                        TITLE 19--CUSTOMS DUTIES
 
                      CHAPTER 4--TARIFF ACT OF 1930
 
                 SUBTITLE III--ADMINISTRATIVE PROVISIONS
 
                     Part V--Enforcement Provisions
 
Sec. 1593a. Penalties for false drawback claims


(a) Prohibition

                          (1) General rule

        No person, by fraud, or negligence--
            (A) may seek, induce or affect, or attempt to seek, induce, 
        or affect, the payment or credit to that person or others of any 
        drawback claim by means of--
                (i) any document, written or oral statement, or 
            electronically transmitted data or information, or act which 
            is material and false, or
                (ii) any omission which is material; or

            (B) may aid or abet any other person to violate subparagraph 
        (A).

                            (2) Exception

        Clerical errors or mistakes of fact are not violations of 
    paragraph (1) unless they are part of a pattern of negligent 
    conduct. The mere nonintentional repetition by an electronic system 
    of an initial clerical error does not constitute a pattern of 
    negligent conduct.

(b) Procedures

                        (1) Prepenalty notice

        (A) In general

            If the Customs Service has reasonable cause to believe that 
        there has been a violation of subsection (a) of this section and 
        determines that further proceedings are warranted, the Customs 
        Service shall issue to the person concerned a written notice of 
        intent to issue a claim for a monetary penalty. Such notice 
        shall--
                (i) identify the drawback claim;
                (ii) set forth the details relating to the seeking, 
            inducing, or affecting, or the attempted seeking, inducing, 
            or affecting, or the aiding or procuring of, the drawback 
            claim;
                (iii) specify all laws and regulations allegedly 
            violated;
                (iv) disclose all the material facts which establish the 
            alleged violation;
                (v) state whether the alleged violation occurred as a 
            result of fraud or negligence;
                (vi) state the estimated actual or potential loss of 
            revenue due to the drawback claim, and, taking into account 
            all circumstances, the amount of the proposed monetary 
            penalty; and
                (vii) inform such person that he shall have a reasonable 
            opportunity to make representations, both oral and written, 
            as to why a claim for a monetary penalty should not be 
            issued in the amount stated.

        (B) Exceptions

            The Customs Service may not issue a prepenalty notice if the 
        amount of the penalty in the penalty claim issued under 
        paragraph (2) is $1,000 or less. In such cases, the Customs 
        Service may proceed directly with a penalty claim.

        (C) Prior approval

            No prepenalty notice in which the alleged violation occurred 
        as a result of fraud shall be issued without the prior approval 
        of Customs Headquarters.

                          (2) Penalty claim

        After considering representations, if any, made by the person 
    concerned pursuant to the notice issued under paragraph (1), the 
    Customs Service shall determine whether any violation of subsection 
    (a) of this section, as alleged in the notice, has occurred. If the 
    Customs Service determines that there was no violation, the Customs 
    Service shall promptly issue a written statement of the 
    determination to the person to whom the notice was sent. If the 
    Customs Service determines that there was a violation, Customs shall 
    issue a written penalty claim to such person. The written penalty 
    claim shall specify all changes in the information provided under 
    clauses (i) through (vii) of paragraph (1)(A). Such person shall 
    have a reasonable opportunity under section 1618 of this title to 
    make representations, both oral and written, seeking remission or 
    mitigation of the monetary penalty. At the conclusion of any 
    proceeding under section 1618 of this title, the Customs Service 
    shall provide to the person concerned a written statement which sets 
    forth the final determination, and the findings of fact and 
    conclusions of law on which such determination is based.

(c) Maximum penalties

                              (1) Fraud

        A fraudulent violation of subsection (a) of this section is 
    punishable by a civil penalty in an amount not to exceed 3 times the 
    actual or potential loss of revenue.

                           (2) Negligence

        (A) In general

            A negligent violation of subsection (a) of this section is 
        punishable by a civil penalty in an amount not to exceed 20 
        percent of the actual or potential loss of revenue for the 1st 
        violation.

