CustomsBrokerLicenseExam

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April 2024, question 15

Broker Compliance · Penalties, recordkeeping and prior disclosure

John Rose has an individual customs broker license and a National Permit. Shady is importing eighteen (18) unmounted 1-carat diamonds worth $2,500.00 each for a total of $45,000.00 in his luggage. Shady is arriving from London, England, via private airplane. Shady intends to put the diamonds in rings to sell from his U.S.-based jewelry store. Rose obtains a power of attorney from Shady to be Shady’s broker, and Rose advises Shady that the diamonds do not need to be declared because the diamonds are absolutely duty free. Which statement below is TRUE with respect to any penalty that may be imposed under these circumstances?

  1. A $45,000.00 penalty may be assessed against the client under 19 USC 1497, but no penalty will be assessed against the broker as only one penalty may be assessed.
  2. A $45,000.00 penalty may be assessed against the broker under 19 USC 1641(d)(1)(D), and a $45,000.00 penalty may be assessed against the client under 19 USC 1497.
  3. A $30,000.00 penalty may be assessed against the broker under 19 USC 1641(d)(1)(D), and a $45,000.00 penalty may be assessed against the client under 19 USC 1497.
  4. A $30,000.00 penalty under 19 USC 1641 may be assessed against the broker and the client jointly, because penalties against a broker may not exceed $30,000.00.
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CBP's answer: C. C: A $30,000.00 penalty may be assessed against the broker under 19 USC 1641(d)(1)(D), and a $45,000.00 penalty may be assessed against the client under 19 USC 1497.

The penalty guidelines use this very example. A broker who counsels a client that gemstones are duty free and need not be declared faces a penalty of $30,000, because a broker penalty under 1641(d)(1)(D) cannot exceed $30,000. The client still incurs the $45,000 personal penalty under 19 USC 1497, which is choice C.

A penalty of $30,000 may be imposed against the broker for such counseling. The client would incur a personal penalty of $45,000 under the provisions of title 19, United States Code, section 1497, but the penalty against the broker cannot exceed $30,000. 19 CFR Part 171, Appendix C

Search for: counseling that gemstones are free of duty

CBP's key cites: 19 CFR Part 171

Question and key from CBP's April 2024 exam and answer key. The walk-through is ours; quotes are from the pinned editions in the reference viewer (HTSUS 2026 Basic, 19 CFR 2025 edition).