19 U.S.C. § 1593a — Penalties for false drawback claims

Page 285 TITLE 19—CUSTOMS DUTIES § 1593a the Treasury shall require any importer of record entering, introducing, or attempting to introduce into the commerce of the United States textile or apparel products that were either directly or indirectly pro- duced, manufactured, supplied, sold, ex- ported, or transported by such named person to show, to the satisfaction of the Secretary, that such importer has exercised reasonable care to ensure that the textile or apparel products are accompanied by documenta- tion, packaging, and labelling that are accu- rate as to its origin. Such reasonable care shall not include reliance solely on a source of information which is the named person. (B) Failure to exercise reasonable care If the Customs Service determines that merchandise is not from the country claimed on the documentation accom- panying the merchandise, the failure to ex- ercise reasonable care described in subpara- graph (A) shall be considered when the Cus- toms Service determines whether the im- porter of record is in violation of section 1484(a) of this title. (b) List of high risk countries (1) List The President or his designee, upon the ad- vice of the Secretaries of Commerce and Treasury, and the heads of other appropriate departments and agencies, is authorized to publish a list of countries in which illegal ac- tivities have occurred involving transshipped textile or apparel products or activities de- signed to evade quotas of the United States on textile or apparel products, if those countries fail to demonstrate a good faith effort to co- operate with United States authorities in ceasing such activities. Such list shall be pub- lished in the Federal Register not later than March 31 of each year. Any country that is on the list and that subsequently demonstrates a good faith effort to cooperate with United States authorities in ceasing illegal activities described in the first sentence shall be re- moved from the list, and such removal shall be published in the Federal Register as soon as practicable. (2) Reasonable care required for subsequent imports (A) Responsibility of importers of record The Secretary of the Treasury shall re- quire any importer of record entering, intro- ducing, or attempting to introduce into the commerce of the United States textile or ap- parel products indicated, on the documenta- tion, packaging, or labelling accompanying such products, to be from any country on the list published under paragraph (1) to show, to the satisfaction of the Secretary, that such importer, consignee, or purchaser has exercised reasonable care to ascertain the true country of origin of the textile or apparel products. (B) Failure to exercise reasonable care If the Customs Service determines that merchandise is not from the country claimed on the documentation accom- panying the merchandise, the failure to ex- ercise reasonable care described in subpara- graph (A) shall be considered when the Cus- toms Service determines whether the im- porter of record is in violation of section 1484(a) of this title. (3) ‘‘Country’’ defined For purposes of this subsection, the term ‘‘country’’ means a foreign country or terri- tory, including any overseas dependent terri- tory or possession of a foreign country. (June 17, 1930, ch. 497, title IV, § 592A, as added Pub. L. 103–465, title III, § 333, Dec. 8, 1994, 108 Stat. 4947; amended Pub. L. 104–295, § 20(c)(3), Oct. 11, 1996, 110 Stat. 3528.) Editorial Notes AMENDMENTS 1996—Subsec. (a)(3). Pub. L. 104–295 substituted ‘‘list under paragraph (1)’’ for ‘‘list under paragraph (2)’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective on the date on which the WTO Agreement enters into force with respect to the United States (Jan. 1, 1995), see section 335 of Pub. L. 103–465, set out as a note under section 3591 of this title. TRANSFER OF FUNCTIONS For transfer of functions, personnel, assets, and li- abilities of the United States Customs Service of the Department of the Treasury, including functions of the Secretary of the Treasury relating thereto, to the Sec- retary of Homeland Security, and for treatment of re- lated references, see sections 203(1), 551(d), 552(d), and 557 of Title 6, Domestic Security, and the Department of Homeland Security Reorganization Plan of Novem- ber 25, 2002, as modified, set out as a note under section 542 of Title 6. For establishment of U.S. Customs and Border Protection in the Department of Homeland Se- curity, treated as if included in Pub. L. 107–296 as of Nov. 25, 2002, see section 211 of Title 6, as amended gen- erally by Pub. L. 114–125, and section 802(b) of Pub. L. 114–125, set out as a note under section 211 of Title 6. § 1593. Repealed. June 25, 1948, ch. 645, § 21, 62 Stat. 862, eff. Sept. 1, 1948 Section, act June 17, 1930, ch. 497, title IV, § 593, 46 Stat. 751, related to smuggling and clandestine impor- tations. See section 545 of Title 18, Crimes and Criminal Procedure. § 1593a. Penalties for false drawback claims (a) Prohibition (1) General rule No person, by fraud, or negligence— (A) may seek, induce or affect, or attempt to seek, induce, or affect, the payment or credit to that person or others of any draw- back claim by means of— (i) any document, written or oral state- ment, or