COAC Releases Final 21CCF Recommendations, Rejecting CBP Proposal on Customs Penalties

Reaching the end of its work with CBP on legislative drafts under the 21st Century Customs Framework, the Commercial Customs Operations Advisory Committee remains at loggerheads with CBP on five remaining enforcement proposals from the agency, including one on penalties that the COAC completely rejected, according to a white paper released June 5.

“COAC recommends that CBP withdraw all of its proposed revisions” to the customs penalty statute at 19 USC 1592, “particularly noting a lack of due process with CBP’s proposal to circumvent the administrative process for fraud cases,” the white paper said.

CBP is “seeking to greatly expand its authority to penalize those who are alleged to have facilitated the import of goods and knowingly or negligently deprived the government of revenue” by eliminating gross negligence as a level of culpability, and getting rid of pre-penalty notices for fraud cases and providing the agency with the ability to directly file suit in court for fraud cases, without an administrative process.

“The overwhelming consensus of trade was that 19 USC § 1592 does not require revision,” said the white paper, which was written by trade industry members of the COAC.

The white paper is the last in a series presented by the COAC over the past year as it has reviewed CBP’s 23 “legislative discussion drafts” and put forward its own recommendations for facilitation measures. Up to now, the COAC has expressed support for 17 of the enforcement measures and opposed one. Beyond rejecting the change to Section 1592 in its latest white paper, the COAC also said changes were needed to the four remaining proposals before it could support them.

For example, in a proposed change that would allow CBP to expand Enforce and Protect Act investigations to entities suspected of evasion that were not included in the original investigation notice, CBP addressed a COAC request to ensure any new entities receive the same level of due process. However, the agency proposal does not include a COAC-proposed provision to end investigations and interim measures should an importer demonstrate to CBP that it has modified its supply chains to be compliant.

Likewise, CBP revised proposed changes to the statute on bonding to eliminate unlimited bond liability for sureties and provide for more information sharing, but CBP still should formalize its administrative process for bond amount reviews and allow for judicial review of that process at CIT. The agency should also not create a new provision requiring that “overdue bonded debt bear interest until paid,” and if it does, it should eliminate similar provisions that the new law would make redundant, the white paper said.

CBP should also include a knowledge standard to a new provision under 19 USC 1595 that would allow the agency to assess penalties for unlawful imports regardless of whether a seizure has occurred and regardless of whether the underlying violation is related to the conveyance of the goods, the white paper said. CBP previously rejected the knowledge standard on the basis that it would “conflict with the statutory language for certain predicate violations, many of which are laws enforced by PGAs.”

In the white paper, the COAC also lamented CBP’s failure to adopt many of the advisory body’s recommendations for facilitation measures. While it said the COAC appreciates CBP’s adoption of its recommendation on advance data filing under 19 USC 1484, as well as another to formally codify the Border Interagency Executive Council, that “represents only five of nineteen Legislative Trade Facilitation Opportunities advanced by COAC throughout the process and summarized in the December 2022 report,” the white paper said.

“COAC and the broader trade community cannot endorse CBP’s modified 21CCF package in the absence of meaningful legislative trade facilitation measures,” the white paper said. “Legislative Trade Facilitation amendments are essential for the success of Customs & Trade Modernization in the 21st Century.”

“Efforts to modernize the Customs laws have now moved on. Members of the trade community have established their own coalitions to advance Legislative Trade Facilitation Opportunities they support and to advocate that their proposals are included in any Customs Modernization legislation that is advanced by Congress,” the white paper said. “COAC encourages members of the public to join and participate in such coalitions and/or pursue these issues directly with Congress.”