If violations covered by the reasonable care statutes are discovered prior to knowledge of the opening of an investigation by Customs, a level of protection is afforded through the filing of a prior disclosure. A valid prior disclosure must follow the legal requirements to be considered valid, but when done properly, it will minimize any penalty that Customs may issue on duty loss errors to a maximum of interest on the money due Customs from the date it was due to the actual date of payment in all cases except fraud, and if fraud is alleged by Customs, the penalty will still be minimized. Where the violation did not result in an underpayment of duty or fees, a valid prior disclosure will stop any penalties from being issued.
Some questions to ask in determining if a disclosure will be warranted are:
- Is this a recurring or one time error?
- Is the issue caused by a “clerical error”?
- If this is a classification error, is it a “good faith disagreement” as to proper classification?
- Did Customs bring the problem to your attention or did you find it yourself?
- Have you made a like disclosure in the past?
- Have you made other disclosures?
Without a valid disclosure, “potential” penalty action by Customs, as well as liquidated damage claims may be made. Should this happen, your option is to pay the penalty or liquidated damage claim, which admits a violation has occurred, or to petition for mitigation or remission of such penalty or liquidated damage claim.
A “penalty” is caused by a violation of the reasonable care statutes whereas a liquidated damage claim is caused by a breach of entry bond conditions. As an example, if you have used an incorrect classification that may very well be a reasonable care issue, whereas, if you failed to make a timely entry summary, that is a breach of the bond requirements. In any case, a penalty or liquidated damage claim, once issued, must be paid or defended against. Payment admits a violation which may be considered an aggravating factor should another violation occur, limiting a “prior good record” defense. Accordingly it is recommended that prior to admitting to any type of violation, the facts be reviewed by an expert. Once an argument has been submitted and Customs has made a determination, should it not be favorable, you still have an appeal process that Deringer Logistics Consulting Group (DLCG) can help you navigate through to argue for further remission or relief.
DLCG has the expertise and experience to review any errors and to help formulate a plan of defense to minimize your exposure as well as to defend against “proposed” penalty amounts, by petitioning for remission or mitigation of any penalty or liquidated damage claim for not only the case in point, but for future possible issues as well. We can help you formulate new procedures to show an immediate remedial response to the issue, which will not only help to keep the violation from recurring, but act as a mitigating factor to minimize any penalty.
For more information on prior disclosures, penalties, and liquidated damage issues, please feel free to contact us at 518-298-8281 or send an email to email@example.com so we can schedule a free consultation with a senior trade advisor to discuss your specific situation. We are here to help.