evidence of intent must be shown before a penalty

can be imposed, no mitigation should be permitted if a violation is found to lie. A 

petition for mitigation could be entertained only on the issue of whether such 

violation did, in fact, occur. 

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IX. SECTION 1641(b)(5)—THE FAILURE OF A CUSTOMS BROKER 

THAT IS LICENSED AS A CORPORATION, ASSOCIATION OR 

PARTNERSHIP TO HAVE, FOR ANY CONTINUOUS PERIOD OF 

120 DAYS, AT LEAST ONE OFFICER OF THE CORPORATION OR 

ASSOCIATION OR ONE MEMBER OF THE PARTNERSHIP 

VALIDLY LICENSED 

A. Important: Violation of this section results in the revocation of the broker's

license by operation of law. 

B. A $10,000 penalty may be imposed pursuant to section 1641(b)(6) because 

the revocation by operation of law results in the broker conducting Customs 

business without a license. No penalty liability would be incurred specifically

under section 1641(b)(5). 

C. Mitigation—Grant no mitigation from any penalty incurred by a broker for 

conducting Customs business without a license as a result of revocation of that 

license by operation of law. 

X. SECTION 1641(c)(3)—FAILURE OF A CUSTOMS BROKER 

GRANTED A PERMIT TO CONDUCT BUSINESS IN A CERTAIN 

DISTRICT TO EMPLOY, FOR A CONTINUOUS PERIOD OF 180 

DAYS, AT LEAST ONE INDIVIDUAL WHO IS LICENSED WITHIN 

THE DISTRICT OR REGION 

A. Important: Violation of this section results in the revocation of a permit by 

operation of law. 

B. Penalties may be imposed for violation of the provisions of 1641(d)(1)(C),

violation of other laws enforced by Customs. Guidelines for imposition of

penalties for conducting Customs business without a permit should be followed. 

C. Mitigation—No mitigation should be permitted from any penalty imposed for 

failure to have a permit when the permit lapses by operation of law. 

XI. SECTION 1641(b)(4)—FAILURE OF A LICENSED BROKER TO 

EXERCISE RESPONSIBLE SUPERVISION AND CONTROL OVER 

THE CUSTOMS BUSINESS THAT IT CONDUCTS 

A. Standards of responsible supervision and control shall be issued by the 

Commissioner of Customs. Statutory authority to set such standards is provided 

by section 1641(f). 

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NOTE: All penalties assessed for violation of 1641(b)(4) shall also cite section 

1641(d)(1)(C) as the statute violated in all notices issued to the alleged violator. 

B. The following penalty amounts shall be assessed against brokers who fail to 

exercise responsible supervision and control over business conducted at district 

level. 

1. A penalty of $1,000 against any broker who: 

a. Continuously makes the same errors on a particular type of 

entry; 

b. Fails to properly instruct employees about Customs business, 

thereby resulting in the filing of incorrect entries or the mishandling 

of transactions relating to Customs business; 

c. Knowingly allows his entry bond to be used to effect release of 

merchandise in districts where he does not have a license or permit 

(this is imposed in addition to any penalty for conducting Customs 

business without a license); 

d. Fails to comply with regulations or procedures but does not 

commit violations that would warrant any higher penalty amount as

described below. 

2. A penalty of $5,000 against any broker who, when requested, is unable 

to produce documents relating to specific Customs business which are 

material to that business (e.g., if the business regards an entry he should 

have the invoice, packing list, etc.). This requirement excludes documents 

not required to be kept by a broker. 

3. A penalty of $5,000 against any broker who is unable to satisfy the 

deciding Customs official that he has a working knowledge of any

operation material to his ability to render valuable service to others in the 

conduct of Customs business. 

Examples include: 

a. A working knowledge of all automated systems in use in the 

district; 

b. A knowledge of the cash flow procedures in each district of 

operation; 

c. Retention of copies of all surety bonds in proper form and in 

sufficient dollar amount; 

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d. Knowledge of filing systems and document record storage in 

each district; 

e. Continuous monitoring to ensure timely payment of all 

obligations including duties, taxes and refunds. 

4. A penalty of $5,000 against any broker who fails to exercise responsible 

supervision and control over the Customs business that it conducts as

defined in section XI.C. of this appendix. 

5. A penalty of $10,000 against any broker who is found to have failed to 

maintain satisfactory accounting records or records of documents filed 

with Customs on any matter. 

C. The following factors shall be indicative of a lack of supervision or lack of 

working knowledge of Customs procedures (the list is not conclusive): 

1. A high rate of entry rejections when compared with other brokers in the 

permitted district. 

2. A high rate of late filing liquidated damages cases when compared with 

other brokers in the permitted district. 

3. In the case of entry summaries filed in the broker's name, a high 

number of missing document cases when compared with other brokers in 

the permitted district. 

4. An inordinate number of entries for which free entry is claimed, but no 

documentation supporting such claim is submitted, resulting in liquidation

of the entries as dutiable. 

5. Inability to assist or failure to cooperate with an audit, including failure to 

provide all records and any other necessary information pertaining to a 

broker's Customs business to assist auditors. 

6. Failure to settle (including petitioning) liquidated damages claims in a 

timely manner. 

7. Evidence to indicate that timely duty refunds to clients are not made or 

accounted for and adequate records of same are not kept (usually will 

result in penalty assessed in accordance with section B.5. above). 

8. Employing a licensed individual for a minimal number of days each 120-

or 180-day period (See, sections 1641(b)(5) and 1641(c)(3) so as to avoid 

violation of the statute. 

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a. For purposes of imposition of penalties under this subsection, a 

minimal number of days shall be 10 working days for each 120-day 

period or 15 working days for each 180-day period. 

b. It shall be presumed that temporary employment of such a 

licensed individual is undertaken solely to avoid revocation of a 

license or permit. Such minimal employment shall be prima facie 

evidence of lack of supervision. 

D. Mitigation. 

1. $1,000 penalties shall not be mitigated unless the broker can show that

extraordinary mitigating factors are present. 

2. $5,000 penalties for failure to produce documents may be mitigated to 

an amount between $2,000 and $3,500 if the documents are produced but

not in a timely fashion. No mitigation shall be afforded if the documents 

are not produced, unless the broker can satisfactorily demonstrate that 

such failure to produce was caused by circumstances beyond the control 

of the broker or his client (e.g., a rupture of relations with the party

responsible for generating the documents). Full mitigation shall be 

afforded in the case of destruction of records by events beyond a broker's 

control, such as theft, flood, fire or other acts of God. 

3. $5,000 penalty for failure to have a working knowledge of any operation 

for which a broker is licensed to do business may be mitigated to a lesser

amount upon a showing by the broker that steps have been taken to 

improve instruction and supervision of employees and an improvement in 

the knowledge of his operation occurs. 

4. $5,000 penalty for failure to exercise responsible supervision and 

control may be mitigated to a lesser amount if the broker immediately

corrects the problem which was the basis for the assessment and 

sufficiently monitors the situation to avoid recurrence. 

5. $10,000 penalty for failure to maintain satisfactory accounting records 

will only be subject to mitigation in full if the broker can prove that 

satisfactory accounting records and documents records are being kept. 

Mitigation in a lesser degree may be afforded upon a showing by the 

broker that a bona fide attempt was made to establish a satisfactory 

accounting and/or recordkeeping system, or upgrade a deficient system, 

but such efforts proved unsuccessful or only partially effective. 

6. Penalty equal to the value of monies not properly paid or accounted for. 

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a. If the broker shows that the monies were paid or accounted for 

and requisite notifications were made, albeit in an untimely fashion 

not to exceed 30 days after any due date, the penalty may be 

mitigated upon payment of 25 percent of the assessed amount, but 

no less than $250. 

b. If the monies were paid and notifications made more than 30 

days after any due date, the penalty may be mitigated upon 

payment of 50 percent of the assessed amount, but not less than 

$1,000. 

c. If there is no proof of proper payment of duties, refunds, etc., no 

mitigation shall be granted. 

XII. LIMITS OF PENALTY ASSESSMENTS 

A. A broker shall be penalized a maximum of $30,000 for any violation or

violations of the statute in any one penalty notice. 

B. If a broker is penalized to the maximum the statute will allow and continues to 

commit the same violation or violations, revocation or suspension of his license 

would be the appropriate sanction. Barring such revocation or suspension 

action, he may again be penalized to the maximum the statute will allow. 

C. From any one audit, the maximum aggregate penalty for all violations 

discovered is $30,000. 

XIII. CONSOLIDATION OF CASES 

Whenever multiple penalties arising from a particular fact situation or pattern are 

contemplated against brokers or individuals operating in different ports, the cases 

may be consolidated in one port. Approval for consolidation must be sought from 

the Brokers Compliance Branch, Office of Trade Compliance at Headquarters. 

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DRAWBACK PENALTIES - 19 U.S.C. 1593A 

APPENDIX D TO PART 171, CUSTOMS REGULATIONS (T.D. 00-5) 

Overview 

On December 8, 1993, the President signed into law the North American Free 

Trade Agreement Implementation Act (Public Law 103-182, 107 Stat. 2057). Title 

VI of that Act contained provisions pertaining to Customs Modernization and thus is

commonly referred to as the Customs Modernization Act or “Mod Act.” Paragraph 

(a) of section 622 of the Mod Act amended the Tariff Act of 1930, as amended, by

adding section 593A, which prohibits the filing of false (fraudulent or negligent) 

drawback claims and prescribes the actions that Customs may take, including the 

assessment of monetary penalties, if such claims are filed. New section 593A was

codified as section 1593a of Title 19 of the United States Code (19 U.S.C. 1593a,

hereinafter "the statute"). 

As in the case of penalties under section 592 of the Tariff Act of 1930, as amended 

(19 U.S.C. 1592), specific procedures and other requirements are set forth in the 

statute for prepenalty notices and penalty claims, the former not being required by

the statute if the penalty is $1,000 or less, and provision is made for limited penalty

assessment if there is a prior disclosure. The statute further provides for the 

applicability of section 618 of the Tariff Act of 1930, as amended (19 U.S.C. 1618), 

which authorizes the administrative remission or mitigation of penalties. Written 

decisions, setting forth a final determination and findings of fact and conclusions of

law upon which that determination was based, are also mandated by the statute. 

The statute provides for the assessment of monetary penalties in amounts not to 

exceed a specific percentage of the actual or potential loss of revenue, with the 

applicable percentage depending on the level of culpability, whether there have 

been prior violations involving the same issue, and whether the violator is a 

participant in the Customs drawback compliance program. (The statute provides for 

the establishment of a drawback compliance program; regulatory provisions relating 

to the operation of that program were adopted as part of the amendments to the 

Customs Regulations regarding drawback published in the Federal Register as 

T.D. 98-16 on March 5, 1998, 63 FR 10970.) The statute also provides for the 

issuance of a notice of a violation (warning letter) in lieu of a monetary penalty in the 

case of a drawback compliance program participant who commits a first (that is,

nonrepetitive) negligent violation.

Guidelines For The Imposition And Mitigation Of Penalties For 

Violations Of 19 U.S.C. 1593a 

A monetary penalty incurred under section 593A, Tariff Act of 1930, as amended 

(19 U.S.C. 1593a; hereinafter referred to as section 593A), may be remitted or 

mitigated under section 618, Tariff Act of 1930, as amended (19 U.S.C. 1618;

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hereinafter referred to as section 618), if it is determined that there exist such 

mitigating circumstances as to justify remission or mitigation. The guidelines below 

will be used by Customs in arriving at a just and reasonable assessment and 

disposition of liabilities arising under section 593A within the stated limitations. It is

intended that these guidelines will be applied by Customs officers in prepenalty 

proceedings, in determining the monetary penalty assessed in the penalty notice, 

and in arriving at a final penalty disposition. The assessed or mitigated penalty 

amount set forth in Customs administrative disposition determined in accordance 

with these guidelines does not limit the penalty amount which the Government may 

seek in bringing a civil enforcement action pursuant to 19 U.S.C. 1593a(i). 

I. Violations Of Section 593a 

A violation of section 593A occurs when a person, through fraud or negligence,

seeks, induces, or 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, 

written or oral statement, or electronically transmitted data or information, or act

which is material and false, or any omission which is material, or aids or abets any 

other person in the foregoing violation. There is no violation if the falsity is due 

solely to clerical error or mistake of fact unless the error or mistake is part of a 

pattern of negligent conduct. Also, the mere unintentional repetition by an 

electronic system of an initial clerical error will not constitute a pattern of negligent

conduct. Nevertheless, if Customs has drawn the person's attention to the 

intentional repetition by an electronic system of an initial clerical error, subsequent

failure to correct the error could constitute a violation of section 593A. 

II. Degrees Of Culpability 

A. Negligence. A violation is determined to be negligent if it results from an act 

or acts (of commission or omission) done with actual knowledge of, or wanton 

disregard for, the relevant facts and with indifference to, or disregard for, the 

offender's obligations under the statute or done through the failure to exercise the 

degree of reasonable care and competence expected from a person in the same 

circumstances in ascertaining the facts or in drawing inferences from those facts, 

in ascertaining the offender's obligations under the statute, or in communicating 

information so that it may be understood by the recipient. As a general rule, a 

violation is determined to be negligent if it results from the offender's failure to 

exercise reasonable care and competence to ensure that a statement made is

correct. 

B. Fraud. A violation is determined to be fraudulent if the material false 

statement, omission or act in connection with the transaction was committed (or 

omitted) knowingly, i.e., was done voluntarily and intentionally, as established by 

clear and convincing evidence. 

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III. Assessment Of Penalties 

A. Issuance of Prepenalty Notice. As provided in § 162.77a of the Customs 

Regulations (19 C.F.R. 162.77a), if Customs has reasonable cause to believe

that a violation of section 593A has occurred and determines that further 

proceedings are warranted, a notice of intent to issue a claim for a monetary 

penalty will be issued to the person concerned. In issuing such prepenalty 

notice, the appropriate Customs field officer will make a tentative determination 

of the degree of culpability and the amount of the proposed claim. A prepenalty

notice will not be issued if the claim does not exceed $1,000. 

B. Issuance of Penalty Notice. After considering representations, if any, made 

by the person concerned pursuant to the notice issued under paragraph (III)(A),

the appropriate Customs field officer will determine whether any violation 

described in section (I) has occurred. If a notice was issued under paragraph 

(III)(A) and the appropriate Customs field officer determines that there was no 

violation, Customs will promptly issue a written statement of the determination to 

the person to whom the notice was sent. If the appropriate Customs field officer

determines that there was a violation, Customs will issue a written penalty claim

to the person concerned. The written penalty claim will specify all changes in the 

information provided in the prepenalty notice issued under paragraph (III)(A). 

The person to whom the penalty notice is issued will have a reasonable 

opportunity under section 618 to make representations, both oral and written, 

seeking remission or mitigation of the monetary penalty. At the conclusion of any 

proceeding under section 618, Customs will provide to the person concerned a 

written statement which sets forth the final determination and the findings of fact 

and conclusions of law on which such determination is based. 

IV. Maximum Penalties 

(1) Fraud. In the case of a fraudulent violation of section 593A, the monetary 

penalty will be in an amount not to exceed 3 times the actual or potential loss of

revenue. 

(2) Negligence. 

(a) In General. In the case of a negligent violation of section 593A, the 

monetary penalty will be in an amount not to exceed 20 percent of the 

actual or potential loss of revenue for the first violation. 

(b) Repetitive Violations. For the first negligent violation that is repetitive 

(i.e., involves the same issue and the same violator), the penalty will be in 

an amount not to exceed 50 percent of the actual or potential loss of 

revenue. The penalty for a second and each subsequent repetitive 

negligent violation will be in an amount not to exceed the actual or

potential loss of revenue. 

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(3) Prior Disclosure

(a) In General. Subject to paragraph (D)(3)(b), if the person 

concerned discloses the circumstances of a violation of section 

593A before, or without knowledge of the commencement of, a 

formal investigation of such violation, the monetary penalty

assessed under this Appendix will not exceed: 

(i) In the case of fraud, an amount equal to the actual or 

potential revenue of which the United States is or may be 

deprived as a result of overpayment of the claim; or 

(ii) If the violation resulted from negligence, an amount equal 

to the interest computed on the basis of the prevailing rate of

interest applied under 26 U.S.C. 6621 on the amount of 

actual revenue of which the United States is or may be 

deprived during the period that begins on the date of 

overpayment of the claim and ends on the date on which the 

person concerned tenders the amount of the overpayment. 

(b) Condition Affecting Penalty Limitations. The limitations in 

paragraph (D)(3)(a) on the amount of the monetary penalty to be 

assessed apply only if the person concerned tenders the amount of 

the overpayment made on the claim either at the time of the 

disclosure or within 30 days (or such longer period as Customs 

may provide) from the date of notice by Customs of its calculation 

of the amount of overpayment. 

(c) Burden of Proof. The person asserting lack of knowledge of the 

commencement of a formal investigation has the burden of proof in 

establishing such lack of knowledge. 

(d) Commencement of Investigation. For purposes of this

Appendix, a formal investigation of a violation is considered to be 

commenced with regard to the disclosing party, and with regard to 

the disclosed information, on the date recorded in writing by 

Customs as the date on which facts and circumstances were

discovered which caused Customs to believe that a possibility of a 

violation of section 593A existed. 

(e) Exclusivity. Penalty claims under section D will be the exclusive 

civil remedy for any drawback-related violation of section 593A. 

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V. Deprivation Of Lawful Revenue 

Notwithstanding section 514, Tariff Act of 1930, as amended (19 U.S.C. 1514), if 

the United States has been deprived of lawful duties and taxes resulting from a 

violation of section 593A, Customs will require that such duties and taxes be 

restored whether or not a monetary penalty is assessed. 

VI. Final Disposition Of Penalty Cases When The Drawback Claimant Is Not A Certified 

Participant In The Drawback Compliance Program 

(1) In General. Customs will consider all information in the petition and all 

available evidence, taking into account any mitigating, aggravating, and 

extraordinary factors, in determining the final assessed penalty. All factors 

considered should be stated in the decision. 

(2) Penalty Disposition When There Has Been No Prior Disclosure. 

(a) Nonrepetitive Negligent Violation. The final penalty disposition will be

in an amount ranging from a minimum of 10 percent of the actual or

potential loss of revenue to a maximum of 20 percent of the actual or

potential loss of revenue. 

(b) Repetitive Negligent Violation. 

(i) First Repetitive Negligent Violation. The final penalty disposition 

will be in an amount ranging from a minimum of 25 percent of the 

actual or potential loss of revenue to a maximum of 50 percent of

the actual or potential loss of revenue. 

(ii) Second and Each Subsequent Repetitive Negligent Violation. 

The final penalty disposition will be in an amount ranging from a 

minimum of 50 percent of the actual or potential loss of revenue to 

a maximum of 100 percent of the actual or potential loss of 

revenue. 

(c) Fraudulent Violation. The final penalty disposition will be in an amount 

ranging from a minimum of 1.5 times the actual or potential loss of

revenue to a maximum of 3 times the actual or potential loss of revenue. 

(3) Penalty Disposition When There Has Been a Prior Disclosure. 

(a) Negligent Violation. The final penalty disposition will be in an amount 

equal to the interest determined in accordance with paragraph (D)(3)(a)(ii). 

(b) Fraudulent Violation. The final penalty disposition will be in an amount 

equal to 100 percent of the actual or potential loss of revenue. 

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(4) Mitigating Factors. The following factors will be considered in mitigation of

the proposed or assessed penalty claim or final penalty amount, provided that 

the case record sufficiently establishes their existence. The list is not exclusive. 

(a) Contributory Customs Error. This factor includes misleading or 

erroneous advice given by a Customs official in writing to the alleged 

violator, but this factor may be applied in such a case only if it appears 

that the alleged violator reasonably relied upon the written information and 

the alleged violator fully and accurately informed Customs of all relevant

facts. The concept of comparative negligence may be utilized in

determining the weight to be assigned to this factor. If the Customs error 

contributed to the violation, but the alleged violator is also culpable, the 

Customs error is to be considered as a mitigating factor. If it is determined 

that the Customs error was the sole cause of the violation, the proposed 

or assessed penalty is to be canceled. 

(b) Cooperation with the Investigation. To obtain the benefits of this 

factor, the alleged violator must exhibit cooperation beyond that expected 

from a person under investigation for a Customs violation. An example of 

the cooperation contemplated includes assisting Customs officers to an 

unusual degree in auditing the books and records of the alleged violator

(e.g., incurring extraordinary expenses in providing computer runs solely

for submission to Customs to assist the agency in cases involving an 

unusually large number of entries and/or complex issues). Another 

example consists of assisting Customs in obtaining additional information 

relating to the subject violation or other violations. Merely providing the 

books and records of the alleged violator may not be considered 

cooperation justifying mitigation inasmuch as Customs has the right to 

examine an importer's books and records pursuant to 19 U.S.C. 1508-

1509. 

(c) Immediate Remedial Action. This factor includes the payment of the 

actual loss of revenue prior to the issuance of a penalty notice and within 

30 days after Customs notifies the alleged violator of the actual loss of 

revenue attributable to the violation. In appropriate cases, where the 

alleged violator provides evidence that, immediately after learning of the 

violation, substantial remedial action was taken to correct organizational or

procedural defects, immediate remedial action may be granted as a 

mitigating factor. Customs encourages immediate remedial action to 

ensure against future incidents of non-compliance. 

(d) Prior Good Record. Prior good record is a factor only if the alleged 

violator is able to demonstrate a consistent pattern of filing drawback

claims without violation of section 593A, or any other statute prohibiting 

the making or filing of a false statement or document in connection with a 

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drawback claim. This factor will not be considered in alleged fraudulent

violations of section 593A. 

(e) Inability to Pay the Customs Penalty. The party claiming the existence 

of this factor must present documentary evidence in support thereof, 

including copies of income tax returns for the previous 3 years and an 

audited financial statement for the most recent fiscal quarter. In certain 

cases, Customs may waive the production of an audited financial 

statement or may request alternative or additional financial data in order to

facilitate an analysis of a claim of inability to pay (e.g., examination of the 

financial records of a foreign entity related to the U.S. company claiming 

inability to pay). In addition, the alleged violator must present information

reflecting ownership and related domestic and foreign parties and must 

provide information reflecting its current financial condition, including 

books and records of account, bank statements, other tax records (for

example, sales tax returns) and a list of assets with current values; if the 

alleged violator is a closely held corporation, similar current financial 

information must be provided on the shareholders, wherever they are 

located. 

(f) Customs Knowledge. This factor may be used in non-fraud cases if it is

determined that Customs had actual knowledge of a violation and failed,

without justification, to inform the violator so that it could have taken earlier

remedial action. This factor is not applicable when a substantial delay in 

the investigation is attributable to the alleged violator. 

(5) Aggravating Factors. Certain factors may be determined to be aggravating 

factors in calculating the amount of the proposed or assessed penalty claim or 

the amount of the final administrative penalty. The presence of one or more 

aggravating factors may not be used to raise the level of culpability attributable to 

the alleged violations, but may be used to offset the presence of mitigating 

factors. The following factors will be considered "aggravating factors", provided

that the case record sufficiently establishes their existence. The list is not 

exclusive. 

(a) Obstructing an investigation or audit. 

(b) Withholding evidence. 

(c) Providing misleading information concerning the violation. 

(d) Prior substantive violations of section 593A for which a final 

administrative finding of culpability has been made. 

(e) Failure to comply with a Customs summons or lawful demand for

records. 

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VII. Drawback Compliance Program Participants 

(1) In General. Special alternative procedures and penalty assessment

standards apply in the case of negligent violations of section 593A committed by 

persons who are certified as participants in the Customs drawback compliance 

program and who are generally in compliance with the procedures and 

requirements of that program. Provisions regarding the operation of the 

drawback compliance program are set forth in part 191 of the Customs 

Regulations (19 C.F.R. part 191). 

(2) Alternatives to Penalties. When a participant described in paragraph (G)(1)

commits a violation of section 593A, in the absence of fraud or repeated 

violations and in lieu of a monetary penalty, Customs will issue a written notice of

the violation (warning letter). 

(a) Contents of Notice. The notice will: 

(i) State that the person has violated section 593A; 

(ii) Explain the nature of the violation; and 

(iii) Warn the person that future violations of section 593A may

result in the imposition of monetary penalties and that repetitive 

violations may result in removal of certification under the drawback

compliance program until the person takes corrective action that is 

satisfactory to Customs. 

(b) Response to Notice. Within 30 days from the date of mailing of the 

written notice, the person must notify Customs in writing of the steps that 

have been taken to prevent a recurrence of the violation unless the person 

establishes to the satisfaction of Customs that no violation took place 

(See, § 162.73a(b)(2)(ii) of the Customs Regulations, 19 C.F.R. 

162.73a(b)(2)(ii)). If the person fails to provide the required notification in 

a timely manner, any penalty assessed for a repetitive violation under

paragraph (G)(3) will not be subject to mitigation under this Appendix. 

(3) Repetitive Violations. 

(a) In General. A person who has been issued a written notice under 

paragraph (G)(2) and who subsequently commits a negligent violation that 

is repetitive (i.e., involves the same issue), and any other person who is a 

participant described in paragraph (G)(1) and who commits a repetitive 

negligent violation, is subject to one of the following monetary penalties: 

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(i) An amount not to exceed 20 percent of the loss of revenue for

the first repetitive violation that occurs within three years from the 

date of the violation of which it is repetitive; 

(ii) An amount not to exceed 50 percent of the loss of revenue for 

the second repetitive violation that occurs within three years from 

the date of the first of two violations of which it is repetitive ; and 

(iii) An amount not to exceed 100 percent of the loss of revenue for

the third and each subsequent repetitive violation that occurs within 

three years from the date of the first of three or more violations of 

which it is repetitive. 

(b) Repetitive Violations Outside 3-year Period. If a participant described 

in paragraph (G)(1) commits a negligent violation that is repetitive but that 

did not occur within 3 years of the violation of which it is repetitive, the new 

violation will be treated as a first violation for which a written notice will be 

issued in accordance with paragraph (G)(2), and each repetitive violation 

subsequent to that violation that occurs within any 3-year period described 

in paragraph (G)(3)(a) will result in the assessment of the applicable 

monetary penalty prescribed in that paragraph. 

(4) Final Penalty Disposition When There Has Been No Prior Disclosure. 

(a) In General. Customs will consider all information in the petition and all 

available evidence, taking into account any mitigating factors (See,

paragraph (F)(4)), aggravating factors (See, paragraph (F)(5)), and 

extraordinary factors in determining the final assessed penalty. All factors 

considered should be stated in the decision. 

(b) First Repetitive Negligent Violation Within 3 Years of Violation Handled 

Under Paragraph (G)(2). The final penalty disposition will be in an amount 

ranging from a minimum of 10 percent of the loss of revenue to a 

maximum of 20 percent of the loss of revenue. 

(c) Second Repetitive Negligent Violation Within 3 Years of Violation 

Handled Under Paragraph (G)(2) or (G)(3). The final penalty disposition 

will be in an amount ranging from a minimum of 25 percent of the loss of

revenue to a maximum of 50 percent of the loss of revenue. 

(d) Third and Each Subsequent Repetitive Negligent Violation Within 3 

Years of Violation Handled Under Paragraph (G)(2) or (G)(3). The final 

penalty disposition will be in an amount ranging from a minimum of 50 

percent of the loss of revenue to a maximum of 100 percent of the loss of 

revenue. 

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(e) Fraudulent Violations. The final penalty disposition will be determined 

in the same manner as in the case of fraudulent violations committed by 

persons who are not participants in the drawback compliance program 

(See, paragraph (F)(2)(c)). 

(5) Final Penalty Disposition When There Has Been A Prior Disclosure. The final 

penalty disposition will be determined in the same manner as in the case of 

persons who are not participants in the drawback compliance program (See,

paragraph (F)(3)). 

VIII. Violations By Small Entities 

In compliance with the mandate of the Small Business Regulatory Enforcement 

Fairness Act of 1996, under appropriate circumstances, the issuance of a penalty 

under section 593A may be waived for businesses qualifying as small business 

entities. Procedures that were established for small business entities regarding 

violations of 19 U.S.C. 1592 in Treasury Decision 97-48 published in the Federal 

Register (62 FR 30378) are also applicable for small entities regarding violations

of section 593A. 