electronically transmitted data or information, or act which is material and false, or (ii) any omission which is material; or (B) may aid or abet any other person to violate subparagraph (A). (2) Exception Clerical errors or mistakes of fact are not violations of paragraph (1) unless they are part Page 286 TITLE 19—CUSTOMS DUTIES § 1593a of a pattern of negligent conduct. The mere nonintentional repetition by an electronic sys- tem of an initial clerical error does not con- stitute a pattern of negligent conduct. (b) Procedures (1) Prepenalty notice (A) In general If the Customs Service has reasonable cause to believe that there has been a viola- tion of subsection (a) and determines that further proceedings are warranted, the Cus- toms Service shall issue to the person con- cerned a written notice of intent to issue a claim for a monetary penalty. Such notice shall— (i) identify the drawback claim; (ii) set forth the details relating to the seeking, inducing, or affecting, or the at- tempted seeking, inducing, or affecting, or the aiding or procuring of, the drawback claim; (iii) specify all laws and regulations al- legedly violated; (iv) disclose all the material facts which establish the alleged violation; (v) state whether the alleged violation occurred as a result of fraud or negligence; (vi) state the estimated actual or poten- tial loss of revenue due to the drawback claim, and, taking into account all cir- cumstances, the amount of the proposed monetary penalty; and (vii) inform such person that he shall have a reasonable opportunity to make representations, both oral and written, as to why a claim for a monetary penalty should not be issued in the amount stated. (B) Exceptions The Customs Service may not issue a prepenalty notice if the amount of the pen- alty in the penalty claim issued under para- graph (2) is $1,000 or less. In such cases, the Customs Service may proceed directly with a penalty claim. (C) Prior approval No prepenalty notice in which the alleged violation occurred as a result of fraud shall be issued without the prior approval of Cus- toms Headquarters. (2) Penalty claim After considering representations, if any, made by the person concerned pursuant to the notice issued under paragraph (1), the Customs Service shall determine whether any violation of subsection (a), as alleged in the notice, has occurred. If the Customs Service determines that there was no violation, the Customs Serv- ice shall promptly issue a written statement of the determination to the person to whom the notice was sent. If the Customs Service de- termines that there was a violation, Customs shall issue a written penalty claim to such person. The written penalty claim shall speci- fy all changes in the information provided under clauses (i) through (vii) of paragraph (1)(A). Such person shall have a reasonable op- portunity under section 1618 of this title to make representations, both oral and written, seeking remission or mitigation of the mone- tary penalty. At the conclusion of any pro- ceeding under section 1618 of this title, the Customs Service shall 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. (c) Maximum penalties (1) Fraud A fraudulent violation of subsection (a) of this section is punishable by a civil penalty in an amount not to exceed 3 times the actual or potential loss of revenue. (2) Negligence (A) In general A negligent violation of subsection (a) is punishable by a civil penalty in an amount not to exceed 20 percent of the actual or po- tential loss of revenue for the 1st violation. (B) Repetitive violations If the Customs Service determines that a repeat negligent violation occurs relating to the same issue, the penalty amount for the 2d violation shall be in an amount not to ex- ceed 50 percent of the total actual or poten- tial loss of revenue. The penalty amount for each succeeding repetitive negligent viola- tion shall be in an amount not to exceed the actual or potential loss of revenue. If the same party commits a nonrepetitive viola- tion, that violation shall be subject to a pen- alty not to exceed 20 percent of the actual or potential loss of revenue. (3) Prior disclosure (A) In general Subject to subparagraph (B), if the person concerned discloses the circumstances of a violation of subsection (a) before, or without knowledge of the commencement of, a for- mal investigation of such violation, the monetary penalty assessed under this sub- section may not exceed— (i) if the violation resulted from fraud, an amount equal to the actual or potential revenue of which the United States is or may be deprived as a result of overpay- ment of the claim; or (ii) if the violation resulted from neg- ligence, an amount equal to the interest computed on the basis of the prevailing rate of interest applied under section 6621 of title 26 on the amount of actual revenue of which the United States is or may be de- prived during the period that— (I) begins on the date of the overpay- ment of the claim; and (II) ends on the date on which the per- son concerned tenders the amount of the overpayment. (B) Condition affecting penalty limitations The limitations in subparagraph (A) on the amount of the monetary penalty to be as- sessed under this subsection apply only if the person concerned tenders the amount of the