More Transparent Customs Administrative Penalty Procedures

On 15 July 2021, the revised Provisions of the Customs on the Procedures for Handling administrative Penalty Cases (new provisions) were officially implemented. Compared with the previous provisions, the new provisions have two particularly noticeable updates to which enterprises should be made aware. Accordingly, management measures and response plans should be specifically adjusted in daily customs processing.

It is clearly stated in the new provisions that the Customs will fully follow the principle of impartiality and openness while according to the combination of penalty and clarification when handling administrative penalty cases. Details are as follows:

• Whoever commits a minor illegal act and makes corrections in a timely manner without causing any harmful consequences shall be exempt from an administrative penalty;
• Whoever violates the law for the first time, resulting in a minor harmful consequences, and makes timely corrections may be exempt from administrative penalty;
• Whoever takes the initiative to eliminate or mitigate the harmful consequences of violations, or takes the initiative to confess to violations not yet in the possession of the Customs, or cooperates with the Customs in the investigating of violations with meritorious performance shall be subject to a lighter or mitigated administrative penalty;
• Whoever proactively cooperates with the Customs in an investigation, admits the fault and accepts the penalty, or commits an illegal act with minor harmful consequences may be imposed a lighter or mitigated penalty.

It should be noted that Customs' specific penalty measures for companies violations are closely related to the attitude of the parties involved and the timeliness of the relief, and that the Customs has a certain discretion on this basis.

It is recommended that enterprises continue to closely monitor the progress of subsequent regulations and customs practices regarding the administrative penalties. For example, in the future, the Customs may introduce a list of “First Violation of Impunity” and benchmarks for administrative penalties to encourage enterprises to minimize the violations and make timely corrections, as it has already introduced with specific measures to reduce administrative penalties under “proactive disclosure”.

This is a groundbreaking combination of penalties and education. In this regard, it is suggested that enterprises should firstly establish daily management records of customs operation. On the one hand, regular self-inspection and evaluation of customs compliance will help to promptly detect irregularities and eliminate or mitigate the harmful consequences to the greatest extent possible, thus minimizing the adverse consequences to be borne by administrative penalties. On the other hand, it will facilitate enterprises to summarize historical experience and continuously improve the daily management of customs operations. At the same time, complete documentation of daily work records can provide strong traceable corroboration for the self-reporting of enterprises when necessary.

The new Provisions effectively reduce the compliance cost in customs issues in various aspects, as reflected in the followings:

• The new Provisions set a time limit within which the Customs shall, in general, make a decision on administrative penalties within six months from the filing date of the administrative penalty case;
• Under certain conditions, the new Provisions provide a new way of handling administrative penalty cases where the facts are clear, the party concerned applies in writing, voluntarily admits the faults and accepts the penalty, and has other evidence to prove, the Customs can handle the case expeditiously by simplifying the process of evidence collection, review and approval;
• The party concerned who has sufficient evidence to prove that there is no subjective fault shall be exempted from administrative penalty.

These measures are designed to reduce unnecessary time costs, communication costs between the Customs and enterprises on both sides. At the same time, it is also noted that the new Provisions encourage the independent proof of enterprises. In the case of enterprises fully discharge the burden of proof, the Customs has a variety of favorable measures, not only can save the processing time of the case, improve efficiency, and even exempt from administrative penalties.

From this perspective, the recommendation to enterprises to establish complete documentation of daily records of customs operations is still valid and applicable. Especially in proving the absence of subjective fault, the regulations do not provide more clear guidelines. However, from an enterprise's operational point of view, it is suggested that enterprises should record all inquiries and communication records related to the customs policies and operations, including website inquiry results, 12360 customs hotline records, customs on-site consultation records, and telephone records, so that if an enterprise has done all possible obligations to achieve compliance and noncompliance still occurs, these records will become valid subjective no-fault proof to support the enterprise's application for exemption from the processing of administrative penalties.