Guidelines for the Cancellation of Claims for Liquidated Damages and Mitigation of Penalties for Failure To Provide General Order Notifications or Failure To Take Possession of General Order Merchandise; Guidelines for Mitigation of Penalties for Delivery of Cargo Without Customs Authorization; Guidelines for Cancellation of Claims for Liquidated Damages for Failing To Deliver In-Bond Merchandise; Guidelines for Cancellation of Claims for Removal of Merchandise From Centralized Examination Stations, Container Freight Stations or Places of Examination

DEPARTMENT OF THE TREASURY

Customs Service

[T.D. 99-29]

Guidelines for the Cancellation of Claims for Liquidated Damages

and Mitigation of Penalties for Failure To Provide General Order

Notifications or Failure To Take Possession of General Order

Merchandise; Guidelines for Mitigation of Penalties for Delivery of

Cargo Without Customs Authorization; Guidelines for Cancellation of

Claims for Liquidated Damages for Failing To Deliver In-Bond

Merchandise; Guidelines for Cancellation of Claims for Removal of

Merchandise From Centralized Examination Stations, Container Freight

Stations or Places of Examination

AGENCY: Customs Service, Department of the Treasury.

ACTION: General notice.

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SUMMARY: Under the Omnibus Trade and Competitiveness Act of 1988, the

Secretary of the Treasury is required to publish guidelines for the

cancellation of bond charges. In Treasury Decision 98-74 (T.D. 98-74),

the Secretary published amendments to the Customs Regulations regarding

the obligation of carriers and certain related parties to provide

notice to Customs and to a bonded warehouse of the presence of

merchandise or baggage that has remained at the place of arrival or

unlading beyond the time period provided by regulation without entry

having been completed. The notice to the bonded warehouse proprietor

initiates his obligation to arrange for transportation and storage of

the unentered merchandise or baggage at the risk and expense of the

consignee. The new regulations provide for the assessment of penalties

or liquidated damages for failure to provide the required notice to

Customs or to a bonded warehouse proprietor of the presence of

unentered merchandise or baggage and for liquidated damages against the

warehouse operator who fails to take required possession of the

merchandise or baggage for which notification has been received.

This document publishes guidelines for the mitigation of penalties

incurred by carriers for failing to provide appropriate notifications.

It also publishes bond cancellation standards to be applied to claims

for liquidated damages incurred by bonded carriers, custodians or

warehouse operators who fail to comply with obligations to provide

notification of the presence of unentered merchandise or to collect

that merchandise about which notification has been received.

In addition, this document publishes new mitigation guidelines for

penalties assessed against carriers and other parties for the delivery

of cargo from the place of unlading without Customs authorization or

delivery of cargo without examination. Inasmuch as these penalties are

very similar to claims for liquidated damages assessed against in-bond

carriers for nondelivery, shortage or delivery directly to the

consignee, the bond cancellation standards for 19 CFR 18.8 in-bond

violations which were published in T.D. 94-38 are revised by this

document to be consistent with guidelines for the mitigation of the

penalties assessed for delivery of cargo without Customs authorization.

Additionally, this document amends T.D. 94-38 to revise bond

cancellation standards for claims for liquidated damages arising from

breach of the Basic Custodial Bond when cargo is removed from a

Centralized Examination Station (CES) without authorization and

standards for claims arising from breach of the Basic Importation Bond

when merchandise is

[[Page 14791]]

not delivered to or is not held at the place of examination. Finally,

the document provides for bond cancellation standards for claims for

liquidated damages arising from the removal of merchandise from a

Container Freight Station (CFS) without authorization.

EFFECTIVE DATE: These guidelines will take effect upon March 26, 1999

and shall be applicable to all cases which are currently open at the

petition or supplemental petition stage. No second supplemental

petitions will be accepted solely to gain the benefit of a less harsh

guideline.

FOR FURTHER INFORMATION CONTACT: Jeremy Baskin, Penalties Branch,

Office of Regulations and Rulings (202) 927-2344.

SUPPLEMENTARY INFORMATION:

Background

Section 1904 of the Omnibus Trade and Competitiveness Act of 1988

(Pub. L. 100-418) amended section 623 of the Tariff Act of 1930 (19

U.S.C. 1623) by adding the following sentence at the end of section

623(c) of the Tariff Act of 1930 (19 U.S.C. 1623(c)):

``In order to assure uniform, reasonable and equitable

decisions, the Secretary of the Treasury shall publish guidelines

establishing standards for setting the terms and conditions for

cancellation of bonds or charges thereunder.''

In T.D. 94-38, dated April 11, 1994, the text of current guidelines

for cancellation of claims for liquidated damages was published.

In a document published as Treasury Decision 98-74 (T.D. 98-74) in

the Federal Register (63 FR 51283) on September 25, 1998, Customs

promulgated amendments to its regulations which implemented section 656

of the North American Free Trade Agreement Implementation Act, Pub. L.

103-182, 107 Stat. 2057, providing for penalties against the owner or

master of any vessel or vehicle or the agent thereof for failure to

notify Customs of any merchandise or baggage unladen for which entry is

not made within the time period prescribed by law or regulation. The

new regulations extend such liability to owners or pilots of aircraft

or the agent thereof.

