OBEY OR PAY: CUSTOMS TARGETS RULES VIOLATIONS \ ERRANT EXPORTERS, IMPORTERS FINED, JAILED

OBEY OR PAY: CUSTOMS TARGETS RULES VIOLATIONS \ ERRANT EXPORTERS, IMPORTERS FINED, JAILED

The U.S. government is hitting back at exporters and importers who show it little respect.

Annoyed that U.S. export licensing requirements and import laws aren't being taken very seriously, Washington is punishing violators with multimillion-dollar fines, seizure of their assets and jail terms.''Outbound compliance is the buzzword now,'' Los Angeles freight forwarder Jeff Coppersmith recently told attendees of the Tradewatch '98 conference. ''There's a lot the exporter and his forwarder can get in trouble with - jail time, fines and loss of exporting privileges.''

In addition to fines, companies will incur costly legal fees to defend themselves.

''If you don't follow the regulations, you'll have to hire someone like me to bail you out,'' said John Liebman, a Los Angeles attorney who specializes in export licensing regulations.

Legal defense in a typical case often costs $500,000 or more, while the cost of complex, contracted litigation can easily exceed $1 million, Mr. Liebman told the Tradewatch conference.

Importers, too, are required to know and abide by all laws covering the classification and valuation of merchandise. Because these laws have a direct bearing on revenue, the government will take immediate action when loss of import duties occurs.

Last week, the U.S. Customs Service publicly declared that enforcement, especially in the area of narcotics interdiction, is the agency's overriding priority - a stance importers and exporters had suspected for several months.

Customs maintains it would prefer to work with importers and exporters in achieving compliance with trade laws rather than resort to punitive measures. But the agency is under heavy pressure from Congress and the Clinton administration to get tough on violators, officials and trade experts say.

Whether it is investigating exporters who failed to get a license before shipping restricted products, or importers who did not demonstrate reasonable care in classifying and assigning value to merchandise, Customs is stepping up its enforcement activities.

TOP OFFICERS TARGETED

The message it is sending to importers and exporters is that compliance with U.S. trade laws must be taken seriously by the top officers in a company. Any business engaged in international trade is advised to have, in writing, a clearly defined compliance program that involves all departments of the company that have anything to do with trade.

If a company does run afoul of the law, but has a sound internal compliance program, Customs will often reduce the fines that apply in that case.

Importers suspected of committing errors are sent a document known as Customs Form 28. Customs brokers and attorneys advise their clients to act immediately upon receiving this form because it is Customs' way of tipping them off that an investigation may already be under way.

''You have to race to get your prior disclosure form to Customs,'' said Michael Dugan, president of Western Overseas Corp. in Long Beach and president of the National Customs Brokers & Forwarders Association of America.

Through prior disclosure, the importer investigates its own operations, and if it is clear a violation occurred, reimburses the government for lost revenue.

DON'T DELAY

Putting C.F. 28 in a drawer and waiting for a slow day to address the problem will simply give Customs the time it needs to build a case against the importer, said John Durant, director of the Commercial Rulings Division at Customs' Office of Regulations and Rulings.

''If customs people wearing guns show up at your office, chances are an investigation has begun,'' he said.

Customs is especially serious about proper record keeping. Since the Customs Modernization Act assigns to importers the responsibility for product classification and valuation, the government must have access to complete and accurate records at the office of the importer so Customs can verify all transactions.

Customs has published its (a)(1)(A) List that details the records importers must keep on file for all transactions. Fines for failing to have proper records range from $10,000 per transaction for negligence to $100,000 per transaction for fraud.

''Those penalties are meant to be an attention grabber,'' Mr. Durant said. ''There's no question we can bring in some heavy artillery here,'' he said.

Customs specialists at large corporations say getting top management to seriously consider a sound customs compliance program can be a major challenge. They note, however, that the benefits of reduced fines and quicker clearance of shipments make it worthwhile to take on that challenge.

NISSAN HEARD THE WORD

Nissan N.A. Inc. began developing its compliance program three years ago, and now has the full cooperation of top management and all departments in the company, said Leslie Cazas, corporate manager of Customs administration.

In order to win the support of chief executives, the customs specialist must talk their language. That may require a cost-benefit analysis of a customs compliance program or a graphic description of fines paid by competitors for customs violations. ''Fear works,'' she said.

Last year, Customs published a slew of implementing regulations for the Mod Act, including regulations covering reasonable care, reconciliation, drawback and record-keeping. The regulations, which are at varying stages of the process required for Department of Treasury approval, are required reading for importers.

Customs has also issued a number of publications on informed compliance. Those publications discuss classification regulations for key imports such as textiles, wearing apparel and auto parts.

With last week's formal declaration that Customs is shifting into an enforcement mode, the trade community is urged to follow these regulations or face the consequences.

''We are witnessing the slow demise of the friendlier, gentler, kinder Customs Service,'' Ms. Cazas said.

PUBLICATIONS

Informed compliance publications available at the U.S. Customs Service. To obtain the publications, contact: U.S. Customs Service, Office of Public Affairs, Public Information Section, Room 2.1A, 1300 Pennsylvania Ave., Washington, D.C., 20229 or use the Internet: www.customs.treas.gov.

1. Customs Value (May 1996)

2. Raw Cotton: Tariff Classification and Import and Import Quotas. (May, 13, 1996)

3. Nafta for Textiles and Textile Articles. (May 14, 1996)

4. Buying and Selling Commissions. (June 1996)

5. Fibers and Yarns. (September 1996)

6. Mushrooms. (October 1996)

7. Textile Apparel Rules of Origin. (October 1996)

8. Marble. (November 1996)

9. Peanuts. (November 1996)

10. Bona Fide Sales and Sales for Exportation. (November 1996)

11. Granite. (February 1997)

12 Caviar. (February 1997)

13. Internal Combustion Piston Engines: Tariff Classification of Engines and Their Parts. (April 1997)

14. What Every Member of the Trade Community Should Know About: Vehicles, Parts and Accessories Under the Harmonized Tariff Schedule. (May 1997)

15. What Every Member of the Trade Community Should Know About: Distinguishing Bolts From Screws. (May 1997)

16. What Every Member of the Trade Community Should Know About: Articles of Wax, Artificial Stone and Jewelry Under the Harmonized Tariff Schedule. (May 1997)

17. Classification of Ribbons, Trimmings and Decorative Yarns. (November 1996)

18. What Every Member of the Trade Community Should Know About Tariff Classification Under the Harmonized Tariff Schedule. (May 1997)

19. What Every Member of the Trade Community Should Know About Classification of Festive Articles as a Result of the Midwest of Cannon Falls Court Case. (November 1997)