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RECORDKEEPING PENALTIES - 19 U.S.C. 1509 (T.D. 00-63) 

Overview 

On December 8, 1993, the President signed into law the North American Free 

Trade Agreement Implementation Act (the “NAFTA Implementation Act”), Public

Law 103-182, 107 Stat. 2057. Title VI thereof contained provisions pertaining to 

Customs modernization and thus is commonly referred to as the Customs

Modernization Act or “Mod Act.” Sections 6l4, 6l5 and 6l6 of the Mod Act amended 

sections 508, 509 and 510 of the Tariff Act of 1930, as amended (19 U.S.C. 1508, 

1509, and 1510), which pertain to recordkeeping requirements applicable to 

importers and others. Section 509 of the Tariff Act of 1930, as amended (19 U.S.C. 

1509), sets forth procedures for the production of documents to Customs and 

Customs examination of those records. Section 509 also sets forth penalties for 

failure to provide records upon Customs demand. 

The Mod Act amended various provisions of the Customs laws to grant Customs 

authority to no longer require the presentation of certain documentation or 

information at the time of entry. These amendments were intended to permit a 

reduction of the documentation and information required to be presented to 

Customs at the time of entry, thereby facilitating the entry process. However, in

exchange for relieving importers of the obligation to present documents at the time 

of entry, and in order not to jeopardize the ability of Customs to obtain those records

at a later date, section 614 of the Mod Act amended section 508 of the Tariff Act of 

1930 to require that the documentation or information be maintained and section 

615 of the Mod Act amended section 509 of the Tariff Act of 1930 to, among other 

things, provide for the imposition of substantial administrative penalties for a failure

of a party required to keep records to comply, within a reasonable time, with a 

demand by Customs for production of such specific entry records. 

Section 509(a)(1)(A) of the Tariff Act of 1930, as amended by Title VI of the Mod 

Act, requires the production, upon demand by Customs, of records required by law 

or regulation for the entry of the merchandise. Section 509(e) of the Tariff Act of 

1930 (19 U.S.C. 1509(e)), as amended by Public Law 103-182, requires the 

Customs Service to identify and publish a list of the records and entry information 

that are required to be maintained and produced under subsection (a)(1)(A) of

section 509 (19 U.S.C. 1509 (a)(1)(A)). This list is commonly referred to as “the 

(a)(1)(A) list.” The (a)(1)(A) list was published in the Customs Bulletin on January 3, 

1996, as T.D. 96-1 and republished in the Federal Register on July 15, 1996, at 61 

FR 36956. It is anticipated that the (a)(1)(A) list will change as entry requirements 

are revised. 

On June 16, 1998 Customs published in the Federal Register (63 FR 32916) the 

final rule to implement the changes to the statutory recordkeeping provisions 

effected by the NAFTA Implementation Act. The final rule moved Customs

requirements regarding recordkeeping from Part 162 to part 163 and amended the 

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requirements in accordance with the Mod Act. In addition, the final rule: (1) set 

forth, as an appendix to new Part 163, the previously published (a)(1)(A) list; and (2) 

included conforming amendments to various provisions within Parts 24, 111, and 

143 of the Customs Regulations (19 C.F.R. Parts 24, 111, and 143). 

The monetary penalties applicable for failure to produce entry records are set forth

in section 163.6, Customs Regulations (19 C.F.R. 163.6). Pursuant to 19 U.S.C. 

1509(g)(5) and section 163.6(b)(5), Customs Regulations (19 C.F.R. 163.6(b)(5)), 

these penalties may be remitted or mitigated pursuant to 19 U.S.C. 1618. 

GUIDELINES FOR THE MITIGATION OF PENALTIES FOR 19 U.S.C. 

1509 

Pursuant to the Mod Act, a party who is subject to Customs recordkeeping 

requirements may be liable for penalties for failure to comply with a lawful demand 

for the production of an entry record unless the party meets certain criteria excusing 

the party from the penalty. In all cases, the amount of the penalty will depend upon 

whether the failure to produce the records is the result of willful conduct or 

negligence. 

In addition to any penalty that may be imposed, if the requested records relate to 

the eligibility of merchandise for a special rate of duty, the entry covering the 

merchandise will be liquidated or reliquidated under the column 1 general rate of 

duty or at the column 2 rate of duty if deemed appropriate. 

The assessment of a penalty for the failure to produce records for Customs 

inspection shall not limit or preclude the Customs Service from issuing, or seeking 

the enforcement of, a Customs summons. 

Specific procedures for issuing PrePenalty Notices and penalty claims were not set

forth in the statute. Customs will follow the procedures that have been set forth in 

section 592 (19 U.S.C. 1592) and which are contained in the Customs Regulations

in 19 C.F.R. 162 and 19 C.F.R. 171. 

The recordkeeping statute provides that any party who has been assessed 

administrative penalties pursuant to 19 U.S.C. 1509 will be able to petition for 

mitigation or remission of the penalties under section 618, Tariff Act of 1930, as

amended (19 U.S.C. 1618), if it is determined that there exists such mitigating 

circumstances as to justify remission or mitigation. The guidelines below will be

used by the Customs Service in arriving at a just and reasonable assessment and 

disposition of penalties arising under section 509 of the Tariff Act of 1930, as

amended (19 U.S.C. 1509) and mitigation of those penalties. It is intended that 

these guidelines shall be applied by Customs officers in penalty (or prepenalty) 

proceedings and in determining the monetary penalty assessed in any penalty 

action pursuant to 19 U.S.C. 1509(g). 

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Except as provided in 19 U.S.C. 1509(g)(4), the assessment of recordkeeping 

penalties is not the exclusive remedy. The assessed penalty amount set forth in 

Customs administrative disposition which is determined in accordance with these 

guidelines does not in any way affect the authority of the U.S. District Court of the 

United States to impose monetary penalties as well as sanctions for the failure to 

produce records summoned by Customs. 

I. Degrees Of Culpability 

In general, a penalty may be imposed pursuant to 19 U.S.C. 1509(g) if a person fails to 

comply with a lawful demand for the production of an entry record contained in the 

(a)(1)(A) list and is not excused from a penalty pursuant to one of the exceptions set

forth in 19 U.S.C. 1509(g)(3) and 19 C.F.R. 163.6(b)(3). There are two degrees of

culpability for penalties under 19 U.S.C. 1509(g) which are defined as follows: 

(A) Negligence: A violation under section 509 (19 U.S.C. 1509) is determined to 

be negligent if it results from an act or acts (of commission or omission) done 

through either the failure to exercise the degree of reasonable care and 

competence expected from a person in the same circumstances in ascertaining 

the facts or in drawing inferences therefrom, in ascertaining the offender’s

obligations under the statute. 

(B) Willful Conduct: A violation is determined to be willful under section 509 (19 

U.S.C. 1509) if the failure to comply with a lawful demand for the production of an 

entry record was committed (or omitted) knowingly, i.e., was done voluntarily and 

intentionally, as established by a preponderance of the evidence. 

II. Procedure For Penalty Assessment 

(A) Commencement of Penalty Actions - Penalties for the failure to comply with a 

lawful demand for the production of entry records may be assessed by the 

appropriate Customs field officer for any violation which occurs on or after July

15, 1996, the date of publication of the “(a)1)(A)” list in the Federal Register. 

(B) Issuance of PrePenalty Notice and Penalty Notice - The specific procedures

and requirements which have been set forth in the case of penalties and 

petitioning rights under section 592 of the Tariff Act of 1930, as amended (19 

U.S.C. 1592) will be followed, to the extent practical, if Customs has reasonable 

cause to believe that a violation of 19 U.S.C. 1509 has occurred. (19 C.F.R. 

162.77-79, 19 C.F.R. 171.11-33). Any penalty imposed under 19 U.S.C. 1509 

may be remitted or mitigated under 19 U.S.C. 1618. Part 171, Customs

Regulations (19 C.F.R. Part 171), sets forth the general procedures involved in

filing a petition for remission or mitigation of a fine, penalty, or forfeiture incurred

under any law administered by Customs. 

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III. Administrative Penalty Disposition 

(A) Mitigation Guidelines - A monetary penalty which is imposed for failure to 

produce (a)(1)(A) entry records for Customs examination within a reasonable 

time may be mitigated or remitted under section 618, Tariff Act of 1930, as 

amended (19 U.S.C. 1618), if it is determined that there exist such mitigating 

circumstances as to justify remission or mitigation. The guidelines below will be 

used by the Customs Service in arriving at a just and reasonable disposition of

penalties arising under 19 U.S.C. 1509. 

It is intended that these guidelines shall be applied by Customs officers in 

arriving at the proper assessment of monetary penalties. In any case, in 

determining the administrative penalty disposition under 19 U.S.C. 1509, the 

appropriate Customs field officer shall consider the entire case record, taking into 

account the presence of any mitigating or aggravating factors. In addition, in 

deciding whether or not to issue a penalty, the deciding officer may take into

account the age and nature of the documents, the overall number of documents 

requested versus the number of documents produced, and the overall 

recordkeeping performance of the person. All such factors should be set forth in 

the written administrative penalty decision. 

In addition to administrative penalties, the Mod Act recognizes the authority of 

courts to impose monetary penalties pursuant to 19 U.S.C. 1510(a) for the failure 

to produce records summoned by Customs pursuant to 19 U.S.C. 1509. 

Moreover, it should be understood that these guidelines do not limit or preclude 

the Customs Service from issuing, or seeking the enforcement of a customs

summons. 

Liabilities incurred under section 509 (19 U.S.C. 1509), shall be mitigated or

remitted in accordance with the following guidelines: 

(B) Dispositions: 

(1) Non-Participants in Recordkeeping Compliance Program 

(a) Definition - Non-participants in the Recordkeeping Compliance 

Program are all persons required to maintain records and who have 

not been certified by Customs to participate in a Recordkeeping 

Compliance Program. 

(b) In cases where a non-participant in the Recordkeeping

Compliance Program fails to comply with the demand for the 

production of records required to be maintained under 19 U.S.C. 

1509(a)(1)(A), Customs may mitigate the penalty amount as set

forth below. 

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(i) Negligent Violations- Penalty dispositions for a negligent 

violation made by a non-participant in the Recordkeeping 

Compliance Program shall be calculated as follows: 

(A) If the violation is a result of the negligence of the 

person in maintaining, storing, or retrieving the 

demanded information, such person shall be subject 

to a penalty, for each release of merchandise, not to 

exceed an amount ranging from a minimum of $5,000 

to a maximum of $10,000 or an amount ranging from

a minimum of 20 percent of the appraised value of the 

merchandise to a maximum of 40 percent of the 

appraised value of the merchandise, whichever

amount is less. 

(ii) Willful Violations - Penalty dispositions for a willful

violation made by a non-participant in the Recordkeeping 

Compliance program shall be calculated as follows: 

(A) If the violation results from the willful failure to

maintain, store or retrieve records, the penalty for

each release will be an amount ranging from a 

minimum of $50,000 to a maximum of $100,000 or an 

amount ranging from a minimum of 45 percent of the 

appraised value of the merchandise to a maximum of 

75 percent of the appraised value of the merchandise,

whichever amount is less. 

(iii) Example - A party files an Entry Summary which

contains two different line items. The first line item

represents an entry of widgets and the second line item 

represents an entry of bolts showing appraised values of 

$1,000 and $2,500, respectively. Customs makes a written 

demand pursuant to 19 C.F.R. 162.6(a) for the production of 

the invoice applicable to each line item listed on the Entry 

Summary. If the party fails to produce the invoice for the 

widgets within the specified time period, then Customs may 

assess a penalty under 19 C.F.R. 162.6(b). If the party’s 

failure to produce the invoice is the result of negligence, in 

accordance with the mitigation guidelines for negligent 

violations, the amount of the penalty would range from a 

minimum of $200 to a maximum of $400, which represents a 

range of a minimum of 20 percent and a maximum of 40 

percent of the appraised value ($1,000) of the widgets. 

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(c) Remission of Claim - If the Customs field officer believes that a 

claim for monetary penalty should be remitted for a reason not set 

forth in these guidelines, the Customs field officer should first seek 

approval from the Chief, Penalties Branch, Customs Service 

Headquarters. 

(2) Participants in the Recordkeeping Compliance Program 

 

(a) Description of program - The Customs Recordkeeping 

Compliance Program is a voluntary Customs program under which 

certified recordkeepers may be eligible for alternatives to penalties 

that might be assessed under 19 C.F.R. 163.6 for failure to produce 

a demanded entry record. A participant in the Recordkeeping 

Compliance Program may be entitled to alternatives to any

recordkeeping penalty that may be assessed should the party be 

unable to produce a requested record. See, 19 C.F.R. 163.12 and 

19 U.S.C. 1509(g). In general, special alternative procedures apply

in the case of negligent violations of 19 U.S.C. 1509 committed by 

persons who are participants in the Recordkeeping Compliance 

Program and who are generally in compliance with the procedures 

and requirements of that program. If a certified participant in the 

Recordkeeping Compliance Program does not produce a 

demanded entry record for a specific release or provide the 

information contained in the demanded entry record by acceptable 

alternate means, Customs shall, in lieu of a monetary penalty issue 

a written notice of violation to the person, provided that the certified 

participant is generally in compliance with the procedures and 

requirements of the program, and provided that the violation was 

not a willful violation or a repetitive negligent violation. However,

even where a certified recordkeeper is eligible for an alternative to 

a penalty, participation in the Recordkeeping Compliance Program

has no limiting effect on the authority of Customs to use a 

summons, court order or other legal process to compel the 

production of records by the certified recordkeeper. 

(b) Certification Requirements for Participants in the Recordkeeping 

Compliance Program - Certified Recordkeepers are those persons 

required to maintain records according to 19 U.S.C. 1508(a) and 

supporting regulations, and who have recordkeeping systems 

certified by Customs under a Recordkeeping Compliance Program. 

A recordkeeper may be certified as a participant in the 

Recordkeeping Compliance Program after meeting the general 

recordkeeping requirements established under 19 C.F.R. 

163.12(b)(3) and 19 U.S.C. 1509(f). 

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(c) Procedures for Participants in Recordkeeping Compliance 

Program 

(i) First-time negligent violations made by participants in the 

Recordkeeping Compliance Program (19 U.S.C. 1509(g) 

and 19 C.F.R. 163.12(d)). Written Notice of Violation - When 

a participant in the Recordkeeping Compliance Program

does not produce a demanded entry record for a specific

release or provide the information contained in the 

demanded entry record by acceptable alternative means, in 

the absence of willfulness or a repetitive negligent violation,

and provided that the participant is generally in compliance 

with the procedures and requirements of the program, 

Customs shall issue a written notice (warning letter) of 

violation to the person in lieu of a monetary penalty. A 

repetitive negligent violation involves any failure to comply

with a lawful demand for the production of an entry record 

contained in the (a)(1)(A) list which occurs within three years 

from the date of the violation of which it is repetitive. 

(ii) The contents of the notice of violation issued to a 

participant in the Recordkeeping Compliance Program for 

failure to produce a demanded entry record or information 

contained therein are contained in 19 U.S.C. 1509(g)(7)(B) 

and 19 C.F.R. 163.12(d)(2). Within a reasonable time after

receiving written notice of a recordkeeping violation, the 

recordkeeper shall notify the Customs Service of the steps it 

has taken to prevent a recurrence of the violation. (19 C.F.R. 

163.12(d)(3)). 

(iii) Repetitive negligent or willful violations by participants in

the Recordkeeping Compliance Program - When a 

participant in the Recordkeeping Compliance Program 

commits a repetitive negligent violation or a willful violation,

the issuance of monetary penalties is appropriate as well as

the removal under the program until corrective action,

satisfactory to the Customs Service, is taken. In cases 

where a participant in the Recordkeeping Compliance 

Program commits a repetitive negligent violation or a willful 

failure to comply with a lawful demand for the production of

entry records, the penalty assessment guidelines for 

negligent violations or willful violations that apply to nonparticipants in the Recordkeeping Compliance Program as 

stated above, shall be utilized. 

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(iv) Example - A participant in the Recordkeeping 

Compliance Program files an Entry Summary on January 1, 

1999 for one entry of telephones. By letter dated February 

1, 1999, Customs makes a written demand pursuant to 19 

C.F.R. 162.6(a) for the production of the invoice covering the 

telephones listed on the Entry Summary. If the participant

fails to produce the invoice for the subject merchandise 

within the specified time period as the result of negligence,

Customs will issue a written notice of violation to the 

participant. On April 1, 1999, Customs makes a written 

demand pursuant to 19 C.F.R. 162.6(a) for the production of 

a GSP Declaration from the same participant in connection 

with an entry of televisions. If the participant fails to produce 

the GSP Declaration for the entry of televisions within the 

specified time period, then, in the absence of fraud, the 

participant’s failure to produce the GSP Declaration will be 

considered a repetitive negligent violation. Accordingly,

Customs may assess a penalty for the second violation 

using the penalty guidelines for negligent violations

applicable to non-participants in the Recordkeeping 

Compliance Program. 

IV. Mitigating Factors 

The following factors shall be considered in mitigation of the proposed or 

assessed penalty claim or final penalty amount for both participants and nonparticipants in the Recordkeeping Compliance Program, provided that the case 

record sufficiently establishes their existence. The following list is not allinclusive. 

1) Communications are impaired because of a language barrier or because of 

the mental condition or a physical ailment of the violator; 

2) Violator cooperates with Customs officers - To obtain the benefits of this 

factor, the violator must exhibit extraordinary cooperation beyond that expected 

from a person under investigation for a Customs violation; 

3) Immediate remedial action - This factor includes the production of and 

presentation of the entry records and information requested prior to the issuance 

of a Penalty Notice. In appropriate cases, where the violator provides evidence 

that immediately after learning of the violation, substantial remedial action was

taken to correct organizational or procedural defects, immediate remedial action 

may be considered as a mitigating factor. Customs encourages immediate 

remedial action to help prevent future incidents of non-compliance; 

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4) Prior good record - Prior good record is a factor only if the violator is able to 

demonstrate a consistent pattern of importations without violation of 19 U.S.C. 

1509, or any other statute prohibiting false or fraudulent importation practices. 

This factor will not be considered if the failure to comply is a result of the willful

failure of the person to maintain, store, or retrieve the demanded record(s) or

information, pursuant to 19 U.S.C. 1509; 

5) Inability to pay the Customs penalty - The party claiming the existence of this

factor must present documentary evidence in support thereof, including copies of

income tax returns for the previous 3 years, and an audited financial statement 

for the most recent fiscal quarter. In certain cases, Customs may waive the 

production of an audited financial statement or may request alternative or 

additional financial data in order to facilitate an analysis of a claim of inability to 

pay (e.g., examination of the financial records of a foreign entity related to the 

U.S. company claiming inability to pay); 

6) Contributory Customs Error - This factor includes misleading or erroneous

advice given by a Customs official in writing to the violator only if it appears that 

the violator reasonably relied upon the information and the violator fully and 

accurately informed Customs of all relevant facts. The concept of comparative 

negligence may be utilized in determining the weight to be assigned to this factor. 

If it is determined that the Customs error was the sole cause of the violation, the 

proposed or assessed penalty claim is to be canceled. If the Customs error 

contributed to the violation, but the violator is also culpable, the Customs error is 

to be considered as a mitigating factor; 

7) The person required to maintain and produce records is inexperienced in the 

customs transactions to which the records relate; 

8) Violator substantially complies with the demand for the production of records 

in comparison to the total number of importations for which records are 

requested. 

V. Aggravating Factors 

Certain factors may be determined to be aggravating factors in calculating the 

amount of the proposed or assessed penalty claim or the amount of the final 

administrative penalty decision. The presence of one or more aggravating 

factors may not be used to raise the level of culpability attributable to the alleged 

violation, but may be utilized to offset the presence of mitigating factors. The

following factors shall be considered “aggravating factors,” provided that the case

record sufficiently establishes their existence. The following list is not allinclusive. 

1) The person required to maintain and produce records is experienced in the 

customs transactions to which the records relate; 

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2) The records are concealed, destroyed or withheld to evade U.S. law; 

3) The importer or other party exhibits behavior, including extreme lack of

cooperation, verbal or physical abuse, or attempted destruction of records; 

4) The importer or other party has a prior recordkeeping violation for which a final 

administrative finding of culpability has been made; 

5) The importer or other party has provided misleading information concerning 

the violation; 

6) The importer or other party has obstructed an investigation or audit; 

7) The importer or other party has demonstrated evidence of a motive to evade 

the production of entry records or information requested by Customs. 

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VESSEL REPAIR PENALTIES (19 U.S.C. 1466) 

I. In General 

It is a violation of the vessel repair statute if the owner or master of a vessel 

subject to vessel repair entry requirements willfully or knowingly neglects or fails

to report, make entry and pay duties as required; makes any false statements 

regarding purchases or repairs without reasonable cause to believe the truth of

the statements; or aids or procures any false statements regarding any material 

matter without reasonable cause to believe the truth of the statement. If a 

violation occurs, the vessel, its tackle, apparel, and furniture, or a monetary 

amount up to their value as determined by Customs, is subject to seizure and 

forfeiture and recoverable from the owner. 

II. Statutory/Regulatory Requirements 

A. The following items, if provided in a foreign country to a vessel documented 

under the laws of the U.S. for foreign or coastwise trades, as well as those 

which were previously documented under the laws of some foreign nation 

or are undocumented at the time that foreign shipyard repairs are 

performed, but which exhibit an intent to engage in those trades, (an 

including vessels documented under U.S. law with a fishery endorsement or 

undocumented American fishing vessels which are repaired, or for which 

parts, nets or equipment are purchased outside the U.S.) must be declared 

and entered and duties paid thereon at the port of first arrival in the U.S. 

1. Expenses of any repairs (including labor) 

2. Cost of repair parts or materials 

3. Equipment (including boats) purchased for vessel 

B. In the case of any U.S. vessel that continuously remain outside the U.S. two 

years or longer, duties shall apply only with respect to: 

1. Fish nets and netting 

2. Other equipment and parts thereof, repair parts and materials 

purchased, or repairs made, during the first six months of their 

absence. 

NOTE: even though some costs may not be dutiable because of the sixmonth rule, all repairs, materials, parts and equipment-related expenditures

must be declared and entered. 

3. Any vessel designed or used primarily for transporting passengers 

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or merchandise which depart the U.S. for the sole purpose of 

obtaining equipment, parts, materials or repairs remain fully liable

for duty regardless of the duration of their absence from the U.S. 

C. Liability for declaration, entry and payment of duties accrues at the time of

first arrival in the U.S. In lieu of payment of duty at the time of entry, a bond 

may be provided to secure payment of duty. 

III. Elements of Violation/Determination of Liability

A. Culpable parties 

1. Owner of vessel, or 

2. Master of vessel 

B. Culpable party must: 

1. Willfully or knowingly neglect or fail to: 

a. Report (declare) 

b. Make entry 

c. Pay duties 

2. Make any false statement without reasonable cause to believe the 

truth of such statement, or 

3. Aid in or procure the making of any false statement as to a material 

matter without reasonable cause to believe the truth of such 

statement. 

C. Amount of liability 

1. Monetary amount of up to the value of the vessel involved, or 

2. Seizure and forfeiture of the vessel (NOTE: Seizure shall never 

occur without the approval of the Director, International Trade 

Compliance Division, ORR) 

D. Failure to declare, file a vessel repair entry or pay duty in a timely manner

constitute a violation of the statute. 

E. Inasmuch as willful neglect is the basis for a violation, intent or fraud need

not be proven in order for a violation to be found. Simple negligence will 

be sufficient to sustain a violation. 

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IV. Penalty Assessment Procedures 

A. Evidence describing a violation may be given by any Customs officer 

discovering such a violation (which may include the boarding inspector, 

carrier control, entry control or vessel liquidation unit) to FP&F having 

jurisdiction in the port where the vessel first arrived. 

B. A prepenalty notice will be issued by FP&F. 

C. The FP&F Officer will determine whether a violation has occurred, but will

not make any decision regarding submission of evidence of cost of 

repairs, casualty or similar matters or grant extensions of time to submit 

documents for purposes of liquidation of the entry. 

D. The prepenalty notice will contain the following: 

1. Description of the circumstances of the alleged violation. 

2. Recitation of the statutes and regulations violated. 

3. Disclosure of all material facts which establish the alleged violation. 

4. A statement of the estimated loss of duties and the amount of the 

proposed penalty. 

5. An indication that the alleged violator has reasonable opportunity to 

make representations, both oral and written, as to why such penalty

claim should not be issued (See, 19 C.F.R. 162.76(b)). 

E. All prepenalty notices shall be issued for an amount equal to four (4) times

the loss of revenue or the value of the vessel, whichever is lower, except 

in the instance where the violation is for the late filing of the entry or 

documents only. In the latter instance, the prepenalty notice shall be 

issued for an amount equal to two (2) times the loss of revenue. 

F. After considering representations made by concerned parties concerning 

the propriety of issuance of the penalty, the FP&F Officer shall determine 

if a violation occurred. 

1. If no violation occurred, the alleged violator shall be notified in 

writing of such decision and the claim shall be cancelled. 

2. If a violation is found to have occurred, the written claim for penalty 

shall be issued. 

G. The international carrier’s bond (See, 19 C.F.R. 113.64) guarantees the 

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payment of any vessel repair duties and penalties. Accordingly, a copy of 

any penalty notice should be provided to surety (See, 19 C.F.R. 172.1). 

H. For petition review procedures, see Section 3.4.2 of the Seized Asset

Management and Enforcement Procedures Handbook. 

V. Mitigation Guidelines 

A. If the violation is for late filing of the entry or any documents relating to

such, the following guidelines should be followed: 

1. First offense, negligence found, but no fraudulent intent – mitigate 

to 5 percent of the loss of revenue or $500, whichever is greater. 

2. Subsequent offenses, negligence found, but no fraudulent intent – 

mitigate to 10 percent of the loss of revenue or $1,000, whichever 

is greater. 

3. If gross negligence found, use guideline for subsequent offense. 

4. Deliberate violation – no relief. 

B. All other violations. 

1. First offense, negligence found – mitigate to 10 percent of the loss

of revenue or $5,000, whichever is greater. 

2. Gross negligence found – mitigate to 50 percent of the loss of 

revenue or $25,000, whichever is greater. 

3. Deliberate violation – grant no relief. 

4. Subsequent violations shall be mitigated at the next higher 

culpability level than that found. For example, a subsequent 

violation occurs and negligence is found. Mitigation should be 

granted using the gross negligence guidelines. 

5. Refusal to cooperate with Customs may justify a finding of gross 

negligence.

C. All mitigation is conditioned upon deposit of any loss of revenue. 

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VESSELS AND OTHER 

CONVEYANCES 

IN FOREIGN AND 

DOMESTIC TRADE; 

CARGO DELIVERY; 

MANIFESTING 

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VESSELS AND OTHER CONVEYANCES IN FOREIGN AND DOMESTIC TRADE; 

CARGO DELIVERY; MANIFESTING 

The Customs Service is responsible for administering and enforcing the 

Customs and navigation laws, including those relating to the entry and reporting 

of arrival of vessels, vehicles and aircraft and those relating to the manifesting,

lading, and unlading of passengers, merchandise, or baggage, and the unlawful

importation of any articles. Laws restricting the use of foreign-flag or 

foreign-built vessels in the coastwise trade or other activities within the waters

of the United States are also enforced. 

SPECIAL NOTE: THE PROVISIONS OF THIS CHAPTER APPLY 

ONLY TO THOSE SITUATIONS WHICH DO NOT INVOLVE NARCOTICS

OR CONTROLLED SUBSTANCES. FAILURE TO MANIFEST 

CONTROLLED SUBSTANCES OR THOSE PENALTIES ASSESSED 

UNDER THE ZERO TOLERANCE PROGRAM ARE COVERED IN OTHER 

CHAPTERS OF THIS VOLUME. 

ARRIVAL AND ENTRY OF VESSELS, VEHICLES AND AIRCRAFT 

I. Arrival Reporting Requirements

Under the provisions of 19 U.S.C. 1433, the following requirements apply to the 

arrival of the listed conveyances: 

A. Vessels. Immediately upon arrival at any port or place in the United States, 

the following vessels must report arrival immediately at the nearest Customs 

facility or such other place as the Secretary of the Treasury may prescribe in

regulations: 

1. Any vessel arriving from a foreign port or place. 

2. Any foreign-flag vessel arriving from a domestic port. 

3. Any vessel carrying bonded merchandise or foreign merchandise for 

which entry has not been made. 

B. Vehicles 

1. Vehicles must only cross at designated border crossing points. 

2. The operator of the vehicle must immediately report arrival and present

the vehicle and all persons and merchandise for inspection. 