The new regulations require the owner, master, operator or pilot,

or the agent thereof, of the arriving carrier, or any subsequent in-

bond carrier or party who accepts custody under a Customs-authorized

permit to transfer, to provide notice of the unentered merchandise or

baggage to a bonded warehouse. The notice to the bonded warehouse

proprietor initiates his obligation to arrange for transportation and

storage of the unentered merchandise or baggage at the risk and expense

of the consignee. The new regulations provide for penalties under 19

U.S.C. 1448 or liquidated damages under the International Carrier Bond

(19 CFR 113.64) against the owner, master, operator or pilot of any

conveyance, or agent thereof, for failure to provide the required

notice to Customs or to a bonded warehouse proprietor. The new

regulations provide for the assessment of liquidated damages under the

Basic Custodial Bond (19 CFR 113.63) against any subsequent in-bond

carrier or other party who accepts custody of the merchandise or

baggage under a Customs-authorized permit to transfer who fails to

notify Customs and a bonded warehouse of the presence of such unentered

merchandise or baggage. Finally, the new regulations provide for

liquidated damages under the Basic Custodial Bond (19 CFR 113.63)

against the warehouse operator who fails to take required possession of

the merchandise or baggage after receipt of notification.

This document publishes guidelines for the mitigation of those

penalties incurred by carriers for failing to provide appropriate

notifications. It also publishes bond cancellation standards to be

applied to claims for liquidated damages incurred by arriving carriers,

bonded carriers, custodians or warehouse operators who fail to comply

with obligations to provide notification of the presence of unentered

merchandise or to collect that merchandise about which notification has

been received.

In addition to new guidelines required for these G.O. notification

and merchandise collection violations, this document publishes new

mitigation guidelines for penalties established against carriers and

other parties for violation of 19 U.S.C. 1595a(b) for facilitating an

importation contrary to law, specifically 19 U.S.C. 1448 for delivery

of merchandise from the place of unlading without Customs

authorization, and 19 U.S.C. 1499 for delivery of cargo without a

requested Customs examination. Customs has found that the current

guidelines for mitigation of these penalties do not provide a

sufficient deterrent for parties who violate these provisions of law.

Additionally, these penalties are very similar to claims for

liquidated damages assessed against in-bond carriers for failing to

deliver, short delivery or delivery directly to the consignee of in-

bond merchandise. In Customs view, both types of violations should be

mitigated or canceled under the same standards. Accordingly, the bond

cancellation standards for 19 CFR 18.8 in-bond violations which were

published in T.D. 94-38, Section III., are revised and replaced by this

document to be consistent with guidelines for the mitigation of the

penalties assessed for delivery of cargo without Customs authorization.

This document also updates bond cancellation standards for claims

for liquidated damages arising from breach of the Basic Custodial Bond

when cargo is removed from a Centralized Examination Station (CES)

without authorization. The bond cancellation standards for violations

arising for removal of merchandise from a CES without authorization

which were published in T.D. 94-38, Section XI., are revised and

replaced by this document to be consistent with guidelines for the

mitigation of the penalties assessed for delivery of cargo without

Customs authorization.

The bond cancellation standards articulated in T.D. 94-38 did not

include standards for removal of merchandise from a Container Freight

Station (CFS). This document publishes standards for the removal of

merchandise from a CFS.

Finally, this document updates bond cancellation standards for

claims for liquidated damages arising from breach of the Basic

Importation Bond when merchandise is not delivered to or is not held at

the place of examination (19 CFR 113.62(f)). The cancellation standards

which were published in T.D. 94-38, Section X., are revised and

replaced by this document to be consistent with guidelines for the

mitigation of the penalties assessed for delivery of cargo without

Customs authorization.

The text of the guidelines is set forth below.

Dated: March 23, 1999.

Raymond W. Kelly,

Commissioner of Customs.

[[Page 14792]]

Guidelines for Cancellation of Claims for Liquidated Damages and

Mitigation of Penalties for Failure To Provide General Order

Notifications or Failure to Take Possession of General Order

Merchandise; Guidelines for Mitigation of Penalties for Delivery of

Cargo Without Customs Authorization; Guidelines for Cancellation of

Claims for Liquidated Damages for Failing To Deliver In-Bond

Merchandise; Guidelines for Cancellation of Claims for Removal of

Merchandise from Centralized Examination Stations, Contained

Freight Stations or Places of Examination

I. Penalties Against Carrier for Failure To Notify Customs of

Presence of Unentered Merchandise

A. Assessment

Any merchandise or baggage regularly landed but not covered by a

permit for its release will be allowed to remain at the place of

unlading until the fifteenth calendar day after landing. No later than

20 calendar days after landing, the master, pilot, operator or owner of

the conveyance or the agent thereof must notify Customs of any such

merchandise or baggage for which entry has not been made. Such

notification must be provided in writing or by any appropriate Customs-

authorized electronic data interchange system. Failure to provide such

notification may result in assessment of a monetary penalty of up to

$1,000 per bill of lading against the master, pilot, operator or owner

of the conveyance or the agent thereof for violation of the provisions

of title 19, United States Code, section 1448 (19 U.S.C. 1448). If the

value of the merchandise on the bill is less than $1,000, the penalty

will be equal to the value of such merchandise.

B. Mitigation

1. If notification of the presence of unentered merchandise is

provided outside the time period allowed by law or regulation, the

penalty may be mitigated to an amount between 10 and 50 percent of the

assessment, but not less than $100 or the value of the merchandise

(whichever is lower), depending on the presence of aggravating or

mitigating circumstances.

2. If notification is not received, or if Customs discovers the

presence of unentered merchandise after the time period for

notification has expired, no mitigation will be afforded.