        (B) Repetitive violations

            If the Customs Service determines that a repeat negligent 
        violation occurs relating to the same issue, the penalty amount 
        for the 2d violation shall be in an amount not to exceed 50 
        percent of the total actual or potential loss of revenue. The 
        penalty amount for each succeeding repetitive negligent 
        violation shall be in an amount not to exceed the actual or 
        potential loss of revenue. If the same party commits a 
        nonrepetitive violation, that violation shall be subject to a 
        penalty not to exceed 20 percent of the actual or potential loss 
        of revenue.

                        (3) Prior disclosure

        (A) In general

            Subject to subparagraph (B), if the person concerned 
        discloses the circumstances of a violation of subsection (a) of 
        this section before, or without knowledge of the commencement 
        of, a formal investigation of such violation, the monetary 
        penalty assessed under this subsection may not exceed--
                (i) if the violation resulted from fraud, an amount 
            equal to the actual or potential revenue of which the United 
            States is or may be deprived as a result of overpayment of 
            the claim; or
                (ii) if the violation resulted from negligence, an 
            amount equal to the interest computed on the basis of the 
            prevailing rate of interest applied under section 6621 of 
            title 26 on the amount of actual revenue of which the United 
            States is or may be deprived during the period that--
                    (I) begins on the date of the overpayment of the 
                claim; and
                    (II) ends on the date on which the person concerned 
                tenders the amount of the overpayment.

        (B) Condition affecting penalty limitations

            The limitations in subparagraph (A) on the amount of the 
        monetary penalty to be assessed under this subsection apply only 
        if the person concerned tenders the amount of the overpayment 
        made on the claim at the time of disclosure, or within 30 days 
        (or such longer period as the Customs Service may provide), 
        after notice by the Customs Service of its calculation of the 
        amount of the overpayment.

        (C) Burden of proof

            The person asserting lack of knowledge of the commencement 
        of a formal investigation has the burden of proof in 
        establishing such lack of knowledge.

                  (4) Commencement of investigation

        For purposes of this section, a formal investigation of a 
    violation is considered to be commenced with regard to the 
    disclosing party and the disclosed information on the date recorded 
    in writing by the Customs Service as the date on which facts and 
    circumstances were discovered or information was received which 
    caused the Customs Service to believe that a possibility of a 
    violation of subsection (a) of this section existed.

                           (5) Exclusivity

        Penalty claims under this section shall be the exclusive civil 
    remedy for any drawback related violation of subsection (a) of this 
    section.

(d) Deprivation of lawful revenue

    Notwithstanding section 1514 of this title, if the United States has 
been deprived of lawful duties and taxes resulting from a violation of 
subsection (a) of this section, the Customs Service shall require that 
such duties and taxes be restored whether or not a monetary penalty is 
assessed.

(e) Drawback compliance program

                           (1) In general

        After consultation with the drawback trade community, the 
    Customs Service shall establish a drawback compliance program in 
    which claimants and other parties in interest may participate after 
    being certified by the Customs Service under paragraph (2). 
    Participation in the drawback compliance program is voluntary.

                          (2) Certification

        A party may be certified as a participant in the drawback 
    compliance program after meeting the general requirements 
    established under the program or after negotiating an alternative 
    program suited to the needs of the party and the Customs Service. 
    Certification requirements shall take into account the size and 
    nature of the party's drawback program and the volume of claims. In 
    order to be certified, the participant must be able to demonstrate 
    that it--
            (A) understands the legal requirements for filing claims, 
        including the nature of the records required to be maintained 
        and produced and the time periods involved;
            (B) has in place procedures to explain the Customs Service 
        requirements to those employees that are involved in the 
        preparation of claims, and the maintenance and production of 
        required records;
            (C) has in place procedures regarding the preparation of 
        claims and maintenance of required records, and the production 
        of such records to the Customs Service;
            (D) has designated a dependable individual or individuals to 
        be responsible for compliance under the program and whose duties 
        include maintaining familiarity with the drawback requirements 
        of the Customs Service;
            (E) has a record maintenance procedure approved by the 
        Customs Service for original records, or, if approved by the 
        Customs Service, for alternate records or recordkeeping formats 
        other than the original records; and
            (F) has procedures for notifying the Customs Service of 
        variances to, and violations of, the requirements of the 
        drawback compliance program or any negotiated alternative 
        programs, and for taking corrective action when notified by the 
        Customs Service for violations or problems regarding such 
        program.

