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If your drawback program includes the Accelerated Payment privilege, you made a commitment to Customs to review your drawback program at least once per year. You are not told what you need to review specifically, but the items that you do review and when they were reviewed are necessary to keep in your records. Extremely prudent claimants will send a letter to Customs with the findings and results of the review, who conducted it, when and what was reviewed.
Since every claimants sports a different program, each review will be different. We suggest you look at a few common items however, such as evidence of export, payment records, inventory records, bills of material, import entries or CDs, and manufacturing records (if appropriate). Your review will include an examination of any changes that took place in the last year, personnel, procedures and records keeping. You might also want to look at a few claims representing a statistical sampling of your program, for errors or possible technical problems. If you file FIFO or other accounting method, you would want to ensure that all import inventory is accounted for and that you can prove it. If you file explicit Direct ID, you should review your procedures for ensuring tracking and test it for validity. Bills of material changes all too often and it would be wise to ensure they are current and that those relevant to your claims actually represent the state affairs at the time the claim was generated.
You might also want to get outside help in this pursuit, as it is an integral part of your drawback program. That way, a qualified outside entity such as a Drawback Customs Broker or a Law firm would be on record with respect to your program. This would also go a long way toward compliance with your responsibility under the MODACT and the concept of Reasonable Care. For more information, please contact our office.
Effective February 24, 2000 Customs has implemented TD 00-5 implementing 19 USC 1593a by making several amendments to the penalty provisions in the Customs Regulations. This new set of rules establishes procedures for the submission of false drawback claims, and sets monetary penalties for violations.
If you are not a DCP participant (Drawback Compliance Program), the penalties are:
- Freud 300% of loss of revenue
- Negligence 20% of loss of revenue for first violation
- 50% of loss of revenue for first repetitive violation
- 100% of loss of revenue for second and subsequent repetitive violation
If you are participant in the DCP, then penalties are:
- Freud 300% of loss of revenue
- Negligence Warning letter for first non-repetitive violation
- 20% of loss of revenue for first repetitive violation within 3 years
- 50% of loss of revenue for second repetitive violation
- 100% of loss of revenue for third and subsequent violation
If you make a prior disclosure (DCP Participant or not) the penalties can’t exceed:
- Freud 100% of loss of revenue
- Negligence Interest occurred on the loss of revenue
Customs has started that any claims field after 11-25-98 are potentially liable for monetary penalties. Customs can also issue pre-penalty notices when it is believed that a violation has occurred and that penalty proceedings are warranted. This could impact filing of a prior disclosure. There are guidelines for mitigation and removal of a participant from the DCP.
We strongly suggest that you take some time and thoroughly review this new provision and how it could affect your drawback program. We also suggest that you consult your legal advisor and or consultant for more information. Remember this is simply an overview of the new regulations and you must be familiar with the entire guideline. For more information, call our office or view the Federal Register of 1-25-2000.
Available for all, the Federal Register is now on the Internet at www.access.gpo.gov/su_docs/fedreg/. The Federal Register is the official daily publication of Rules, Proposed Rules, Notices of Federal Agencies and other organizations as well as Executive Orders and various Presidential Documents.
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