II. Claims for Liquidated Damages Assessed Against a Bonded Party

for Failure To Notify Customs of the Presence of Unentered

Merchandise

A. Assessment

Any merchandise or baggage that is taken into custody from an

arriving carrier by any party under a Customs-authorized permit to

transfer or in-bond entry may remain in the custody of that party for

15 calendar days after receipt under such permit to transfer or 15

calendar days after arrival at the port of destination. No later than

20 calendar days after receipt under the permit to transfer or 20

calendar days after arrival under bond at the port of destination, the

party must notify Customs of any such merchandise or baggage for which

entry has not been made. Such notification must be provided in writing

or by any appropriate Customs-authorized electronic data interchange

system. If the party fails to notify Customs of the unentered

merchandise or baggage in the allotted time, he may be liable for the

payment of liquidated damages equal to $1,000 per bill of lading for

which notification is not given for violation of the provisions of 19

CFR 113.63(c)(4) and: 19 CFR 4.37(b), if original arrival is by vessel;

19 CFR 122.50(b), if original arrival is by air; or 19 CFR 123.10(b),

if original arrival is by land carrier.

B. Mitigation

1. If notification of the presence of unentered merchandise is

provided outside the time period allowed by law or regulation, the

claim for liquidated damages may be canceled upon payment of an amount

between 10 and 50 percent of the assessment, depending on the presence

of aggravating or mitigating circumstances.

2. If notification is not received, or if Customs discovers the

presence of unentered merchandise after the time period for

notification has expired, no mitigation will be afforded.

III. Claims for Liquidated Damages Incurred by the Carrier or Other

Party for Failure To Notify the Bonded Warehouse of the Presence of

Unentered Merchandise

A. Assessment

In addition to the notification to Customs, the carrier (or any

other party to whom custody of the unentered merchandise has been

transferred by a Customs authorized permit to transfer or in-bond

entry) must provide notification of the presence of such unreleased and

unentered merchandise or baggage to a bonded warehouse certified by the

port director as qualified to receive general order merchandise. Such

notification must be provided in writing or by any appropriate Customs-

authorized electronic data interchange system and must be provided

within the 20-calendar day period. If the party to whom custody of the

unentered merchandise or baggage has been transferred by a Customs-

authorized permit to transfer or in-bond entry fails to notify a

Customs-approved bonded warehouse of such merchandise or baggage within

the applicable 20-calendar-day period, he may be liable for the payment

of liquidated damages of $1,000 per bill of lading for which

notification is not given. Liability of the arriving carrier would be

under the provisions of 19 CFR 113.64(b) and: 19 CFR 4.37(c) if the

original arrival was by vessel; 19 CFR 122.50(c) if the original

arrival was by air; or 19 CFR 123.10(c) if the original arrival was by

land carrier. Liability of the party to whom custody has been

transferred by a Customs-authorized permit to transfer or in-bond entry

would be under the provisions of 19 CFR 113.63(b), 19 CFR 113.63(c)

and: 19 CFR 4.37(c) if the original arrival was by vessel; 19 CFR

122.50(c) if the original arrival was by air; or 19 CFR 123.10(c) if

the original arrival was by land carrier.

B. Mitigation

1. If notification of the presence of unentered merchandise is

provided to the bonded warehouse outside the time period allowed by law

or regulation, the claim for liquidated damages may be canceled upon

payment of an amount between 10 and 50 percent of the assessment,

depending on the presence of aggravating or mitigating circumstances.

2. If notification is not received, or if Customs discovers the

presence of unentered merchandise after the time period for

notification has expired, no mitigation will be afforded.

IV. Claims for Liquidated Damages Against a Bonded Warehouse for

Failure To Collect Unentered Merchandise for Which Notification Has

Been Received

A. Assessment

If the bonded warehouse operator fails to take possession of

unentered and unreleased merchandise or baggage within five calendar

days after receipt of notification of the presence of such merchandise

or baggage under this section, he may be liable for the payment of

liquidated damages of $1,000 per bill of lading remaining uncollected.

Liability would be under

[[Page 14793]]

19 CFR 113.63(a)(1) and: 19 CFR 4.37(d) if the original arrival was by

vessel; 19 CFR 122.50(d) if the original arrival was by air; or 19 CFR

123.10(d) if the original arrival was by land carrier.

B. Mitigation

1. If the bonded warehouse operator takes possession of unentered

merchandise outside the time period allowed by law or regulation, the

claim for liquidated damages may be canceled upon payment of an amount

between 10 and 50 percent of the assessment, depending on the presence

of aggravating or mitigating circumstances.

2. If the bonded warehouse operator never takes possession of

merchandise for which he has received appropriate notification, no

mitigation will be afforded.

V. Delivery of Cargo Without Customs Authorization

A. Assessment

Penalties for removal of merchandise from the place of unlading

without authorization will be assessed under the provisions of 19

U.S.C. 1595a(b) for violation of the provisions of 19 U.S.C. 1448 or

penalties for delivery of merchandise without Customs examination will

be assessed under the provisions of 19 U.S.C. 1595a(b) for violation of

19 U.S.C. 1499.

1. These penalties may be assessed against any party who is deemed

to be responsible for the unauthorized removal or delivery.

2. Penalties are assessed in an amount equal to the domestic value

of the merchandise removed or delivered without authorization.

3. Penalties of these types assessed against holders of

international carrier bonds are secured by the terms and conditions of

the bond up to the limit of the bond. Penalties may be collected in

full from the violator. Collection from a surety is limited to the

amount of the bond.

4. Double penalties should not be assessed, i.e., while the same

misdelivery may be without Customs authorization and may involve

avoidance of examination, only one assessment equal to the value of the

merchandise should be made. If multiple assessments from the same

transaction occur, mitigation should reflect the policy that only a

single penalty should have been assessed.