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C. Aircraft. Aircraft must comply with such advance notification, arrival, reporting 

and landing requirements as prescribed by Part 122, Customs Regulations. 

D. Additional requirements 

1. The Master of a vessel, person in charge of a vehicle or pilot of an 

aircraft shall present all documents, papers, or manifests as may be 

prescribed by 19 C.F.R. Part 4 (relating to vessels), Part 122 (relating 

to aircraft), or Part 123 (relating to vehicles). 

2. Departure from the place of arrival or discharge of passengers or

merchandise may only occur in accordance with Regulations. 

E. Boarding of vessels 

1. Per 19 C.F.R. 4.1(b) only a pilot of a navigation vessel (e.g., a 

tugboat), an officer of a U.S. government agency or a vessel agent 

dealing with vessel entry formalities may board an arriving vessel 

without the authorization of the port director. 

2. Per 19 C.F.R. 4.1(d), the pilot of a tugboat or other vessel shall bring 

such vessel alongside an incoming vessel and put on board any

person thereof except as authorized by law or regulation. 

3. Per 19 C.F.R. 4.1(c), no person may leave an arriving vessel, other 

than for the purpose of reporting arrival, with or without the consent of 

the master, without the permission of the port director or Customs 

officer in taking charge of the vessel. 

F. Aircraft commander responsibility 

If an aircraft lands in the United States and Customs officers have not

arrived, the aircraft commander shall hold the aircraft and any

merchandise or baggage on the aircraft for inspection. Passengers and 

crewmembers shall be kept in a separate place until Customs officers

authorize their departure. See, 19 C.F.R. 122.36. 

II. Making Entry

A. Vessels 

1. All vessels are required to report arrival as noted in Part I; all are 

required to make entry except the following (See, 19 U.S.C. 1441): 

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a. Vessels of war and public vessels employed for the 

conveyance of letters dispatches and not permitted by the 

laws of the nations to which they belong to be employed in 

the transportation of passengers or merchandise in trade, 

b. Passenger vessels making three trips or more a week

between a U.S. port and a foreign port (including ferryboats), 

c. Licensed yachts (including foreign-flag yachts with cruising 

licenses) or undocumented U.S. pleasure vessels not 

engaged in trade nor in any way violating the Customs laws

and not having visited any hovering vessel and vessels

carrying passengers on excursion from the U.S. V.I. to

British V.I. and returning, 

d. Vessels arriving in distress or for taking on bunker oil or sea 

stores and departing within 24 hours of arrival without taking 

on board any passengers or other merchandise, and 

e. Tugs enrolled and licensed to engage in foreign and 

coastwise trade when towing vessels which are required by

law to enter and clear. 

2. U.S. Vessels (19 U.S.C. 1434, 19 C.F.R. 4.3, 19 C.F.R. 4.9). The 

master of an American vessel arriving in the U.S. from a foreign port or 

place or arriving from another U.S port with unentered foreign 

merchandise or in-bond merchandise must, within 48 hours of the 

arrival of the vessel in a Customs district, make formal entry of the 

vessel at the Customhouse. 

3. Foreign Vessels (19 U.S.C. 1434, 19 C.F.R. 4.9). The master of any 

foreign vessel must also make entry at the Customhouse within 48 

hours of arrival in the Customs district. See, 19 C.F.R. 4.9(c) for 

requirements regarding delivery of foreign vessel documents. 

B. Vehicles 

The person in charge of a vehicle carrying merchandise shall present the 

inward manifest at the time of report of arrival of the vehicle (19 C.F.R.

123.5). When baggage arrives in the actual possession of a traveler, his

declaration shall be in lieu of presentation of a manifest (19 C.F.R. 123.3). 

C. Aircraft

1. All aircraft are required to make entry except; 

a. Public aircraft (i.e., aircraft owned by or under the control and 

management of the U.S. government or one of its agencies), 

and 

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b. Private aircraft (i.e., any flight which is arriving from foreign 

engaged in a personal or business flight which is not carrying 

cargo or passengers for commercial purposes). 

 

2. Air cargo manifests shall be presented. In some instances a general 

declaration may be presented in lieu of an air cargo manifest. See, 19 

C.F.R. 122.43. 

3. Per 19 C.F.R. 122.42, the aircraft commander shall present all required 

forms to Customs at once after arrival. Per 19 C.F.R. 122.27(c) he 

shall present pilot certificate, medical certificate and aircraft registration 

certificate if requested. 

III. Seizures/Penalties 

For failure to report arrival, presentation of any false paper or document, violation 

of any regulation regarding the entry and arrival of conveyances, the discharge of 

passengers or merchandise, or departure from the place of arrival without 

customs authorization, the following sanctions, pursuant to the provisions of title 

19, United States Code, section 1436, are available: 

A. A civil penalty in the amount of $5,000 for a first offense or $10,000 for a 

subsequent offense assessable only against: 

1. The master of a vessel, 

2. The person in charge of a vehicle, or 

3. The pilot of an aircraft. 

B. A civil penalty equal to the value of any merchandise (except sea stores or 

their equivalent) in or aboard an unreported conveyance may also be 

assessed against the master, person in charge, or pilot. This penalty is in 

addition to the $5,000 or $10,000 statutory penalty. 

C. Seizure of the conveyance. 

D. Seizure of the merchandise in or aboard the conveyance. 

NOTE: Seizure of merchandise should only occur under limited circumstances.

See, Section V of this Chapter for clarification. 

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IV. Penalty Assessment 

A. If the identity of the master of a vessel, person in charge of a vehicle, or pilot of 

an aircraft can be ascertained, assessment of the $5,000 or $10,000 penalty 

against that party is appropriate. 

B. An additional penalty equal to the value of the merchandise on board may be 

assessed against the master, pilot, or person in charge only if arrival of the 

conveyance is not reported or the conveyance is not properly entered and 

aggravating factors are present. Examples of aggravating factors are: 

1. Documentary or other evidence that establishes violator's intent. 

2. Informant provides information which tends to establish master, 

pilot or person in charge's intent to violate the statute. 

3. Unmanifested or unreported articles concealed to evade U.S. law 

rather than for safekeeping. 

4. Behavior such as extreme lack of cooperation, verbal or physical 

abuse, attempted escape, or other behavior which tends to 

demonstrate a lack of respect for law. 

5. Experience in importing. For purposes of these guidelines, an 

experience in importing is established by showing that an 

individual, through prior arrivals into the United States or other 

commercial experience, should have known of conveyance entry

and documentation presentation procedures. 

6. A failure to report arrival could result in the possible importation of

prohibited or restricted merchandise. 

C. The penalty described in paragraph B. shall be assessed in an amount equal to 

the domestic, rather than transaction, value of the merchandise. 

D. These penalties are assessable only against the master, person in charge or 

pilot. They may not be assessed against passengers in an unreported 

conveyance, importers of merchandise, consignees of merchandise, brokers or

freight forwarders. 

1. This penalty cannot be assessed against a passenger on any 

conveyance that does not report arrival. For example, when a 

vehicle which enters without inspection (EWI) contains a driver and 

a passenger, the penalty for failure to report arrival is assessed

against the operator of the vehicle. The passenger in the vehicle is 

not liable for this penalty. 

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2. If the violator is a conveyance operator who is an employee of a 

corporate entity (e.g., airline, steamship company, trucking 

company), the penalty notice may be issued against the 

conveyance operator in care of the corporate entity and mailed to 

the employing entity. If a petition is filed by the airline, steamship

company, trucking company, etc., on behalf of the employee, as a 

matter of policy the petition should be considered and mitigation 

afforded based on the case record. 

3. If the employing company pays the penalty on behalf of the 

employee conveyance operator, the payment should be accepted 

and the case processed per standard operating procedures. 

E. Multiple violations on the same arrival, or on a continuous voyage. 

1. If a first-time violator fails to report arrival, he necessarily does not 

present a manifest as required by regulation. While these acts 

constitute two violations of the statute, separate penalties of $5,000 

should not be assessed for each violation. As a matter of policy, a 

single $5,000 penalty for the failure to report arrival incident is

sufficient sanction. 

2. As a general rule, a violator who fails to report arrival at numerous 

ports on a continuous sea voyage or fails to report at more than 

one airport on the same contemporaneous journey, should be 

considered as a first-time violator at each port if no element of

intent exists for the violation. Intent will be presumed if Customs 

has advised the violator of the reporting requirements after 

discovery of the violation at any of the ports where arrival was not 

reported and violations continue. Barring a finding of intent, each

violation should be considered a first violation and the ports where 

each violation occurred may assess a separate $5,000 penalty. No 

port should issue a $10,000 penalty as a subsequent violation. 

3. As a general rule, a penalty for departure from the place of arrival

without authorization should not be assessed against a violator who 

fails to report arrival entirely. In order for this penalty to lie, the 

violator must have first reported to a Customs officer and then 

departed without authorization. 

F. Presentation or display of a false or altered user fee decal shall be 

considered to be presentation of a false document for purposes of 1436 

penalty assessment. A penalty shall be assessed in the amount of $5,000 

against the operator of the vehicle for a first offense. A $10,000 penalty

should be assessed for a second or subsequent offense. 

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G. Penalties Against Aircraft Pilots 

1. Under the provisions of 19 C.F.R. 122.166, civil penalties against a 

pilot of an aircraft shall be assessed as provided by 19 U.S.C. 1436 

with respect to the following actions: 

a. Advance notification of arrival 

b. Report of arrival 

c. Landing of aircraft 

d. Presentation of documentation 

e. Departure from the port, place or airport of arrival without

authorization 

f. Discharge of passengers or merchandise (to include baggage)

without authorization.

2. If an aircraft pilot violates any of the regulations promulgated in Part 

122 that deal with something other than those actions listed in a. 

through f. above, a penalty of $5,000 should be assessed under the 

provisions of 19 U.S.C. 1644a. The penalty notice, in addition to 

section 1644a, should also reference the specific regulation 

violated and provide a detailed description of the violation. 

3. All second or subsequent penalties issued for violation of section 

1644a shall also be issued for $5,000. 

4. Consistent with the policy articulated in paragraph IV.E.1., above, if

an aircraft pilot commits multiple offenses on one arrival (i.e., fails

to give advance notification of arrival and fails to report arrival) he 

shall incur one penalty for that arrival. 

H. Presentation of false documents, manifests, etc. 

1. If there is a manifest discrepancy that is not attributable to a 

deliberate smuggling attempt, penalties should be assessed 

pursuant to 19 U.S.C. 1584 for failure to manifest. 

2. Manifest discrepancies for which a penalty generally should not be 

assessed under section 1436 are as follows:

a. The manifest does not contain shipper or consignee names 

b. The manifest has an inadequate description of the cargo or

has incorrect values, either of which could be attributable to 

paperwork error or mistake. 

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c. There is a shortage or overage that can be attributable to 

paperwork errors or mistakes in tabulation of the amount of 

cargo on the conveyance by parties other than the operator 

of the conveyance. 

3. Manifest penalties under 1436 are appropriate for the presentation 

of any false manifest information or data. 

NOTE: Manifest presentation and discrepancy violations should be 

processed under the provisions of this section entitled MANIFEST

OR CARGO DELIVERY VIOLATIONS. 

4. If there is a substantial material falsity between the amount of 

merchandise manifested and invoiced and the amount of 

merchandise actually discovered on the conveyance, then seizure 

of the merchandise may be appropriate. See, Section VI., below. 

5. NOTE: The provisions of 19 C.F.R. 123.5 require a manifest listing 

baggage and other merchandise, certified by the person in charge,

to be presented to the Customs officer at the time the report of 

arrival is made. If the operator of commercial vehicle arrives

without a completed manifest, he will be required to complete a 

manifest and present it to the appropriate Customs officer. He may

be the subject of a penalty under 19 U.S.C. 1584 at the discretion 

of the local port director. 

V. Recreational Vessel Reporting 

1. Port Directors in ports which have numerous pleasure vessels that 

frequently touch foreign or traverse in foreign waters and return to 

U.S. waters shall have enforcement discretion in the assessment of 

penalties for failure to report arrival. 

2. In lieu of penalty action, port directors may, at their discretion, issue 

warning letters to first-time violators who are masters of pleasure 

vessels that fail to report arrival. 

VI. Seizures 

A. Unless there is a compelling reason to do so, a conveyance involved in a 

violation of 19 U.S.C. 1436 shall not be seized for a first violation. 

B. Notwithstanding subparagraph A., above, seizure of a conveyance is 

always appropriate if: 

1. The failure to report is part of a deliberate smuggling attempt, 

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2. The violation occurs in association with other unlawful activity (not 

necessarily limited to smuggling). 

3. There is a lack of information necessary to assess a penalty. E.g., if 

a vehicle runs a port and the identity of the person in charge of the 

vehicle at the time of the violation cannot be ascertained, later 

seizure of the vehicle would be appropriate. 

4. Seizure of the conveyance is necessary to secure payment of the 

penalty (e.g., if an entry without inspection occurs and the operator 

of the vehicle is a foreign national and the likelihood of collection of 

a monetary penalty is remote). The conveyance also may be held 

under the provisions of 19 U.S.C. 1594 in order to secure payment 

of the penalty. 

C. Statutory limitations regarding the seizure of common carriers, as provided 

for in 19 U.S.C. 1594, are applicable. When a violation of section 1436 is

the only violation present, a common carrier will not be seized unless the 

violation is intentional in nature. 

D. As a general rule, merchandise which is owned by someone other than 

the master of a vessel, operator of a vehicle or pilot of an aircraft should 

not be seized unless there is evidence of other unlawful activity or there is 

evidence to indicate that the owner of the property, or the agent of the 

owner, is responsible for the violation for which seizure could be effected 

(See, paragraph E. below). 

E. NOTE: In land border situations, if a significant manifest discrepancy

exists, and it is determined that the operator of the vehicle did not know of

the discrepancy and it appears that the false documents were prepared by 

the owner of the property or his broker, freight forwarder or other agent, 

seizure of the merchandise is appropriate. If the significant discrepancy is 

attributable to the negligence of the operator of a commercial vehicle,

seizure would not be appropriate. A monetary penalty against the 

operator of the vehicle is the appropriate sanction. 

VII. Mitigation/Remission Guidelines 

The following guidelines should be used for violations of section 1436 that do not

involve controlled substances. 

A. Penalties - $5,000 first offense for failure to report arrival. 

1. If the violation involves a recreational vessel master who fails to 

report arrival, mitigate to an amount not less than $100 nor more 

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than $500, depending upon the presence of aggravating 

circumstances (See, IV.B. above). 

2. If the violation involves the operator of a non-commercial 

conveyance who fails to report arrival after entry into the United 

States at an unmanned port of entry or airport, mitigate to an 

amount not less than $100 nor more than $500, depending on the 

presence of aggravating circumstances (See, IV.B. above). 

3. If the violation involves a situation involving failure to report arrival 

that is not described in subparagraphs 1., and 2., above, mitigate to 

an amount between $500 and $2,500 depending on the presence 

of aggravating factors (See, IV.B. above). 

4. If the violator can show that the failure to report arrival occurred 

because of a medical emergency, inclement weather or arrival of a 

conveyance in distress, the district director may remit the penalty

without payment. 

5. If multiple violations occurred on the same arrival, but only one 

penalty was issued (See, paragraphs IV.E.1. and IV.G.4. above), 

mitigation to an amount in the higher range of the guidelines is

permitted. 

B. Penalties - $5,000 first offense for presentation of false document or 

manifest, failure to have manifest, failure to deliver manifest to Customs, 

or departure from place of arrival without Customs authorization; mitigate 

to an amount not less than $500 nor more than $2,500 depending on the 

presence of aggravating circumstances (See, IV.B. above). 

NOTE: Relief may be denied if any document pertaining to the registry of 

the vessel, vehicle or aircraft is counterfeit or otherwise forged or altered. 

C. Penalties - $10,000 subsequent offense for failure to report arrival,

mitigate to an amount not less than $1,000, nor more than $5,000 

depending on the presence of aggravating factors. If the payment of a 

mitigated amount has no deterrent effect on a chronic violator, relief may

be denied and the full penalty amount collected. 

D. Penalties - $10,000 subsequent offense for presentation of a false 

document or manifest, failure to have a manifest, or departure from the 

place of arrival without Customs authorization; mitigate to an amount not

less than $1,000 nor more than $5,000 depending upon the presence of 

aggravating circumstances (See, IV.B. above). 

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E. Penalties equal to the value of the merchandise aboard a conveyance

which was not properly reported or entered, mitigate to an amount equal 

to between 5 and 20 percent of the penalty depending on the presence of 

aggravating factors. If an intentional smuggling attempt on an unreported 

conveyance can be proven, then mitigation to an amount higher than 20 

percent or even denial of relief from the penalty may be appropriate. 

F. Penalties assessed for violation of the provisions of 19 U.S.C. 1644a and 

Part 122 of the Customs Regulations, mitigate the penalties in accordance 

with guidelines provided in subparagraph B. above. 

G. Seizure of Conveyances 

1. If the seizure results because the conveyance is used in 

association with other unlawful activity or is used as part of a 

deliberate smuggling attempt, grant no relief unless the claimant

can show that he was neither privy to nor had reason to believe the 

illegal activity would occur. 

2. If the seizure results to secure payment of a penalty assessed for 

violation of section 1436, remit the forfeiture following the 

guidelines for mitigation of $5,000 or $10,000 penalties based on 

the number of violations attributable to the person in charge of the 

conveyance. 

3. If the seizure results because assessment of a penalty could not be 

made because the identity of the master, person in charge or pilot

was not known, remit the forfeiture following the guidelines for 

mitigation of $5,000 or $10,000 penalties based on the number of

violations attributable to the conveyance. 

4. If seizure occurs in addition to a monetary penalty, remit the 

forfeiture of the conveyance upon payment of an amount equal to

the mitigation afforded with regard to the monetary penalty. This

amount cannot exceed the domestic value of the conveyance. 

H. Seizure of merchandise 

1. If the seizure results because the merchandise is being deliberately

smuggled, grant no relief. 

2. If the seizure results because of a significant manifest discrepancy 

and there is a calculable loss of revenue because of the 

discrepancy, remit the forfeiture upon payment of an amount equal 

to no less than two times and no more than six times the loss of 

revenue depending on the presence of aggravating circumstances 

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(See, IV.B. above). If the merchandise would be absolutely or 

conditionally free of duty, remit the forfeiture upon payment of an 

amount between one and ten percent of the domestic value 

depending on the presence of aggravating circumstances. 

I. Every remission shall be conditioned upon payment of the costs of seizure 

and storage (if any) and execution of an agreement to hold Customs

harmless from any other possible claimants to the seized property who 

may come forward and make claims against that property. 

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PASSENGER/CREWMEMBER VIOLATIONS 

I. Specific Violations 

A. An individual boards an arriving vessel before Customs grants

authorization. 

1. No person except a pilot in connection with the navigation of the vessel 

or an officer of Customs, Coast Guard, APHIS or an agent of the 

vessel exclusively for purposes relating to Customs formalities, shall go

on board any vessel arriving from outside the Customs territory without

the permission of Customs. (See, 19 C.F.R. 4.1(c)(1)) 

2. Penalty of $5,000 against the master for violation of 19 U.S.C. 1436 

and 19 C.F.R. 4.1(c)(1). 

B. An individual departs an arriving conveyance before Customs 

authorization. 

 1. Vessels 

a. No person may leave an arriving vessel except for the 

purpose of reporting arrival without the permission of the 

Customs officer in charge. 

b. Penalty of $5,000 against the master for violation of 19 

U.S.C. 1436 and 19 C.F.R. 4.1(c)(2). 

 2. Aircraft 

a. The commander of an aircraft is responsible for keeping 

arriving passengers and crewmembers in a separate place 

until Customs authorizes their departure. 

b. Penalty of $5,000 against the aircraft commander for 

violation of 19 U.S.C. 1436 and 19 C.F.R. 122.36. 

C. A carrier unlades passengers without Customs permission. 

1. Vessels or vehicles 

Penalty of $1,000 for the first passenger unladen and $500 for 

every subsequent passenger unladen without a permit to be 

assessed against the master of the vessel or any person involved 

in the unlading. 19 U.S.C. 1454. 

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 2. Aircraft 

Penalty of $5,000 against the aircraft pilot for violation of 19 U.S.C. 

1436, 19 C.F.R. 122.166, and 19 C.F.R. 122.38. 

 

D. A passenger or crewmember individual leaves a reported conveyance

without Customs authorization. 

For a first violation, penalty of $5,000 against the individual for violation of

19 U.S.C. 1459. For a second or subsequent violation, a penalty of

$10,000. 

E. A passenger or crewmember arriving on a reported conveyance fails to 

report immediately to the designated Customs facility. 

For a first violation, penalty of $5,000 against the individual for violation of

19 U.S.C. 1459. For a second or subsequent violation, a penalty of

$10,000. 

F. A passenger or crewmember arriving on a reported conveyance departs the 

designated Customs facility without authorization. 

For a first violation, penalty of $5,000 against the individual for violation of 

19 U.S.C. 1459. For a second or subsequent violation, a penalty of

$10,000. 

G. An individual arriving on an unreported conveyance fails to report his or her

arrival to a Customs officer. 

For a first violation, penalty of $5,000 against the individual for violation of 

19 U.S.C. 1459. For a second or subsequent violation, a penalty of

$10,000. 

H. A crewmember attempts to land articles and does so in a manner so as to 

avoid inspection. 

Seizure of the merchandise plus a personal penalty against the 

crewmember equal to the value of the merchandise landed in a manner so

as to avoid inspection pursuant to 19 U.S.C. 1453 and 19 C.F.R. 148.67(a). 

I. A crewmember fails to declare all merchandise, which he has landed and 

upon which duties are owed. 

Seizure of the merchandise plus a personal penalty against the 

crewmember equal to the value of the merchandise not declared (to be 

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treated as merchandise unladen without a permit) pursuant to 19 U.S.C. 

1453 and 19 C.F.R. 148.67(b). 

J. A crewmember files a declaration but omits certain articles from that 

declaration. 

Treat as a regular 19 U.S.C. 1497 failure to declare case. See, 19 C.F.R. 

148.67(c). 

II. Mitigation Guidelines 

A. For all violations of 19 U.S.C. 1436 or 19 U.S.C. 1459 described in I. above, 

mitigate in accordance with guidelines provided in ARRIVAL AND ENTRY

OF VESSELS, VEHICLES AND AIRCRAFT, Section VI., above, for 

departure from the place of arrival without Customs authorization.

B. For all violations of 19 U.S.C. 1453 or 19 U.S.C. 1497 described in I. above, 

mitigate in accordance with guidelines for 19 U.S.C. 1497 violations. 

C. For all violations of 19 U.S.C. 1454 described above, mitigate in

accordance with guidelines for 19 U.S.C. 1454 penalties provided in IV. 

OTHER VESSEL PENALTIES below. 

 

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MANIFEST AND CARGO DELIVERY VIOLATIONS 

I. Presentation of Manifests 

The following list of violations covers the most frequently referenced 

discrepancies or irregularities involving the presentation of manifests. 

A. Carrier does not have manifest in its possession, the master of a vessel or 

person in charge of a vehicle does not produce the manifest to an officer 

demanding the same or the carrier does not produce it upon demand by 

post-audit team: 

1. Penalty action against master of vessel or person in charge of rail

or truck carrier; assess a penalty of $1,000 for violation of 19 

U.S.C. 1584. 

2. Penalty action against pilot of air carrier; assess a penalty of $5,000 

for violation of 19 U.S.C. 1433, 19 U.S.C. 1436, 19 C.F.R. 122.48 

and 19 C.F.R. 122.166. 

3. NOTE: The provisions of 19 C.F.R. 123.5 require a manifest listing 

baggage and other merchandise, certified by the person in charge,

to be presented to the Customs officer at the time the report of 

arrival is made. If the operator of commercial vehicle arrives

without a completed manifest, he will be required to complete a 

manifest and present it to the appropriate Customs officer. He may

be the subject of a penalty under 19 U.S.C. 1584 at the discretion 

of the local port director. 

4. Mitigation to $500 may be afforded from any penalty assessed 

under 1584 against the master of vessel or operator of vehicle or 

under 1436 against the pilot of an aircraft. No relief will be afforded 

to a repeat violator of this section who incurs a penalty under 1584 

for failing to present a manifest upon the demand of a Customs 

officer. Notwithstanding any mitigation provisions under 19 U.S.C. 

1436 guidelines, as a general rule mitigation to $1,000 will be 

afforded to any pilot of an aircraft who is a repeat violator. 

B. Carrier does not deliver manifest to Customs immediately upon arrival: 

1. Penalty action against master of vessel; assess a penalty of $5,000 

for violation of 19 U.S.C. 1433. 

2. Penalty action against operator of rail or truck carrier or aircraft 

pilot; assess a penalty of $5,000 for violation of 19 U.S.C. 1433, 19 

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U.S.C. 1436, and 19 C.F.R. 123.5 (if truck) or 19 C.F.R. 123.6 (if 

rail carrier) or 19 C.F.R. 122.42(c) (aircraft). 

3. Notwithstanding any mitigation provisions under 19 U.S.C. 1436 

guidelines, mitigation may be afforded to an amount not less than 

$250 nor more than $1,000. Mitigation of penalties assessed 

against rail and truck carrier operators and pilots of aircraft should 

be consistent with that afforded to masters of vessels who have

similar records of prior violations. 

4. In the case of aircraft pilots, if a pilot incurs numerous penalties for 

this violation, or exhibits a continuing course of conduct in failing to 

deliver the manifest to Customs upon arrival, and the assessment

of the $5,000 penalty for violation of 19 U.S.C. 1436 has no

deterrent effect, an additional penalty may be assessed for violation 

of 19 U.S.C. 1644a, 19 C.F.R. 122.48, 19 C.F.R. 122.42(c) and 19 

C.F.R. 122.161. That penalty shall be mitigated in accordance with 

guidelines in effect for mitigation of penalties incurred for violation 

of 19 U.S.C. 1436. 

II. Inaccuracies or Discrepancies in Manifests 

The following violations involve manifests that inadequately describe 

merchandise, include merchandise that is not found (shortage) or fail to manifest

merchandise entirely (overage). 

A. Manifest does not contain list all inward cargo as required by 19 C.F.R.

4.7a(c). The manifest should contain sufficient detail as required by the CF1302 Cargo Declaration. The manifest description should include the number 

and kind of packages and description of the goods. Those carriers that accept

unit-loaded cargo may use the provisions of 19 C.F.R. 4.7a and indicate 

Shipper's Load and Count (SLAC) next to the quantity on the manifest. When 

discrepancies are discovered for SLAC quantities, the carrier should be 

warned and permitted to rectify this with the shipper. 

1. When these sorts of discrepancies are originally discovered, the 

carrier should be informed of the problem and counseled as to the 

correct manner of description of the merchandise contained on the 

manifest. 

2. If carriers continue to make errors or inadequately describe 

merchandise on the manifest after instruction from Customs, a 

penalty should be issued for violation of 19 U.S.C. 1584 in the 

amount of the domestic value of the cargo not adequately 

described. Said penalty cannot exceed $10,000. A prepenalty 

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notice must be issued if the penalty is to be issued for more than 

$1,000. See, 19 C.F.R. 162.76. 

3. The penalty may be assessed against any party that is directly or 

indirectly responsible for the inadequate merchandise description. 

The penalty is the same for air, sea, or land carriers. 

4. For these violations, the penalties may be mitigated to the domestic

value of the merchandise inadequately described or $500, 

whichever is less. If the violator is responsible for numerous

description inadequacies and the mitigation afforded has had no 

deterrent effect, the penalties may be mitigated upon payment of

amounts in excess of $500. In no case can mitigation be in an 

amount that exceeds the assessed penalty. 

B. Manifest does not contain shipper/consignee names, or identifies the shippers

as "various." 

1. When these sorts of omissions or insufficiencies are originally

discovered, the carrier should be informed of the problem and 

counseled as to the appropriate designation of shippers or 

consignee names that should appear on the manifest. 

2. If parties responsible for preparing manifests continue to omit 

names of shippers or consignees or continue to identify them as

"various," on the manifest after instruction from Customs, a penalty

should be issued for violation of 19 U.S.C. 1584 in the amount of 

the domestic value of the cargo which is not ascribed to a named 

shipper or consignee. Said penalty cannot exceed $10,000. A 

prepenalty notice must be issued if the penalty is to be issued for

more than $1,000. See,19 C.F.R. 162.76. 

3. The penalty may be assessed against any party that is directly or 

indirectly responsible for the omission. The penalty is the same for

air, sea or land carriers. 

