Wednesday, May 12, 2010

Would A $5 Million Penalty Get Your Attention?

Export penalties usually receive more publicity than import violations. Therefore, when we read about an import penalty, it must be a big one! Obviously, a $5 million violation for an importer is big enough news to warrant a prominent place on the CBP web site and several newspapers and online publications. To make a long story short, Pep Boys, a large automotive aftermarket retailer, imported over 200,000 vehicles and engines from China that did not meet U.S. emission standards under the Clean Air Act.

Other than the hefty price tag of $5 million in civil penalties, let’s examine some of the reasons why this story is newsworthy.

(1) Importers Receive Penalties

This case serves as a reminder to importers that they can receive penalties too! The EPA, CBP and the Department of Justice claim that the Pep Boys penalty is the largest importation case in Clean Air Act history.

(2) Large Importers Are Not Exempt

With over 580 stores in 35 states, Pep Boys is a large importer of automotive aftermarket parts and government employees like to go shopping too! We don’t know how this case was initiated, but let’s be honest, we think about importing and exporting when we go shopping. Come on, don’t deny that you flip over products to see where they are made. Have you ever gone into a store that sold textile samples and wondered how they could sell the clothing that had small rips or contained “sample” stamped on them? The EPA said its inspectors and CBP officers “discovered the violations through inspections conducted at Pep Boys stores, at U.S. ports, and through a review of importation documents” provided to the EPA by the company.

(3) CBP Isn’t the Only Agency Importers Need to Worry About

Classifying everything correctly, using the proper origin marking and declaring the correct value makes CBP happy, but it doesn’t mean that the importer is off the hook. Importers should take note that CBP is the gatekeeper for dozens of government agencies; however, most importers are primarily concerned with fewer than ten of those agencies. In this case, the importer was required to ensure that the imported engines and vehicles complied with the same EPA Clean Air Act requirements that applied to domestic products.

Learn from the lessons of your fellow importers! Review your products for compliance with other government agency requirements. Save your organization from the potential fines, penalties and publicity that result from a violation of CBP laws as well as those of other government agencies. Not sure if your products are subject to other agency regulation? Check with your broker, attorney or other trade compliance consultant. If in doubt, contact the government agency you suspect may regulate your product.

HERE to read the Settlement Summary.

HERE to read the Consent Decree.

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