Customs regulations require bonds to be filed by the importer of record, warehouseman, and/or other custodians of merchandise, to ensure compliance with a variety of obligations related to the entry, transportation, and storage of imported goods. If there is a breach of an obligation under the bond, Customs and Border Protection (CBP) may issue a claim for liquidated damages. Pursuant to 19 CFR § 172.3(b), petitions for relief from liquidated damages must be filed within 60 days from the date of mailing to the bond principal the notice of claim for liquidated damages or penalty secured by a bond.
I. Background
Notwithstanding 19 CFR § 172.3(b), petitions for relief may be accepted, at the discretion of the Fines, Penalties, and Forfeitures (FP&F) Officer, at any time prior to commencement of any sanctioning action against a bond principal or issuance of any notice to show cause against a surety. If a petition is untimely, CBP’s Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages TD 02-20 at 248, state that CBP shall first consider the petition as though it had been filed timely and determine the amount of mitigation that would have been afforded in the case had the petition been filed timely. This determination is known as the base amount.
Once the base amount is determined, CBP charges an additional amount in excess of the base by calculating the number of calendar days the petition is late and charging an additional mitigation amount of 0.1 percent per day, but in no case shall the additional amount be less than $400.
II. Changes to Mitigation Guidelines
CBP plans to tighten its policy with regard to acceptance of late petitions and raise the mitigated amount when determining additional amounts to be paid. CBP observed that current mitigation guidelines have not served to deter or reduce the number of late filings in liquidated damages cases.
CBP proposed to amend the guidelines to provide limitations on an FP&F officer’s discretion to accept late filings. Late petitions will not be accepted more than 180 days after the date of mailing of the notice of claim to the bond principal, or in the case of a surety, the date of mailing of the first demand; or after the petitioner has previously submitted a petition in the same case and/or been offered mitigation, and such mitigation amount was not paid within the prescribed period; or after the claim is referred to the Office of Chief Counsel for collection; or after commencement of sanctioning action against the principal; or after the issuance of a notice to show cause against the surety.
With respect to calculating late petition mitigation amounts, CBP will multiply the full assessed amount of the claim (rather than the mitigated amount) by 0.1 percent by the number of days the petition is late. The additional amount will be added to the base amount and in no case will the amount be less than $400.
CBP will also revisit the guidelines in an effort to account for inflation. Many of the mitigated amounts have not changed in 30 years. For example, the mitigated amount for a late entry summary was promulgated in the early 1980s.
III. Implications
Changes to the calculation of final mitigated amounts can result in significant monetary increases. For example, consider the following:
- FDA entry valued at $45,000. Secured 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 CFR § 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.
IV. Conclusion
Importers and brokers should make sure that petitions are timely to take advantage of reduced mitigated amounts. The price for filing late is likely to face substantial increase. The final changes will be published in the Customs Bulletin and, according to CBP, are not subject to formal notice and comment rulemaking. The exact date of publication is unknown.