overpayment made on the claim at the time of disclosure, or within 30 days (or such Page 287 TITLE 19—CUSTOMS DUTIES § 1593a longer period as the Customs Service may provide), after notice by the Customs Serv- ice of its calculation of the amount of the 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. (4) Commencement of investigation For purposes of this section, a formal inves- tigation of a violation is considered to be com- menced with regard to the disclosing party and the disclosed information on the date re- corded in writing by the Customs Service as the date on which facts and circumstances were discovered or information was received which caused the Customs Service to believe that a possibility of a violation of subsection (a) existed. (5) Exclusivity Penalty claims under this section shall be the exclusive civil remedy for any drawback related violation of subsection (a). (d) Deprivation of lawful revenue Notwithstanding section 1514 of this title, if the United States has been deprived of lawful duties and taxes resulting from a violation of subsection (a), the Customs Service shall require that such duties and taxes be restored whether or not a monetary penalty is assessed. (e) Drawback compliance program (1) In general After consultation with the drawback trade community, the Customs Service shall estab- lish a drawback compliance program in which claimants and other parties in interest may participate after being certified by the Cus- toms Service under paragraph (2). Participa- tion in the drawback compliance program is voluntary. (2) Certification A party may be certified as a participant in the drawback compliance program after meet- ing the general requirements established under the program or after negotiating an al- ternative program suited to the needs of the party and the Customs Service. Certification requirements shall take into account the size and nature of the party’s drawback program and the volume of claims. In order to be cer- tified, the participant must be able to dem- onstrate that it— (A) understands the legal requirements for filing claims, including the nature of the records required to be maintained and pro- duced and the time periods involved; (B) has in place procedures to explain the Customs Service requirements to those em- ployees that are involved in the preparation of claims, and the maintenance and produc- tion of required records; (C) has in place procedures regarding the preparation of claims and maintenance of re- quired records, and the production of such records to the Customs Service; (D) has designated a dependable individual or individuals to be responsible for compli- ance under the program and whose duties in- clude maintaining familiarity with the drawback requirements of the Customs Serv- ice; (E) has a record maintenance procedure approved by the Customs Service for origi- nal records, or, if approved by the Customs Service, for alternate records or record- keeping formats other than the original records; and (F) has procedures for notifying the Cus- toms Service of variances to, and violations of, the requirements of the drawback com- pliance program or any negotiated alter- native programs, and for taking corrective action when notified by the Customs Service for violations or problems regarding such program. (f) Alternatives to penalties (1) In general When a party that— (A) has been certified as a participant in the drawback compliance program under subsection (e); and (B) is generally in compliance with the ap- propriate procedures and requirements of the program; commits a violation of subsection (a), the Cus- toms Service, shall, in the absence of fraud or repeated violations, and in lieu of a monetary penalty, issue a written notice of the violation to the party. Repeated violations by a party may result in the issuance of penalties and re- moval of certification under the program until corrective action, satisfactory to the Customs Service, is taken. (2) Contents of notice A notice of violation issued under paragraph (1) shall— (A) state that the party has violated sub- section (a); (B) explain the nature of the violation; and (C) warn the party that future violations of subsection (a) may result in the imposi- tion of monetary penalties. (3) Response to notice Within a reasonable time after receiving written notice under paragraph (1), the party shall notify the Customs Service of the steps it has taken to prevent a recurrence of the violation. (g) Repetitive violations (1) A party who has been issued a written no- tice under subsection (f)(1) and subsequently commits a repeat negligent violation involving the same issue is subject to the following mone- tary penalties: (A) 2d violation An amount not to exceed 20 percent of the loss of revenue. (B) 3rd violation An amount not to exceed 50 percent of the loss of revenue. (C) 4th and subsequent violations An amount not to exceed 100 percent of the loss of revenue. Page 288 TITLE 19—CUSTOMS DUTIES § 1594 (2) If a party that has been certified as a par- ticipant in the drawback compliance program under subsection (e) commits an alleged viola- tion which was not repetitive, the party shall be issued a ‘‘warning letter’’, and, for any subse- quent violation, shall be subject to the same maximum penalty amounts