CBP Issues Mandatory AES, FTR Penalty Mitigation Guidelines

(According to the guidelines, the Census Bureau published a final rule on June 2, 2008 amending the provisions of the FTR to require mandatory filing of export information (i.e., electronic export information (EEI)) through the Automated Export System (AES) or through AESDirect¹ for all shipments where the export information is required by the FTR. Pursuant to the FTR, civil penalties not to exceed $10,000 per violation may be imposed for the failure to file or the delayed filing of export information in AES, the filing of false or misleading information in AES, and other violations of the FTR. The authority to issue civil penalties to enforce the FTR was delegated to CBP. )

Census' final rule took effect July 2, 2008. The final rule stated that the implementation of the provisions amending the FTR would be delayed until September 30, 2008, to allow all affected parties sufficient time in which to come into compliance with the final rule. In addition, in order to provide the public with advance notice of the penalty mitigation guidelines, CBP will not commence the issuance of penalties for FTR violations until thirty days after the date of publication of the guidelines (i.e., until February 1, 2009).)

Penalties May be Assessed Against Any Culpable Party in Export Transaction

CBP states that penalties may be assessed against any culpable party with respect to the export transaction. These parties include the U.S. Principal Party in Interest (USPPI), the Foreign Principal Party in Interest (FPPI), freight forwarders, authorized agents (which may include brokers and other parties to the export transaction), and carriers. Penalties may be assessed against more than one culpable party.

CBP notes that its issuance of a penalty for a violation of the FTR does not preclude CBP from issuing penalties for other violations that may exist with respect to the export transaction.

Informed Compliance Possible for First Offenses

For first violations of the FTR, CBP may take alternative action to the assessment of penalties, including, but not limited to, educating and informing the parties involved in the export transaction of the applicable U.S. export laws and regulations, or issuing a warning letter to the party. However, CBP may issue penalties when the party has previously received a warning letter or the party has been educated by an enforcement agency through an outreach program or by other means.

Penalties for Failure to File EEI in AES

A failure to file occurs if the government discovers that there is no record in the AES for an export transaction by the date that the record is required and that discovery is made and communicated to the USPPI, authorized agent, or other party before the violation is corrected. However, any AES record filed later than 10 days after the due date will be considered a failure to file, regardless of whether the violation was or was not discovered by the government.

These penalties will be assessed against USPPIs, authorized agents or other parties to the export transaction, or the FPPI, its authorized agent, or other appropriate party to the transaction if a routed export transaction as defined in 15 CFR 30.1(c). The Notice of Penalty will be issued at the maximum amount of $10,000.

(See 15 CFR 30.4 for the time periods for filing of the EEI.)

Penalty Mitigation

First Recorded Offense - $750 to $2,500

Second Recorded Offense - $1,000 to $3,500

Third Recorded Offense - $1,500 to $5,000

Fourth and Subsequent Recorded Offenses - $2,000 to $10,000

CBP notes that the existence of one or more mitigating factors to the violation may result in mitigation at the low end of the mitigation range. If one or more aggravating factors exist, the penalty may be mitigated at the high end of the mitigation range. Mitigating and aggravating factors may be used to offset each other.

Penalties for Late Filing of EEI in AES

Late filing occurs when the AES record is filed beyond the due date for such filing. However, any AES record filed later than 10 days after the due date will be considered a non-filing of the AES record and will be subject to the penalties listed for failure to file EEI in AES (see above). Further, any AES record filed after the government discovers the violation and communicates the violation to the USPPI or authorized agent will be considered a failure to file in the AES, also subject to the penalty scheme for the failure to file EEI in AES (see above).

These penalties will be issued to USPPIs, authorized agents, or other person as appropriate; or the FPPI, its authorized agent or other person as appropriate if a routed transaction. The Notice of Penalty will be issued in an amount that reflects $1,100 per each day late, up to a maximum of $10,000.

Penalty Mitigation

First Recorded Offense - $250 per day to $1,500

Second Recorded Offense - $500 per day to $2,500

Third Recorded Offense - $750 per day to $3,500

Fourth and Subsequent Recorded Offenses - $1,100 per day up to a maximum of $10,000

CBP notes that if one or more mitigating factors as enumerated below exist, the mitigated penalty amount may be reduced from the prescribed amount, but no lower than $250. If one or more aggravating factors as enumerated below exist, the mitigated penalty amount may be increased beyond the prescribed amount, but no higher than $10,000.

Penalties for Other FTR Violations

Penalties for other FTR violations include the following (not an exhaustive list):

Incorrect value for shipment.

Other incorrect information in the AES record, such as an incorrect USPPI, consignee, end-user, commodity description, or port of export.

Failure to cite license code or license number.

Failure to obtain Power of Attorney for AES transmission.

Failure to identify transaction as a routed transaction.

Failure to correct information in AES as the changes become known to the filer.

