U.S. Customs Service
Compliance with the Inflation Adjustment Act Gao ID: GAO-02-1045R September 9, 2002Earlier this year, GAO began a governmentwide review of the implementation of the Federal Civil Penalties Inflation Adjustment Act of 1990. The 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 the review, the Customs Service's Office of Chief Counsel indicated that three of the agency's civil penalties are covered by the act but that the agency had not adjusted any of them for inflation.
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Director: Team: Phone:GAO-02-1045R, U.S. Customs Service: Compliance with the Inflation Adjustment Act
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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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