Regular readers of our newsletter, and those familiar with U.S. import and export regulations, know that U.S. Customs and Border Protection ("CBP" or "Customs") generally enforces the U.S. import regulations, while multiple executive government agencies administer regulations related to the export of goods. Such agencies include, but are not limited to, the Department of Commerce Bureau of Industry and Security ("BIS"), the Department of State Directorate of Defense Trade Controls ("DDTC"), the Department of the Treasury Office of Foreign Assets Control, the Drug Enforcement Agency, and the Census Bureau.
However, CBP also enforces export regulations at the country's ports, which can lead to a situation that every exporter hopes to avoid: the seizure by CBP of export merchandise. These seizures can be prompted by violations of regulations administered by multiple agencies and can range from egregious violations of U.S. sanctions laws to forgetting to cite a license or license exception in the Electronic Export Information ("EEI") of an export shipment.
In July 2019, CBP updated its Mitigation Guidelines (the "Guidelines"), specifically the section related to forfeiture remission for export seizures.1 When property is seized by Customs, interested parties may submit an administrative petition, requesting remittance of the forfeiture and the return of the merchandise. Customs is not required to grant relief in any specific case, but, if CBP does decide to grant relief, it can consult the Guidelines, which include a change in remittance payment structure.
To "remit forfeiture," the exporter typically must pay a "forfeiture remission amount" to have the merchandise released from seizure. Under the Guidelines, the remission amount is a percentage of the value of the merchandise, similar to the structure for the seizure of imports.
CBP also abandoned its previous distinction between technical violations and substantive violations of export regulations. The new guidelines acknowledge a difference between License Violations and Non-License Violations, with a recommendation that License Violations should generally necessitate a remission on the higher end of the range of amounts, which range from 10% to 80% of the value of the merchandise.
The Guidelines also provide a description of several mitigating and aggravating factors that should be considered when CBP determines the remission amount. The mitigating factors listed by CBP include:
- Inexperience of the exporter;
- Prior good record;
- Voluntary disclosure of the violation to CBP and/or the other concerned agency;
- Violation caused by the action of another party;
- Exceptional cooperation with CBP or other agency officials;
- Evidence of remedial measures;
- Substantial assistance in the investigation of another person; and
- Presence of an active export compliance program.
Aggravating factors include:
- Related criminal conviction;
- Intentional violation;
- Pattern of violations;
- Several violations in the same export transaction;
- Multiple violations in previous three-year period;
- Pattern of disregard of export responsibilities; and
- Lack of an active export compliance program.
The Guidelines provide clarity as to CBP's actions once export merchandise is seized by the agency, but the underlying truth is that many exporters do not realize CBP's ability to detain and seize export goods and often think of Customs as only an import agency. An exporter may not be aware of CBP's enforcement of export regulations until the exporter receives a notice of seizure from Customs.
Exporters are generally used to dealing with BIS, DDTC, or other agencies with export responsibility after receiving notice of an audit of their historical EEI or questions related to a particular export months after the export occurred (see our previous article, The STA License Exception by the Numbers, regarding BIS audits of Strategic Trade Authorization exports). Those circumstances, while not ideal, allow for the exporter to gather documentation to provide to the export agency and file a voluntary self-disclosure if necessary, sometimes before suffering any negative economic impact. When products are seized, though, the exporter will likely incur storage and appraisal costs at the very least.
Customs has always had this tool available for investigating exports, but it may be using it more frequently these days based on the availability of electronic information for auditing through the Automated Export System.
The best strategy to prevent seizure for export violations is an optimized export compliance program to prevent violations – whether of the license or non-license variety – from occurring in the first place. As stated above, having an export compliance program is a mitigating factor and not having a program is an aggravating factor when Customs reviews seizure petitions for relief.
If export merchandise is detained, it's important to attempt to sort the issue out as soon as possible, potentially before CBP seizes the shipment, which will trigger the need for a petition for relief and further complicate issues. In some cases, CBP may coordinate with the exporter after detention but prior to seizing the property.
Customs seizure of export merchandise can be very frustrating and lead to complications and fees that are not usually present with typical export violations, but the attorneys at Torres Law are prepared to help if you receive a Notice of Detainment or Seizure from CBP.
1 Mitigation Guidelines: Export Control Seizures, U.S. Customs and Border Protection (July 2019), available at https://www.cbp.gov/sites/default/files/assets/documents/2019-Jul/H291261_Export%20Guidelines_7-29-19.508.pdf.
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