A key business group agreed to accept the idea of letting the U.S. Customs Service impose penalties for violations of the rules on duty refunds.

This change in the stance of a coalition called the Joint Industry Group clears a major roadblock to customs reform legislation."I think it's great," said Samuel H. Banks, Customs' assistant commissioner for commercial operations. "Now we've got an agreement in concept."

The Joint Industry Group, a coalition of multinational companies, issued a statement Friday in support of refund penalties. Members of the organization have been deeply divided over the issue.

Under the duty drawback program, companies receive refunds for imported parts incorporated into products that are exported.

The program is used primarily by large manufacturing companies such as General Motors, which receives "tens of millions of dollars worth" of drawback refunds every year, according to Ron Glowzinski, GM's duty drawback administrator.

The Joint Industry Group, meeting Friday, voted to endorse penalties against companies that submit fraudulent drawback claims in return for changes in the law that would make the program more accessible to exporters.

"If Congress is willing, we will in fact consider and endorse penalties as long as they don't exceed (Internal Revenue Service) levels," said William D. Oatman, an attorney for the group.

"This is the first time the (group) has considered support for penalties in the area of drawback," he said.

Now that the industry group has agreed in principle to penalties, "we need to go in concert up to (Capitol Hill)" and present a unified position to Congress, said Mr. Banks.

"I guess we can reach an amicable conclusion. . .It puts us all in essence on the same footing," he said.

Customs has been pushing for penalties for fraud of four times the amount of revenue lost but has indicated in comments to the industry that it would accept fines of three times the value. Under IRS-style penalties, fines for fraud would be no larger than 75 percent of the value of the lost revenues.

Representatives from the industry group and the American Association of Exporters and Importers will be meeting today and tomorrow with House aides and Peter K. Nunez, assistant secretary for enforcement in the Treasury Department, said Eugene J. Milosh, president of the association.

"We want to point out that with the increase in exports, they shouldn't be concerned about penalties," he said.

Over the past two months, representatives from Customs have been negotiating with industry over the drawback language, which will be incorporated into legislation to reform and modernize the Customs Service.

These negotiations have been sponsored by aides to the House Ways and Means Committee.

During the course of these talks, rifts have developed between the Joint Industry Group, the association and the International Trade Facilitation Council-NCITD.

The industry group and the association have endorsed the IRS-style penalties, while the NCITD - the original author of that proposal - has accepted Customs arguments for penalty levels of three times the lost revenue.

"The NCITD caved in with Customs," charged Mr. Milosh. "Obviously the JIG didn't embrace that."

The only member of the association that wants triple penalties is the American Iron and Steel Institute, which is "basically protectionist," said Mr. Milosh.

The association and the industry group "are where we were over a year ago," said James A. Geraghty, an attorney with Donohue and Donohue, New York, and special counsel to the Drawback Committee of the NCITD.

The association has "lost sight of the fact that our compromise includes support from Customs to make drawback more accessible" to exporters, he said.