Late EEI Filing: Is It Too Late To Mitigate?

by: Derrick Kyle, Associate and Jordan Jensen, Law Clerk

In 2009, the U.S. Customs and Border Protection (“CBP”) published guidelines that govern the enforcement and mitigation of civil penalties for companies and other entities that fail to comply with the Foreign Trade Regulations (“FTR”) in 15 C.F.R. § 30.[1] These regulations require exporters to file Electronic Export Information (“EEI”), which is the electronic equivalent of the former Shipper’s Export Declaration (“SED”), and is filed through the Automated Export System or AESDirect (“AES”).[2]

While Section 30 includes a list of violations that trigger civil penalties, it also lists mitigating factors for violations. According to the guidelines, proving that the “violation was an isolated occurrence,” submitting a voluntary self-disclosure (“VSD”), or offering evidence that the violating party has a compliance program in place may lessen penalties for exporters that take initiative and proactively remedy potential violations.[3]

Following the release of the 2009 guidelines, exporters have repeatedly criticized the “upsurge in penalties” that CBP has imposed for violations of FTR requirements. Specifically, exporters complain that the stated $10,000 fine per violation is too steep, even though first-time violators have frequently received fines as low as $250.[4]  Over the last decade, the most common violations cited have been entry of the “wrong port of export on submission” and “failure to include the name of a carrier in the EEI.”[5] Violations have also been heavy for filers that claim their goods are “sold en route or on the water,” but who fail to retroactively enter consignee names within the designated four-day period after the sale.[6]

Despite the high penalties, VSDs have often served as a mitigating factor in CBP’s determination of the penalty amount, or whether to impose penalties at all. According to Section 30, VSDs can mitigate penalties only when the Census Bureau receives information for review “prior to the time that [it] . . . has learned the same or substantially similar information from another source and has commenced an investigation or inquiry.”[7]  Additionally, an exporter who files a VSD must thoroughly review “all export transactions for the past five years” and notify Census as soon as possible with all required corrections. 

Importantly, Section 30 mentions nothing that allows for mitigation of a penalty when an exporter lacks the resources to retroactively amend previous export transactions that contain reporting errors. This is problematic for companies that, after the submission of VSDs, must correct the record but lack EEI records and are unable to obtain them from their freight forwarders.[8] Another issue for exporters looking to mitigate penalties lies in the disclaimers of the guidelines, which assert that even the filing of a VSD “may be outweighed by aggravating factors” in a penalty determination.[9]

As such, when considering whether to submit a Census VSD, exporters must weigh all the risks associated with submitting. To receive mitigation under a Census VSD, the exporter must correct the relevant elements in each of its EEIs for a period of five years. Thus, unlike the VSDs of other agencies, a Census VSD requires correction of each of the shipments that contain reporting errors. Depending on the company, these shipments may number in the thousands. This may be especially problematic for those exporters who do not possess copies of their EEIs and who will need to rely on their freight forwarders to provide records, which can be a time-consuming process. Unfortunately, in many cases, forwarders are also unable to provide the necessary records. Although both exporters and forwarders are required to maintain them, we see many cases where neither party possesses the records nor the internal mechanisms to retrieve or tie the EEIs to specific company records.

Thus, in order to avoid high penalties, exporters must exercise diligence by continuously monitoring its EEI filings and providing the Census Bureau with any and all new information concerning corrections to the record. Failure to maintain copies of EEI filings can increase an exporter’s chances of inadvertent errors, and will hurt its chances of being able to correct historic exports. In addition, failure to maintain copies of the EEIs filed is a violation of the FTR recordkeeping requirements. Exporters should closely monitor their EEI filings for potential reporting errors to ensure any required corrections are made promptly.

[1] 15 C.F.R. § 30.1.

[2] Id.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] 15 C.F.R. § 30.74(a)(2).

[8] 46 C.F.R. § 515.2(h)(1).

[9] Id.