B. Penalty Mitigation

1. If the violator can show that the violation occurred solely as a

result of Customs error, the penalty should be canceled.

2. If the violator can show that the merchandise was never received

or landed, the penalty should be mitigated without payment.

3. If the merchandise which was removed without authorization or

delivered without examination could have been the subject of an

informal entry, the penalty may be mitigated upon payment of an amount

equal to the duties, fees, taxes and charges that would have been due

on the merchandise had entry been properly made plus an amount between

$100 and $500, depending on the presence of aggravating or mitigating

factors.

4. If the violator comes forward and discloses the violation to

Customs prior to Customs discovery of the violation, the penalty may be

mitigated upon payment of an amount equal to the duties, fees, taxes

and charges that would have been due on the merchandise had entry been

properly made plus $50.

5. If the merchandise which was removed without authorization was

not designated for Customs examination and the violator can show that

the merchandise was entered and duties, fees, taxes and charges paid

thereon, the penalty may be mitigated upon payment of an amount between

$250 and $2,000 depending on the presence of aggravating or mitigating

factors.

6. If the merchandise which was removed without authorization was

not designated for Customs examination and the violator cannot show

that the merchandise was entered and duties, fees, taxes and charges

paid thereon, the penalty may be mitigated upon payment of an amount

equal to the duties, fees, taxes and charges that would have been due

on the merchandise had entry been properly made plus an amount between

$300 and $2,500 depending on the presence of aggravating or mitigating

factors.

7. If the merchandise which was removed without authorization or

delivered without examination was designated for Customs examination

and the violator can show that the merchandise was entered and duties,

fees, taxes and charges paid thereon, the penalty may be mitigated upon

payment of an amount between $2,500 and $20,000 depending on the

presence of aggravating or mitigating factors. In no case shall the

mitigated amount be lower than any costs chargeable to the importer

which are incident to such examination. Conversely, the mitigated

amount can never exceed the value of the shipment.

8. If the merchandise which was removed without authorization or

delivered without examination was designated for Customs examination

and the violator cannot show that the merchandise was entered and

duties, fees, taxes and charges paid thereon, the penalty may be

mitigated upon payment of an amount equal to the duties, fees, taxes

and charges that would have been due on the merchandise had entry been

properly made plus an amount between $3,000 and $25,000 depending on

the presence of aggravating or mitigating factors. In no case shall the

mitigated amount be lower than any costs chargeable to the importer

which are incident to such Customs examination. Conversely, the

mitigated amount can never exceed the value of the shipment.

9. If the violator has a history of removal of merchandise from the

place of unlading without Customs authorization or delivery without

Customs examination or particularly aggravating circumstances exist

with regard to a violation, the Fines, Penalties and Forfeitures

Officer may mitigate the penalty upon payment of a higher amount than

that authorized by these guidelines; however, the advice of

Headquarters, Office of Regulations and Rulings, Penalties Branch will

be sought to determine appropriate mitigation.

10. Theft of merchandise from Customs custody. Merchandise which is

stolen from the carrier prior to having been released by Customs shall

be treated as having been delivered without Customs authorization. The

carrier will be liable for penalties and mitigation will occur in

accordance with these guidelines. It should also be noted that

penalties under 19 USC 1595a(b) for violation of 19 USC 1448 or 1499

(as well as criminal sanctions under 18 U.S.C. 549) may also be

assessed against the individuals who steal the merchandise from Customs

custody. In those instances, no mitigation will be afforded to the

person or persons primarily responsible for the illegal act. Aiders and

abettors may receive mitigation to 25-50 percent of the penalty,

depending upon the degree of complicity.

C. Mitigating and Aggravating Factors

1. Mitigating Factors

a. Violator inexperienced in the handling of cargo.

b. Violator has a general good performance and low error rate in

the handling of cargo.

c. Violator demonstrates remedial action has been taken to prevent

future violations.

2. Aggravating Factors

a. Violator refuses to cooperate with Customs or acts to impede

Customs activity with regard to the case.

[[Page 14794]]

b. Violator has a rising error rate which is indicative of

deteriorating performance in the handling of cargo.

D. Restricted or Prohibited Merchandise

If Customs has reason to believe that the merchandise which was

removed from the place of unlading without authorization or which was

delivered without examination may have been restricted or prohibited

from entry, that will be considered an extraordinary aggravating factor

and will result in either no mitigation or mitigation at the high end

of the mitigation range.

VI. Guidelines for Cancellation of Claims for Shortage, Irregular

Delivery, Non-Delivery or Delivery Directly to the Consignee of In-

Bond Merchandise (19 CFR 18.8)

A. Assessment

All claims for liquidated damages assessed for breach of the

provisions of 19 CFR 18.8 for shortage, irregular delivery, nondelivery

or delivery directly to the consignee of in-bond merchandise will be

assessed for the value of the merchandise or three times the value of

the merchandise if the merchandise is restricted or is alcoholic

beverages.