(f) Alternatives to penalties

                           (1) In general

        When a party that--
            (A) has been certified as a participant in the drawback 
        compliance program under subsection (e) of this section; and
            (B) is generally in compliance with the appropriate 
        procedures and requirements of the program;

    commits a violation of subsection (a) of this section, the Customs 
    Service, shall, in the absence of fraud or repeated violations, and 
    in lieu of a monetary penalty, issue a written notice of the 
    violation to the party. Repeated violations by a party may result in 
    the issuance of penalties and removal of certification under the 
    program until corrective action, satisfactory to the Customs 
    Service, is taken.

                       (2) Contents of notice

        A notice of violation issued under paragraph (1) shall--
            (A) state that the party has violated subsection (a) of this 
        section;
            (B) explain the nature of the violation; and
            (C) warn the party that future violations of subsection (a) 
        of this section may result in the imposition of monetary 
        penalties.

                       (3) Response to notice

        Within a reasonable time after receiving written notice under 
    paragraph (1), the party shall notify the Customs Service of the 
    steps it has taken to prevent a recurrence of the violation.

(g) Repetitive violations

    (1) A party who has been issued a written notice under subsection 
(f)(1) of this section and subsequently commits a repeat negligent 
violation involving the same issue is subject to the following monetary 
penalties:

                          (A) 2d violation

        An amount not to exceed 20 percent of the loss of revenue.

                          (B) 3rd violation

        An amount not to exceed 50 percent of the loss of revenue.

                  (C) 4th and subsequent violations

        An amount not to exceed 100 percent of the loss of revenue.

    (2) If a party that has been certified as a participant in the 
drawback compliance program under subsection (e) of this section commits 
an alleged violation which was not repetitive, the party shall be issued 
a ``warning letter'', and, for any subsequent violation, shall be 
subject to the same maximum penalty amounts stated in paragraph (1).

(h) Regulation

    The Secretary shall promulgate regulations and guidelines to 
implement this section. Such regulations shall specify that for purposes 
of subsection (g) of this section, a repeat negligent violation 
involving the same issue shall be treated as a repetitive violation for 
a maximum period of 3 years.

(i) Court of International Trade proceedings

    Notwithstanding any other provision of law, in any proceeding 
commenced by the United States in the Court of International Trade for 
the recovery of any monetary penalty claimed under this section--
        (1) all issues, including the amount of the penalty, shall be 
    tried de novo;
        (2) if the monetary penalty is based on fraud, the United States 
    shall have the burden of proof to establish the alleged violation by 
    clear and convincing evidence; and
        (3) if the monetary penalty is based on negligence, the United 
    States shall have the burden of proof to establish the act or 
    omission constituting the violation, and the alleged violator shall 
    have the burden of providing evidence that the act or omission did 
    not occur as a result of negligence.

(June 17, 1930, ch. 497, title IV, Sec. 593A, as added Pub. L. 103-182, 
title VI, Sec. 622(a), Dec. 8, 1993, 107 Stat. 2181.)


                             Effective Date

    Section 622(b) of Pub. L. 103-182 provided that: ``The amendment 
made by subsection (a) [enacting this section] applies to drawback 
claims filed on and after the nationwide operational implementation of 
an automated drawback selectivity program by the Customs Service. The 
Customs Service shall publish notice of this date in the Customs 
Bulletin.''

                  Section Referred to in Other Sections

    This section is referred to in section 1621 of this title; title 28 
section 1582.
