Customs’ mission is to (1) ensure that merchandise and persons entering and exiting the United States do so in compliance with U.S. laws and regulations and (2) collect revenue from international trade. Customs collected $22.1 billion in revenue at more than 300 ports of entry in fiscal year 1998. Customs performs its mission with a workforce of nearly 20,000 personnel at its headquarters, 20 Customs Management Centers, 20 investigative offices, 5 Strategic Trade Centers, and 301 ports of entry around the country. Customs established a two-step procedure to process merchandise imported into the United States. During the first step, known as cargo release, Customs assumes direct control of the merchandise and uses an inspection process to verify that the cargo meets import requirements and is properly and accurately documented. When Customs determines that these requirements have been met, the cargo is released. During the second step, referred to as entry summary, Customs selects for review some of the detailed paperwork that has been submitted by the importer. Customs subsequently liquidates the importation (completes the transaction) after determining that the appropriate import duty has been paid. Although cargo release and entry summary are Customs’ major programs for ensuring compliance with trade laws, its commercial fraud, fines, penalties, and forfeitures program is its major weapon against violators of these laws. Customs also assesses liquidated damages when an importer does not comply with regulations. Civil monetary penalties, on the other hand, are assessed for violations, such as misclassification, knowingly falsifying the country of origin, and other fraudulent acts. Customs usually takes seizure actions when merchandise is illegal or not admissible to the United States. Although Customs agents, inspectors, and import specialists assess penalties and make seizures, it is the Fines, Penalties, and Forfeitures offices that are responsible for administrative processing and tracking of all liquidated damages, penalty, and seizure cases. Customs has been performing these activities for many years, long before the Mod Act, and continues to perform them in addition to its informed compliance efforts. For over 15 years, Customs has used its Automated Commercial System (ACS) to store and process import information and to manage import- related activities, such as collecting revenue and capturing trade statistics.ACS allows Customs to identify, track, and control imported merchandise during cargo release and entry summary liquidation processing. It also allows Customs to retrieve import information whenever needed. In the late 1980s, Customs recognized the need to overhaul, streamline, and update its automated data processing capabilities and reorient its business processes. Customs also realized that it needed to work with the trade community and Congress to forge legislation for meaningful change. After several attempts, compromise legislation acceptable to Customs, Congress, and the trade community was developed. This legislation, the Customs Modernization and Informed Compliance Act or Mod Act, which allowed Customs to automate its processes incrementally and allowed Customs to be flexible and innovative in redesigning its business processes, became law on December 8, 1993, as Title VI of the North American Free Trade Agreement Implementation Act. The Mod Act introduced two new concepts: informed compliance and shared responsibility. These concepts were premised on the theory that in order to maximize voluntary compliance with Customs laws and regulations, the trade community needed to be fully and completely informed of its legal obligations. In addition, Customs was to effectively communicate its requirements to the trade community, and the people and businesses subject to those requirements were to conduct their regulated activities in conformance with U.S. laws and regulations. The trade community was to use reasonable care in meeting its responsibilities. According to Customs, there is a general consensus that a “black and white” definition of reasonable care is impossible because the concept of acting with reasonable care depends upon individual circumstances. In lieu of a definition, Customs has issued a checklist of measures for importers to use as guidance in meeting the reasonable care requirements. Most import activity is attributable to a relatively small group of importers. In fiscal year 1998, Customs processed shipments with a total value of about $897 billion for more than 443,000 commercial importers. Only 1,000 of these importers, or less than 1 percent, accounted for about 60 percent of import value—a total of $538 billion. These percentages have remained fairly constant for several years, at least since fiscal year 1996. Customs determined that these top 1,000 importers are in a position to have a significant impact on trade compliance rates and introduced a “big player focus” towards trade compliance. In addition to big players, Customs directed its trade compliance efforts toward primary focus industries (PFIs). Customs selected industries as PFIs if they were considered vital to U.S. national interest on the basis of a number of factors, including strategic importance, international trade agreements, health and safety, and economic concerns. For fiscal year 1998, Customs selected the following PFIs for trade compliance attention: Critical Components (Bearings and Fasteners), Textiles and Wearing Apparel. In addition to focusing on big players and PFIs, Customs developed and implemented several key initiatives and actions as part of its