B. Documents Filed Late or Merchandise Delivered Late

1. Modified CF 5955A. Notices of liquidated damages incurred for

documents filed late or merchandise delivered late this violation may

be issued on a modified CF-5955A. If a modified form is issued, it

shall specify two options from which the petitioner may choose to

resolve the demand.

a. Option 1. The bond principal or surety may pay a specified sum

within 60 days and the case will be closed. By electing this option in

lieu of petitioning, the principal or surety waives the right to file a

petition. He may, however, file a supplemental petition, if he does so

in accordance with the Customs Regulations and has some new fact or

information which merits consideration in accordance with these

guidelines.

b. Option 2. The bond principal or surety may file a petition for

relief. By filing a petition for relief, the petitioner will no longer

be afforded the Option 1 mitigation amount. The Fines, Penalties and

Forfeitures Officer will grant full relief when the petitioner

demonstrates that the violation did not occur or that the violation

occurred solely as a result of Customs error. If the petitioner fails

to demonstrate that the violation did not occur or that the violation

occurred solely as a result of Customs error, the Fines, Penalties and

Forfeitures Officer may cancel the claim upon payment of an amount no

less than $100 greater than the Option 1 amount.

2. If merchandise is delivered untimely to the port of destination

or exportation (not within 15 days if transported by air, 30 days if

transported by vehicle, or 60 days if transported by vessel) but is

otherwise intact, the Fines, Penalties and Forfeitures Officer may

cancel the claim upon payment of an amount between $100 or $500,

depending on the presence of aggravating or mitigating factors.

3. If merchandise is delivered timely but the documentation is not

filed with Customs within 2 days of arrival in the port of delivery,

the Fines, Penalties and Forfeitures Officer may cancel the claim upon

payment of an amount between $100 and $500, depending on the presence

of aggravating or mitigating factors.

4. If the bonded carrier consistently fails to deliver paperwork

timely and Customs business is impeded by these repeated failures, the

Fines, Penalties and Forfeitures Officer may cancel any claim upon

payment of a higher amount than the guidelines generally permit. The

advice of Headquarters, Office of Regulations and Rulings, Penalties

Branch, may be sought to determine appropriate mitigation.

C. Failure To Deliver, Shortage or Delivery Directly to the Consignee

1. If the in-bond carrier can show that the violation occurred

solely as a result of Customs error, the claim for liquidated damages

should be canceled without payment.

2. If the in-bond carrier can show that the merchandise was never

received or landed, the claim for liquidated damages should be canceled

without payment.

3. If the merchandise which was not delivered, delivered short or

delivered directly to the consignee could have been the subject of an

informal entry, the claim for liquidated damages may be canceled upon

payment of an amount equal to the duties, fees, taxes and charges that

would have been due on the merchandise had entry been properly made

plus an amount between $100 and $500, depending on the presence of

aggravating or mitigating factors.

4. If the in-bond carrier comes forward and discloses the violation

to Customs prior to Customs discovery of the violation, the claim for

liquidated damages may be canceled upon payment of an amount equal to

the duties, fees, taxes and charges that would have been due on the

merchandise had entry been properly made, plus $50.

5. If the merchandise which was not delivered, delivered short or

delivered directly to the consignee was not designated for Customs

examination and the in-bond carrier can show that the merchandise was

entered and duties, fees, taxes and charges paid thereon, the claim for

liquidated damages may be canceled upon payment of an amount between

$250 and $2,000 depending on the presence of aggravating or mitigating

factors.

6. If the merchandise which was not delivered, delivered short or

delivered directly to the consignee was not designated for Customs

examination and the in-bond carrier cannot show that the merchandise

was entered and duties, fees, taxes and charges paid thereon, the claim

for liquidated damages may be canceled upon payment of an amount equal

to the duties, fees, taxes and charges that would have been due on the

merchandise had entry been properly made plus an amount between $300

and $2,500 depending on the presence of aggravating or mitigating

factors.

7. If the merchandise which was not delivered, delivered short or

delivered directly to the consignee was designated for Customs

examination and the in-bond carrier can show that the merchandise was

entered and duties, fees, taxes and charges paid thereon, the claim for

liquidated damages may be canceled upon payment of an amount between

$2,500 and $20,000 depending on the presence of aggravating or

mitigating factors. In no case should the amount upon which the claim

may be canceled be lower than any chargeable costs which are incident

to such examination. Conversely, the amount upon which the claim may be

canceled can never exceed the value of the claim for liquidated

damages.

8. If the merchandise which was not delivered, delivered short or

delivered directly to the consignee was designated for Customs

examination and the in-bond carrier cannot show that the merchandise

was entered and duties, fees, taxes and charges paid thereon, the claim

for liquidated damages may be canceled upon payment of an amount equal

to the duties, fees, taxes and charges that would have been due on the

merchandise had entry been properly made plus an amount between $3,000

and $25,000 depending on the presence of aggravating or mitigating

factors. In no case should the amount upon which the claim may be

canceled be lower than any chargeable costs which are incident to such

Customs

[[Page 14795]]

examination. Conversely, the amount upon which the claim may be

canceled can never exceed the value of the claim for liquidated

damages.

9. If the in-bond carrier has a history of not delivering,

delivering short or delivering directly to the consignee, or

particularly aggravating circumstances exist with regard to a claim,

the Fines, Penalties and Forfeitures Officer may cancel the claim for

liquidated damages upon payment of a higher amount than that authorized

by these guidelines; however, the advice of Headquarters, Office of

Regulations and Rulings, Penalties Branch must be sought to determine

appropriate mitigation.

10. Theft of in-bond merchandise. In-bond merchandise which is

stolen from the carrier prior to having been delivered to Customs at

the port of destination or exportation will be treated as having been

not been delivered. The carrier will be liable for liquidated damages

and mitigation will occur in accordance with these guidelines. It

should also be noted that penalties under 19 U.S.C. 1595a(b) for

violation of 19 USC 1448 or 1499 (as well as criminal sanctions under

18 U.S.C. 549) may also be assessed against the individuals who steal

the merchandise from the bonded carrier. Claims assessed for theft of

merchandise in those instances will be administered in accordance with

guidelines articulated in Section V.B.10. above.