stated in paragraph (1). (h) Regulation The Secretary shall promulgate regulations and guidelines to implement this section. Such regulations shall specify that for purposes of subsections (c) and (g), a repeat negligent viola- tion involving the same issue shall be treated as a repetitive violation for a maximum period of 3 years. (i) Court of International Trade proceedings Notwithstanding any other provision of law, in any proceeding commenced by the United States in the Court of International Trade for the re- covery of any monetary penalty claimed under this section— (1) all issues, including the amount of the penalty, shall be tried de novo; (2) if the monetary penalty is based on fraud, the United States shall have the burden of proof to establish the alleged violation by clear and convincing evidence; and (3) if the monetary penalty is based on neg- ligence, the United States shall have the bur- den of proof to establish the act or omission constituting the violation, and the alleged vio- lator shall have the burden of providing evi- dence that the act or omission did not occur as a result of negligence. (June 17, 1930, ch. 497, title IV, § 593A, as added Pub. L. 103–182, title VI, § 622(a), Dec. 8, 1993, 107 Stat. 2181; amended Pub. L. 108–429, title I, § 1563(f), Dec. 3, 2004, 118 Stat. 2587.) Editorial Notes AMENDMENTS 2004—Subsec. (h). Pub. L. 108–429 substituted ‘‘sub- sections (c) and (g)’’ for ‘‘subsection (g)’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108–429 effective Dec. 3, 2004, and applicable to drawback entries filed on or after Dec. 3, 2004, and to those filed before Dec. 3, 2004, if liq- uidation of the drawback entry is not final on Dec. 3, 2004, see section 1563(g)(1) of Pub. L. 108–429, set out as a note under section 1313 of this title. EFFECTIVE DATE Pub. L. 103–182, title VI, § 622(b), Dec. 8, 1993, 107 Stat. 2186, which provided that the enactment of this section would apply to drawback claims filed on and after the nationwide operational implementation of an auto- mated drawback selectivity program by the Customs Service, was repealed by Pub. L. 116–113, title VI, § 601, Jan. 29, 2020, 134 Stat. 78, effective on the date the USMCA entered into force (July 1, 2020). TRANSFER OF FUNCTIONS For transfer of functions, personnel, assets, and li- abilities of the United States Customs Service of the Department of the Treasury, including functions of the Secretary of the Treasury relating thereto, to the Sec- retary of Homeland Security, and for treatment of re- lated references, see sections 203(1), 551(d), 552(d), and 557 of Title 6, Domestic Security, and the Department of Homeland Security Reorganization Plan of Novem- ber 25, 2002, as modified, set out as a note under section 542 of Title 6. For establishment of U.S. Customs and Border Protection in the Department of Homeland Se- curity, treated as if included in Pub. L. 107–296 as of Nov. 25, 2002, see section 211 of Title 6, as amended gen- erally by Pub. L. 114–125, and section 802(b) of Pub. L. 114–125, set out as a note under section 211 of Title 6. § 1594. Seizure of conveyances (a) In general Whenever— (1) any vessel, vehicle, or aircraft; or (2) the owner or operator, or the master, pilot, conductor, driver, or other person in charge of a vessel, vehicle, or aircraft; is subject to a penalty for violation of the cus- toms laws, the conveyance involved shall be held for the payment of such penalty and may be seized and forfeited and sold in accordance with the customs laws. The proceeds of sale, if any, in excess of the assessed penalty and expenses of seizing, maintaining, and selling the property shall be held for the account of any interested party. (b) Exceptions (1) No conveyance used by any person as a common carrier in the transaction of business as a common carrier is subject to seizure and forfeiture under the customs laws for violations relating to merchandise contained— (A) on the person; (B) in baggage belonging to and accom- panying a passenger being lawfully trans- ported on such conveyance; or (C) in the cargo of the conveyance if the cargo is listed on the manifest and marks, numbers, weights and quantities of the outer packages or containers agree with the mani- fest; unless the owner or operator, or the master, pilot, conductor, driver or other person in charge participated in, or had knowledge of, the violation, or was grossly negligent in preventing or discovering the violation. (2) Except as provided in paragraph (1) or sub- section (c), no vessel, vehicle, or aircraft is sub- ject to forfeiture to the extent of an interest of an owner for a drug-related offense established by that owner to have been committed or omit- ted without the knowledge, consent, or willful blindness of the owner. (c) Prohibited merchandise on conveyance If any merchandise the importation of which is prohibited is found to be, or to have been— (1) on board a conveyance used as a common carrier in the transaction of business as a common carrier in one or more packages or containers— (A) that are not manifested (or not shown on bills of lading or airway bills); or (B) whose marks, numbers, weight or quantities disagree with the manifest (or with the bills of lading or airway bills); or (2) concealed in or on such a conveyance, but not in the cargo;