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New Bill Would Increase Customs Penalties, Allow Private Civil Lawsuits for Customs Violations

A new bill introduced in the Senate March 15 would dramatically increase penalties for fraud and gross negligence and create a new pathway for civil lawsuits against customs violators from companies, labor unions and trade associations that have been injured by customs fraud.

Co-sponsored by Sens. Sherrod Brown, D-Ohio, and Thom Tillis, R-N.C., the Fighting Trade Cheats Act would up the penalty for fraud under 19 USC 1592 from the domestic value of the goods to three times the domestic value. The penalty for gross negligence would rise to the lesser of three times the domestic value or 10 times the duties, taxes and fees deprived from the government.

Under the bill, fraudulent violations would also be penalized with a new five-year ban on importing, and grossly negligent violations would face a new two-year ban.

And a new provision would apply the same ban to “affiliated persons” of the entity that committed the fraudulent or grossly negligent violations. The bill adopts the definition for affiliated persons found in the antidumping and countervailing duty laws: family members, other officers or directors of the entity, partners, employers and employees, holders of voting stock and persons under common control.

New provisions on a private right of action for customs fraud or gross negligence violations would allow domestic manufacturers, producers, wholesalers, labor unions or trade associations injured by Section 1592 fraud or gross negligence violations to bring a civil suit for damages against the violator or anyone who aided or abetted them in U.S. District Court.

Plaintiffs could seek “compensatory damages” equal to the amount of the injury, plus an additional penalty of three times the amount of compensatory damages. They could also seek an injunction barring the violator from importing the merchandise at issue, as well as attorney’s fees and costs. DOJ would have the right to intervene in the lawsuits.

The bill also would prevent people and companies that commit fraudulent and grossly negligent customs violations from participating in CBP’s importer of record program, and provide for their importer of record numbers to be revoked if found guilty of fraud or gross negligence.

Affiliated persons could be subject to the same penalty based on information declared to CBP “suggesting a formal or ongoing relationship between that person” and the violator, "including similarities in imported merchandise (including article classification upon importation), common declared exporters and shippers, and historical import volumes.”

“By allowing private companies harmed by trade cheats to use their own resources to fight back, the bill would help address customs fraud and protect American workers and American jobs,” said a news release released March 15 by Brown's office. The news release added that the United Steelworkers labor union supports the bill.

“Ohioans know all too well how foreign competitors cheat the rules to steal American jobs,” Brown said in the release. “This is an ongoing battle -- one I’m going to continue to fight for Ohio workers and Ohio companies. Our bipartisan plan will update and strengthen trade remedy laws and allow American manufacturers to use their own resources to fight back against bad actors.”

“The Chinese Communist Party has a long history of violating trade agreements with the United States, costing North Carolina businesses and workers,” Tillis said. “I’m proud to co-introduce this bipartisan legislation to hold the CCP and other bad actors accountable and empower private American companies to take action and fight back against trade cheats.”