D. Mitigating and Aggravating Factors

1. Mitigating Factors

a. Carrier inexperienced in the handling of in-bond cargo.

b. Carrier has a general good performance and low error rate in the

handling of in-bond cargo.

c. Carrier demonstrates remedial action has been taken to prevent

future claims.

2. Aggravating Factors

a. Carrier refuses to cooperate with Customs or acts to impede

Customs activity with regard to the case.

b. Carrier has a rising error rate which is indicative of

deteriorating performance in the delivery of in-bond cargo.

E. Restricted or Prohibited Merchandise

If Customs has reason to believe that the merchandise which was not

delivered, delivered short or delivered directly to the consignee may

have been restricted or prohibited from entry, that will be considered

an extraordinary aggravating factor and will result in either no

mitigation or mitigation at the high end of the mitigation range.

VII. Guidelines for Cancellation of Claims Arising From the Failure

of a Centralized Examination Station (CES) Operator To Deliver

Merchandise To or Retain Merchandise at the CES (19 CFR 151.15, 19

CFR 113.63)

A. Assessment

Merchandise not delivered to or retained at a Centralized

Examination Station (CES) by the CES operator will be the subject of a

claim for liquidated damages for violation of the provisions of 19 CFR

151.15(b)(3) and 19 CFR 113.63(b)(2) equal to the value of the

merchandise or three times the value of the merchandise if it is

restricted or prohibited or is alcoholic beverages.

B. Mitigation of Claims Arising for Failure To Deliver Merchandise to

the CES or Removal or Delivery of Merchandise From the CES Without

Authorization

1. If the CES operator can show that the violation occurred solely

as a result of Customs error, the claim for liquidated damages should

be canceled without payment.

2. If the CES operator can show that the merchandise was never

received or landed, the claim for liquidated damages should be canceled

without payment.

3. If the merchandise which was not delivered to the CES or removed

or delivered from the CES without authorization could have been the

subject of an informal entry, the claim for liquidated damages may be

canceled upon payment of an amount equal to the duties, fees, taxes and

charges that would have been due on the merchandise had entry been

properly made plus an amount between $100 and $500, depending on the

presence of aggravating or mitigating factors.

4. If the CES operator comes forward and discloses the violation to

Customs prior to Customs discovery of the violation, the claim for

liquidated damages may be canceled upon payment of an amount equal to

the duties, fees, taxes and charges that would have been due on the

merchandise had entry been properly made, plus $50.

5. By its very nature, merchandise not delivered to a CES or

removed or delivered from a CES without authorization is designated for

Customs examination. If the CES operator can show that the merchandise

was entered and duties, fees, taxes and charges paid thereon, the claim

for liquidated damages may be canceled upon payment of an amount

between $2,500 and $20,000 depending on the presence of aggravating or

mitigating factors. In no case shall the amount upon which the claim

may be canceled be lower than any chargeable costs which are incident

to such examination. Conversely, the amount upon which the claim may be

canceled can never exceed the value of the claim for liquidated

damages.

6. If the merchandise was not delivered to a CES or was removed or

delivered from a CES without authorization, and the CES operator cannot

show that the merchandise was entered and duties, fees, taxes and

charges paid thereon, the claim for liquidated damages may be canceled

upon payment of an amount equal to the duties, fees, taxes and charges

that would have been due on the merchandise had entry been properly

made plus an amount between $3,000 and $25,000 depending on the

presence of aggravating or mitigating factors. In no case should the

amount upon which the claim may be canceled be lower than any

chargeable costs which are incident to such Customs examination.

Conversely, the amount upon which the claim may be canceled can never

exceed the value of the claim for liquidated damages.

7. If the CES operator has a history of receipting for merchandise

which has not been delivered to the CES or allowing merchandise to be

removed or delivered from the CES without authorization, or

particularly aggravating circumstances exist with regard to a claim,

the Fines, Penalties and Forfeitures Officer may cancel the claim for

liquidated damages upon payment of a higher amount than that authorized

by these guidelines; however, the advice of Headquarters, Office of

Regulations and Rulings, Penalties Branch must be sought to determine

appropriate mitigation.

8. Theft of bonded merchandise. Merchandise which is stolen from

the CES shall be treated as having been removed without authorization.

The CES operator will be liable for liquidated damages and mitigation

will occur in accordance with these guidelines. It should also be noted

that penalties under 19 USC 1595a(b) for violation of 19 USC 1448 or

1499 (as well as criminal sanctions under 18 U.S.C. 549) may also be

assessed against the individuals who steal the merchandise from a CES.

Claims for theft of merchandise in those instances will be administered

in accordance with guidelines articulated in Section V.B.10. above.

C. Mitigating and Aggravating Factors

1. Mitigating Factors

[[Page 14796]]

a. CES operator is inexperienced in the handling of cargo.

b. CES operator has a general good performance and low error rate

in the handling of cargo.

c. CES operator demonstrates remedial action has been taken to

prevent future claims.

2. Aggravating Factors

a. CES operator refuses to cooperate with Customs or acts to impede

Customs activity with regard to the case.

b. CES operator has a rising error rate which is indicative of

deteriorating performance in the handling and safekeeping of cargo.

D. Restricted or Prohibited Merchandise

If Customs has reason to believe that the merchandise which was not

delivered to a CES or was removed from the CES without authorization

may have been restricted or prohibited from entry, that will be

considered an extraordinary aggravating factor and will result in

either no mitigation or mitigation at the high end of the mitigation

range.