Failure to provide carrier with appropriate proof of filing citation or exemption legend by the time periods set forth in the FTR.

Failure to retain all records relating to the export shipment for a 5-year period from the date of export.

These penalties may be issued against USPPIs, authorized agents, freight forwarders, and any other person as appropriate, or the FPPI or its authorized agent if a routed transaction, or other persons as appropriate. The Notice of Penalty will be issued at the maximum amount of $10,000.

Penalty Mitigation

First Recorded Offense - $500 to $2,500

Second Recorded Offense - $750 to $3,500

Third Recorded Offense - $1,000 to $5,000

Fourth and Subsequent Recorded Offenses - $2,000 to $10,000

CBP notes that mitigating factors as enumerated below may result in a mitigated penalty at the low end of the mitigation range or a penalty below the minimum penalty amount, but no lower than $500. Aggravating factors as enumerated below may result in a mitigated amount at the high end of the mitigation range. Mitigating and aggravating factors may serve to offset each other.

Carrier, Etc. Penalties

CBP states that penalties may be issued against exporting carriers or other persons as appropriate for the following violations:

Failure of carriers to adhere to requirements set forth in 15 CFR 30.45.

Failure to provide the USPPI or authorized agent with changes to the date of export or the port of export.

Failure to report the proof of filing citation or exemption legend on the required manifest.

When filing an incomplete manifest under bond, the failure to file the manifest information within the prescribed time period after export (''late filing'').

When filing incomplete under bond, the failure to provide the list of proof of filing citations or exemption legends prior to departure from the port of exit.

For carriers exempted from filing a manifest, the failure to file, upon request, the proof of filing citations or exemption legends.

The Notice of Penalty will be issued at the maximum amount of $10,000, except for late filing of the manifest information. For late filing of the manifest information, the penalty will be issued at $1,100 per each day late, up to a maximum of $10,000 per violation, in accord with 15 CFR 30.47(b).

Penalty Mitigation

First Recorded Offense - $500 to $2,500

Second Recorded Offense - $750 to $3,500

Third Recorded Offense - $1,000 to $5,000

Fourth and Subsequent Recorded Offenses - $2,000 to $10,000

CBP notes that mitigating factors as enumerated below may result in a mitigated penalty amount at the low end of the mitigation range or lower, but not less than $500. Aggravating factors as enumerated below may result in a mitigated amount at the high end of the mitigation range. Mitigating and aggravating factors may be used to offset each other.

Mitigating and Aggravating Factors

Mitigating factors (not an exhaustive list):

First-time USPPI or authorized agent, FPPI, carrier, etc.

Voluntary self-disclosure of the violation, in accordance with 15 CFR 30.74 (Extraordinary Mitigating Factor).

Clear documentary evidence of remedial measures undertaken to prevent future violations.

Exceptional cooperation with CBP, Census or the Bureau of Industry and Security (BIS).

The violation was an isolated occurrence.

The party has provided substantial assistance in the investigation of another person.

The party demonstrates that it has a systematic export compliance effort.

Aggravating factors (not an exhaustive list):

Several violations in the same export transaction (e.g., wrong port code; incorrect value; missing required data; violations of the regulations of other agencies, such as the Department of State or the Drug Enforcement Administration, in addition to the Census violation).

Circumstances suggest the intentional nature of the violation (e.g., wrong value where invoices or other documents covering goods show correct value; claiming post-departure to avoid pre-departure filing when filer is not an approved post-departure filer).

High number of violations in preceding 3-year period².

Evidence of criminal conviction for a related violation, such as a BIS violation.

The party exhibits a pattern of disregard for its responsibilities under U.S. export laws and regulations.

The party exports as a regular part of its business, but lacked a systematic export compliance effort.

¹AES is the electronic method for filing SED information directly with CBP and Census. AESDirect is the Census' free Internet-based system for filing SED information with AES.

²CBP notes that for purposes of the penalty guidelines above, only violations occurring or resolved within the 3-year period preceding the subject violation will be considered as prior violations.

(See ITT's Online Archives or 06/02/08, 06/05/08, and 06/19/08 news, 08060200, 08060515, and 08061915 for Parts I - III of BP's summaries of Census' final rule. See ITT's Online Archives or 06/18/08 news, 08061815, for BP summary on different reporting timeframes for Census vs. CBP AES regulations. See ITT's Online Archives or 06/03/08 news, 08060305, for BP summary of Census' notice to trade on mandatory AES.

See ITT's Online Archives or 10/03/08 news, 08100305, for BP summary of the extension of the informed compliance period until penalty mitigation guidelines issued.)

Mitigation guidelines (CBP Bulletin, Vol. 43, No. 2, dated January 2, 2009) available at http://www.cbp.gov/linkhandler/cgov/trade/legal/bulletins_decisions/bulletins_2009/vol43_01022009_no2/43genno2.ctt/43genno2.pdf.