Issue 258, May 25, 2000
Ever since the passage of the Customs Modernization Act in December 1993, U.S. importers have been reminded of their responsibility and obligation to obey the U.S. Customs? rules and regulations by using ?reasonable care?. While the focus on reasonable care may be new, the concept has actually been a part of Customs? discipline since the passage of the Customs penalty provisions in 19 U.S. Code Sec. 1592, under the Tariff Act of 1930. Section 1592 generally provides that ??.no person, by fraud, gross negligence, or negligence?.?, shall violate the Customs? rules. The term ?negligence? is defined as the failure to exercise reasonable care. Therefore, when importers fail to use reasonable care, they immediately become liable for possible penalties under Section 1592. However, when importers practice reasonable care, penalties are not likely.

With this in mind, importers must use their best efforts to ensure that they exercise reasonable care in ALL their import activities, including classification, valuation, country of origin marking and special claims. Reasonable care is clearly the best insurance policy for preventing and avoiding U.S. Customs penalties.

One of the best strategies for ensuring the exercise of reasonable care is to rely on the advice and opinions of a qualified U.S. Customs Expert. The U.S. Customs Service has recognized that reliance on Customs experts is an automatic presumption of reasonable care. U.S. Customs Brokers, Customs Attorneys or other Customs Consultants, including in-house experts, are recognized as qualified U.S. Customs experts.

Satisfaction of reasonable care requires that the importer follow three simple steps: 1) The importer consults with a qualified expert on a specific issue and provides all required information, preferably in writing; 2) The qualified expert reviews the information and provides an opinion, preferably in writing; and 3) The importer relies and acts on the advice.

In a recent case involving a 1592 Penalty Action, the U.S. Customs Service claimed that an importer was liable for duties, interest and penalties over the duration of five years for negligently misclassifying its merchandise. The importer, however, successfully argued that it exercised reasonable care when it relied on the written advice of a qualified U.S. Customs expert, even though that advice was incorrect. The penalty case was dismissed and the importer?s liability was substantially reduced to increased duties on unliquidated entries only (approximately 1 year of imports).

The importer?s use of reasonable care was clearly the best insurance available for preventing and avoiding U.S. Customs penalties. All importers are encouraged to establish internal controls and procedures designed to ensure reasonable care.

Our contributing writer, Steven B. Zisser, is an attorney in the San Diego border community of Otay Mesa where he specializes in the practice of U.S. Customs and International Trade Law. He can be reached via email or at (619) 671-0376.

Please note that due to the complex nature of the subject matter, Danzas AEI cannot be responsible for actions taken by the reader in reliance on the information contained herein without prior consultation with Danzas AEI.