E. Failure To Maintain Records as Required by Regulation

1. If a CES operator fails to maintain records as required by

Customs, claims for liquidated damages not involving merchandise for

violation of 19 CFR 113.63(a)(3) and 19 CFR 118.4 will result.

2. If the breach resulted from clerical error, the claim may be

canceled without payment.

3. If the breach resulted from negligence, the claim may be

canceled upon payment of an amount between $100 and $250 per default,

depending on the presence of aggravating or mitigating factors.

4. If the breach was intentional, no relief shall be granted.

VIII. Guidelines for Cancellation of Claims Arising From the

Removal of Merchandise Without Authorization From a Container

Freight Station (CFS) (19 CFR 113.63(b))

A. Assessment

Merchandise not retained at a Container Freight Station (CFS) by

the CFS operator shall be the subject of a claim for liquidated damages

for violation of the provisions of 19 CFR 113.63(b)(2) equal to the

value of the merchandise or three times the value of the merchandise if

it is restricted or prohibited or is alcoholic beverages.

B. Mitigation of Claims Arising for Removal or Delivery of Merchandise

From the CFS Without Authorization

1. If the CFS operator can show that the violation occurred solely

as a result of Customs error, the claim for liquidated damages should

be canceled without payment.

2. If the CFS operator can show that the merchandise was never

received or landed, the claim for liquidated damages should be canceled

without payment.

3. If the merchandise which was removed or delivered from the CFS

without authorization could have been the subject of an informal entry,

the claim for liquidated damages may be canceled upon payment of an

amount equal to the duties, fees, taxes and charges that would have

been due on the merchandise had entry been properly made plus an amount

between $100 and $500, depending on the presence of aggravating or

mitigating factors.

4. If the CFS operator comes forward and discloses the violation to

Customs prior to discovery of the violation by Customs, the claim for

liquidated damages may be canceled upon payment of an amount equal to

the duties, fees, taxes and charges that would have been due on the

merchandise had entry been properly made, plus $50.

5. If the merchandise which was removed or delivered from the CFS

without authorization was not designated for Customs examination and

the CFS operator can show that the merchandise was entered and duties,

fees, taxes and charges paid thereon, the claim for liquidated damages

may be canceled upon payment of an amount between $250 and $2,000

depending on the presence of aggravating or mitigating factors.

6. If the merchandise which was removed or delivered from the CFS

without authorization was not designated for Customs examination and

the CFS operator cannot show that the merchandise was entered and

duties, fees, taxes and charges paid thereon, the claim for liquidated

damages may be canceled upon payment of an amount equal to the duties,

fees, taxes and charges that would have been due on the merchandise had

entry been properly made plus an amount between $300 and $2,500

depending on the presence of aggravating or mitigating factors.

7. If the merchandise removed or delivered from a CFS without

authorization was designated for Customs examination and the CFS

operator can show that the merchandise was entered and duties, fees,

taxes and charges paid thereon, the claim for liquidated damages may be

canceled upon payment of an amount between $2,500 and $20,000 depending

on the presence of aggravating or mitigating factors. In no case should

the amount upon which the claim may be canceled be lower than any

chargeable costs which are incident to such examination. Conversely,

the amount upon which the claim may be canceled can never exceed the

value of the claim for liquidated damages.

8. If the merchandise which was removed or delivered from a CFS

without authorization and was designated for Customs examination and

the CFS operator cannot show that the merchandise was entered and

duties, fees, taxes and charges paid thereon, the claim for liquidated

damages may be canceled upon payment of an amount equal to the duties,

fees, taxes and charges that would have been due on the merchandise had

entry been properly made plus an amount between $3,000 and $25,000

depending on the presence of aggravating or mitigating factors. In no

case should the amount upon which the claim may be canceled be lower

than any chargeable costs which are incident to such Customs

examination. Conversely, the amount upon which the claim may be

canceled can never exceed the value of the claim for liquidated

damages.

9. If the CFS operator has a history of receipting for merchandise

which has been removed or delivered from the CFS without authorization

or allowing merchandise to be removed from the CFS without

authorization, or particularly aggravating circumstances exist with

regard to a claim, the Fines, Penalties and Forfeitures Officer may

cancel the claim for liquidated damages upon payment of a higher amount

than that authorized by these guidelines; however, the advice of

Headquarters, Office of Regulations and Rulings, Penalties Branch must

be sought to determine appropriate mitigation.

10. Theft of merchandise from the CFS. Merchandise which is stolen

from the CFS shall be treated as having been removed without

authorization. The CFS operator will be liable for liquidated damages

and mitigation will occur in accordance with these guidelines. It

should also be noted that penalties under 19 USC 1595a(b) for violation

of 19 USC 1448 or 1499 (as well as criminal sanctions under 18 U.S.C.

549) may also be assessed against the individuals who steal the

merchandise from a CFS. Claims for theft of merchandise in those

instances will be administered in accordance with guidelines

articulated in Section V.B.10. above.

[[Page 14797]]

C. Mitigating and Aggravating Factors

1. Mitigating Factors

a. CFS operator is inexperienced in the handling of cargo.

b. CFS operator has a general good performance and a low error rate

in the handling of cargo.

c. CFS operator demonstrates remedial action has been taken to

prevent future claims.

2. Aggravating Factors

a. CFS operator refuses to cooperate with Customs or acts to impede

Customs activity with regard to the case.

b. CFS operator has a rising error rate which is indicative of

deteriorating performance in the handling and safekeeping of cargo.

