Practice areas > Voluntary Disclosures

Voluntary Disclosure Program

The reality of effective customs enforcement for any country is that it is dependent upon voluntary self-compliance by those involved in the international trade industry. Of course, the U.S. government attempts to encourage compliance though the use of audits and enforcement actions, as well as increasing civil and criminal penalties under the law. In fact, U.S. penalties have been steadily escalating since 9/11, as exemplified by the October 2007 enactment of the International Emergency Economic Powers Enhancement Act (IEEPA), which focuses upon export control violations.

Perfect Compliance is Unrealistic

Those sophisticated in international trade recognize that it is unrealistic to assume that any set of regulations can absolutely erase, or prevent, regulatory violations. Perfect compliance simply cannot be sustained, over time, by companies engaging in large numbers of import/export transactions that involve complex regulations. Excellence in compliance is a goal that can be reached, however, and it is likewise reasonable to assume that excellence in compliance can be sustained over time.

For those acting in good faith to maintain compliance, the problem becomes how best to deal with those issues that fall between the excellence and perfection standards: what does one do in good faith when noncompliance occurs? It is here that voluntary disclosure programs come into play: plans are established on when a self-disclosure is required, and how best that disclosure should be made.

Implementing Voluntary Disclosure Programs

Disclosures to U.S. Customs & Border Patrol

Any program implementing voluntary disclosures to U.S. Customs & Border Patrol must be entered into after much analysis and deliberation, and the program must be voluntary and initiated by the client. Disclosures will not qualify if they are made after the client has knowledge of an audit, investigation, or other enforcement action. Additionally, each disclosure must involve at least one monetary penalty and include information that is one or more years overdue.

Voluntary disclosures are made to U.S. Customs to mitigate the risk of penalties arising from import violations. A properly presented voluntary disclosure can result in a statutory guarantee of no penalty being assessed.

However, in processing the disclosure, it is very important to insure that every nuance surrounding the error, or non-compliance, has been reviewed and all necessary corrections have been made. This involves a study of the most minute detail. Without undertaking this review, the company risks the chance that Customs will find minor deficiencies, and thereafter assess a penalty.

Disclosures to Other Agencies

The same standards of exacting care should be undertaken for voluntary disclosures to any other federal agency involved in the customs compliance effort, as well as every country that may be impacted. Each agency has its own individual policies and procedures regarding disclosure investigations and resolution. Each country will have its own standards and protocols, as well. It is important for companies to understand the needs and wants of the agency, and the country, involved prior to making any kind of formal disclosure of noncompliance with the agency’s regulations or the nation’s laws.

Without a thorough understanding of the scope of disclosure requirements involved, a company acting in the utmost good faith can still find itself facing severe fines and penalties. One recent, and infamous, example involves the Chiquita Banana matter, where the company’s voluntary disclosure ultimately resulted in potential criminal charges being pursued by Columbian authorities against both the directors and officers involved in the situation. The importance of proper planning of each voluntary disclosure cannot be underestimated.

Fuerst Ittleman & Voluntary Disclosures

Fuerst Ittleman advises clientele on voluntary disclosures of a wide variety of customs law violations, as well as conducting internal investigations on behalf of the client. Clients can expect agency responses to range from something as simple as a warning letter without any accompanying fine or penalty, to a full-blown courtroom proceeding seeking hefty fines and imprisonment of principals. Accordingly, Fuerst Ittleman also advocates on behalf of clients with federal authorities, negotiating settlements and defending companies in both agency enforcement proceedings as well as federal criminal prosecutions.

Voluntary disclosure programs remain controversial: there are those who argue against ever making them. There are those that argue they must always be made. The better road, from Fuerst Ittleman’s perspective, is to allow the client to make the final decision, after viewing the matter from both a legal and business viewpoint: has any law really been violated? When and where did the violation occur? A minor infraction seven years ago must be weighed very differently from a two year old violation of a major anti-terrorist policy.