Law and the Border: Don’t take pre-clearance rules at Customs lightly

by Daniel Joyce

In 1999, carriers saw the introduction of Commercial Vehicle Processing Centres (CVPCs) at Canadian Customs plazas near U.S. borders. The purpose of these CVPCs was to allow the review of Customs entry paperwork before the truck actually travelled across the border into the United States.

For example, prior to introduction of the CVPCs, up to 700 trucks a day were being referred into secondary U.S. Customs inspection at the Ft. Erie/Buffalo port of entry. The concept behind the CVPCs was to reduce the number of trucks requiring secondary inspection and to reduce congestion at the bridge, allowing trucks to be cleared and released faster.

Unfortunately, the opposite can be true for congestion around CVPCs in Canada. Concerns about exhaust fumes, noise and congestion in Ft. Erie resulted in the movement of the Ft. Erie CVPC a few kilometres to the west, farther from the border.

The introduction of CVPCs allowed for the implementation of U.S. Customs’ Pre-Arrival Processing System (PAPS). The combination of CVPC and PAPS was a joint development effort of government and industry groups from both sides of the border, including the Ontario Trucking Association, Canadian Trucking Alliance, American Trucking Associations and the Northern Border Customs Brokers Association.

U.S. Congress enacted the Trade Act of 2002 in response to security concerns following 9/11. The Act amended certain provisions of the Customs laws to require carriers to transmit cargo information electronically prior to the carrier’s arrival at a U.S. port of entry.

What are the consequences for noncompliance? Many carriers may be unaware that the Customs regulations provide for a statutory penalty of US$5,000 for any violation of the electronic transmission requirement.

A more common scenario is a driver who finds himself at the port of entry without having transmitted his cargo data in advance, either through inadvertence or communications problems. The driver faces a dilemma – do I spend more time trying to find a CVPC or other place for transmitting data, or do I just take my chances and cross the border? It is not an unreasonable assumption to believe that Customs could excuse the electronic transmission requirement in some cases, allowing the driver to clear the load “the old fashioned way,” and perhaps receiving a warning not to do it again. But that doesn’t happen. There is no warning and leniency for first-time offenders. Drivers have been shocked to find they are automatically hit with a US$5,000 penalty, with no ability to talk themselves out of it at the time of clearing the load.

Fortunately, there is a process for requesting a reduction in the statutory US$5,000 penalty. Despite the union of Customs and Immigration personnel into U.S. Customs and Border Protection, the Customs penalty system operates in virtual identical fashion to the former U.S. Customs regime.

The driver is issued a Notice of Penalty on the same form used previously by U.S. Customs, with a summary of the violation and the relevant laws and regulations. The driver has 60 days to either pay the penalty or seek a reduction (“mitigation”) of the penalty. In most cases of this type, no penalty is payable at the port of entry as a condition of releasing the load. Sometimes smaller penalties are assessed and collected at the port of entry, and in those cases the petition process, discussed below, can be used to seek a refund.

It is almost always the driver, not the carrier, who receives the penalty. In most cases, the carrier’s name does not even appear on the Notice of Penalty. This is often a chilling experience for a driver, who is subject to a penalty far in excess of any income he or she will make on the trip.

Customs regulations provide for a “petition” procedure to seek a reduction, or, in some cases, a complete elimination (“remission”) of the penalty. The petition must be filed in duplicate and addressed to the Fines, Penalties and Forfeiture Officer at the Customs office involved, and must contain certain required identifying information about the violation and the parties involved.

There is no special, pre-printed form that can be downloaded and completed.

The petition procedure is generally very fair, and the US$5,000 penalty is almost always reduced in circumstances where the driver made a simple mistake, or error in judgment. But you can’t get a reduction unless you ask for it.

All drivers and carriers should be aware of the severity of the Customs regulations and avoid the temptation to test the system.

However, if you do have a problem, you can have some comfort in knowing that there is an avenue for relief.

– Daniel Joyce is a partner with the Buffalo N.Y. law firm Jaeckle Fleischmann & Mugel LLP. He can be reached at (716) 843-3946.

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