Authority to issue civil penalties to enforce the FTR has been delegated to CBP, which has published guidelines on how it will assess penalties for certain violations based on four mitigation schemes outlined as follows:

• Penalties for the Failure to File Electronic Export Information (EEI) in AES
• Penalties for the Late Filing of Electronic Export Information (EEI) in AES
• Penalties for Various Other FTR Violations
• Penalties for Carrier Filing Failures

Each penalty scheme follows a sequence of recorded offenses, typified by the following one for failure to file EEI:

• First Recorded Offense – $750 to $2,500
• Second Recorded Offense – $1000 to $3500
• Third Recorded Offense – $1500 to $5000
• Fourth and Subsequent Recorded Offense – $2000 to $10,000

In addition to a voluntary disclosure, a number of other mitigating factors can reduce the penalty. Additional mitigating factors may include: a first-time offense; documented remedial measures to prevent future violations; exceptional cooperation; isolated occurrence; providing substantial assistance during investiga tion; and demonstration of systematic export compliance efforts.

If one or more mitigating factors are present, it may result in a reduced penalty amount from the prescribed amount with a minimum penalty of $250 or $500, depending on the mitigation scheme. The reduced amounts are based on the type of violation and which of the four mitigation schemes covers that violation. In situations of a first-time offense, CBP may take an alternative action to the assessment of penalties, such as a warning letter. Note that multiple violations can occur in a single export transaction and penalties can be assessed on a per-shipment basis where violations are repeated. Therefore, the total amount of fines can be significant for companies that export regularly.

Alternatively, if one or more aggravating factors exist, then the mitigated penalty amount may increase beyond the prescribed amount but no higher than $10,000 per violation. The guidelines provide a list
of examples of aggravating factors. The examples include: several violations in the same export transac tion; circumstances suggesting an intentional violation; a high number of violations in the preceding three-year period; evidence of criminal conviction for related violation; pattern of disregard for U.S. export laws and regulations; and evidence of lack of systematic export compliance effort.

Penalties may be assessed against any culpable party with respect to the export transaction. This includes the U.S. Principal Party in Interest (USPPI), the Foreign Principal Party in Interest (FPPI), freight forward ers, authorized agents (which may include brokers and other parties to the export transaction), and carriers.

The notice states that CBP will commence the issuance of civil penalties for FTR violations on February 1. Although enforcement actions for violations of these regulations have previously been relatively rare, the publication of these guidelines suggests that CBP is planning a more robust civil penalty program. All companies involved in international business should ensure that they maintain full compliance with the FTR to avoid the increased penalties and the new cop on the beat.

For further information, Thomas M. deButts, Esq. or Ada L. Loo, Esq. at www.pillsburylaw.com

— Thomas M. deButts, Esq. Ada L. Loo, Esq.

© 2009 Pillsbury Winthrop Shaw Pittman LLP. All Rights Reserved.

The International Trade Commission has announced that the final version of the 2007 Harmonized Tariff System (HTS)l became effective on February 3, 2007. This will include the World Customs Organization (WCO) changes. Changes will affect about 10% of the eight-digit codes. Importers have until February 20, 2007 to begin using the new HTS codes.

The ITC has posted a draft version on its website, but has committed to posting a the final version by January 22, 2007. The US Customs and Border Protection (CBP) will allow a 17-day grace period for importers to transition to the new system. This grace period will end on February 20, 2007. These implementation plans are posted on their website.

Census solicited feedback with their February proposed rule, which they received in spades from over forty different exporters, carriers, trade associations, and even other federal government agencies. For those seeking to understand every nuance, impact, and possible criticism of the Census proposal, the comments are an excellent resource. (Although, unfortunately, when Census scanned the comments into Adobe Acrobat files they did not turn on the optical character recognition feature which would have made it possible to easily locate references to particular words or phrases.) I particularly recommend the response offered by the Regulations and Procedures Technical Advisory Committee (pdf, RPTAC), which identifies numerous inconsistencies and ambiguities in the Census proposal, and the comments from US Customs and Border Protection (pdf, CBP) which argues that even the very limited exemptions from filing EEI provide an unacceptable loophole for bad actors to exploit. CBP wants all exemptions eliminated, including the sub-$2,500 exclusion.

Census is expected to issue a final rule as early as this month, which will most likely go into effect sometime around the first day of the new year.