4. For these violations, the penalties may be mitigated to the domestic

value of the merchandise inadequately described or $500, 

whichever is less. If the violator is responsible for numerous and 

continuous omissions and the mitigation afforded has had no 

deterrent effect, the penalties may be mitigated to amounts in 

excess of $500. In no case can mitigation be in an amount that

exceeds the assessed penalty. 

C. Manifest quantity is greater than entered or discovered quantity, i.e., 

manifested but not found (shortage). 

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1. If Customs receives or there is filed an adequate manifest

discrepancy report (MDR) within the time period provided for by 

regulation (60 days for vessels per 19 C.F.R. 4.12, 30 days for 

aircraft per 19 C.F.R. 122.49(a)(2), and 60 days for vehicle carrier 

per 19 C.F.R. 123.9(b)), or if during an audit the manifest records 

indicate that adequate MDR's are present, then no penalty action is

warranted. 

2. Manifest discrepancy reports (MDR's) may be filed by any party

discovering a discrepancy, including but not limited to the importing 

carrier, a subsequent in-bond carrier, a cartman or lighterman, or

an importer. Manifest discrepancy reporting procedures are 

chronicled in Customs Directive 3240-067A.

3. The party last receipting for the full amount of merchandise listed

on the manifest, in-bond document or transfer document is

responsible for reporting discrepancies. 

4. If a clear and concise statement as to the reason for the 

discrepancy is not provided (such statement supported by proof in 

the form of bills of lading, signed affidavits, exporter's and shipper's 

messages and telexes or any other documents that would 

substantiate the discrepancy) in the discrepancy report, Customs 

must find that the shortage occurred. 

5. A penalty of $1,000 shall be assessed under 19 U.S.C. 1584 

against any party directly or indirectly responsible for the failure to 

explain the discrepancy. 

6. Mitigation may be afforded to an amount equal to no less than $200 

for violations of this type. If violations continue and mitigation has

no deterrent effect on a violator, the district director, in his 

discretion, may deny relief from this penalty. 

D. Manifest quantity is less than entered or discovered quantity (overage). 

1. If Customs receives or there is filed an adequate manifest

discrepancy report within the time period provided for by regulation 

(60 days for vessels per 19 C.F.R. 4.12, 30 days for aircraft per 19 

C.F.R. 122.49(a)(2), and 60 days for vehicle carrier per 19 C.F.R. 

123.9(b)), or if during an audit the manifest records indicate that 

adequate MDR's are present, then no penalty action is warranted. 

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2. Carrier is responsible for the merchandise until it has been placed 

in G.O. warehouse, exported, entered or receipted for by another 

party (container freight station, in-bond carrier, etc.). 

3. The party last receipting for the full amount of merchandise listed 

on the manifest, in-bond document or transfer document is

responsible for reporting discrepancies. 

4. If the manifest discrepancy report is not adequate a penalty should 

be issued under 19 U.S.C. 1584 equal to the domestic value of the 

merchandise or $10,000 whichever is smaller. The penalty may be 

assessed against any party directly or indirectly responsible for the 

manifest discrepancy. 

5. Any 1584 penalty for over $1,000 requires issuance of a prepenalty

notice. See, 19 C.F.R. 162.76. 

6. If the overage has been released without Customs authorization, a 

penalty in the amount of the domestic value of the merchandise 

may be assessed under the provisions of 19 U.S.C. 1595a(b) for 

violation of the provisions of 19 U.S.C. 1448 for removal of 

merchandise from the place of unlading without Customs 

authorization against any party responsible for the unauthorized 

release. 

7. Mitigation of any 1584 penalty assessed for an overage should be 

afforded to an amount between 10 and 50 percent of the assessed

amount, but no less than $200. If a violator is a chronic one and 

the above mitigation does not have a deterrent effect, mitigation to 

an amount in excess of 50 percent is permitted. 

8. Mitigation of section 1595a(b) penalties for violation of section 

1448, follow mitigation guidelines found in section III.B. below. 

E. Failure to file manifest discrepancy reports 

1. Vessel - No specific penalty for this failure, assess 19 U.S.C. 1584 

penalty for overage or shortage resulting from the failure to report 

the discrepancy. 

2. Air – while a $5,000 can be assessed against the pilot for 19 U.S.C.

1644a and 19 C.F.R. 122.49, as a matter of policy only the 1584 

penalty for overage or shortage resulting from the failure to report 

the discrepancy (as in the vessel environment). 

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3. Land carrier - No specific penalty for this failure, assess 19 U.S.C. 

1584 penalty for discrepancy as above. 

5. Failure to file a manifest discrepancy report shall be considered to

be an aggravating factor when mitigating any 1584 penalty that 

results against a land carrier for a shortage or overage. 

6. Mitigation from penalties arising under 19 U.S.C. 1584 against a 

party for failing to file a manifest discrepancy report shall be under 

guidelines stated in sections C. and D. above. 

F. Carrier does not maintain adequate records at the time of audit review. 

1. If no manifest exists for a particular conveyance arrival, penalties

should be issued and mitigated in accordance with subparagraph I. 

A. above. 

2. If manifest discrepancy reports are not maintained, penalties should 

be issued and mitigated in accordance with subparagraph E. 

above. 

3. A separate violation will be established for each conveyance arrival 

for which a manifest or a manifest discrepancy report is not 

maintained. 

4. Recordkeeping penalties pursuant to 19 U.S.C. 1509 may be 

pursued. 

G. Unmanifested merchandise when container is delivered with seals intact, but 

upon examination, either an overage or shortage is discovered. 

1. When a container is sealed prior to being received by the carrier, 

the carrier or any party who is responsible for the accuracy of the 

manifest remains legally responsible for inaccuracies in the 

manifest. However, if Customs receives or there is filed an 

adequate manifest discrepancy report within the time period 

provided for by regulation (60 days for vessels per 19 C.F.R. 4.12,

30 days for aircraft per 19 C.F.R. 122.49(a)(2), and 60 days for

vehicle carrier per 19 C.F.R. 123.9(b)), or if during an audit

manifest records indicate that a discrepancy was annotated, then 

no penalty action is warranted. 

2. If the violator can show that it had no knowledge of the violation,

and the evidence indicates that neither tampering with the seals nor 

carrier records has occurred, the penalty may be remitted in full. 

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3. If the carrier is responsible for placing seals on the containers, full 

mitigation will not be afforded and the guidelines noted above for

shortages and overages should be followed. 

H. Seizure of merchandise 

1. Under the provisions of 19 U.S.C. 1584, failure to manifest 

merchandise belonging or consigned to the master or any crew of a 

vessel or to the owner or person in charge of a vehicle or to the 

pilot or crew of an aircraft. Only the unmanifested merchandise is 

subject to seizure and forfeiture. The conveyance carrying the 

unmanifested merchandise is not subject to seizure and forfeiture 

under 1584. 

2. Remission of forfeitures incurred under section 1584 should be 

consistent with penalty mitigation guidelines articulated in section 

VI.H., ARRIVAL AND ENTRY OF VESSELS, VEHICLES AND 

AIRCRAFT, above. 

III. Delivery of Cargo Without Customs Authorization (19 U.S.C. 

1595a(b) for Violation of 19 U.S.C. 1448 and/or 19 U.S.C. 1499) 

A. Penalty Assessment. Penalties for removal of merchandise from the 

place of unlading without authorization will be assessed under the 

provisions of 19 U.S.C. 1595a(b) for violation of the provisions of 19 

U.S.C. 1448 or penalties for delivery of merchandise without Customs

examination will be assessed under the provisions of 19 U.S.C. 1595a(b) 

for violation of 19 U.S.C. 1499. 

1. These penalties may be assessed against any party who is 

deemed to be responsible for the unauthorized removal or delivery 

(e.g., non-vehicle operating common carrier [NVOCC], container 

freight station, independent trucker, anyone who removes 

merchandise without Customs authorization. 

2. Penalties are assessed in an amount equal to the domestic value of 

the merchandise removed or delivered without authorization. 

3. Penalties of these types assessed against holders of international 

carrier bonds are secured by the terms and conditions of the bond 

up to the limit of the bond. Penalties may be collected in full from 

the violator. Collection from a surety is limited to the amount of the 

bond. 

4. Double penalties should not be assessed, i.e., while the same 

misdelivery may be without Customs authorization and may involve 

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avoidance of examination, only one assessment equal to the value 

of the merchandise should be made. If multiple assessments from

the same transaction occur, mitigation should reflect the policy that 

only a single penalty should have been assessed. 

B. Penalty Mitigation (See, T.D. 99-29) 

1. If the violator can show that the violation occurred solely as a result of

Customs error, the penalty should be cancelled. 

2. If the violator can show that the merchandise was never received or 

landed, the penalty should be mitigated without payment. 

3. If the merchandise which was removed without authorization or 

delivered without examination could have been the subject of an 

informal entry, the penalty may be mitigated upon payment of an 

amount equal to the duties, fees, taxes and charges that would have 

been due on the merchandise had entry been properly made plus an 

amount between $100 and $500, depending on the presence of 

aggravating or mitigating factors. 

4. If the violator comes forward and discloses the violation to Customs, 

the penalty may be mitigated upon payment of an amount equal to the 

duties, fees, taxes and charges that would have been due on the 

merchandise had entry been properly made plus $50. 

5. If the merchandise which was removed without authorization was not 

designated for Customs examination and the violator can show that the 

merchandise was entered and duties, fees, taxes and charges paid 

thereon or that the merchandise was exported, the penalty may be 

mitigated upon payment of an amount between $250 and $2,000 

depending on the presence of aggravating or mitigating factors. 

6. If the merchandise which was removed without authorization was not 

designated for Customs examination and the violator cannot show that 

the merchandise was entered and duties, fees, taxes and charges paid 

thereon or that the merchandise was exported, the penalty may be 

mitigated upon payment of an amount equal to the duties, fees, taxes

and charges that would have been due on the merchandise had entry 

been properly made plus an amount between $300 and $2,500 

depending on the presence of aggravating or mitigating factors. 

7. If the merchandise which was removed without authorization or 

delivered without examination was designated for Customs 

examination and the violator can show that the merchandise was

entered and duties, fees, taxes and charges paid thereon or that the 

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merchandise was exported, the penalty may be mitigated upon 

payment of an amount between $2,500 and $20,000 depending on the 

presence of aggravating or mitigating factors. In no case shall the 

mitigated amount be lower than any costs chargeable to the importer 

which are incident to such examination. Conversely, the mitigated 

amount can never exceed the value of the shipment. 

8. If the merchandise which was removed without authorization or 

delivered without examination was designated for Customs 

examination and the violator cannot show that the merchandise was

entered and duties, fees, taxes and charges paid thereon or that the 

merchandise was exported, the penalty may be mitigated upon 

payment of an amount equal to the duties, fees, taxes and charges

that would have been due on the merchandise had entry been properly 

made plus an amount between $3,000 and $25,000 depending on the 

presence of aggravating or mitigating factors. In no case shall the 

mitigated amount be lower than any costs chargeable to the importer 

which are incident to such Customs examination. Conversely, the 

mitigated amount can never exceed the value of the shipment. 

9. If the violator has a history of removal of merchandise from the place of

unlading without Customs authorization or delivery without Customs 

examination or particularly aggravating circumstances exist with regard 

to a violation, the Fines, Penalties and Forfeitures Officer may mitigate 

the penalty upon payment of a higher amount than that authorized by

these guidelines; however, the advice of HQ, ORR, Penalties Branch 

will be sought to determine appropriate mitigation. 

10. Theft of merchandise from Customs custody. Merchandise which is

stolen from the carrier prior to having been released by Customs shall 

be treated as having been delivered without Customs authorization. 

The carrier will be liable for penalties and mitigation will occur in

accordance with these guidelines. It should also be noted that 

penalties under 19 U.S.C. 1595a(b) for violation of 19 U.S.C. 1448 or 

1499 may also be assessed against the individuals who steal the 

merchandise from Customs custody. In those instances, no mitigation 

will be afforded to the person or persons primarily responsible for the 

illegal act. Aiders and abettors may receive mitigation to 25-50 percent 

of the penalty, depending upon the degree of complicity. 

C. Mitigating and Aggravating Factors. 

1. Mitigating Factors 

a. Violator inexperienced in the handling of cargo. 

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b. Violator has a general good performance and low error rate 

in the handling of cargo. 

c. Violator demonstrates remedial action has been taken to 

prevent future violations. 

2. Aggravating Factors 

a. Violator refuses to cooperate with Customs or acts to 

impede Customs activity with regard to the case. 

b. Violator has a rising error rate, which is indicative of

deteriorating performance in the handling of cargo. 

D. Restricted or Prohibited Merchandise. If Customs has reason to believe 

that the merchandise which was removed from the place of unlading 

without authorization or which was delivered without examination may

have been restricted or prohibited from entry, that will be considered an 

extraordinary aggravating factor and will result in mitigation at the high end 

of the mitigation range. 

E. If an importer indicates he hasn't received all cargo, this penalty can be 

generated against carrier. Filing of MDR, police report of theft or other 

explanation of discrepancy after a short delivery will not eliminate any 

penalty assessment. Such action taken after discovery of the shortage 

will be considered in mitigation. 

IV. Other Vessel Penalties 

A. Penalties Against Carrier for Failure to Notify Customs of Presence of

Unentered Merchandise (G.O. Notification Penalties) 

1. Obligation to notify Customs 

Any merchandise or baggage regularly landed but not covered by a 

permit for its release will be allowed to remain at the place of 

unlading until the fifteenth calendar day after landing. No later than 

20 calendar days after landing, the master, pilot, operator or owner 

of the conveyance or the agent thereof must notify Customs of any

such merchandise or baggage for which entry has not been made. 

Such notification must be provided in writing or by any appropriate 

Customs-authorized electronic data interchange system. 

2. Penalty assessment 

Failure to provide such notification may result in assessment of a 

monetary penalty of up to $1,000 per bill of lading against the 

master, pilot, operator or owner of the conveyance or the agent

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thereof for violation of the provisions of title 19, United States Code, 

section 1448 (19 U.S.C. 1448). If the value of the merchandise on 

the bill is less than $1,000, the penalty will be equal to the value of

such merchandise. 

3. Mitigation 

a. If notification of the presence of unentered merchandise is

provided outside the time period allowed by law or

regulation, the penalty may be mitigated to an amount 

between 10 and 50 percent of the assessment, but not less

than $100, depending on the presence of aggravating or 

mitigating circumstances. 

b. If notification is not received, or if Customs discovers the 

presence of unentered merchandise after the time period for 

notification has expired, no mitigation will be afforded. 

4. For claims for liquidated damages arising against the arriving 

carrier for failure to notify the bonded warehouse of the presence of 

unentered merchandise, against the in-bond carrier or receiver of

the merchandise under a Customs-authorized permit-to-transfer to 

notify Customs and the bonded warehouse of the presence of

unentered merchandise and against the bonded warehouse for 

failure to collect merchandise for which it had received notification, 

see sections XII, XIV, and XV of the Liquidated Damages Chapter 

of this Handbook. 

B. Unlading or lading merchandise from a vessel or vehicle without a permit 

(19 U.S.C. 1453). 

1. This violation generally involves failure to obtain a CF-3171 to unlade 

merchandise, commencement of unlading prior to Customs officer's

supervision of unlading, or unlading merchandise which has not been 

properly manifested. 

2. This violation may also involve diversion of merchandise if

merchandise is manifested for delivery at Port B, but is offloaded at 

Port A before conveyance arrival at Port B (vessels only) or 

overcarriage of merchandise if merchandise is manifested for delivery

at Port A, but is overcarried to Port B and unladen there. If this 

diversion of cargo occurs for reasons other than those expressed in 19 

C.F.R. 4.33 and the manifest is not amended to reflect the 

diversion/overcarriage of cargo, a penalty under the provisions of 19 

U.S.C. 1453 may be assessed. If this violation is discovered only

because the carrier informs Customs of the offloading, then the 

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above-noted penalties may be waived at the discretion of the port 

director. 

3. Penalty may be assessed against the master of vessel, person in 

charge of vehicle and all parties responsible for the violation. 

4. Penalty amount - domestic value of merchandise unladen or laden 

without a permit. 

5. Statute also permits seizure of merchandise and vessel. Do not seize 

without Headquarters, ORR, Penalties Branch, approval. 

6. Mitigation to $500-$5,000 is appropriate. If penalty is for less than 

$500 grant no relief. 

7. If the $500 to $5,000 mitigation does not have a deterrent effect, 

mitigation to an amount exceeding $5,000 may be appropriate. 

8. For aircraft, penalty of $5,000 shall be assessed against pilot (if a first 

violation) for violation of 19 U.S.C. 1433, 19 C.F.R. 122.38 and 19 

C.F.R. 122.166. Penalty is $10,000 for subsequent violations. 

Notwithstanding any other 1436 mitigation guidelines, mitigate 

consistent with 5. and 6. above. 

C. Unlading passengers without a permit (19 U.S.C. 1454). 

1. Penalty may be assessed against master of vessel, person in 

charge of vehicle and every other person who knowingly is 

concerned or who aids in the violation. 

2. Penalty amount - $1,000 for the first passenger unladen and $500 

per each subsequent passenger unladen without a permit. 

3. Applies to the unlading of passengers – not crew members. 

4. Mitigation to $100-$250 per passenger depending on the presence 

of aggravating factors. See, IV.B. in ARRIVAL AND ENTRY OF

VESSELS, VEHICLES AND AIRCRAFT. 

5. If a party continues to violate the statute and the $100-$250 

mitigation does not have a deterrent effect, grant no relief. 

6. Penalty of $5,000 against aircraft pilot for permitting passengers to 

depart without Customs permission under 19 U.S.C. 1644a and 19 

C.F.R. 122.36. Penalty is $5,000 per incident and not $5,000 per 

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passenger. Mitigate consistent with paragraph 3. above based on 

number of passengers permitted to depart. 

D. Failure of a vessel or vehicle which, at any authorized place, fails to come 

to a stop when signaled to do so by a Customs officer displaying proper

insignia 19 U.S.C. 1581(d). 

1. Penalty is to be assessed against the master, owner, operator or 

person in charge of the conveyance. 

2. Penalty is in the amount of not more than $5,000 nor less than

$1,000. 

3. As a general rule, no mitigation should be granted. If the violator 

can show that there was a true misunderstanding and that no loss 

of revenue was incurred due to the failure to come to a stop, then 

extraordinary mitigation may be afforded to an amount to be 

determined by the FP&F Officer. 

E. Obstruction of boarding officer (19 U.S.C. 1455). See, also 46 U.S.C. 

App. 324 relating to obstruction of boarding officer checking licensing or

registry. Same penalty assessment and mitigation. 

1. Assess penalty against any officer, owner, agent of the owner, or 

member of the crew of such vessel who obstructs or hinders the 

customs officer in the performance of his duty. 

2. Penalty amount - $500. 

3. As a general rule, no relief. 

F. Presentation by a master of a vessel of forged, altered or false document 

to an examining officer who has boarded the vessel in accordance with

the authority granted by 19 U.S.C. 1581(a) to examine a manifest or other 

documents and 19 U.S.C. 1581(b) to pursue and arrest any person 

engaged in the breach of the navigation laws. This is a violation of 19 

U.S.C. 1581(c). 

1. Penalty may only be assessed against a master of a vessel. 

2. The master must have knowledge that the document was forged, 

altered or false. 

3. Penalty amount is between $500 and $5,000. 

4. No mitigation should be granted. 

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5. This penalty should not be assessed against a master who 

presents a manifest with a discrepancy as to merchandise amounts 

or descriptions which are more properly penalized under 19 U.S.C. 

1584. 

G. Unlawful unlading or transshipment (19 U.S.C. 1586) 

1. Penalty against master of vessel for unlading merchandise after 

arrival in Customs waters but before arrival at place for discharge 

and before receiving permit to unlade - twice the value of the 

merchandise unladen but not less than $10,000. Vessel and cargo 

are subject to seizure and forfeiture. 19 U.S.C. 1586(a). 

2. Penalty against master of vessel for transshipment of merchandise 

from a vessel located at a point adjacent to the Customs waters to 

a vessel which may introduce such merchandise into the U.S. in 

violation of law - twice the value of the merchandise transshipped 

but not less than $10,000. Vessel and cargo are subject to seizure 

and forfeiture. 19 U.S.C. 1586(b). 

3. Penalty against master of vessel for transshipment of merchandise 

from a vessel located at a point adjacent to the Customs waters to 

a U.S. vessel twice the value of the merchandise transshipped but 

not less than $10,000. Vessel and cargo are subject to seizure and 

forfeiture. 19 U.S.C. 1586(c). 

4. Penalty against master of vessel that receives illegally transshipped 

merchandise or any other person who aids or assists in such 

transshipment - twice the value of the merchandise transshipped 

but not less than $10,000. Vessel and cargo are subject to seizure. 

19 U.S.C. 1586(d). 

5. Above penalties are not incurred if transshipment results because 

of accident or stress of weather. 19 U.S.C. 1586(f). 

6. As a general rule, no mitigation from penalties or forfeitures shall 

occur for these violations. 

7. For violations involving the transfer of merchandise between an 

aircraft and a vessel, see the provisions of 19 U.S.C. 1590. 

H. Failure to comply with direction of boarding officer (19 U.S.C. 1587). 

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1. Penalty amount - not more than $5,000 nor less than $500. 

Seizure and forfeiture of vessel and cargo may also be incurred for 

this violation. 

2. As a general rule, no mitigation from this penalty or forfeiture. 

V. Departure of Vessels; Transportation in Coastwise Trade 

Failure to comply with clearance procedures upon departure to a foreign port or 

place (19 U.S.C. 1436) 

1. All vessels bound for a foreign port or place are required to clear

except (See, 19 C.F.R. 4.60): 

a. Any documented vessel with a pleasure license

endorsement or an undocumented American pleasure 

vessel, 

b. A documented vessel with a Great Lakes license that will 

touch foreign only to take on bunker fuel, 

c. Vessels exempted from entry by 19 U.S.C. 1441, 

2. Documents required for clearance are provided for by 19 C.F.R. 

4.63 including CF-1302A, Cargo Declaration Outward with

Commercial Forms. 

3. Violations:

a. Departure without obtaining clearance from Customs. 

b. Delivery of false outward manifest, data or information 

(which would include “rollovers”, i.e., merchandise

manifested for an outbound conveyance, but actually placed 

on a second outbound conveyance). 

c. Prior to departure, failing to present SED for validation when

merchandise covered by the SED is licensable by the 

Department of State or the Department of Commerce. 

d. Failing to file outward manifest. 

4. Penalty amounts - $5,000 for first violation, $10,000 for any

subsequent violation, assessable for violation of 19 U.S.C. 1436

against the master of the vessel, pilot of the aircraft or operator of

the vehicle, consistent with the rules set forth in Section IV.,

ARRIVAL AND ENTRY OF VESSELS, VEHICLES AND 

AIRCRAFT, above. 

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5. Mitigation shall be consistent with mitigation guidelines in Section 

VI.B., ARRIVAL AND ENTRY OF VESSELS, VEHICLES AND 

AIRCRAFT, above. 

6. The 19 U.S.C. 1436 penalty will generally not be assessed for late 

filing of a complete outward manifest or late filing of Shipper's 

Export Declarations (SEDs). 

7. Both a 19 U.S.C. 1436 and claims for liquidated damages for late 

filing of SEDs (15 C.F.R. 30.24) and/or late filing of the complete 

outward manifest (19 C.F.R. 113.64(c)) can arise from the same 

conveyance departure. 

8. Slot Charters (vessels) 

a. Slot charter operators cannot incur penalties under 1436.

Those penalties must be assessed against the master of the 

vessel. 

b. There is nothing in the regulations which bars the holder of a 

slot charter from obligating his bond in lieu of that submitted 

by the arriving or departing carrier or agent of that carrier for 

any liquidated damages that may arise due to the holder of 

the slot charter’s failure to comply with outbound document

submission requirements. However, 1436 penalties must be 

assessed against the master of the vessel. 

A. Failure to have permit to proceed or failure to have a certified copy of 

manifest (19 U.S.C. 1436). 

1. Penalty amount - $5,000 for first violation; $10,000 for each 

subsequent violation assessed against the master of the vessel. 

2. Mitigation shall be consistent with mitigation guidelines in Section 

VI.B., ARRIVAL AND ENTRY OF VESSELS, VEHICLES AND 

AIRCRAFT, above. 

B. Use of nonqualified vessel to tow any other vessel other than a vessel in 

distress (46 U.S.C. App. 316(a)) 

1. Penalty of between $250 and $1,000 to be recovered from owner or 

master plus $50 per ton on the measurement of the towed vessel. 

Penalty should be based on gross tonnage rather than net tonnage. 

2. Mitigate to between 25 and 50 percent of claim for first violation, no 

relief for subsequent violations. 

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C. Offering vessels for sale when the vessels have entered under a cruising 

license (19 U.S.C. 1595a(a), 19 C.F.R. 4.94, Chapter 89, Additional U.S. 

Note 1, Harmonized Tariff Schedules of the United States (HTSUS)). 

1. Vessels which enter the United States under a cruising license may 

not be offered for sale. See, 19 C.F.R. 4.94. 

2. Offer for sale of such a vessel renders it subject to seizure and 

forfeiture under the provisions of 19 U.S.C. 1595a(a) for violation of 

46 U.S.C. App. 104 and 19 C.F.R. 4.94. 

3. Remit the forfeiture upon payment of an amount between 2 and 6 

times the loss of revenue. If the vessel would have been absolutely

free of duty upon entry, e.g., as American Goods Returned, remit

the forfeiture upon payment of one-half percent of the value or $100 

whichever is higher. 

D. Coastwise Transportation of Merchandise and Passengers in Noncoastwise Qualified Vessels (46 U.S.C. App. 883 for merchandise and 46 

U.S.C. App. 289 for passengers) 

1) Provisions of these statutes prohibit the carriage of merchandise and 

passengers, respectively, between coastwise points in the United 

States by a non-coastwise qualified (e.g. foreign-flag) vessel. These 

statutes are enacted specifically to preserve for U.S. vessels the 

transportation of goods and people within points encompassed by U.S. 

territorial waters. They are strictly applied by Customs, as intended by

Congress. 

2) Statutory citations - 46 U.S.C. App. 883 (merchandise); 46 U.S.C. App.

289 (passengers); The foregoing laws are part of, and known loosely

as, the “Jones Act.” Regulations: 19 C.F.R. 4.80 (general); 19 C.F.R. 

4.80b, 171.11(c) (merchandise); 19 C.F.R. 4.80a (passengers) 

a) Merchandise violations – Penalty Assessment 

The penalty (see below) may be assessed against any person 

transporting the merchandise, or causing it to be transported. This

includes the importer, consignee, master of the vessel, vessel

agent, or owner of the vessel. Typically, the assessment is made 

against the vessel agent or owner (if the owner is located in the 

U.S.). 

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Merchandise violation – Example 

A vessel that is not coastwise qualified loads merchandise at 

Norfolk, Virginia, and unloads it at Savannah, Georgia. If the 

transportation does not fall into an exception, discussed below, or 

one of the 13 provisos to section 883, it would be a violation of the 

coastwise law. 

b) Merchandise violations – Seizure. 

Although the statute provides for seizure of the merchandise 

transported illegally, the approval of the Headquarters Penalties 

Branch must be obtained before seizure. 

c) Merchandise violations – Penalty Amounts. 

The statute also provides for a penalty up to the domestic value of 

the merchandise (or the actual cost of the transportation, whichever 

is greater). 

Note: No penalty should be assessed in an amount higher than 

$100,000, regardless of the value of the merchandise in violation or 

cost of transportation, if the violation arose from an emergency to 

the vessel that required, for reasons of safety or other humanitarian 

cause, that coastwise transportation occur. An example would be a 

violation directly caused by a hurricane or other force of nature. In 

case of a violation caused by such an emergency, the penalty must

be assessed, and mitigation left to the discretion of the Fines, 

Penalties and Forfeitures Officer. There is no limit on the amount

of penalty to be assessed when the violation occurred due to 

commercial expediency. 

d) Merchandise violations – Mitigation. 

a. The Fines, Penalties & Forfeitures Officer may remit in full if 

the petition for relief establishes that the violation occurred 

as a direct result of the arrival of the transporting vessel in 

distress (See, 19 C.F.R. 171.11(c)). 

b. If the vessel is not in distress, but the coastwise movement 

occurred due to some other humanitarian concern, e.g.

disembarkation of a crew member because of a life 

threatening injury or illness, that somehow involved the 

unlading of domestic cargo, then the penalty would be 

assessed, but mitigated in full. 

