The urgency that stresses modern supply chains can conflict with the exercise of reasonable care and thoughtful compliance with the matrix of legal requirements applicable to imported goods. Decisions made in haste, on insufficient information, or on misplaced confidence — even if commercially reasonable — can lead to errors. When compliance breaks down, or simple human error creeps in, CBP’s investigatory functions are triggered and significant penalties, including criminal sanctions, can apply.
As a result of our long history as one of the first major Washington firms to develop a customs and international trade practice, Arent Fox has deep experience and a long record of success guiding clients through investigations and resolving penalty claims, both civil and criminal.
Investigations have many sources: CBP’s focus on priority industries and risky activities, whistleblowers (whose incentives have increased), a renewed emphasis on enforcement, incomplete answers to simple questions that trigger deeper inquiry, patterns that suggest risk of non-compliance by specific importers or entire industries, referrals or requests from other agencies, etc. The pace of investigation is similarly broad ranging from the execution of search warrants without notice (including the attendant seizure of records and devices) to courtesy notice in advance of written requests for information. Our Customs/Import Compliance group has handled investigations arising in all these patterns.
Working closely with client teams across divisions and borders, we have succeeded in bringing investigations to rapid, successful conclusion.
In dozens of instances, we have guided clients through the prior disclosure process, thereby limiting penalty exposure and establishing a going-forward confidence within CBP of the client’s commitment to compliance and low-risk profile. Opportunities to employ prior disclosure have arisen in the context of audits and assessments, CBP routine inquiries (CF 28s) and CBP proposed actions, actions taken (CF 29s), and from formal and informal self-assessments.
Where investigations reveal violations of controlling laws or regulations, penalties of various magnitudes, including criminal prosecution, can apply. The most common penalty assertions arise from alleged misstatements or omissions in the documents presented in connection with importation. Other specific penalties apply to various activities associated with importation including for failing to mark (or mis-marking) country of origin, failing to maintain adequate and readily retrievable records, and failing to secure sufficient evidence of preferences prior to claiming them.
Arent Fox’s Customs/Import Compliance group has defended clients against dozens of penalty claims arising from these and other circumstances. In the criminal context, we have seen an increase in prosecutions associated with allegations of fraud (e.g. customs undervaluation/“double invoicing”) and of smuggling for import activities calculated to evade trade protections (antidumping and countervailing duty orders) and reduce tariff liability. We have successfully defended clients against these types of criminal allegations.
