CBP TO INCREASE LIQUIDATED DAMAGES ASSESSMENTS

Changes planned to CBP fines

 

In recent discussions with the International Trade Surety Association (ITSA) and Customs Surety Executive Committee (CSEC), CBP stated that they are mandating a significant change to the calculation of final mitigation on liquidated damage claims (LD) when petitions are untimely. Click here to view the source document. CBP believes that the current mitigation guidelines on late petitions have not served to deter or reduce the incidence thereof.

 

Customs Regulations allow 60 days for filing petitions seeking relief from LD. See 19 C.F.R. § 172.3(b). For many years, CBP has accepted late petitions but has granted less relief than for timely petitions. In accordance with CBP’s Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages as amended by T.D. 02-20, late settlements were calculated as follows:

  1. Calculate mitigation as if petition were timely. This is the “base amount.”
  2. Multiply base amount by .001 and then by the number of days by which the petition was late. The minimum additional assessment is $400.
  3. Add step 2 amount to base amount.

The new calculation is reportedly to be as follows:

  1. Calculate mitigation as if petition were timely. This is the “base amount.”
  2. Multiply the full original assessment amount by .001 and then by the number of days by which the petition was late. The minimum additional assessment is $400.
  3. Add step 2 amount to base amount.
  4. Petitions more than 180 days late will not be accepted and the full original assessment amount must be paid. (There was no such previous time limit.)

This change can result in monumental increases to final mitigated amounts, especially for LD cases (primarily late filing of entry summary) subject to “Option 1 Amounts.” An illustration:

  • FDA entry valued at $45,000 secured by an STB. Bond amount (3x value per CBP Bond Amount Guidelines) is $135,000. Assume duty/HMF of zero, MPF of $156, and 7501 filed 10 days late. Per 19 C.F.R. § 113.62(m), the original assessment is $135,000 and the Option 1 Amount is $102. Assume further that the petition is filed 75 days late.
  • Under the old calculation, CBP required $602. (Unless the petitioner can prove that the original violation did not take place or that CBP was entirely at fault for the late 7501 acceptance, CBP would add $100 to the Option 1 amount in response to a timely petition. $400 + $202 = $602.)
  • Under the new calculation, CBP requires $10,327.

A final version is to be published in the Customs Bulletin (exact date unknown) and the foregoing may be revised, including but not limited to an increase to Option 1 calculations. While CBP has said that such changes are not subject to notice and comment requirements, they have reached out to NCBFAA and AAEI with advance notice of the impending changes. If you are a member of either association, we strongly encourage you to contact them with your feelings on this important subject. NCBFAA member comments should be sent to recp@ncbfaa.org with the Subject line “CBP LD Mitigation Changes.” AAEI’s Customs Committee is handling the issue. AAEI member comments should be sent to mrowden@aaei.org. Do not comment directly to CBP, only to your association.

 

Importers and brokers are urged to institute new processes/safeguards to make doubly sure that you petition timely or take prompt advantage of Option 1 Amounts. The price of letting something “fall through the cracks” has just gone up substantially. Also note that the upcoming changes underscore the importance of an importer limiting LD exposure by maintaining a continuous bond in the correct amount rather than multiplying liability through use of STBs.

 

.

 

 

 

Leave a Reply