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c. However, if neither of the foregoing situations--distress or 

humanitarian reason--are present, then the violation will be 

considered to have been committed for commercial 

expediency (even where no monetary gain is realized by the 

violator). In that case, the assessed penalty will be mitigated

to an amount equal to between 10 and 50 percent of that 

assessed. 

d. NOTE: The unavailability of a coastwise-qualified vessel is 

NOT a mitigating factor in a case where commercial 

expediency has been found. Mitigation normally will be

accomplished at the 10 percent level for a first violation that 

is not aggravated. Examples of aggravating factors would 

be a second or subsequent violation, or a violation that was 

deliberate, in that Customs obtains evidence or information 

that the violation was premeditated, or that the violation 

occurred after the violator was informed by Customs that the 

anticipated transportation would constitute a violation of 

section 883. 

e. However, in either situation, a non-aggravated first violation 

or an aggravated violation, Customs reserves the ability in a 

given case to recover a liability in an amount that would 

offset any economic gain that inured to the violator as a 

result of the violation, even if that amount would exceed the 

mitigated penalty that would otherwise have been taken. For

example, if the normal mitigated penalty amount were 10 

percent of the domestic value of the cargo illegally

transported, or $15,000, but the vessel avoided costs of 

$30,000 by committing the violation as a commercial 

expedient, then Customs could take a mitigated penalty of 

$30,000, rather than $15,000. 

e) Passenger Violations – Penalty Assessment. 

The penalty for a violation will be assessed against the master of the vessel. 

1. Passenger Violations – Penalty Example 

A non-coastwise qualified vessel embarks passengers at New 

York, New York, transports them to Miami, Florida, and allows them 

to disembark there, either temporarily, or to terminate the voyage. 

That transportation would violate section 289. 

2. Passenger Violations – Penalty Amount. 

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The law prescribes the amount of the penalty to be assessed: 

$200 per passenger transported and landed. NOTE: The term

“passenger” is defined in 19 C.F.R. 4.50(b) as “any person carried 

on a vessel who is not connected with the operation of such vessel,

her navigation, ownership, or business.” So, it does not include 

crewmembers. 

3. Passenger Violations – Mitigation. 

a. 46 U.S.C. App, 320 provides for the mitigation by Customs of a 

penalty assessed under section 289, when the offense was

not “willfully committed.” Thus, if the violation was deliberate 

or intentional, then no mitigation of the $200 per passenger 

statutory liability should be granted. 

b. Violations that occur because of commercial expediency will be 

considered to be deliberate. Violations that may occur due 

to a force of nature, the vessel being in distress, or by

reason of safety or humanitarian concern, will be assessed 

at the statutory amount, but then mitigated in full by the 

Fines, Penalties and Forfeitures Officer or Headquarters

Penalties Branch. 

A first violation that is not intentional normally may be mitigated to $100 per 

passenger. No mitigation will be granted in second or subsequent violations. 

VI. International Carrier Bond 

A. Bond Conditions; Guarantee of Payment of Penalties 

Under the terms of the International Carrier Bond, if any vessel, vehicle or 

aircraft, or any master, owner, or person in charge of a vessel, vehicle or 

aircraft incurs a penalty, duty, tax or other charge provided by law or

regulation the obligors (principal and surety, jointly and severally) agree to 

pay the sum upon demand by Customs (19 C.F.R. 113.64(a)). This is the 

only bond that guarantees the payment of penalties. 

B. If a carrier or employee of a carrier (i.e., an aircraft pilot, truck driver or 

vessel master) incurs a monetary penalty and the carrier, as bond 

principal, either does not petition or does not comply with a mitigation 

decision, a demand on surety for the penalty amount should be made. The 

surety will then have the same petitioning rights as the principal. The bond

amount provides the maximum of the surety's liability. The full penalty

amount (even if it exceeds the bond) may still be sought from the principal. 

See, 19 C.F.R. Part 172 for administrative procedures. 

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C. Unlike liquidated damages claims, monetary penalties may be assessed in 

amounts that exceed the bond. 

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LIQUIDATED 

DAMAGES

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I. In General 

A. Claims for liquidated damages are contractual in nature 

 arising from breaches of the terms of bonds. 

B. By statute, the Secretary of the Treasury authorizes Customs officers to 

require bonds to ensure protection of the revenue or assure compliance 

with any provision of law that Customs may be authorized to enforce. See,

19 U.S.C. 1623(a). 

C. 19 U.S.C. 1623 is an enabling statute. It is incorrect to cite section 1623 

on the CF-5955A as the statute violated. 

D. Parties to bond contract: 

1. Principal – party who takes out bond as required by regulation (e.g., 

importer of record, bonded warehouse proprietor, bonded carrier, 

container freight station, centralized examination station, gauger, 

foreign trade zone operator, etc.) 

2. Surety - underwriter of debt (corporate or individual surety) 

3. Beneficiary (Customs) 

E. Cancellation authority - Under the provisions of 19 U.S.C. 1623, the 

Secretary of Treasury may cancel (i.e., mitigate) claims for liquidated 

damages upon terms and conditions he deems appropriate. Authority to 

cancel all liquidated damages claims has been delegated to Customs. 

F. Coverage 

1. Single entry – covers a single entry of merchandise or a single arrival 

of a conveyance. 

2. Continuous (term) – covers all transactions occurring during a set term 

(usually one year). Continuous bonds are automatically renewed on 

their anniversary date. 

G. Customs Bond Conditions – see 19 C.F.R. Part 113, Subpart G 

1. Basic importation and entry bond – see 19 C.F.R. 113.62 

2. Basic custodial bond – see 19 C.F.R. 113.63 

3. International carrier bond – see 19 C.F.R. 113.64 

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4. Repayment of erroneous drawback payments – see 19 C.F.R. 113.65 

5. Control of containers and instruments of international traffic – see 19 

C.F.R. 113.66 

6. Commercial gauger and commercial laboratories – see 19 C.F.R.

113.67 

7. Wool and fur products labeling acts and fiber products identification act 

– see 19 C.F.R. 113.68 

8. Production of bills of lading – see 19 C.F.R. 113.69 

9. Bond to indemnify U.S. for detention of copyrighted material – see 19 

C.F.R. 113.70 

10. Bond condition to observe neutrality – see 19 C.F.R. 113.71 

11. Bond condition to pay court costs (claim and cost bond) – see 19 

C.F.R. 113.72 

12. Foreign trade zone operator bond – 19 C.F.R. 113.73 

H. Termination of bonds – See, 19 C.F.R. 113.27 

1. Termination by principal. A request by a principal to terminate a bond 

shall be made in writing to the port director and shall take effect on the 

date requested if the date is at least 10 business days after the date of 

receipt of the request. Otherwise the termination shall be effective on 

the close of business 10 business days after the request is received at

the port. 

2. Termination by surety. A surety may, with or without the consent of the 

bond principal, terminate a Customs bond on which it is obligated. The 

surety shall provide reasonable written notice of termination to the port 

director and the principal and shall be sent to both Customs and the 

principal by certified mail, with a return receipt requested. Thirty (30) 

days shall constitute reasonable notice unless the surety can show to 

the satisfaction of the port director that a lesser time is reasonable 

under the facts and circumstances. 

3. Customs does not terminate bonds. The port director can require 

additional bonding from a principal and surety if he believes that 

acceptance of a transaction secured by a continuous bond would place 

the revenue in jeopardy or otherwise hamper the enforcement of 

Customs laws or regulations. See, 19 C.F.R. 113.13. 

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4. Termination of a bond does not extinguish any obligations under the 

bond that were undertaken while the bond was in force. Also, 

termination does not serve to cancel any claim for liquidated damages 

that has been assessed against a bond. 

II. Statute of Limitations for Bond Violations-See, 28 U.S.C. 2415 

A. The statute of limitations for the vast majority of liquidated damages cases

is six years from the date the right of action accrues, i.e., the date of 

breach of the bond condition. 

B. In some limited instances, the statute of limitations will run one year after 

final decisions have been rendered in applicable administrative 

proceedings required by contract or by law (if that one year period expires 

beyond six years from the date of the breach of the bond condition). 

C. Statute does not run: 

1. if the violator (principal on the bond) is outside of the United States 

2. if the violator is exempt from the legal process (e.g., insane) 

3. if facts material to the right of action-are not known by the Customs 

so that the claim can not be issued 

III. FP&F Officer’s Mitigation Authority

A. All cases involving claims of $200,000 or less (with certain exceptions).

See, 19 C.F.R. 172.11(a) and T.D. 00-58. 

B. Exceptions; No dollar limit to the district director's cancellation authority in 

the following cases: 

1. Late or non-filing of entry summary cases 

2. Late or non-filing of reconciliation entry cases 

C. If it is definitely determined that the act or omission forming the basis for

the claim for liquidated damages did not occur, the claim may be canceled 

by the FP&F Officer without regard to assessed amount. See, 19 C.F.R. 

172.11(b). 

D. No action will be taken on any petition from a principal or surety if received 

after the issuance to surety of a notice to show cause pursuant to 19 

C.F.R. 113.38(c)(3). See, 19 C.F.R. 172.13(b). 

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E. No action will be taken on any petition if the civil liability has been referred 

to the Department of Justice for institution of legal proceedings. The 

petition will be forwarded to the Department of Justice. See, 19 C.F.R. 

172.13(a). 

IV. Assessment of Claims 

A. Maximum assessments - Claims for liquidated damages cannot be 

assessed against either the principal or the surety for an amount in excess

of that for which the bond is written. See, Bill Curphy Company v. Elliott,

207 F.2d 103. 

B. Minimum assessments - No claim should be assessed for less than $100,

except where the law or regulation expressly provides that a lesser

amount may be taken, e.g., a claim for late filing of SED or export 

documents necessary to complete outward manifest that is one day late. 

Assessment of $50 is mandated by regulation and is appropriate in that

instance. Also, carnet violations may be issued for less than the minimum. 

C. Assessing against correct bond. 

1. The bond in effect at the time a transaction is commenced is

responsible for obligations that arise and payment of any liquidated 

damages because breaches of those obligations. That bond will 

remain liable for breaches of any obligations that vest while the 

bond is in force. For example, the international carrier bond

presented for the arrival and clearance of a conveyance will cover 

all obligations governing the reporting of arrival (including 

manifesting of cargo, unlading of merchandise, etc.) and clearance 

of that conveyance. If a violation is discovered in a subsequent 

audit, the bond presented for that arrival will be charged even if 

another bond has been obtained by the carrier in the interim. 

2. Superseding Bonds - The importer of record on a CF-3461 who 

uses his bond to effect release of goods is responsible for the 

payment of estimated duties. A superseding bond filed in the name

of another party (usually the actual owner or consignee) at the time 

of filing the entry summary will shift liability for any subsequent 

obligations (e.g., increased duties, redelivery notices issued after 

presentation of the superseding bond) but will not make the party 

named in the superseding bond liable for previously vested 

obligations such as payment of estimated duties. 

D. Assessment amounts – Unless another amount is authorized by law or

regulation, liquidated damages are generally assessed in an amount equal 

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to the entered value of the merchandise which is the subject of the bond 

breach or three times the entered value of that merchandise if the 

merchandise is restricted, prohibited or alcoholic beverages. 

V. Offers in Compromise 

A. FP&F Officers have been delegated the authority to accept offers in 

compromise in liquidated damages cases consistent with their authority to 

mitigate claims, i.e., when the amount assessed (not the amount offered) 

is $200,000 or less (or in any late or non-filing of an entry summary or late 

or non-filing of a reconciliation entry case). 

B. Any decision by the FP&F Officer to accept an offer submitted with regard 

to a claim for liquidated damages must be approved by the Assistant Chief

Counsel, Account Services Division, Indianapolis. 

VI. Petitions for Relief 

Petitions for relief from liquidated damages claims shall be considered timely if

they are filed within 60 days of the date of issuance of the CF-5955A. See, 19 

C.F.R. 172.3(b). Extensions may be granted by the FP&F Officer when the 

circumstances so warrant. 

A. Pursuant to 19 C.F.R. 172.1(a), sureties are notified at the same time as 

principals of liability for liquidated damages. The concurrent notice shall be

construed as a courtesy copy for sureties. 

B. If the principal does not respond to the initial notice in 60 days, a demand 

on the surety is issued as soon thereafter as possible. The surety will 

then have 60 days to petition from the date of the demand. See, 19 C.F.R. 

172.4. 

C. Supplemental petitions must be filed within 60 days of the decision on the 

original petition for relief or within 60 days following an administrative or 

judicial decision with respect to issues serving as the basis for the claim

for liquidated damages (whichever is later) unless another time to file such

a supplemental petition is prescribed in the original decision. See, 19 

C.F.R. 172.41. 

D. Carnet Cases. The petitioning process for carnet cases differs from all 

other cases. See, Section III B., below, for information. 

VII. Protests 

Claims for liquidated damages are not protestable by the bond principal. See,

United States v. Toshoku America, Inc., 879 F.2d 815 (Fed. Cir. 1989). If a 

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principal does file a protest, the FP&F Officer may either return the protest and

inform the principal that protests may not be filed, or treat the protest as a petition 

for relief. A surety may protest a claim for liquidated damages. 

If a protest is filed against a Customs action that forms the basis for the claim for 

liquidated damages (the most common example being the filing of a protest 

against a notice of redelivery), the claim for liquidated damages may be 

assessed, but any action on the claim should be held in abeyance pending the 

resolution of the protest (including any applications for further review). 

VIII. Providing Copies of Bonds and Entries 

A. Customs is not required to attach a copy of the bond to its demand for

payment when Customs supplies sufficient information for the surety to 

locate the bond and ascertain its liability for payment. See, Peerless

Insurance v. United States, 703 F. Supp. 104 (1988). 

B. A formal demand containing the name and address of delinquent debtor,

the bill number, billing date, port name, document date, entry number, the 

amount due and the importer number was found to be a sufficient 

demand. See, Peerless v. United States, supra. 

IX. Defenses 

The surety stands in the shoes of the principal and may raise any defense or

issue that the principal could raise. The surety will receive the same mitigation 

that would have been due the principal. 

X. Effect Of Liquidation 

Liquidation of an entry does not affect the issuance or mitigation of claim for 

liquidated damages if the violation occurred while entry bond was still in effect. 

Exception: If a Notice of Redelivery (CF-4647) is issued after liquidation has 

become final, a claim for liquidated damages for failure to redeliver cannot be 

assessed. See, 19 C.F.R. 141.113(g). 

XI. Bankruptcy of Principal 

Bankruptcy of a principal does not affect the liability of the surety. Any claims for

liquidated damages should be pursued against the surety. 

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GUIDELINES FOR CANCELLATION OF LIQUIDATED DAMAGES CLAIMS REF: T.D. 

94-38, T.D. 98-53, T.D. 99-29, T.D. 01-41 AND T.D. 02-20 

I. Guidelines for Cancellation of Claims for Liquidated Damages 

for Failure to File Entry Summaries Timely (19 C.F.R. 142.15 and 

113.62(b)), Failure to Pay Estimated Duties Timely (19 C.F.R. 

113.62(a)(1)(i) and 113.62(l)(4)), and Failure to Remit Passenger 

Processing Fees Timely (19 C.F.R. 113.64(a)) (T.D. 94-38) 

A. Failure to file entry summaries timely. 

Claims for liquidated damages for failure to file entry summaries timely 

shall be issued and mitigated as follows: 

1. Notification of liquidated damages incurred; modified CF-5955A. 

Notices of liquidated damages incurred shall be issued on a 

modified CF-5955A. The modified form shall specify two options

from which the petitioner may choose to resolve the demand. 

a. Option 1. He may pay a specified sum within 60 days and 

the case will be closed. By electing this option in lieu of 

petitioning, he waives his right to file a petition. He may, 

however, file a supplemental petition, if he does so in 

accordance with the Customs Regulations and has some 

new fact or information which merits consideration in 

accordance with these guidelines. 

b. Option 2. Petition for relief. Pursuant to the provisions of 19 

C.F.R. 172.2 and 172.4, the bond principal or surety may file 

a petition for relief. By filing a petition for relief, the petitioner

will no longer be afforded the Option 1 mitigation amount. 

The FP&F Officer shall grant full relief when the petitioner 

demonstrates that the violation did not occur or that the 

violation occurred solely as a result of Customs error. If the 

petitioner fails to demonstrate that the violation did not occur 

or that the violation occurred solely as a result of Customs 

error, the FP&F Officer may cancel the claim upon payment 

of an amount no less than $100 greater than the Option 1 

amount. 

2. Calculation of mitigated amount; entry summary filed late. The 

amounts to be set forth under Option 1 on the CF 5955A shall be 

calculated as follows:

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a. Dutiable entry summary filed late. The bond principal or

surety shall be charged an administrative fee of $100 plus 

interest on the withheld duty at the rate of 0.1 percent (.001) 

per calendar day that the withheld duty was late. The 

interest amount shall be rounded up to the next dollar. For 

purposes of this calculation, the withheld duty amount shall 

be rounded down to the next dollar. For purposes of these 

mitigation guidelines, the term "withheld duty" shall include 

unpaid duties, merchandise processing fees, harbor

maintenance fees and any other taxes or charges due and 

owing at the time of filing of the entry summary. 

b. Duty-free entry filed late. The bond principal or surety shall 

be charged an administrative fee of $100 plus interest on 

any withheld fees and taxes calculated at the rate of 0.1 

percent (.001) per calendar day that the entry summary was

late. 

c. Dutiable entry rejected and re-filed late with no withheld 

duty, fees and taxes. The bond principal or surety shall be 

charged $100. 

d. Dutiable entry filed timely but rejected, re-filed late with 

additional duties, fees and taxes owed. The bond principal 

or surety shall be charged an administrative fee of $100 plus

interest calculated on withheld duties, fees and taxes only,

calculated at the rate of 0.1 percent (.001) per calendar day

that the withheld duty was late. 

3. Entry summary not filed. 

a. If at the time the demand for liquidated damages is issued 

the entry summary has not been filed, a claim for liquidated 

damages for non-filing of the entry summary shall be issued. 

No mitigated amount shall be offered under Option 1. As a 

prerequisite for mitigation, the principal must file the entry 

summary and pay estimated duties, fees and taxes or the 

surety must deposit estimated duties, fees and taxes. 

b. Once the estimated duties, fees and taxes have been paid, a 

notice of claim for liquidated damages shall be issued for 

late filing of the entry summary, replacing the earlier notice 

of claim for non-filing of the entry summary. The late filing

claim issued as a result of a non-filing situation shall be

canceled in accordance with the following guidelines once 

the estimated duties, fees and taxes have been deposited. 

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i. The bond principal shall be charged an administrative 

fee of $200 plus interest on the withheld duty at the 

rate of 0.1 percent (.001) per calendar day that the 

entry summary was late. The interest amount shall 

be rounded up to the next dollar. For purposes of this

calculation, the duty amount shall be rounded down to 

the next dollar. 

ii. When the surety deposits estimated duties, fees and 

taxes, the surety shall be charged an administrative 

fee of $200 plus 0.1 percent (.001) per calendar day

between issuance of the demand on surety and 

payment of the estimated duties, fees and taxes. 

c. If no response from the principal is received within 60 days

from the date of issuance of the non-filing claim, a claim for

liquidated damages for the non-filing shall be issued to both

the principal and surety, but no Option 1 mitigation shall be 

offered. 

4. Late filing of statement summaries. 

a. If a Customs broker files an entry statement including 

multiple entry summaries for processing in an untimely 

manner, the FP&F Officer may, in his or her discretion, 

cancel all claims for liquidated damages arising because of 

the late filing in accordance with the following standard: 

The broker shall be charged, as an Option 1 amount, an 

administrative fee of $500 plus interest on the withheld duty 

at the rate of 0.1 percent (.001) per calendar day that the 

withheld duty was late. The interest amount shall be 

rounded up to the next dollar. For purposes of this

calculation, the withheld duty amount shall be rounded down 

to the next dollar. For purposes of these mitigation 

guidelines, the term "withheld duty" shall include unpaid 

duties, merchandise processing fees, harbor maintenance 

fees and any other taxes or charges due and owing at the 

time of filing of the entry summary. A broker who is

responsible for late submission of a statement summary 

shall be afforded this mitigation with regard to any first 

violation. This mitigation may be afforded with regard to a 

subsequent violation, based upon the discretion of the 

district director. 

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b. Petition for relief. 

i. If the broker files a petition for relief which 

demonstrates that the violation did not occur or

occurred as a result of Customs error, all claims 

arising from the late filing should be canceled without 

payment. 

ii. If the broker files a petition for relief which fails to

demonstrate that the violation did not occur or 

occurred as a result of Customs error, the claim shall 

be canceled upon payment of $700 plus interest on 

any withheld fees and taxes calculated at the rate of

0.1 percent (.001) per calendar day that the entry 

statement was late. 

c. Failure to pay Option 1 amount or petition for relief. 

If a broker fails to pay the Option 1 amount or fails to petition 

for relief, Customs shall issue appropriate claims for 

liquidated damages against all bond principals and sureties 

and the mitigation guidelines enumerated in paragraph B. 

above shall be followed. In no case shall the $500 plus 

interest Option 1 amount afforded to brokers in these cases

be afforded to principals or sureties. 

5. Suspension of immediate release privileges. If an importer fails to 

meet his obligations with regard to claims for liquidated damages 

for late filing of entry summaries, the FP&F Officer is always 

empowered to recommend to the port director suspension of 

immediate release privileges of the importer. Alternatively, the 

FP&F Officer may choose to assess liquidated damages but not 

offer an Option 1 alternative. 

B. Late or non-payment of estimated duties. 

Claims for liquidated damages for late or non-payment of estimated duties

shall be issued in an amount equal to double the late-paid estimated 

duties, fees, taxes and charges or $1,000 (whichever is greater) and 

mitigated as follows: 

1. Notification of liquidated damages incurred; estimated duties not 

paid. If at the time the demand for liquidated damages is issued 

the estimated duties, fees and taxes have not been paid, the claim 

shall be issued on a CF-5955A citing 19 C.F.R. 113.62(a)(1)(i) and 

19 C.F.R. 113.62(l)(4) as the bond conditions violated. No 

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mitigated amount shall be offered under Option 1. As a 

prerequisite for mitigation, the principal must pay estimated duties,

fees and taxes or the surety must deposit estimated duties, fees

and taxes. 

 2. Notification of liquidated damages incurred; estimated duties paid 

late; modified CF 5955A. If at the time of issuance of the demand 

for liquidated damages, estimated duties, fees and taxes have been 

paid, the Notices of Claim for Liquidated Damages incurred shall be 

issued on a modified CF-5955A. The modified form shall specify 

two options from which the petitioner may choose to resolve the 

demand. 

a. Option 1. He may pay a specified sum within 60 days and 

the case will be closed. By electing this option in lieu of 

petitioning, he waives his right to file a petition. He may, 

however, file a supplemental petition, if he does so in 

accordance with the Customs Regulations and has some 

new fact or information which merits consideration in 

accordance with these guidelines. 

b. Option 2. Petition for relief. Pursuant to the provisions of 19 

C.F.R. 172.2 and 172.4, the bond principal or surety may file 

a petition for relief. By filing a petition for relief, the petitioner

will no longer be afforded the Option 1 mitigation amount. 

The FP&F Officer shall grant full relief when the petitioner 

demonstrates that the violation did not occur or that the 

violation occurred solely as a result of Customs or financial 

institution error. If the petitioner fails to demonstrate that the 

violation did not occur or that the violation occurred solely as

a result of Customs or financial institution error, the FP&F

Officer may cancel the claim upon payment of an amount no 

less than $100 greater than the Option 1 amount. 

3. Calculation of Option 1 amounts. 

a. If estimated duties, taxes and charges are paid untimely, but 

payment is made before Customs is required to issue a 

Notice of Claim as described in Subparagraph B(1) above,

the bond principal or surety shall be charged an 

administrative fee of $100 plus interest on the withheld duty 

at the rate of 0.1 percent (.001) per calendar day that the 

withheld duty was late. The interest amount shall be 

rounded up to the next dollar. For purposes of this

calculation, the withheld duty amount shall be rounded down 

to the next dollar. For purposes of these mitigation 

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guidelines, the term "withheld duty" shall include unpaid

duties, merchandise processing fees, harbor maintenance 

fees and any other taxes or charges due and owing at the 

time of filing of the entry summary. 

b. If estimated duties, taxes, fees and charges are paid 

untimely by the bond principal after Customs has issued a 

claim for liquidated damages for non-payment of estimated 

duties in accordance with Subparagraph B(1) above, the 

bond principal shall be charged an administrative fee of $200 

plus interest on the withheld duty at the rate of 0.1 percent 

(.001) per calendar day that the payment was late. The 

interest amount shall be rounded up to the next dollar. For 

purposes of this calculation, the duty amount shall be 

rounded down to the next dollar. 

c. When the surety deposits estimated duties, fees and taxes,

in response to a demand made in accordance with 

Subparagraph B(1) above, the surety shall be charged an 

administrative fee of $200 plus 0.1 percent (.001) per 

calendar day between issuance of the demand on surety 

and payment of the estimated duties, fees and taxes. 

C. Failure to remit collected passenger processing fees. 

Claims for liquidated damages for untimely payment to Customs of 

collected passenger processing fees shall be issued in an amount equal to 

two times the passenger processing fees which have been collected but

not timely paid to Customs and mitigated as follows: 

1. Notification of liquidated damages incurred; passenger processing 

fees not remitted. If at the time the demand for liquidated damages 

is issued the collected fees have not been remitted to Customs, the 

claim shall be issued on a CF-5955A citing 19 C.F.R. 113.64(a) and 

19 C.F.R. 24.22(g) as the bond condition and regulations violated. 

No mitigated amount shall be offered under Option 1. As a 

prerequisite for mitigation, the principal must remit the collected 

fees or the surety must deposit an amount equal to those 

unremitted fees. 

2. Notification of liquidated damages incurred; passenger processing 

fees paid late; modified CF 5955A. If at the time of issuance of the 

demand for liquidated damages, the collected fees have been 

remitted, the Notices of Claim for Liquidated Damages incurred 

shall be issued on a modified CF-5955A. The modified form shall 

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specify two options from which the petitioner may choose to resolve 

the demand. 

a. Option 1. He may pay a specified sum within 60 days and 

the case will be closed. By electing this option in lieu of 

petitioning, he waives his right to file a petition. He may, 

however, file a supplemental petition, if he does so in 

accordance with the Customs Regulations and has some 

new fact or information which merits consideration in 

accordance with these guidelines. 

b. Option 2. Petition for relief. Pursuant to the provisions of 19 

C.F.R. 172.2 and 172.4, the bond principal or surety may file 

a petition for relief. By filing a petition for relief, the petitioner

will no longer be afforded the Option 1 mitigation amount. 

The FP&F Officer shall grant full relief when the petitioner 

demonstrates that the violation did not occur or that the 

violation occurred solely as a result of Customs error. If the 

petitioner fails to demonstrate that the violation did not occur 

or that the violation occurred solely as a result of Customs 

error, the FP&F Officer may cancel the claim upon payment 

of an amount no less than $100 greater than the Option 1 

amount. 

3. Calculation of Option 1 amounts. 

a. If the collected passenger processing fees are remitted 

untimely, but are remitted so that Customs is not required to 

issue a Notice of Claim as described in Subparagraph C(1)

above, the bond principal or surety shall be charged an 

administrative fee of $200 plus interest on the unremitted 

fees at the rate of 0.1 percent (.001) per calendar day that 

the fees were late. The interest amount shall be rounded up 

to the next dollar. 

b. If the collected but unremitted fees are remitted untimely by 

the bond principal after Customs has issued a claim for 

liquidated damages for failure to remit those fees in 

accordance with Subparagraph C(1) above, the bond 

principal shall be charged an administrative fee of $1,000 

plus interest on the unremitted fee at the rate of 0.1 percent 

(.001) per calendar day that the payment was late. The 

interest amount shall be rounded up to the next dollar. 

 

c. When the surety deposits an amount equal to the collected 

but unremitted fees, in response to a demand made in 

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accordance with Subparagraph C(1) above, the surety shall 

be charged an administrative fee of $1,000 plus 0.1 percent 

(.001) per calendar day between issuance of the demand on 

surety and payment of an amount equal to the collected but 

unremitted fees. 

