Customs Law Advisory - $250,000 Settlement Payment Underscores Importance of Accurate Export Documentation, Even for Shipments Not Subject to Restriction or License

Earlier this month, the US Department of Commerce’s Bureau of Industry and Security (BIS) settled an enforcement action brought against freight forwarder P.R.A. World Wide Trading Co., Inc., of Brooklyn, NY (PRA) for misdeclaring the value of exported goods. The $250,000 settlement amount underscores the importance of complete and accurate export declarations, even where the merchandise is not subject to an export license or other restriction.

The violations at issue were alleged to have occurred from June 2001 to December 2002.  BIS’s proposed charging letter alleges that for forty-one export shipments, PRA declared values in the Shipper’s Export Declarations (SED) that were less than 20 percent of the actual value of the merchandise.  The BIS documents also describe an additional violation: conspiracy to make false statements regarding the value of the exported merchandise. The proposed charging letter states that PRA received repeated warnings against declaring incorrect export values. The documents contain no indication of exports of particularly sensitive products for restricted end-users or end-uses, only incorrect, low values repeatedly declared on export documents.

Parts 758.1 and 772 of the Export Administration Regulations (EAR) confirm that the Shipper’s Export Declaration (SED) is an export control document.  False statements on export control documents are a violation of the EAR, as demonstrated in the PRA case. At the time of the alleged PRA violations, BIS had the authority to assess civil penalties up to a maximum of $11,000 per violation. In the PRA case, this meant a potential maximum of $462,000.  Under the settlement agreement, PRA is required to pay a civil penalty in the amount of $250,000, with $160,000 due within 30 days from the order and the balance suspended for one year (then waived if all settlement conditions are met).

Since the PRA events, the potential maximum amount for civil penalties has increased to $50,000 per violation. Thus, if the PRA violations occurred today, the total penalty amount at issue could be as high as $2.1 million on forty-two potential violations. The PRA case highlights the potentially high cost of export declaration errors, even for a data point such as valuation, which is often overshadowed by exporter concerns regarding licensing and other export control provisions. The PRA documents do not describe what role if any was played by the exporter or US Principal Party in Interest in these shipments. However, even though this case involved a freight forwarder, rather than an exporter, equal responsibility for accurate export declarations rests with the exporter. This is especially true in current practice since many exporters use direct electronic filing under the Automated Export System (AES Direct).

The action taken by BIS against PRA illustrates the need for all parties involved in exporting merchandise from the United States to meet the EAR’s requirements for accurate export declarations, even for shipments that do not require a license or trigger any other export restriction. Failure to meet these requirements can lead to costly enforcement action not just from the sort of penalties faced by PRA, but also due to the increased potential for BIS scrutiny of the accuracy and completeness of other aspects of a company’s export compliance efforts.

If you have any questions on making proper export declarations, please feel free to contact Greg McCue at 202.429.6421.