informed compliance strategy, including (1) information programs, (2) compliance measurement, (3) compliance assessment, (4) account management, and (5) responses to noncompliance. The remainder of this report will discuss these five initiatives and actions, Customs’ implementation of them, and their results. Providing information to importers to inform them about trade laws, regulations, and Customs policies and procedures is not new; it has been going on for years. However, under its informed compliance strategy, developed as a result of the Mod Act, Customs enhanced its basic information program and developed a new targeted information program to provide the importing community with relevant information concerning its responsibilities and rights under Customs laws and regulations. Through these two programs, Customs provided importers with extensive information using the Internet, an electronic bulletin board, seminars, and informed compliance publications on such topics as value, classification, reasonable care, and recordkeeping requirements. Ports of entry around the country also provided informed compliance information to their local importing communities. Limited feedback that we obtained from several major importers indicated overall satisfaction with Customs’ informed compliance information efforts. According to the Commissioner of Customs’ May 1996 memorandum for trade community members on informed compliance strategy, the basic information program was intended for all parties involved in importing. Using the program, Customs would continue to issue rulings on the proper classification of imported give the trade community an opportunity to comment on draft regulatory documents by posting the documents on the Customs Electronic Bulletin Board (CEBB); establish an educational outreach program to educate the trade community on Mod Act responsibilities; establish a Customs Web server for dissemination of Customs information increase the knowledge of Customs staff through internal and external consider making information, such as Customs Bulletins, notices, and directives, available via CD-ROM. In accordance with its informed compliance strategy, we found that in calendar year 1998, Customs had issued over 13,000 rulings, posted 7 draft regulatory documents to the CEBB for public comment, and developed 13 informed compliance publications. In addition, in fiscal year 1998, Customs conducted over 130 internal and external educational seminars. Customs established its Web site on the Internet in August 1996, recording 1.5 million visits to the site in its initial year. Customs chose not to pursue distribution of such information as Customs Bulletins, notices, directives, and other informed compliance materials by CD-ROM because the information became accessible once the Web site was established. The CEBB was established in January 1991 to provide importers access to current, relevant Customs operations and trade information. Enhanced for informed compliance purposes, news releases, rulings, and about 25 other subject areas can be accessed through the CEBB. Almost all information on the CEBB can also be accessed through the Customs Web site. In March 1999, we accessed CEBB files through the Web site and found that one subject area, Mod Act Information, contained 70 information files, including draft and final regulations, Customs’ informed compliance strategy, and numerous informed compliance publications. These files included, for example, informed compliance publications that discussed reasonable care and recordkeeping requirements. According to Customs, the CEBB will eventually be phased out and all data integrated into the Web site. The Customs Web site contains an extensive array of information, including regulations and rulings, merchandise tariff classification and entry procedures, marking requirements, and informed compliance strategy and publications. Web page selections include such topics as “About U.S. Customs” and “Importing and Exporting.” As of April 1999, over 10.6 million visits to Customs’ Web site had been recorded since it was established in August 1996. As part of its efforts to educate the importing community on its responsibilities, Customs developed an informed compliance publication series. The publication series entitled “What Every Member of the Trade Community Should Know About:***” addressed trade issues, such as merchandise classification, customs value, and reasonable care. Thirty- four trade topics have been covered in this series since its inception in 1996. Customs received positive feedback from the trade community about this series and its applicability toward understanding informed compliance responsibilities. According to the Commissioner’s May 1996 memorandum, the targeted information program was designed to provide information and assistance to the importers beyond that provided through the basic program. The targeted information program was primarily aimed at industries and certain trade segments that required special efforts to deal with compliance issues. The targeted information programs used a variety of communication methods, including development and distribution of industry- and/or commodity-specific seminars and industry association sponsored meetings, importer visits, and videotapes. Customs has produced a number of commodity- and industry-specific publications under its “What Every Member of the Trade Community Should Know About:***” series. In fiscal year 1998, such publications as Ribbons & Trimmings, Footwear, and Lamps, Lighting and Candle Holders were issued as guides to help with classification of these commodities.