D. Referral of petitions to Headquarters. 

The FP&F Officer may always refer a petition for relief to Customs

Headquarters, Penalties Branch, for advice or guidance. This referral is at

the discretion of the FP&F Officer and shall not be allowed to a petitioner

as a matter of right. 

A. Claims are assessed for two times the duties plus merchandise

processing fees or 110 percent of the duties plus merchandise processing 

fees. 

NOTE: Do not include harbor maintenance fees in this calculation, as they

are paid on TIB entries) unless such different amount has been authorized 

in accordance with the provisions of 19 C.F.R. 10.31(f). 

B. Cancel the claim without payment if the breach was for the benefit of the 

United States. 

1. The breach was due wholly to circumstances beyond the importer's 

control and which could not have been reasonably anticipated i.e.

destruction by accidental fire, documented theft 

2. Merchandise which was the subject of the entry would have been 

entitled to free entry as domestic products exported and returned or

under any other duty-free provision. 

D. If the merchandise was exported or destroyed timely but Customs was not

notified in a timely manner so as to cancel the bond, cancel the claim for 

liquidated damages upon payment of an amount between 1 and 5 percent

of the claim (depending on aggravating or mitigating factors present), but 

not less than $100. 

II. Guidelines for Cancellation of Claims for Liquidated Damages 

for Violation of Temporary Importation Bonds (19 C.F.R. 10.39) 

(T.D. 94-38) 

C. Cancel the claim upon payment of an amount equal to the merchandise

processing fee that would have been due on the merchandise had an 

entry for consumption been filed (but not less than $100) if: 

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E. If the merchandise was exported or destroyed but outside the bond period,

cancel the claim for liquidated damages upon payment of an amount 

between 5 and 10 percent of the claim (depending on aggravating or

mitigating factors present), but not less than $200. 

1. Examples of aggravating factors: 

a. Importer is uncooperative, e.g., fails to provide information to 

Customs. 

b. A large number of violations of this type by the importer in 

relation to the total number of transactions engaged in. 

c. Importer's willful disregard of or carelessness toward 

responsibilities under applicable statutes, regulations or

bond. 

2. Examples of mitigating factors: 

a. Importer cooperates with Customs personnel in resolution of 

the case. 

b. Importer takes immediate remedial action. 

c. Lack of experience in importing. 

d. A small number of violations of this type in relation to the 

number of transactions engaged in. 

F. If Customs designates a TIB entry for examination upon exportation or for 

supervision of destruction and the importer fails to obtain export 

examination or supervision of destruction, cancel the claim upon payment 

of an amount between 10 and 25 percent of the claim, but not less than 

$300, depending on the presence of aggravating or mitigating factors. 

G. If the merchandise is sold domestically, the following guidelines should be 

followed 

1. Grant relief equal to one times the duty on merchandise which is

sold but later exported within the bond period. 

2. Grant relief to one and one-half times the duty on merchandise, 

which is sold but later exported outside the bond period. 

3. If merchandise is sold but later exported outside the bond period, 

grant no relief if the bond amount represents 110 percent of the 

duties on the merchandise. 

H. Grant no relief from the claim for liquidated damages in the following 

cases: 

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1. When the merchandise has entered into the commerce of the 

United States. If a petitioner claims the merchandise has been 

exported or destroyed, but does not present satisfactory proof of 

such exportation or destruction, the merchandise shall be 

presumed to have entered the commerce for purposes of these 

guidelines. 

2. When the importer requests that a TIB entry be amended to a 

consumption entry after the merchandise has been released from 

Customs custody. 

3. When TIB merchandise is sold, but not exported. 

III. Guidelines for Cancellation of Claims Involving Carnets (T.D. 02-

20) 

A. Assessment of claims 

1. Articles entered under an ATA or TECRO/AIT carnet must be re-exported 

or destroyed prior to the expiration of the carnet period. 

 

2. Failure to re-export or destroy those articles in the time period prescribed 

will result in the assessment of liquidated damages in an amount equal to 

110 percent of the duties due on said articles. 

3. The term “duties” shall not include Merchandise Processing Fees or 

Harbor Maintenance Fees for carnet claim assessment purposes. 

4. All claims are assessed against the guaranteeing association, the United 

States Council for International Business (USCIB). 

5. No claim may be established more than one year after the expiration of 

the period for which the carnet was valid. 

B. Petitions for relief 

1. Petitions for relief must be filed within 6 months of the date of the claim. 

2. The petition must provide proof of re-exportation or destruction of the 

articles. 

3. If no petition is submitted in the 6-month period, the USCIB must 

provide full payment of the claim. 

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4. Such payment must be made within 30 days from the end of the 6-

month period. 

5. The USCIB will then have 90 days from the date of payment to 

submit adequate proof of re-exportation or destruction in order to 

receive a refund. 

C. Proof of re-exportation or destruction; regularization fees. 

1. The ATA Convention allows Customs officials to charge a 

regularization fee for assisting the foreign issuing association in 

avoiding the liquidated damages. The regularization fee is a 

service fee and is not liquidated damages. Regularization fees 

shall be charged as described herein. 

2. If the petitioner provides a re-exportation counterfoil,

unconditionally discharged by Customs, then the claim will be 

closed without payment. If payment of liquidated damages has

been made, then a full refund shall be afforded. The term 

“unconditionally discharged” means that no remarks were noted by

a Customs officer in the appropriate sections of the counterfoil. 

3. If the petition provides an appropriate importation carnet voucher, 

signed by a foreign Customs officer, the claim will then be 

regularized upon payment of $50. 

4. If the petitioner provides any other acceptable proof of reexportation or destruction, then the claim will be regularized upon

payment of $100. 

5. Small dollar value carnets. If the assessed amount for breach of a 

carnet is $100 or less (including carnets for zero duties), the claim 

still must be assessed. It is possible, based upon the type of proof

of re-exportation or destruction provided, that payment of a 

regularization fee in excess of the assessed liquidated damages 

amount, could occur. Unlike other liquidated damages claims, the 

amount of the bond does not limit liability for payment of the 

regularization fee, which is a fee for service. (See, section F.

below)

D. Partial re-exportation or destruction. 

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1. In any situation where partial re-exportation or destruction occurs, if 

that re-exportation or destruction occurs within the carnet period 

and proof of re-exportation or destruction other than an 

unconditional discharge by a Customs officer is provided, Customs

will collect a regularization fee with regard to that portion of

merchandise for which adequate proof of re-exportation or 

destruction is provided. 

2. If the partial re-exportation or destruction occurs beyond the carnet

period, mitigation may be afforded (see Section E. below). 

3. Full liquidated damages will be charged on that portion of the 

merchandise for which neither proof of re-exportation or destruction 

is provided. As such, partial liquidated damages and a 

regularization fee could be collected in closure of the same carnet. 

4. If a re-exportation counterfoil showing an unconditional discharge 

as to part of a shipment of merchandise is provided timely, no 

collection will be made as to that merchandise. 

E. Late Re-Exportation. 

1. If merchandise is re-exported (or destroyed) after the one-year 

period and a re-exportation counterfoil indicating unconditional 

discharge by a Customs officer is provided timely, the claim shall 

be cancelled without payment. 

2. If merchandise is re-exported (or destroyed) 180 days or more after

the expiration of the carnet period and a re-exportation counterfoil 

indicating an unconditional discharge by a Customs officer is not 

provided, no relief from the claim shall be afforded. 

3. If merchandise is re-exported (or destroyed) more than 90 days but 

less than 180 days after the expiration of the carnet period and 

adequate proof of re-exportation or destruction other than a reexportation counterfoil with an unconditional discharge by a 

Customs officer is provided, the claim for liquidated damages may

be cancelled upon payment of 50 percent of the liquidated 

damages assessed amount but not less than $100. 

4. If merchandise is re-exported (or destroyed) 90 days or less after 

the expiration of the carnet period and adequate proof of reexportation or destruction other than an exportation counterfoil with 

an unconditional discharge by a Customs officer is provided, the 

claim for liquidated damages may be cancelled upon payment of 25 

percent of the claim but not less than $50. 

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F. Late Re-Exportation of Duty-free and Zero Duty Merchandise. 

1. If merchandise is duty-free or has a zero duty rate, claims for

liquidated damages should still be assessed. 

2. Claims for duty-free and zero duty Carnets will be processed in

accordance with these guidelines. 

G. Issuance of claims. 

1. If a claim is received by the USCIB after the one-year period has 

expired, the claim will not be pursued. 

2. Claims issued by Customs more than 30 days prior to the end of 

the one-year period will be presumed to be timely. 

3. Claims should be issued by Customs as promptly as possible after

discovery. 

IV. Guidelines for Cancellation of Claims Involving Failure to 

Redeliver Merchandise into Customs Custody or Failure to 

Comply With a Notice of Refusal of Admission Issued by

Another Government Agency (19 C.F.R. 141.113, 113.62(d) or

113.62(e)) (T.D. 94-38) 

A. Statutes and regulations enforced on behalf of the Food and Drug 

Administration (FDA) and the Consumer Product Safety Commission 

(CPSC). 

1. The provisions of 21 C.F.R. 1.97 (FDA Regulations) and 16 C.F.R. 

1500.271 (CPSC Regulations) require that the port director of

Customs and the district director of the other agency be in 

agreement as to the amount to be accepted in cancellation of the 

claim for liquidated damages. All petitions for relief received in FDA 

and CPSC cases must be referred to those agencies for 

recommendation. By regulation Customs must follow the 

recommendation of FDA or CPSC. 

2. EXCEPTION: When the sole requirement which has been imposed 

by FDA on refused merchandise is exportation or destruction under 

Customs supervision, apply guidelines to be used in the case of 

other Customs statutes or regulations in Subparagraph K below. 

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3. If any merchandise which is requested for examination by the other 

agency is available for examination at the place designated by such 

other agency but is not examined for any reason, Customs will not 

issue liquidated damages with regard to such merchandise or will 

cancel any claim related to such merchandise without payment. 

4. If there is a compelling reason to depart from the recommendation 

of the other agency, state such reason in a referral memorandum

and forward the case record to Customs Headquarters, Office of 

Regulations and Rulings, Penalties Branch. 

B. Statutes and regulations enforced on behalf of other agencies (not FDA or

CPSC).

1. Any petition received should be forwarded to the other agency for 

recommendation. As a rule, the recommendation of the other 

agency as to appropriate mitigation will be followed. 

2. Customs is not required by regulation to follow the recommendation 

of agencies other than FDA and CPSC. If the FP&F Officer finds 

the recommendation of the other agency to be arbitrary and 

capricious, he may modify the recommendation to be consistent 

with Customs guidelines. 

C. Country of origin marking cases - merchandise marked with the country of 

origin after liquidation of the entry and outside the 30-day marking period. 

1. If the merchandise is marked outside the 30-day marking period 

and after liquidation of the entry, the entry should be reliquidated if

liquidation has not become final, and marking duties should be 

assessed and collected. 

2. If marking duties have been assessed and collected, cancel the 

claim upon payment of one percent of the value of the 

merchandise, but not less than $100 for a first-time violation.

Cancel upon payment of between one and five percent but not less

than $250 for a subsequent violation. 

3. Grant no relief in any case until marking duties are assessed and 

collected; however, if liquidation is final and marking duties cannot

be assessed, cancel upon payment of an amount equal to 11 

percent of the value of the merchandise but not less than $100 for a 

first violation and between 11 and 15 percent but not less than 

$250 for a subsequent violation. 

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D. Country of origin marking cases - merchandise marked outside the 30-day

period, but before liquidation. 

1. If the merchandise is properly marked with the country of origin 

outside the 30-day period but before liquidation of the entry, 

liquidated damages are appropriate, but marking duties are not

due. 

2. For a first time violation, if the merchandise has been marked under 

Customs supervision outside the 30-day period, cancel the claim

upon payment of an amount equal to one percent of the value of 

the merchandise, but not less than $100. 

3. For subsequent violations, cancel upon payment of an amount 

between one and five percent of the value of the merchandise but 

not less than $250 depending upon the number of violations and 

the presence of aggravating and mitigating factors. 

E. Marking cases - merchandise not marked with the country of origin. 

1. Relief from liquidated damages incurred is contingent upon deposit 

of marking duties. See, 19 C.F.R. 134.54(c). 

2. For a first-time violation, where marking duties have been assessed 

and collected, cancel the claim upon payment of an amount 

between 10 and 25 percent of the value depending on the presence 

of aggravating or mitigating factors. 

3. If it is a subsequent violation and marking duties have been 

assessed and collected, cancel the claim upon payment of an 

amount between 25 and 50 percent of the value of the 

merchandise. 

4. If marking duties have been assessed but not collected, grant no 

relief. If liquidation of the entry has become final, thereby barring 

the assessment of marking duties, cancel as follows: 

a. If it is a first-time violation, cancel the claim for liquidated 

damages upon payment of an amount between 20 and 35 

percent of the value. 

b. If it is a second or subsequent violation, cancel the claim for 

liquidated damages upon payment of an amount between 35 

and 60 percent of the value. 

5. Examples of aggravating factors: 

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a. Offender is uncooperative, e.g., fails to provide information 

to Customs when requested. 

b. A large number of violations of this type by the offender in 

relation to the total number of transactions engaged in. 

c. Offender's experience in importing. 

d. Offender's willful disregard or carelessness toward 

responsibilities under the applicable statutes or regulations. 

6. Examples of mitigating factors: 

a. Contributory Customs error, e.g., offender demonstrates that 

he acted in accordance with instructions given by Customs 

personnel.

b. Offender cooperates with Customs personnel in resolution of

the case. 

c. Offender takes immediate remedial action. 

d. Offender's lack of importing experience. 

e. A small number of violations of this type by the offender in 

relation to the number of transactions engaged in. 

F. False designation of origin cases.

1. When merchandise is marked with a false designation of origin, and 

a claim for liquidated damages for failure to redeliver that 

merchandise results and the offender can demonstrate that the 

merchandise was marked with the correct country of origin outside 

the redelivery period designated in the notice of redelivery, the 

claim should be canceled upon payment of an amount equal to one 

percent of the value of the merchandise, but not less than $100 for 

a first violation. For subsequent violations of this type, the claim 

should be canceled upon payment of an amount equal to one to 

five percent of the value of the merchandise, but not less than 

$250. 

2. When merchandise is marked with a false designation of origin and 

the merchandise is not properly marked with the true country of 

origin and a first violation is involved, the claim should be canceled 

upon payment of an amount between 25 and 50 percent of the 

value of the merchandise. 

3. For a subsequent violation where the merchandise is not properly

marked with the true country of origin, the claim should be canceled 

upon payment of an amount equal to no less than 50 percent of the 

value of the merchandise. 

G. Quota/visa violative merchandise. 

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1. If the importer fails to redelivery visa-violative merchandise, but 

subsequent to the assessment of the claim produces a valid visa or 

visa waiver, cancel the claim upon payment of an amount between 

one and five percent of the value of the merchandise, but not less

than $100, depending on the presence of aggravating or mitigating

factors. 

2. If no visa is ever produced, and it is a first-time violation, cancel the 

claim upon payment of an amount between 20 and 30 percent of

the value of the merchandise, depending on the presence of 

aggravating or mitigating factors. 

3. If no visa is ever produced, and it is a subsequent violation, cancel 

the claim upon payment of no less than 40 percent of the value of 

the merchandise. 

4. If the importer fails to redeliver quota merchandise, and it is a firsttime violation, cancel the claim upon payment of an amount 

between 25 and 50 percent of the value of the merchandise,

depending on the presence of aggravating or mitigating 

circumstances. 

5. For subsequent quota redelivery violations, cancel the claim upon 

payment of no less than 50 percent of the value of the 

merchandise. 

6. For merchandise that is not redelivered which is subject to both 

quota and visa restrictions, follow guidelines for cancellation of 

claims relating to quota-violative merchandise. 

H. Copyright-violative merchandise. 

1. If the importer fails to redeliver copyright-violative merchandise, but

after assessment of liquidated damages receives a retroactive 

licensing of the merchandise from the copyright holder, cancel the 

claim upon payment of an amount between one and five percent of 

the value of the merchandise, but not less than $100. 

2. If no authorization is received from the copyright holder, cancel a 

first-time violation upon payment of an amount between 20 and 50 

percent of the value of the merchandise, depending on the 

presence of aggravating or mitigating factors. 

3. For subsequent violations where no authorization of the copyright 

holder is received, cancel the claim upon payment of an amount

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equal to no less than 50 percent of the value of the merchandise. 

In order to receive any relief, extraordinary mitigating factors must 

be shown. 

I. Trademark-violative merchandise. 

1. If the importer fails to redeliver trademark-violative merchandise,

but after assessment of liquidated damages receives a retroactive 

licensing of the merchandise from the trademark holder, cancel the 

claim upon payment of an amount between one and five percent of 

the value of the merchandise, but not less than $100. 

2. If no authorization is received from the trademark holder, cancel a 

first-time violation upon payment of an amount between 20 and 50 

percent of the value of the merchandise, depending on the 

presence of aggravating or mitigating factors. 

3. For subsequent violations where no authorization of the trademark 

holder is received, cancel the claim upon payment of an amount

equal to no less than 50 percent of the value of the merchandise. 

In order to receive any relief, extraordinary mitigating factors must 

be shown. 

4. As a general rule, if the merchandise is counterfeit, no relief shall 

be granted. If the merchandise is genuine, that fact shall be 

considered as a mitigating factor in accordance with the above 

guidelines. 

J. Failure to provide a sample. 

1. If the importer fails to provide a sample within the time period 

prescribed on the request for a sample, but then does provide the 

sample subsequent to the issuance of liquidated damages and can 

prove to the satisfaction of the import specialist that the sample is, 

in fact, from the shipment in question and the merchandise is not 

violative of any provision of law regarding its admissibility, the claim 

for liquidated damages may be canceled upon payment of an 

amount between one and five percent of the value of the 

merchandise in the shipment, but not less than $100. 

2. If the importer fails to provide a sample, cancel the claim consistent 

with guidelines for the violation which the sample was being 

examined. For example, if a sample is sought to determine 

whether merchandise is copyright-violative, and the importer fails to 

provide a sample, cancel the claim consistent with guidelines for 

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failure to redeliver copyright-violative merchandise where no 

retroactive license is given. 

K. Other Customs-enforced statutes and regulations. 

1. If the merchandise is not redelivered for any reason not

enumerated above or is redelivered outside the time period 

prescribed for redelivery in the notice of redelivery, the claim may

be canceled upon payment of between 1 and 10 percent of the 

value of the merchandise depending upon the presence of 

aggravating or mitigating factors. 

2. For subsequent violations, cancel the claim upon payment of an 

amount between 10 and 50 percent of the value of the 

merchandise, depending upon the presence of aggravating or 

mitigating factors. 

3. If the issue is Customs supervision of exportation or destruction of 

merchandise which is the subject of a notice of refusal of admission 

issued by FDA or CPSC, and such exportation or destruction 

occurs, but not under supervision, cancel the claim in accordance 

with guidelines enumerated in subparagraphs K.1. or K.2. directly 

above. 

4. If exportation or destruction (when ordered) never occurs, grant no 

relief. 

5. Claims for liquidated damages arising for failure to comply with 

special marking for watch and clock movements, cases and dials

as required by Chapter 91, Additional U.S. Note 4, United States 

Tariff Schedule (19 U.S.C. 1202) shall be canceled in accordance 

with the guidelines promulgated subparagraphs K(1) or K(2) directly 

above. 

V. Guidelines for Cancellation of Claims Arising From Failure to 

Provide Missing Documents (19 C.F.R. 113.42) (T.D. 94-38) 

A. Except when another period is fixed by law or regulation, any document 

for the production of which a bond is given shall be delivered within 120 

days from the date of notice from Customs requesting such document or

any extension of time that may be granted under 19 C.F.R. 113.43. 

B. Issuance of modified CF-5955A. A modified CF5955A similar to that 

issued in cases involving late filing of entry summaries shall be issued in 

missing document cases. 

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1. Option 1.

a. Petitioner may pay a specified sum within 60 days and the 

case will be closed. 

b. Such payment shall act as a waiver of his right to file a 

petition. 

2. Option 2.

a. Normal petitioning procedures are in effect. 

b. Mitigation shall not be permitted to an amount less than 

$100 greater than that afforded under Option 1 unless

extraordinary mitigating factors can be shown. 

c. Petitions shall be limited to the following issues: 

i. Circumstances causing the delay in filing of the 

document. 

ii. Extent of the lateness. 

iii. Past record of the importer. 

iv. Lack of intent to file documents untimely. 

C. Missing documents not provided. When a claim for liquidated damages is

issued and the missing documents have not been provided (as opposed to 

being provided untimely), a modified CF-5955A should not be issued. 

D. Calculation of mitigated amount. 

1. Document other than invoice filed late - cancel upon payment of 

$100. 

2. Invoice filed late: 

a. No resulting duty advance - cancel upon payment of $100. 

b. Resulting duty advance - cancel upon payment of $100 plus

0.1 percent of amount of duty advance for each calendar day

late. 

3. Document not filed: 

a. If absence of document will not affect duty due, cancel upon 

payment of $200. 

b. If absence of document impedes Customs ability to appraise 

merchandise, cancel upon payment of $200 plus further 

duties determined by Customs to be owing after a 

reasonable appraisal of merchandise is made. 

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4. Document upon which a claim of conditionally free or reduced duty 

entry is based: 

a. Filed late - Cancel upon payment of $100 plus 0.1 percent 

per calendar day late of duty that would have been due had 

the entry been liquidated as fully dutiable. This mitigation is

not affected by the fact that the late-filed documents 

substantiated the conditionally free or reduced duty claim. 

b. Non-filing. 

i. For the first violation cancel upon payment of $200 

plus liquidation of the entry as fully dutiable. 

ii. For second or subsequent violation, cancel upon 

payment of $400 plus liquidation of the entry as fully

dutiable. 

E. Continuous course of conduct. 

1. By an importer. If there is a continuing course of conduct by an 

importer where conditionally free entry is claimed, but documents 

supporting such claim are regularly missing from the entry and are 

not provided, the presumption after the fourth violation shall be one 

of bad faith in the filing of the entry as conditionally free. No relief 

from the claim should be afforded. 

2. By a customs broker. If the violator is a Customs broker, a civil 

monetary penalty for violation of the provisions of title 19, United 

States Code, section 1641, may be appropriate. 

F. Second or subsequent offenses. 

Except as noted in subparagraph E above, second or subsequent

offenses will not be considered in cancellation of claims other than as 

relating to importers' past record in consideration of petitions for relief. 

VI. Guidelines for Cancellation of Claims Arising From Failure to 

Timely File Shipper’s Export Declarations (15 C.F.R. 30.24) and 

Other Export Documents (19 C.F.R. 113.64(c)) (T.D. 94-38) 

A. Notification of liquidated damages; modified CF-5955A. Notices of 

liquidated damages incurred may be issued on a modified CF-5955A. The 

modified form shall specify two options from which the petitioner may 

choose to resolve the demand. 

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1. Option 1. He may pay a specified sum within 60 days and the case 

will be closed. By electing this option in lieu of petitioning, he

waives his right to file a petition. He may, however, file a 

supplemental petition, if he does so in accordance with the 

Customs Regulations and has some new fact or information which 

merits consideration in accordance with these guidelines. 

2. Option 2. Petition for relief. The bond principal or surety may file a 

petition for relief. By filing a petition for relief, the petitioner will no 

longer be afforded the Option 1 mitigation amount. The FP&F

Officer shall grant full relief when the petitioner demonstrates that 

the violation did not occur or that the violation occurred solely as a 

result of Customs error. If the petitioner fails to demonstrate that 

the violation did not occur or that the violation occurred solely as a 

result of Customs error, the FP&F Officer may cancel the claim 

upon payment of an amount no less than $100 greater than the 

Option 1 amount; however, in no case can the amount afforded in 

mitigation exceed the amount of the original claim. 

B. Assessment amounts. 

1. $50 per day for each of first three days late. 

2. $100 per day for each day late beyond three. 

3. Maximum assessment is $1,000. 

 

C. Mitigation guidelines. 

1. For each offense, the claim for liquidated damages may be 

canceled upon payment of an amount between 25 and 50 percent 

of the claim, but not less than $100. 

2. NOTE: All claims assessed for $50 or $100 (1 or 2 days late) will 

receive no mitigation. 

3. If a carrier has a poor record of compliance with shipper's export

declaration filing requirements as compared to other carriers in a

port, and mitigation in accordance with subparagraph (B)(1) above 

has had no deterrent effect, relief from the claim for liquidated 

damages may be denied. 

 

D. Slot Charters. 

There is nothing in the regulations which bars the holder of a slot charter 

from obligating his bond in lieu of that submitted by the arriving or

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departing carrier or agent of that carrier for any liquidated damages that

may arise due to his (the holder of the slot charter’s) malfeasance.

E. These guidelines should also be used for claims for liquidated damages 

arising from violation of the provisions of 19 C.F.R. 113.64(c) for late filing

of export documents (e.g., bills of lading) in order to complete the outward

manifest. 

VII. Guidelines for Cancellation of Claims for Shortage, Irregular 

Delivery, Non-Delivery or Delivery Directly to the Consignee of 

In-bond Merchandise (19 C.F.R. 18.8) (T.D. 99-29) 

A. Assessment. 

All claims for liquidated damages assessed for breach of the provisions of

19 C.F.R. 18.8 for shortage, irregular delivery, non-delivery or delivery

directly to the consignee of in-bond merchandise will be assessed for the 

value of the merchandise or three times the value of the merchandise if

the merchandise is restricted or is alcoholic beverages. 

B. Documents filed late or merchandise delivered late. 

1. Modified CF 5955A. Notices of liquidated damages incurred for this 

violation may be issued on a modified CF-5955A. If a modified 

form is issued, it shall specify two options from which the petitioner 

may choose to resolve the demand. 

a. Option 1. The bond principal or surety may pay a specified 

sum within 60 days and the case will be closed. By electing 

this option in lieu of petitioning, the principal or surety waives

the right to file a petition. He may, however, file a 

supplemental petition, if he does so in accordance with the 

Customs Regulations and has some new fact or information 

which merits consideration in accordance with these 

guidelines. 

b. Option 2. The bond principal or surety may file a petition for 

relief. By filing a petition for relief, the petitioner will no 

longer be afforded the Option 1 mitigation amount. The 

Fines, Penalties and Forfeitures Officer shall grant full relief 

when the petitioner demonstrates that the violation did not 

occur or that the violation occurred solely as a result of

Customs error. If the petitioner fails to demonstrate that the 

violation did not occur or that the violation occurred solely as

a result of Customs error, the Fines, Penalties and 

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Forfeitures Officer may cancel the claim upon payment of an 

amount no less than $100 greater than the Option 1 amount. 

2. If merchandise is delivered untimely to the port of destination or

exportation (not within 15 days if transported by air, 30 days if 

transported by vehicle, or 60 days if transported by vessel) but is 

otherwise intact, the Fines, Penalties and Forfeitures Officer may 

cancel the claim upon payment of an amount between $100 or 

$500, depending on the presence of aggravating or mitigating 

factors. 

3. If merchandise is delivered timely but the documentation is not filed 

with Customs within 2 days of arrival in the port of delivery, the 

Fines, Penalties and Forfeitures Officer may cancel the claim upon 

payment of an amount between $100 and $500, depending on the 

presence of aggravating or mitigating factors. 

4. If the bonded carrier consistently fails to deliver paperwork timely 

and Customs business is impeded by these repeated failures, the 

Fines, Penalties and Forfeitures Officer may cancel any claim upon 

payment of a higher amount than the guidelines generally permit. 

The advice of Headquarters, Office of Regulations and Rulings,

Penalties Branch, may be sought to determine appropriate 

mitigation. 

C. Failure to deliver, shortage or delivery directly to the consignee. 

1. If the in-bond carrier can show that the violation occurred solely as 

a result of Customs error, the claim for liquidated damages should 

be canceled without payment. 

2. If the in-bond carrier can show that the merchandise was never 

received or landed, the claim for liquidated damages should be 

canceled without payment. 

3. If the merchandise which was not delivered, delivered short or

delivered directly to the consignee could have been the subject of 

an informal entry, the claim for liquidated damages may be 

canceled upon payment of an amount equal to the duties, fees, 

taxes and charges that would have been due on the merchandise 

had entry been properly made plus an amount between $100 and 

$500, depending on the presence of aggravating or mitigating 

factors. 

 

4. If the in-bond carrier comes forward and discloses the violation to 

Customs, the claim for liquidated damages may be canceled upon 

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payment of an amount equal to the duties, fees, taxes and charges

that would have been due on the merchandise had entry been 

properly made, plus $50. 

