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entitled 'U.S. Customs Service: Compliance with the Inflation 
Adjustment Act' which was released on September 9, 2002. 

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United States General Accounting Office: 
Washington, DC 20548: 

September 9, 2002: 

The Honorable Robert C. Bonner: 
Commissioner: 
U.S. Customs Service: 

Subject: U.S. Customs Service: Compliance with the Inflation Adjustment 
Act: 

Dear Mr. Bonner: 

Earlier this year, we initiated a governmentwide review of the 
implementation of the Federal Civil Penalties Inflation Adjustment Act 
of 1990, (Inflation Adjustment Act) as amended. [Footnote 1] The 
Inflation Adjustment Act requires each federal agency to issue a
regulation adjusting its covered maximum civil monetary penalties for 
inflation by October 23, 1996, and requires each agency to make 
necessary adjustments at least once every 4 years thereafter. During 
our review, the U.S. Customs Service’s Office of Chief Counsel 
indicated that three of the agency’s civil penalties are covered by the
act but the agency had not adjusted any of them for inflation. This 
report is intended to bring this matter to your attention and to 
recommend corrective action. 

Customs Identified Three Civil Penalties That Are Covered by the 
Inflation Adjustment Act: 

Section 3 of the Inflation Adjustment Act defines a covered civil 
penalty as any “penalty, fine, or other sanction that … is for a 
specific monetary amount as provided by Federal law” or “has a maximum 
amount provided for by Federal law,” and “is assessed or enforced by an 
agency pursuant to Federal law” and “is assessed or enforced pursuant 
to an administrative proceeding or a civil action in the Federal 
courts.” Customs’ Office of Chief Counsel provided us with a list of 
civil penalties that it considered covered by the Inflation Adjustment 
Act. [Footnote 2] Table 1 lists those penalties as well as their 
maximum penalty amounts, assessment methods, and the dates that the 
penalties were last set or adjusted. 

Table 1: U.S. Customs Service Civil Penalties Covered by the Inflation 
Adjustment Act: 

U.S.C. citation: 46 U.S.C. App. 289; 
Description of violation: Transportation of passengers between ports or 
places in the United States by foreign vessels; 
Maximum penalty amount: $200; 
Assessment method: For each passenger transported and landed; 
Date penalty was last set or adjusted: 1898. 

U.S.C. citation: 46 U.S.C. App. 316; 
Description of violation: Use of a foreign vessel to tow any vessel 
other than a vessel in distress, from any port or place in the United 
States, to another port or place in the United States; 
Maximum penalty amount: $1,000[A]; 
Assessment method: Per violation; 
Date penalty was last set or adjusted: 1940. 

U.S.C. citation: 46 U.S.C. App. 316; 
Description of violation: Use of a foreign vessel to tow any vessel 
other than a vessel in distress, from any port or place in the United 
States, to another port or place in the United States; 
Maximum penalty amount: $50; 
Assessment method: Per ton on the measurement of every vessel towed in 
violation of this section; 
Date penalty was last set or adjusted: 1940. 

Note: For purposes of this report, we considered different penalty 
amounts within the same statutory provisions (e.g., per violation and 
per ton on the measurement of every vessel towed) to be separate civil 
penalties. 

[A] The statutory minimum penalty for this violation is $250. 

Source: U.S. Customs Service’s Office of Chief Counsel. 

[End of table] 

Customs Has Not Adjusted Its Covered Civil Penalties for Inflation: 

Under the Inflation Adjustment Act, Customs (like other covered federal 
agencies) was required to publish a regulation by October 23, 1996, 
adjusting its maximum civil penalties for inflation. The amount of the 
adjustment was to be based on changes in the Consumer Price Index (CPI) 
from June of the calendar year in which the penalty was last set or 
adjusted to June of the year prior to the adjustment (i.e., June 1995 
for adjustments made in October 1996). However, the statute limited the 
first adjustments of the agencies’ penalties to 10 percent of the 
penalty amounts. Because the CPI had increased by more than 10 percent 
since the penalties in table 1 were last set or adjusted, Customs 
should have published a regulation in the Federal Register by October 
23, 1996, increasing each of these penalties by 10 percent. 

The Inflation Adjustment Act also required Customs to examine its civil 
penalties by October 23, 2000, and, if necessary, to make a second 
round of inflation adjustments. The calendar year 2000 adjustments were 
to be based on changes in the CPI from June of the year in which the 
penalties were last adjusted (e.g., June 1996) to June of the year 
prior to the adjustment (June 1999). 

However, our review of the Federal Register for calendar years 1996 
through 2001 did not reveal any Customs regulations that increased the 
agency’s civil penalties for inflation. Customs’ Office of Chief 
Counsel confirmed that the agency had not published any penalty 
adjustment regulations pursuant to the Inflation Adjustment Act, but 
was not aware why the agency had not done so. 

Recommendation for Executive Action: 

We recommend that the Commissioner of the U.S. Customs Service initiate 
a regulatory action to adjust for inflation all of the agency’s civil 
penalties that are covered by the Inflation Adjustment Act. 

Agency Comments and Our Evaluation: 

On August 20, 2002, we provided a draft of this report to the 
Commissioner of the U.S. Customs Service for his review and comment. On 
August 30, 2002, the Acting Director of Customs’ Office of Planning 
provided written comments indicating that the agency concurred with our 
recommendation and would amend its regulations to comply with the 
Inflation Adjustment Act. She also said that in concert with those 
regulatory changes, Customs would publish a Federal Register notice 
indicating the new amounts of the penalties as adjusted for inflation. 

We are sending copies of this report to the appropriate congressional 
committees, and it will be available at no charge on GAO’s web site at 
[hyperlink, http://www.gao.gov]. If you or your staff have any 
questions on the matters discussed in this report, you may contact 
Curtis Copeland or me at (202) 512-6806. Major contributors to this 
report include Joseph Santiago and Oliver Walker. 

Sincerely yours, 

Signed by: 

Victor S. Rezendes: 
Managing Director: 
Strategic Issues: 

[End of correspondence] 

Footnotes: 

[1] The Inflation Adjustment Act is codified at 28 U.S.C. 2461 note. 
The 1990 act was amended in 1996 by the Debt Collection Improvement 
Act, which added the requirement for agencies to adjust their civil
penalties by regulation (Pub. L. 104-134, Sec. 31001, 110 Stat. 1321-
373). 

[2] The Inflation Adjustment Act explicitly exempts other civil 
penalties that Customs administers under the Tariff Act of 1930 (19 
U.S.C. 1202 et seq.). 

[End of section] 

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