D. Restricted or Prohibited Merchandise

If Customs has reason to believe that the merchandise which was

removed from the CFS without authorization may have been restricted or

prohibited from entry, that will be considered an extraordinary

aggravating factor and will result in either no mitigation or

mitigation at the high end of the mitigation range.

IX. Guidelines for Cancellation of Claims Arising From the Failure

To Hold Merchandise at the Place of Examination (19 CFR 113.62(f))

A. Assessment

The importer of record (or Customs broker if the broker is acting

as importer of record) may seek and obtain permission from Customs to

have merchandise examined at a place other than at a wharf or other

place in the charge of a Customs officer. The importer obligates the

provisions of its basic importation bond guaranteeing to deliver the

merchandise to the place of examination and hold it there until

examination occurs. If merchandise which is to be held at the place of

examination or delivered to the place of examination as obligated by

the importer of record under the terms and conditions of the basic

importation bond is not so held or delivered, a claim for liquidated

damages arises for violation of the provisions of 19 CFR 113.62(f)

equal to the value of the merchandise or three times the value of the

merchandise if it is restricted or prohibited or is alcoholic

beverages.

B. Mitigation of Claims Arising for Failure To Hold Merchandise at or

Deliver Merchandise to the Place of Examination Pursuant to the

Provisions of the Basic Importation Bond

1. If the importer of record can show that the violation occurred

solely as a result of Customs error, the claim for liquidated damages

should be canceled without payment.

2. If the importer of record can show that the merchandise was

never received or landed, the claim for liquidated damages should be

canceled without payment.

3. If the merchandise which was not held at or delivered to the

place of examination could have been the subject of an informal entry,

the claim for liquidated damages may be canceled upon payment of an

amount equal to the duties, fees, taxes and charges that would have

been due on the merchandise had entry been properly made plus an amount

between $100 and $500, depending on the presence of aggravating or

mitigating factors.

4. By its very nature, merchandise not held at or delivered to the

place of examination is considered to be designated for Customs

examination. If the importer of record can show that the merchandise

was entered and duties, fees, taxes and charges paid thereon, the claim

for liquidated damages may be canceled upon payment of an amount

between $2,500 and $20,000 depending on the presence of aggravating or

mitigating factors. In no case should the amount upon which the claim

may be canceled be lower than any chargeable costs which are incident

to such examination. Conversely, the amount upon which the claim may be

canceled can never exceed the value of the claim for liquidated

damages.

5. If the merchandise was not held at or delivered to the place of

examination and the importer of record cannot show that the merchandise

was entered and duties, fees, taxes and charges paid thereon, the claim

for liquidated damages may be canceled upon payment of an amount equal

to the duties, fees, taxes and charges that would have been due on the

merchandise had entry been properly made plus an amount between $3,000

and $25,000 depending on the presence of aggravating or mitigating

factors. In no case should the amount upon which the claim may be

canceled be lower than any chargeable costs which are incident to such

Customs examination. Conversely, the amount upon which the claim may be

canceled can never exceed the value of the claim for liquidated

damages.

6. If the importer of record has a history of not holding

merchandise at or not delivering merchandise to the place of

examination, or particularly aggravating circumstances exist with

regard to a claim, the Fines, Penalties and Forfeitures Officer may

cancel the claim for liquidated damages upon payment of a higher amount

than that authorized by these guidelines; however, the advice of

Headquarters, Office of Regulations and Rulings, Penalties Branch will

be sought to determine appropriate mitigation.

7. Theft of merchandise from the place of examination or while

being delivered to the place of examination. Merchandise which is

stolen from the custody of the importer of record at or on its way to

the place of examination will be treated as having been removed without

authorization. The importer of record will be liable for liquidated

damages and mitigation will occur in accordance with these guidelines.

It should also be noted that penalties under 19 USC 1595a(b) for

violation of 19 USC 1448 or 1499 (as well as criminal sanctions under

18 U.S.C. 549) may also be assessed against the individuals who steal

the merchandise from the importer of record. Claims for theft of

merchandise in those instances will be administered in accordance with

guidelines articulated in Section V.B.10. above.

C. Mitigating and Aggravating Factors

1. Mitigating Factors

a. The importer of record is inexperienced in the handling of

cargo.

b. The importer of record has a general good performance and a low

error rate in the delivery and safekeeping of cargo.

c. The importer of record demonstrates remedial action has been

taken to prevent future claims.

2. Aggravating Factors

a. The importer of record refuses to cooperate with Customs or acts

to impede Customs activity with regard to the case.

b. The importer of record has a rising error rate which is

indicative of deteriorating performance in the delivery and safekeeping

of cargo.

D. Restricted or Prohibited Merchandise

If Customs has reason to believe that the merchandise which was not

held at the place of examination or was not delivered to the place of

examination may have been restricted or prohibited from entry, that

will be considered an extraordinary aggravating factor and will result

in either no mitigation or mitigation at the high end of the mitigation

range.

E. Failure to Keep Customs Seal or Cording Intact

The importer of record also agrees to keep any Customs seals or

cording intact until the merchandise is examined. For a violation which

involves the failure to keep any Customs seal or cording intact until

the

[[Page 14798]]

merchandise is examined, the claim will be canceled upon payment of an

amount between $100 and $500 if there is no evidence to indicate the

merchandise in the sealed or corded shipment was tampered with. If

there is evidence of tampering, the claim will be canceled upon payment

of an amount equal to the value of any missing merchandise. Tampering

with seals also may result in criminal sanctions under 18 U.S.C. 549.

[FR Doc. 99-7410 Filed 3-26-99; 8:45 am]

BILLING CODE 4820-02-P