5. If the merchandise which was not delivered, delivered short or

delivered directly to the consignee was not designated for Customs 

examination and the in-bond carrier can show that the merchandise 

was entered and duties, fees, taxes and charges paid thereon (in 

the case of an IT) or that the merchandise was exported (in the 

case of an IE or T&E), the claim for liquidated damages may be 

canceled upon payment of an amount between $250 and $2,000 

depending on the presence of aggravating or mitigating factors. 

6. If the merchandise which was not delivered, delivered short or

delivered directly to the consignee was not designated for Customs 

examination and the in-bond carrier cannot show that the 

merchandise was entered and duties, fees, taxes and charges paid 

thereon (in the case of an IT), or that the merchandise was 

exported (in the case of an IE or T&E), the claim for liquidated 

damages may be canceled upon payment of an amount equal to 

the duties, fees, taxes and charges that would have been due on 

the merchandise had entry been properly made plus an amount 

between $300 and $2,500 depending on the presence of 

aggravating or mitigating factors. 

7. If the merchandise which was not delivered, delivered short or

delivered directly to the consignee was designated for Customs 

examination and the in-bond carrier can show that the merchandise 

was entered and duties, fees, taxes and charges paid thereon (in 

the case of an IT), or that the merchandise was exported (in the 

case of an IE or T&E), the claim for liquidated damages may be 

canceled upon payment of an amount between $2,500 and $20,000 

depending on the presence of aggravating or mitigating factors. In 

no case shall the amount upon which the claim may be canceled be

lower than any chargeable costs which are incident to such 

examination. Conversely, the amount upon which the claim may be 

canceled can never exceed the value of the claim for liquidated 

damages. 

8. If the merchandise which was not delivered, delivered short or

delivered directly to the consignee was designated for Customs 

examination and the in-bond carrier cannot show that the 

merchandise was entered and duties, fees, taxes and charges paid 

thereon (in the case of an IT), or that the merchandise was 

exported (in the case of an IE or T&E), the claim for liquidated 

damages may be canceled upon payment of an amount equal to 

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the duties, fees, taxes and charges that would have been due on 

the merchandise had entry been properly made plus an amount 

between $3,000 and $25,000 depending on the presence of 

aggravating or mitigating factors. In no case shall the amount upon 

which the claim may be canceled be lower than any chargeable 

costs which are incident to such Customs examination. 

Conversely, the amount upon which the claim may be canceled can 

never exceed the value of the claim for liquidated damages. 

9. If the in-bond carrier has a history of not delivering, delivering short 

or delivering directly to the consignee, or particularly aggravating 

circumstances exist with regard to a claim, the Fines, Penalties and 

Forfeitures Officer may cancel the claim for liquidated damages 

upon payment of a higher amount than that authorized by these 

guidelines; however, the advice of HQ, ORR, Penalties Branch

shall be sought to determine appropriate mitigation. 

10. Theft of in-bond merchandise. In-bond merchandise which is

stolen from the carrier prior to having been delivered to Customs at 

the port of destination or exportation shall be treated as having 

been not been delivered. The carrier will be liable for liquidated

damages and mitigation will occur in accordance with these 

guidelines. It should also be noted that penalties under 19 U.S.C.

1595a(b) for violation of 19 U.S.C. 1448 or 1499 may also be 

assessed against the individuals who steal the merchandise from 

the bonded carrier. Theft of merchandise in those instances will be 

mitigated in accordance with guidelines articulated in Section

III.B.10. of the Guidelines for Delivery of Cargo Without Customs

Authorization in the Vessel Section of this Handbook. 

D. Mitigating and Aggravating Factors. 

1. Mitigating Factors 

a. Carrier inexperienced in the handling of in-bond cargo. 

b. Carrier has a general good performance and low error rate in 

the handling of in-bond cargo. 

c. Carrier demonstrates remedial action has been taken to 

prevent future claims. 

2. Aggravating Factors 

a. Carrier refuses to cooperate with Customs or acts to impede 

Customs activity with regard to the case. 

b. Carrier has a rising error rate, which is indicative of

deteriorating performance in the delivery of in-bond cargo. 

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E. Restricted or Prohibited Merchandise. 

If Customs has reason to believe that the merchandise which was not 

delivered, delivered short or delivered directly to the consignee may have 

been restricted or prohibited from entry, that will be considered an 

extraordinary aggravating factor and will result in mitigation at the high end 

of the mitigation range. 

VIII. Guidelines for Cancellation of Claims Arising From Violation of 

Warehouse Proprietor’s Bond (19 C.F.R. PART 19, 19 C.F.R. 

113.63) (T.D. 94-38) 

The following guidelines apply to violations involving bonded warehouse 

proprietors and duty-free store operators. 

A. Defaults Involving Merchandise. Defaults involving merchandise include 

violations involving merchandise which: 

1. Cannot be located or accounted for in a bonded warehouse. 

2. Has been removed from a bonded warehouse without a Customs 

permit. 

3. Has been deposited, manipulated, manufactured, or destroyed in a 

bonded warehouse: 

a. Without proper Customs permit; 

b. Not in accordance with the description of the activity in the 

permit; or 

c. In the case of Class 6 warehouses, not manufactured in 

accordance with the formula specified in section 19.13(e) of 

the Customs Regulations (19 C.F.R. 19.13(e)). 

B. Defaults Not Involving Merchandise. Defaults not involving merchandise

include those instances of failure, other than those involving merchandise,

to comply with Customs laws and regulations. The same act shall not be 

regarded as both a default involving merchandise and a default not

involving merchandise. 

C. Defaults Involving Merchandise; Petitions. Petitions received in cases

arising from defaults involving merchandise should be processed in 

accordance with the following. 

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1. If the breach resulted from clerical error or mistake (a non-negligent 

inadvertent error), the claim should be canceled without payment. 

2. If the breach resulted from negligence but no threat to the revenue 

occurred (e.g., the merchandise was not manipulated in 

accordance with the permit to manipulate) the claim should be 

canceled upon payment of an amount between one and 15 percent 

of the value of the merchandise involved in the breach, but not less

than $100 nor more than $10,000. If the merchandise involved in 

the breach is restricted merchandise, that shall be considered an 

aggravating factor which shall result in mitigation on the higher end 

of the range. 

3. If the breach resulted from negligence and a potential loss of 

revenue resulted (e.g., merchandise cannot be located in the 

warehouse, merchandise is removed from the warehouse without a 

permit), the claim shall be canceled upon payment of an amount 

between one and three times the loss of revenue (loss of revenue 

to include duties, fees and taxes), but not less than $100. If the 

merchandise involved in the breach is restricted merchandise, the 

claim shall be canceled upon payment of an amount between three 

and five times the loss revenue but in no case less than 10 percent 

of the value of such merchandise. 

4. If the breach is intentional (e.g., the warehouse proprietor conspires 

to remove merchandise from the warehouse without proper entry), 

there will be no relief granted from liquidated damages. 

5. Aggravating factors. 

a. Principal's failure or refusal to cooperate with Customs. 

b. Large number of violations compared to number of 

transactions handled.

c. Experience of principal. 

d. Principal's carelessness or willful disregard toward its 

responsibilities. 

6. Mitigating factors. 

a. Contributory error by Customs. 

b. Small number of violations compared to number of 

transactions handled.

c. Remedial action taken by principal. 

d. Cooperation with Customs. 

e. Lack of experience of principal. 

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f. Merchandise which cannot be located or released without 

permit is returned to Customs custody. 

D. Defaults Not Involving Merchandise; Modified CF 5955A. Defaults not 

involving merchandise shall be processed in accordance with the following 

guidelines. 

1. Modified CF 5955A. Notices of liquidated damages incurred may 

be issued on a modified CF-5955A. The modified form shall 

specify two options from which the petitioner may choose to resolve 

the demand. 

a. Option 1. He may pay a specified sum within 60 days and 

the case will be closed. By electing this option in lieu of 

petitioning, he waives his right to file a petition. He may, 

however, file a supplemental petition, if he does so in 

accordance with the Customs Regulations and has some 

new fact or information which merits consideration in 

accordance with these guidelines. 

b. Option 2. Petition for relief. The bond principal or surety 

may file a petition for relief. By filing a petition for relief, the 

petitioner will no longer be afforded the Option 1 mitigation 

amount. The FP&F Officer shall grant full relief when the 

petitioner demonstrates that the violation did not occur. If 

the petitioner fails to demonstrate that the violation did not

occur, the FP&F Officer may cancel the claim upon payment 

of an amount no less than $100 greater than the Option 1 

amount. 

2. Maximum Assessments. In cases involving violations which do not 

involve merchandise which are assessed at $1,000 for each 

business day that the violation continues, a maximum of $10,000 

shall be assessed for any one such continuing violation unless the 

district director can articulate a legitimate enforcement purpose for 

exceeding said limit. These claims shall be canceled in 

conformance with the terms of these guidelines. 

3. Clerical Error. If the breach resulted from clerical error, the claim 

may be canceled without payment. 

4. Negligence. If the breach resulted from negligence, the claim may 

be canceled upon payment of an amount between $100 and $250 

per default actually assessed, depending on the presence of

aggravating or mitigating factors. For example, if a document is 

filed 100 days late, Customs, by policy, will generally limit the 

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assessment to $10,000. Mitigation will be based on the $10,000 

actual assessment and not relate to the $100,000 potential 

assessment. 

5. Intentional violation. If the breach was intentional, no relief shall be 

granted. 

IX. Guidelines for Cancellation of Claims Arising From Violation of 

Airport Security Regulations (19 C.F.R. 122.181 ET.SEQ.) (T.D. 

94-38) 

A. Assessment of claims for liquidated damages; Modified CF 5955A.

Notices of liquidated damages incurred may be issued on a modified CF5955A if the violation is of a type that warrants mitigation. The modified 

form shall specify two options from which the petitioner may choose to 

resolve the demand. The modified form should not be offered in any

situation where the district director anticipates that substantial factual or

legal issues may be raised. 

1. Option 1. He may pay a specified sum within 60 days and the case 

will be closed. By electing this option in lieu of petitioning, he

waives his right to file a petition. He may, however, file a 

supplemental petition, if he does so in accordance with the 

Customs Regulations and has some new fact or information which 

merits consideration in accordance with these guidelines. 

2. Option 2. Petition for relief. Pursuant to the provisions of 19 C.F.R.

172.2 and 172.4, the bond principal or surety may file a petition for 

relief. By filing a petition for relief, the petitioner will no longer be 

afforded the Option 1 mitigation amount. The FP&F Officer shall 

grant full relief when the petitioner demonstrates that the violation 

did not occur or that the violation occurred solely as a result of 

Customs error. If the petitioner fails to demonstrate that the 

violation did not occur or that the violation occurred solely as a 

result of Customs error, the FP&F Officer may cancel the claim 

upon payment of an amount no less than $100 greater than the 

Option 1 amount. 

B. Mitigation Guidelines.

1. Failure to conduct a background investigation or failure to retain 

background investigation records: 

a. No mitigation unless extraordinary mitigating circumstances

exist. 

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b. An example of an extraordinary mitigating circumstance 

would be destruction of records by accidental fire or act of

God. 

2. Unauthorized entry in secured area, failure to openly display or 

possess identification card, strip or seal or failure to surrender 

identification upon demand by an authorized Customs officer, 

cancel the claim upon payment of an amount between $250 and 

$500. 

3. Failure to return, failure to report loss or theft of identification card, 

strip or seal or failure to notify port director that employee no longer

requires access to a secured area: 

a. First violation - cancel upon payment of $500. 

b. Second or subsequent violation - grant no relief. 

4. Presentation of an identification card, strip or seal by a person other 

than to whom it was issued: 

a. For a first violation, cancel without payment if the bond 

principal can show that it was unaware that its employee,

agent or contractor used the card, strip or seal in an 

improper manner and it had given warnings about such 

conduct to all its employees, agents or contractors. 

b. For a subsequent violation against a bond principal who has

received full cancellation of a claim as described in (B)(4)(a) 

above, cancel the claim upon payment of $200. 

c. For any violation where the bond principal was aware that its 

employees, agents or contractors were acting in this 

improper manner, no relief shall be granted. 

5. Refusal of an employee, agent or contractor to obey any proper 

order of a Customs officer or any Customs order, rule or regulation. 

a. For a first violation, cancel without payment if the bond 

principal can show that it was unaware that its employee,

agent or contractor had acted contrary to proper order, rule 

or regulation and it had given warnings about such conduct

to all its employees, agents and contractors. 

b. For a subsequent violation against a bond principal who has

received full cancellation of a claim as described in 

subparagraph (B)(5)(a) above, cancel upon payment of 

between $200 and $500. 

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c. For any violation where the bond principal was aware that its 

employees, agents or contractors were acting in this 

improper manner, no relief shall be granted. 

X. Guidelines for Cancellation of Claims Arising From the Failure to 

Hold Merchandise at the Place of Examination (19 C.F.R. 

113.62(f)) (T.D. 99-29) 

A. Assessment. 

 

The importer of record (including a Customs broker when acting as

importer of record) may seek and obtain permission from Customs to have 

merchandise examined at a place other than at a wharf or other place in 

the charge of a Customs officer. The importer obligates the provisions of

its basic importation bond guaranteeing to deliver the merchandise to the 

place of examination and hold it there until examination occurs. If 

merchandise which is to be held at the place of examination or delivered 

to the place of examination as obligated by the importer of record under

the terms and conditions of the basic importation bond is not so held or

delivered, a claim for liquidated damages arises for violation of the 

provisions of 19 C.F.R. 113.62(f) equal to the value of the merchandise or

three times the value of the merchandise if it is restricted or prohibited or

is alcoholic beverages.

B. Mitigation of claims arising for failure to hold merchandise at or deliver

merchandise to the place of examination pursuant to the provisions of the 

Basic Importation Bond. 

1. If the importer of record can show that the violation occurred solely

as a result of Customs error, the claim for liquidated damages

should be canceled without payment. 

2. If the importer of record can show that the merchandise was never 

received or landed, the claim for liquidated damages should be 

canceled without payment. 

3. If the merchandise which was not held at or delivered to the place 

of examination could have been the subject of an informal entry, 

the claim for liquidated damages may be canceled upon payment of

an amount equal to the duties, fees, taxes and charges that would 

have been due on the merchandise had entry been properly made 

plus an amount between $100 and $500, depending on the 

presence of aggravating or mitigating factors. 

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4. By its very nature, merchandise not held at or delivered to the place 

of examination is considered to be designated for Customs 

examination. If the importer of record can show that the 

merchandise was entered and duties, fees, taxes and charges paid 

thereon, the claim for liquidated damages may be canceled upon 

payment of an amount between $2,500 and $20,000 depending on 

the presence of aggravating or mitigating factors. In no case shall 

the amount upon which the claim may be canceled be lower than 

any chargeable costs which are incident to such examination. 

Conversely, the amount upon which the claim may be canceled can 

never exceed the value of the claim for liquidated damages. 

5. If the merchandise was not held at or delivered to the place of

examination and the importer of record cannot show that the 

merchandise was entered and duties, fees, taxes and charges paid 

thereon, the claim for liquidated damages may be canceled upon 

payment of an amount equal to the duties, fees, taxes and charges

that would have been due on the merchandise had entry been 

properly made plus an amount between $3,000 and $25000 

depending on the presence of aggravating or mitigating factors. In 

no case shall the amount upon which the claim may be canceled be

lower than any chargeable costs which are incident to such 

Customs examination. Conversely, the amount upon which the 

claim may be canceled can never exceed the value of the claim for 

liquidated damages. 

6. If the importer of record has a history of not holding merchandise at 

or not delivering merchandise to the place of examination, or 

particularly aggravating circumstances exist with regard to a claim, 

the Fines, Penalties and Forfeitures Officer may cancel the claim

for liquidated damages upon payment of a higher amount than that

authorized by these guidelines; however, the advice of HQ, ORR, 

Penalties Branch will be sought to determine appropriate mitigation. 

7. Theft of merchandise from the place of examination or while being 

delivered to the place of examination. Merchandise which is stolen 

from the custody of the importer of record at or on its way to the 

place of examination will be treated as having been removed

without authorization. The importer of record will be liable for 

liquidated damages and mitigation will occur in accordance with 

these guidelines. It should also be noted that penalties under 19 

U.S.C. 1595a(b) for violation of 19 U.S.C. 1448 or 1499 may also 

be assessed against the individuals who steal the merchandise 

from the importer of record. Theft of merchandise in those 

instances will be mitigated in accordance with guidelines articulated 

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in Section III.B.10., of the Guidelines for Delivery of Cargo Without 

Customs Authorization in the Vessel section of this Handbook. 

 

C. Mitigating and Aggravating Factors. 

1. Mitigating Factors 

a. The importer of record is inexperienced in the handling of 

cargo. 

b. The importer of record has a general good performance and 

a low error rate in the delivery and safekeeping of cargo. 

c. The importer of record demonstrates remedial action has 

been taken to prevent future claims. 

2. Aggravating Factors 

a. The importer of record refuses to cooperate with Customs or 

acts to impede Customs activity with regard to the case. 

b. The importer of record has a rising error rate which is 

indicative of deteriorating performance in the delivery and 

safekeeping of cargo. 

D. Restricted or Prohibited Merchandise. 

If Customs has reason to believe that the merchandise which was not held 

at the place of examination or was not delivered to the place of

examination may have been restricted or prohibited from entry, that will be

considered an extraordinary aggravating factor and will result in mitigation

at the high end of the mitigation range. 

E. Failure to Keep Customs Seal or Cording Intact. 

The importer of record also agrees to keep any Customs seals or cording 

intact until the merchandise is examined. For a violation which involves 

the failure to keep any Customs seal or cording intact until the 

merchandise is examined, the claim will be canceled upon payment of an 

amount between $100 and $500 if there is no evidence to indicate the 

merchandise in the sealed or corded shipment was tampered with. If

there is evidence of tampering, the claim will be canceled upon payment

of an amount equal to the value of any missing merchandise. 

XI. Guidelines for Cancellation of Claims Arising From the Failure of 

a Centralized Examination Station (CES) Operator to Deliver 

Merchandise to or Retain Merchandise at the CES (19 C.F.R. 

151.15, 19 C.F.R. 113.63) (T.D. 99-29) 

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A. Assessment. 

Merchandise not delivered to or retained at a Centralized Examination 

Station (CES) by the CES operator shall be the subject of a claim for

liquidated damages for violation of the provisions of 19 C.F.R.

151.15(b)(3) and 19 C.F.R. 113.63(b)(2) equal to the value of the 

merchandise or three times the value of the merchandise if it is restricted 

or prohibited or is alcoholic beverages.

B. Mitigation of claims arising for failure to deliver merchandise to the CES or 

removal or delivery of merchandise from the CES without authorization. 

1. If the CES operator can show that the violation occurred solely as a 

result of Customs error, the claim for liquidated damages should be 

canceled without payment. 

2. If the CES operator can show that the merchandise was never 

received or landed, the claim for liquidated damages should be 

canceled without payment. 

3. If the merchandise which was not delivered to the CES or removed 

or delivered from the CES without authorization could have been 

the subject of an informal entry, the claim for liquidated damages 

may be canceled upon payment of an amount equal to the duties, 

fees, taxes and charges that would have been due on the 

merchandise had entry been properly made plus an amount 

between $100 and $500, depending on the presence of 

aggravating or mitigating factors. 

4. If the CES operator comes forward and discloses the violation to 

Customs, the claim for liquidated damages may be canceled upon 

payment of an amount equal to the duties, fees, taxes and charges

that would have been due on the merchandise had entry been 

properly made, plus $50. 

5. By its very nature, merchandise not delivered to a CES or removed 

or delivered from a CES without authorization is designated for 

Customs examination. If the CES operator can show that the 

merchandise was entered and duties, fees, taxes and charges paid 

thereon, the claim for liquidated damages may be canceled upon 

payment of an amount between $2,500 and $20,000 depending on 

the presence of aggravating or mitigating factors. In no case shall 

the amount upon which the claim may be canceled be lower than 

any chargeable costs which are incident to such examination. 

Conversely, the amount upon which the claim may be canceled can 

never exceed the value of the claim for liquidated damages. 

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6. If the merchandise was not delivered to a CES or was removed or 

delivered from a CES without authorization, and the CES operator

cannot show that the merchandise was entered and duties, fees, 

taxes and charges paid thereon, the claim for liquidated damages 

may be canceled upon payment of an amount equal to the duties, 

fees, taxes and charges that would have been due on the 

merchandise had entry been properly made plus an amount 

between $3,000 and $25,000 depending on the presence of 

aggravating or mitigating factors. In no case shall the amount upon 

which the claim may be canceled be lower than any chargeable 

costs which are incident to such Customs examination. 

Conversely, the amount upon which the claim may be canceled can 

never exceed the value of the claim for liquidated damages. 

7. If the CES operator has a history of receipting for merchandise 

which has not been delivered to the CES or allowing merchandise 

to be removed or delivered from the CES without authorization, or 

particularly aggravating circumstances exist with regard to a claim, 

the Fines, Penalties and Forfeitures Officer may cancel the claim

for liquidated damages upon payment of a higher amount than that

authorized by these guidelines; however, the advice of HQ, ORR, 

Penalties Branch shall be sought to determine appropriate

mitigation. 

8. Theft of bonded merchandise. Merchandise which is stolen from

the CES shall be treated as having been removed without 

authorization. The CES operator will be liable for liquidated 

damages and mitigation will occur in accordance with these 

guidelines. It should also be noted that penalties under 19 U.S.C.

1595a(b) for violation of 19 U.S.C. 1448 or 1499 may also be 

assessed against the individuals who steal the merchandise from a 

CES. Theft of merchandise in those instances will be mitigated in 

accordance with guidelines articulated in Section III.B.10., of the 

Guidelines for Delivery of Cargo Without Customs Authorization in 

the Vessel section of this Handbook. 

C. Mitigating and Aggravating Factors. 

1. Mitigating Factors 

a. CES operator inexperienced in the handling of cargo. 

b. CES operator has a general good performance and low error

rate in the handling of cargo. 

c. CES operator demonstrates remedial action has been taken 

to prevent future claims. 

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2. Aggravating Factors 

a. CES operator refuses to cooperate with Customs or acts to 

impede Customs activity with regard to the case. 

b. CES operator has a rising error rate which is indicative of 

deteriorating performance in the handling and safekeeping of 

cargo. 

D. Restricted or Prohibited Merchandise. 

If Customs has reason to believe that the merchandise which was not 

delivered to a CES or was removed from the CES without authorization 

may have been restricted or prohibited from entry, that will be considered 

an extraordinary aggravating factor and will result in mitigation at the high 

end of the mitigation range. 

E. Failure to maintain records as required by regulation. 

1. If a CES operator fails to maintain records as required by Customs, 

claims for liquidated damages not involving merchandise for 

violation of 19 C.F.R. 113.63(a)(3) and 19 C.F.R. 118.4 shall result. 

2. If the breach resulted from clerical error, the claim may be canceled 

without payment. 

3. If the breach resulted from negligence, the claim may be canceled 

upon payment of an amount between $100 and $250 per default, 

depending on the presence of aggravating or mitigating factors. 

4. If the breach was intentional, no relief shall be granted. 

XII. Guidelines for Cancellation of Claims Arising from the Removal 

of Merchandise Without Authorization From a Container Freight 

Station (CFS) (19 C.F.R. 19.40 ET.SEQ.) (19 C.F.R. 113.63(b)) 

(T.D. 99-29) 

A. Assessment. 

Merchandise not retained at a Container Freight Station (CFS) by the CFS 

operator shall be the subject of a claim for liquidated damages for violation 

of the provisions of 19 C.F.R. 113.63(b)(2) equal to the value of the 

merchandise or three times the value of the merchandise if it is restricted 

or prohibited or is alcoholic beverages.

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B. Mitigation of claims arising for removal or delivery of merchandise from the 

CFS without authorization. 

1. If the CFS operator can show that the violation occurred solely as a 

result of Customs error, the claim for liquidated damages should be 

canceled without payment. 

2. If the CFS operator can show that the merchandise was never 

received or landed, the claim for liquidated damages should be 

canceled without payment. 

3. If the merchandise which was removed or delivered from the CFS 

without authorization could have been the subject of an informal 

entry, the claim for liquidated damages may be canceled upon 

payment of an amount equal to the duties, fees, taxes and charges

that would have been due on the merchandise had entry been 

properly made plus an amount between $100 and $500, depending 

on the presence of aggravating or mitigating factors. 

4. If the CFS operator comes forward and discloses the violation to 

Customs, the claim for liquidated damages may be canceled upon 

payment of an amount equal to the duties, fees, taxes and charges

that would have been due on the merchandise had entry been 

properly made, plus $50. 

5. If the merchandise which was removed or delivered from the CFS 

without authorization was not designated for Customs examination 

and the CFS operator can show that the merchandise was entered 

and duties, fees, taxes and charges paid thereon, the claim for

liquidated damages may be canceled upon payment of an amount

between $250 and $2,000 depending on the presence of 

aggravating or mitigating factors. 

6. If the merchandise which was removed or delivered from the CFS 

without authorization was not designated for Customs examination 

and the CFS operator cannot show that the merchandise was 

entered and duties, fees, taxes and charges paid thereon, the claim

for liquidated damages may be canceled upon payment of an 

amount equal to the duties, fees, taxes and charges that would 

have been due on the merchandise had entry been properly made 

plus an amount between $300 and $2,500 depending on the 

presence of aggravating or mitigating factors. 

7. If the merchandise removed or delivered from a CFS without 

authorization was designated for Customs examination and the 

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CFS operator can show that the merchandise was entered and 

duties, fees, taxes and charges paid thereon, the claim for 

liquidated damages may be canceled upon payment of an amount

between $2,500 and $20,000 depending on the presence of 

aggravating or mitigating factors. In no case shall the amount upon 

which the claim may be canceled be lower than any chargeable 

costs which are incident to such examination. Conversely, the 

amount upon which the claim may be canceled can never exceed 

the value of the claim for liquidated damages. 

8. If the merchandise which was removed or delivered from a CFS 

without authorization and was designated for Customs examination 

and the CFS operator cannot show that the merchandise was 

entered and duties, fees, taxes and charges paid thereon, the claim

for liquidated damages may be canceled upon payment of an 

amount equal to the duties, fees, taxes and charges that would 

have been due on the merchandise had entry been properly made 

plus an amount between $3,000 and $25,000 depending on the 

presence of aggravating or mitigating factors. In no case shall the 

amount upon which the claim may be canceled be lower than any 

chargeable costs which are incident to such Customs examination. 

Conversely, the amount upon which the claim may be canceled can 

never exceed the value of the claim for liquidated damages. 

9. If the CFS operator has a history of receipting for merchandise 

which has been removed or delivered from the CFS without 

authorization or allowing merchandise to be removed from the CFS 

without authorization, or particularly aggravating circumstances 

exist with regard to a claim, the Fines, Penalties and Forfeitures

Officer may cancel the claim for liquidated damages upon payment 

of a higher amount than that authorized by these guidelines; 

however, the advice of HQ, ORR, Penalties Branch shall be sought

to determine appropriate mitigation. 

10. Theft of merchandise from the CFS. Merchandise which is stolen 

from the CFS shall be treated as having been removed without 

authorization. The CFS operator will be liable for liquidated

damages and mitigation will occur in accordance with these 

guidelines. It should also be noted that penalties under 19 U.S.C.

1595a(b) for violation of 19 U.S.C. 1448 or 1499 may also be 

assessed against the individuals who steal the merchandise from a 

CFS. Theft of merchandise in those instances will be mitigated in 

accordance with guidelines articulated in Section III.B.10. of the 

Guidelines for Delivery of Cargo Without Customs Authorization in 

the Vessel section of this Handbook. 

 

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C. Mitigating and Aggravating Factors. 

1. Mitigating Factors 

a. CFS operator inexperienced in the handling of cargo. 

b. CFS operator has a general good performance and a low 

error rate in the handling of cargo. 

c. CFS operator demonstrates remedial action has been taken 

to prevent future claims. 

2. Aggravating Factors 

a. CFS operator refuses to cooperate with Customs or acts to 

impede Customs activity with regard to the case. 

b. CFS operator has a rising error rate which is indicative of 

deteriorating performance in the handling and safekeeping of 

cargo. 

D. Restricted or Prohibited Merchandise. 

If Customs has reason to believe that the merchandise which was

removed from the CFS without authorization may have been restricted or 

prohibited from entry, that will be considered an extraordinary aggravating

factor and will result in mitigation at the high end of the mitigation range. 

XIII. Claims for Liquidated Damages Assessed Against a Bonded 

Party for Failure to Notify Customs of the Presence of Unentered 

Merchandise (T.D. 99-29) 

A. Assessment. 

Any merchandise or baggage that is taken into custody from an arriving 

carrier by any party under a Customs-authorized permit to transfer or inbond entry may remain in the custody of that party for 15 calendar days 

after receipt under such permit to transfer or 15 calendar days after arrival 

at the port of destination. No later than 20 calendar days after receipt

under the permit to transfer or 20 calendar days after arrival under bond at

the port of destination, the party must notify Customs of any such 

merchandise or baggage for which entry has not been made. Such 

notification must be provided in writing or by any appropriate Customsauthorized electronic data interchange system. If the party fails to notify

Customs of the unentered merchandise or baggage in the allotted time, he 

may be liable for the payment of liquidated damages equal to $1,000 per

bill of lading for which notification is not given for violation of the provisions

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of 19 C.F.R. 113.63(c)(4) and: 19 C.F.R. 4.37(b), if original arrival is by

vessel; 19 C.F.R. 122.50(b), if original arrival is by air; or 19 C.F.R.

123.10(b), if original arrival is by land carrier. 

B. Mitigation. 

1. If notification of the presence of unentered merchandise is provided 

outside the time period allowed by law or regulation, the claim for

liquidated damages may be canceled upon payment of an amount

between 10 and 50 percent of the assessment, depending on the 

presence of aggravating or mitigating circumstances. 

2. If notification is not received, or if Customs discovers the presence 

of unentered merchandise after the time period for notification has 

expired, no mitigation will be afforded. 

XIV. Claims for Liquidated Damages Incurred by the Carrier or Other 

Party for Failure to Notify the Bonded Warehouse of the 

Presence of Unentered Merchandise (T.D. 99-29) 

A. Assessment. 

In addition to the notification to Customs, the carrier (or any other party to 

whom custody of the unentered merchandise has been transferred by a 

Customs authorized permit to transfer or in-bond entry) must provide 

notification of the presence of such unreleased and unentered 

merchandise or baggage to a bonded warehouse certified by the port 

director as qualified to receive general order merchandise. Such 

notification must be provided in writing or by any appropriate Customsauthorized electronic data interchange system and must be provided 

within the 20-calendar day period. If the party to whom custody of the 

unentered merchandise or baggage has been transferred by a Customsauthorized permit to transfer or in-bond entry fails to notify a Customsapproved bonded warehouse of such merchandise or baggage within the 

applicable 20-calendar-day period, he may be liable for the payment of 

liquidated damages of $1,000 per bill of lading for which notification is not 

given. Liability of the arriving carrier would be under the provisions of 19 

C.F.R. 113.64(b) and: 19 C.F.R. 4.37(c) if the original arrival was by

vessel; 19 C.F.R. 122.50(c) if the original arrival was by air; or 19 C.F.R. 

123.10(c) if the original arrival was by land carrier. Liability of the party to 

whom custody has been transferred by a Customs-authorized permit to 

transfer or in-bond entry would be under the provisions of 19 C.F.R. 

113.63(b), 19 C.F.R. 113.63(c) and: 19 C.F.R. 4.37(c) if the original arrival 

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was by vessel; 19 C.F.R. 122.50(c) if the original arrival was by air; or 19 

C.F.R. 123.10(c) if the original arrival was by land carrier. 

 

B. Mitigation. 

1. If notification of the presence of unentered merchandise is provided 

to the bonded warehouse outside the time period allowed by law or 

regulation, the claim for liquidated damages may be canceled upon 

payment of an amount between 10 and 50 percent of the 

assessment, depending on the presence of aggravating or

mitigating circumstances. 

2. If notification is not received, or if Customs discovers the presence 

of unentered merchandise after the time period for notification has 

expired, no mitigation will be afforded. 

XV. Claims for Liquidated Damages Against a Bonded Warehouse 

for Failure to Collect Unentered Merchandise For Which 

Notification Has Been Received (T.D. 99-29) 

A. Assessment. 

If the bonded warehouse operator fails to take possession of unentered 

and unreleased merchandise or baggage within five calendar days after 

receipt of notification of the presence of such merchandise or baggage 

under this section, he may be liable for the payment of liquidated damages 

of $1,000 per bill of lading remaining uncollected. Liability would be under

19 C.F.R. 113.63(a)(1) and: 19 C.F.R. 4.37(d) if the original arrival was by

vessel; 19 C.F.R. 122.50(d) if the original arrival was by air; or 19 C.F.R.

123.10(d) if the original arrival was by land carrier. 

B. Mitigation. 

1. If the bonded warehouse operator takes possession of unentered 

merchandise outside the time period allowed by law or regulation, 

the claim for liquidated damages may be canceled upon payment of

an amount between 10 and 50 percent of the assessment, 

depending on the presence of aggravating or mitigating 

circumstances. 

2. If the bonded warehouse operator never takes possession of

merchandise for which he has received appropriate notification, no 

mitigation will be afforded. 

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XVI. Guidelines for Cancellation of Claims Arising From Violation of 

Foreign Trade Zone Regulations (19 C.F.R. Part 146, 19 C.F.R. 

113.73) (T.D. 01-41) 

A. Defaults Involving Merchandise. Defaults involving merchandise include 

those violations relating to merchandise which: 

1. Cannot be located or accounted for in the activated area of a 

foreign trade zone; 

2. Has been removed from the activated area of the zone without a 

proper Customs permit; or 

3. Has been admitted, manipulated, manufactured, exhibited, or 

destroyed in the activated area of a zone: 

a. Without proper Customs permit; or 

b. Not in accordance with the description of the activity in the 

Customs permit. 

B. Defaults Not Involving Merchandise. Default not involving merchandise 

means any instance of failure, other than one involving merchandise or

late payment of the annual fee, to comply with the laws or regulations

governing foreign trade zones. A default involving one zone lot or unique 

identifier may not be combined with a default under another lot or unique 

identifier. 

C. Defaults Involving Merchandise; Petitions. Claims arising from defaults

involving merchandise should be processed in accordance with the 

following: 

1. If the breach resulted from clerical error or mistake (a non-negligent 

inadvertent error), the claim should be canceled without payment. 

2. If the breach resulted from negligence but no threat to the revenue 

occurred (e.g., the merchandise was not manipulated in 

accordance with the permit to manipulate) the claim should be 

canceled upon payment of an amount between one and 15 percent 

of the value of the merchandise involved in the breach, but not less

than $100 nor more than $10,000. If the merchandise involved in 

the breach is restricted merchandise, that shall be considered an 

aggravating factor which shall result in mitigation on the higher end 

of the range. If the merchandise involved in the breach is domestic

status merchandise, that shall be considered a mitigating factor 

which shall result in mitigation on the lower end of the range. 

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3. If the breach resulted from negligence and a potential loss of 

revenue resulted (e.g., merchandise cannot be located in the zone, 

merchandise is removed from the zone without a permit), the claim 

shall be canceled upon payment of an amount between one and 

three times the loss of revenue (loss of revenue to include duties,

fees and taxes). If the merchandise involved in the breach is 

restricted merchandise, the claim shall be canceled upon payment 

of an amount between three and five times the loss revenue but in 

no case less than 10 percent of the value of such merchandise. 

4. If the breach is intentional (e.g., the foreign trade zone operator 

conspires to remove merchandise from the warehouse zone 

without proper entry being made), there will be no relief granted 

from liquidated damages. 

5. Aggravating factors. 

a. Principal's failure or refusal to cooperate with Customs. 

b. Large number of violations compared to number of 

transactions handled.

c. Experience of principal. 

d. Principal's carelessness or willful disregard toward its 

responsibilities. 

6. Mitigating factors. 

a. Contributory error by Customs. 

b. Small number of violations compared to number of 

transactions handled.

c. Remedial action taken by principal. 

d. Cooperation with Customs. 

e. Lack of experience of principal. 

f. Merchandise which cannot be located or which has been 

removed without permit is returned to Customs custody. 

g. The merchandise involved in the breach is domestic status 

merchandise. 

7. If the violator comes forward and informs Customs of a violation, 

prior to Customs discovery of the violation, the claim for liquidated 

damages may be cancelled, at the discretion of the appropriate

Customs officer, upon payment of an amount equal to the duties, 

fees, taxes and charges that would have been due on the 

merchandise had entry been properly made, plus $50. 

8. If the violator comes forward and informs Customs of a violation, 

prior to Customs discovery of the violation, and the violation 

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involves restricted merchandise, then the claim for liquidated 

damages may be cancelled, at the discretion of the appropriate

Customs officer, upon payment of an amount equal to the duties, 

fees, taxes and charges that would have been due on the 

merchandise had entry been properly made, plus 5 percent of the 

value of the merchandise, but not less than $500. The kind and 

character of the restriction will be considered before relief under 

this provision is allowed. 

D. Defaults Not Involving Merchandise; Modified CF 5955A. Defaults not 

involving merchandise shall be processed in accordance with the following 

guidelines. 

1. Modified CF 5955A. Notices of liquidated damages incurred may 

be issued on a modified CF-5955A. The modified form shall 

specify two options from which the petitioner may choose to resolve 

the demand. 

a. Option 1. He may pay a specified sum within 60 days and 

the case will be closed. By electing this option in lieu of 

petitioning, he waives his right to file a petition. He may, 

however, file a supplemental petition, if he does so in 

accordance with the Customs Regulations and has some 

new fact or information which merits consideration in 

accordance with these guidelines. 

b. Option 2. Petition for relief. The bond principal or surety 

may file a petition for relief. By filing a petition for relief, the 

petitioner will no longer be afforded the Option 1 mitigation 

amount. The FP&F Officer shall grant full relief when the 

petitioner demonstrates that the violation did not occur. If 

the petitioner fails to demonstrate that the violation did not

occur, the FP&F Officer may cancel the claim upon payment 

of an amount no less than $100 greater than the Option 1 

amount. 

2. Maximum Assessments. In cases involving violations which do not 

involve merchandise which are assessed at $1,000 for each 

business day that the violation continues, a maximum of $10,000 

shall be assessed for any one such continuing violation unless the 

FP&F Officer can articulate a legitimate enforcement purpose for

exceeding said limit. These claims shall be canceled in 

conformance with the terms of these guidelines. 

3. Clerical Error. If the breach resulted from clerical error, the claim 

may be canceled without payment. 

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4. Negligence. If the breach resulted from negligence, the claim may 

be canceled upon payment of an amount between $100 and $250 

per default actually assessed, depending on the presence of

aggravating or mitigating factors. For example, if a document is 

filed 100 days late, Customs, by policy, will generally limit the 

assessment to $10,000. Mitigation will be based on the $10,000 

actual assessment and not relate to the $100,000 potential 

assessment. 

5. Intentional Breach. If the breach was intentional, no relief shall be 

granted. 

6. Violator disclosing violation before Customs discovery. If the 

violator comes forward and discloses the violation to Customs prior 

to Customs discovery of the violation, whether or not the violation is

a continuing one, the claim for liquidated damages may be 

cancelled, at the discretion of the appropriate Customs officer, upon 

payment of the amount of $50. 

E. Cancellation of claims for late payment of the annual fee.

1. If the late payment resulted from clerical error or mistake, the claim 

may be canceled upon payment of the amount due but not paid. 

2. If the late payment resulted from negligence, cancel upon payment 

of the amount due but not paid plus the following percent of that

amount for each day payment is in arrears: 

a. First seven calendar days - not less than one-third of one 

percent nor more than three-fourths of one percent per day. 

b. Second seven calendar days - not less than one and onethird percent nor more than one and three-fourths percent 

per day. 

c. After the fourteenth calendar day - not less than two and 

one-third nor more than two and three-fourths percent per 

day. 

3. If the late payment was intentional, no relief shall be granted. 

XVII. Guidelines for Cancellation of Claims for Late Filing or Failure to 

File Softwood Lumber Information (19 C.F.R. 12.140, 19 C.F.R. 

113.62(k), 19 C.F.R. 113.62(l)(5)) (T.D. 98-53) 

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A. The provisions of 19 C.F.R. 12.140 set forth special entry requirements for 

softwood lumber. The importer of record is obligated to obtain and 

provide to Customs information regarding the issuance of a Canadian 

export permit. The export permit information must be provided to 

Customs within 20 working days of release of the merchandise. 

B. Late presentation of export permit information. Claims for liquidated

damages for late presentation of export permit information shall be 

processed in accordance with the following guidelines. 

1. Modified CF-5955A. Notices of liquidated damages incurred may

be issued on a modified CF-5955A. The modified form shall specify 

two options from which the petitioner may choose to resolve the 

demand. 

a. Option 1. He may pay a specified sum within 60 days and 

the case will be closed. By electing this option in lieu of

petitioning, he waives his right to file a petition. 

b. Option 2. Petition for relief. The bond principal or surety may 

file a petition for relief. By filing a petition for relief, the 

petitioner will no longer be afforded the Option 1 mitigation 

amount. The Fines, Penalties, and Forfeitures Officer shall 

grant full relief when the petitioner demonstrates that the 

violation did not occur or occurred solely as a result of 

Customs error. If the petitioner fails to demonstrate that the 

violation did not occur or occurred solely as a result of 

Customs error, the Fines, Penalties, and Forfeitures Officer

may cancel the claim upon payment of an amount no less

than $100 greater than the Option 1 amount. 

2. Cancellation of claims for late presentation of export permit 

information. Liquidated damages incurred for late presentation of 

the necessary information may be canceled upon payment of an 

amount between 25 and 50 percent of the claim but not less than 

$500 and not more than $3,000. Such amount may be afforded as 

an Option 1 amount. Mitigation shall be based upon the experience 

of the importer and the number of violations incurred compared with 

the number of importations made. No relief shall be granted from 

any claim issued for $500 or less. 

C. Failure to present export permit information. If the importer fails to present

the appropriate export permit information, no relief from the claim for 

liquidated damages will be granted unless the importer can show that the 

information was not required or that the violation occurred solely as a 

result of Customs error. Upon presentation of proof which satisfies the 

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Fines, Penalties, and Forfeitures Officer that the information was not 

required or that the violation occurred solely as a result of Customs error 

the claim shall be canceled without payment. 

XVIII. Guidelines for Cancellation of Claims for Failure to File 

Reconciliations Timely (REF: 64 FR 73121, dated December 29, 

1999; 66 FR 14619, dated March 13, 2001) 

The filing of NAFTA Reconciliations is now optional. Accordingly, the liquidated 

damages provisions in this section apply only to value, classification, and 9802 

Reconciliations. They do not apply to NAFTA Reconciliations. 

A. Requirements 

As described above and in the Federal Register notice of February 6, 1998, the 

flagging of an entry summary creates an obligation on the part of the importer to 

file a Reconciliation within the allotted time, covering the flagged issue(s) on that 

entry summary. This notice removes the obligation to reconcile NAFTA eligibility

for entry summaries flagged for that issue. Each entry summary flagged for 

value, classification, and/or 9802 issues must be covered by a Reconciliation 

filed prior to the due date, 15 months from the earliest entry summary date of the 

underlying entry summaries. Up to 9,999 underlying entry summaries may be 

covered by a single Reconciliation. If any one of the underlying entry summaries'

due dates has passed prior to Reconciliation filing, the entire Reconciliation is 

considered late. However, the importer and filer have discretion to determine 

which and how many entry summaries are grouped on a Reconciliation, 

regardless of the flagging method and timing involved in the original flagging of 

those entry summaries. 

B. Liquidated Damages for Non-Filed and Late-Filed Reconciliations 

The obligation to file Reconciliations created by the flagging of entry summaries

carries liquidated damages implications for failure to do so timely. Each flagged 

entry summary remains an independent entity until reconciled. Customs has no 

way of knowing which entry summaries will be covered by a single Reconciliation 

until one is actually filed. Once the Reconciliation has been filed, the universe of

entry summaries covered by it is established. Moreover, the Reconciliation is an 

entry in its own right and has the same legal status as other Customs entries. For 

these reasons, late-filing and non-filing of Reconciliations will be dealt with using 

different mechanisms. 

C. Liquidated Damages Mechanisms 

1. “No File” Liquidated Damages 

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Periodically, Customs will perform research to identify flagged entries that 

were not reconciled timely (within 15 months of their date). In cases where 

flagged entry summaries are found to have not been covered by a 

Reconciliation, Customs will issue a single ``No File'' liquidated damages

claim against the importer of record for all unreconciled flagged entries 

past their due dates for the calendar month. Subsequent filing of

Reconciliations to cover entries on this monthly consolidated liquidated 

damages report will result in mitigation of the initial liquidated damages

claim. 

2. “Late File” Liquidated Damages 

In cases where flagged entry summaries are found to have been covered 

by a Reconciliation that was filed late, Customs will issue a single ``Late 

File'' liquidated damages claim against the Reconciliation entry itself (as 

opposed to a claim against the importer that covers the calendar month, 

as in the case of ``No File'' liquidated damages claims). This mechanism

applies also to reconciliations, filed timely or not, where payment of 

additional monies (duties, taxes, fees, and interest) due is made late or 

not at all. 

3. Where Liquidated Damages Claims Are Processed 

Each importer participating in the ACS Reconciliation Prototype is 

assigned to a particular reconciliation processing port. Liquidated 

damages claims involving Reconciliation will always be processed 

by the Reconciliation processing port. This is true regardless of the 

port(s) where the underlying entry summaries were filed. 

D. Summary of Liquidated Damages Claims 

There are five different types of liquidated damages violations under the ACS 

Reconciliation Prototype. The descriptions, assessed liquidated damages 

amounts, and ``option 1'' amounts are shown below. ``Option 1'' refers to the 

option where importers may agree to pay a reduced amount, but waive rights to 

mitigate the claim below that amount. The term ``money'' in this listing refers to 

the additional duties, taxes, fees, and interest due upon Reconciliation. 

1. Reconciliation No File 

Description: Entry summaries flagged but no Reconciliation filed.

Customs will issue a single consolidated liquidated damages claim for all 

entries fitting this description for a given importer, per month, per surety. 

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a. 

b. 

Assessed Liquidated Damages Amount: Total entered value of the 

underlying entry(ies). 

Option 1 Amount: The filing of the Reconciliation entry (or entries) 

covering the flagged entry summaries listed on the consolidated 

liquidated damages claim (CF 5955A), with all applicable duties, taxes,

fees, and interest owed, will be treated as a petition for relief. Payment 

of the Option 1 amount will be authorized only upon the proper filing of

this Reconciliation, with duties, taxes, fees, and interest. For a 

consolidated monthly liquidated damages claim covering five or more 

flagged entry summaries, the Option 1 amount is $500. For 

consolidated monthly claims involving four or fewer flagged entry 

summaries, the Option 1 amount is $100 per entry. 

2. Reconciliation Money No File 

Description: Reconciliation filed timely but without payment of additional 

duties, taxes, fees, and interest due. 

a. Assessed Liquidated Damages Amount: $1,000 or double the 

duties, taxes, fees, and interest due on the Reconciliation, 

whichever is greater. 

b. Option 1 Amount: Payment of the Option 1 amount will be 

authorized only after all duties, taxes, fees, and interest due are 

paid. For claims involving five or more flagged entry summaries, 

the amount is $500. For claims involving four or fewer flagged 

entry summaries, the amount is $100 per entry. 

3. Reconciliation Late File 

a. Description: Reconciliation filed and paid after the 15-month 

deadline. 

b. Assessed Amount: $1,000 or double the duties, taxes, fees, and 

interest, if applicable, due on the Reconciliation, whichever is

greater. 

c. Option 1 Amount: For claims involving five or more flagged entry

summaries, the amount is $500. For claims involving four or fewer 

flagged entry summaries, the amount is $100 per entry. 

4. Reconciliation Money Late File 

a. Description: Reconciliation filed timely but payment of additional 

duties, taxes, fees, and interest due submitted late. 

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b. Assessed Amount: $1,000 or double the duties, taxes, fees, and 

interest due on the Reconciliation, whichever is greater. 

c. Option 1 Amount: For claims involving five or more flagged entry

summaries, the amount is $500. For claims involving four or fewer 

flagged entry summaries, the amount is $100 per entry. 

5. Reconciliation Late File with Money No File 

a. 

b. 

c. 

Description: Reconciliation filed late, without payment of duties, 

taxes, fees, and interest due. 

Assessed Amount: $1,000 or double the duties, taxes, fees, and 

interest due on the Reconciliation, whichever is greater. 

Option 1 Amount: Payment of Option 1 amount will be authorized 

only after duties, taxes, fees, and interest due are paid. For claims 

involving five or more flagged entry summaries, the amount is

$500. For claims involving four or fewer flagged entry summaries, 

the amount is $100 per entry. 

E. Surety Issues 

The liquidated damages claims that result from failure to file Reconciliations or 

filing them untimely may be for substantial amounts. Failure to resolve these 

claims could saturate the importer's continuous bond. Thus, in certain 

circumstances, importers may be required to submit single entry bonds for further 

entry summaries or make live entry with payment to secure release of

merchandise. 

XIX. Guidelines for Cancellation of Claims for Failure to Redeliver 

Export Merchandise (19 C.F.R. 113.64(f)(1) and (f)(2)) (T.D. 02-20) 

A. Assessment 

Claims for failure to redeliver merchandise exported in violation of the 

export laws result in the assessment of liquidated damages equal to 3 times

the value of that merchandise. 

B. Mitigation 

1. There will be no mitigation of the claim for liquidated damages in 

the event that a significant enforcement objective is involved with 

respect to the reason for the redelivery order. For example, if goods

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subject to the redelivery order were stolen or were being exported 

to a country for which exportations of the specific goods are 

embargoed, no relief should be given from the liquidated damages

claim. 

2. For all other cases, the following guidelines apply to the 

cancellation of the claim for liquidated damages: 

a. First violation - Cancel the claim for liquidated damages upon 

payment of an amount between 10 and 50 percent of the value 

of the cargo but in no case will the claim be cancelled upon an 

amount less than two times the freight charges (if calculable). 

This is necessary in order to offset any economic advantage 

that might be gained through a failure to redeliver. 

b. Second and subsequent violations - Cancel the liquidated 

damages claim upon payment of an amount no less than the 

value of the cargo or five times the freight charges (if 

calculable), whichever is larger. 

XX. Guidelines for Assessment and Cancellation of Claims for 

Failure or Late Filing of NAFTA Duty Deferral Entries (T.D. 02-20) 

A. Filing of NAFTA Duty Deferral Entry 

 

1. If merchandise originally entered into a duty-deferral program here 

in US (TIB, bonded warehouse or FTZ) and then exported to 

Canada or Mexico or entered into a duty-deferral program in 

Canada or Mexico, a NAFTA duty-deferral entry must be filed. 

2. A CF 7501 Summary reporting export and duty-owed information 

must be filed with Customs 10 working days from the date of export 

or entry into the duty-deferral program in Canada or Mexico. 

3. If summary is never filed or filed after 10-working day filing period, a 

liquidated damages claim citing 19 C.F.R. 113.62(b)(4) and 

181.53(a)(2)(iii)(B) may be initiated for a NAFTA duty deferral nonor late file. Claim is assessed at value of merchandise exported 

B. Payment of NAFTA Duty Deferral Duties 

1. Payment of duties due with the NAFTA duty-deferral entry must be 

deposited with Customs no later than 60 calendar days from the 

date of export or entry into the duty-deferral program in Canada or 

Mexico. See, 19 C.F.R. 181.53(a)(2)(iii)(C). This includes any

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reduced duties that must be deposited with the filing of any claim

for reduced duties per 19 C.F.R. 181.53(a)(3)(ii). 

2. Failure to deposit or late deposit of duties will result in the 

assessment of a claim for liquidated damages for double the unpaid

duties or $1,000, whichever is greater, for violation of 19 C.F.R.

113.62(a)(1) and 19 C.F.R. 181.53(a)(2)(iii)(C). 

C. Mitigation Guidelines

1. Late file of the duty-deferral entry (no revenue consequence) where 

7501 is filed outside the 10-working day period, but the NAFTA 

deferral duties are paid timely (as in A.3. above) - Option 1 amount 

of $100. If the principal or surety petitions for relief and cannot 

show that the violation did not occur, or only occurred as a result of 

Customs error, then mitigate to an amount no lower than $200. 

2. Failure to deposit duties within 60 calendar days of export or entry

into a duty-deferral program in Canada or Mexico, (as in B.2.

above), no mitigation shall be afforded until duties are deposited. 

3. Late payment of duties after issuance of a claim for failure to 

deposit duties, Option 1 amount of $200 + interest amount 

calculated in same manner as for late payment of estimated duties. 

If the principal or surety petitions for relief and cannot show that the 

violation did not occur, or only occurred as a result of Customs 

error, then mitigate to an amount no lower than $300 plus the 

appropriate interest amount. 

4. Late payment of duties when a failure to deposit claim was not 

issued, Option 1 amount of $100 + interest amount calculated in 

same manner as for late payment of estimated duties. If the 

principal or surety petitions for relief and cannot show that the 

violation did not occur, or only occurred as a result of Customs 

error, then mitigate to an amount no lower than $200 plus the 

appropriate interest amount. 

XXI. Guidelines for Cancellation of Claims for Violations Arising 

From Failure to Comply With Trade Fair Regulations (T.D. 02-20) 

A. Trade Fair Operators are required to file a Basic Importation Bond covering 

articles entered for the Fair per 19 C.F.R. 147.2. 

B. If payments required by 19 C.F.R. 147.33 (relating to reimbursement to the 

Government by the fair operator of certain expenses), 19 C.F.R. 147.41 

(relating to merchandise removed from the fair not in accordance with 

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regulation) and 19 C.F.R. 147.43 (relating to entry of merchandise from a fair) 

are not made upon demand, then liquidated damages may be assessed per 

19 C.F.R. 147.3 and 19 C.F.R. 113.62(h) or 113.62(g). 

C. Failure to use or handle merchandise in a manner which entitles it to duty-free 

entry (i.e., removing it from the Fair other than in accordance with regulation 

including failure to make entry, if appropriate) will result in assessment of 

liquidated damages equal to the value of the merchandise involved in the 

violation (or three times the value if the merchandise is prohibited, restricted 

or alcoholic beverages) in accordance with 19 C.F.R. 147.3, 147.41, 147.43, 

113.62(h) and 113.62(l)(1). 

D. Failing to exonerate the United States from risk or loss relating to the 

expenses incurred regarding the Fair will result in a claim for those expenses 

pursuant to 19 C.F.R. 147.3, 147.33 and 113.62(g). 

E. Cancellation standards. 

1. There will be no mitigation from any claim made for failure to exonerate 

the Government from risk or loss per 19 C.F.R. 113.62(g). 

2. For failure to use or handle the merchandise in a manner entitling it to 

duty-free entry, the claim will be cancelled upon payment of an amount 

between one and five times the loss of revenue (if a revenue loss

violation) or upon payment of 5 to 30 percent of value (if no revenue 

loss is involved) depending on the presence of mitigating or

aggravating circumstances. 

XXII. Guidelines for Cancellation of Claims When Petitions for Relief 

Are Filed Untimely (T.D. 02-20) 

A. Petitions may be accepted at the discretion of the FP&F Officer at any time 

prior to commencement of any sanctioning action against a bond principal or 

the issuance of any notice to show cause against a surety. 

B. If a petition is received untimely, Customs shall first consider the petition as

though it had been filed timely and shall determine the amount of mitigation 

that would have been afforded in the case had the petition been filed timely.

For purposes of these guidelines, this determination shall be known as the 

base amount. 

C. Once the base amount has been determined, Customs shall charge an 

additional amount in excess of the base amount by calculating the number of 

calendar days that a petition is late and charging an additional mitigation 

amount of 0.1 percent (.001) per day, but in no case shall the additional

amount be less than $400. 

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D. If the bond principal fails to file a petition during the time period provided by 

regulation, but then files a petition during the period in which the surety, by 

regulation, could file a petition, that petition will be considered as a late

petition. The number of days late shall be calculated from the end of the 60-

day petitioning period afforded to the principal. The demand on surety will be 

considered as an additional demand. 

NOTE: FOR PURPOSES OF ALL BOND CANCELLATION STANDARDS, THE 

TERM VALUE SHALL MEAN VALUE AS DETERMINED UNDER 19 U.S.C. 1401A. 

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ADDITIONAL INFORMATION 

IX. 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. 

X. 

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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. 

XI. 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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XII. 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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253

 

XIII. “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