Customs and Border Protection Revises Liquidated Damage Practices for Late Files and Mitigation Formulas


Customs and Border Protection (CBP) is in the process of making significant changes to its disposition of liquidated damage claims. One such change is to the amount CBP will assess upon mitigation of an initial claim for liquidated damages, upon receipt of a petition seeking relief and/or demonstrating the existence of mitigating factors. Preliminary indications are that the settlement amounts currently being offered, as set forth in CBP’s Fines, Penalties and Forfeitures Guidelines, will be increased to adjust for inflation, and likely will be further increased to reflect CBP’s view that its current guidelines are too lenient to effectively discourage conduct in breach of importer bond conditions, as provided in section 113.62 of the CBP Regulations.

The second change relates to CBP policy for untimely petitions (normally due 60 days from the date of the liquidated damages notice). Currently, the formula CBP applies for late petitions calculates the mitigated amount as if the petition were filed timely and then adds the greater of (1) $400.00 or (2) one-tenth of one percent per day (for each days the petition is delinquent), multiplied by that mitigated amount. Under the new formula, CBP will apply the one-tenth of one percent per day factor to the full original assessment, rather than to the mitigated amount (this can result in substantial increases in the late petition assessment, particularly where the original assessment is based upon the full value of the goods, or even a multiple of that full value, while the mitigated amount is typically only several hundred dollars). Additionally, CBP will no longer permit the filing of late petitions more than 180 days after the petition due date.

The publication/effective date of these changes and of the new mitigation guidelines is not yet known but there has been some indication from CBP personnel that the changes will be subject to public notice in the next several months. For the interim period, please note that CBP at some ports is already refusing to accept petitions which are considered materially delinquent and are instead, reissuing claims for the full original liquidated damages amount (currently, the standard for non-acceptance of a petition is discretionary and would not preclude a determination that a petition filed after 180 days will be rejected). As such, it is essential for importers to insure that procedures are in place to timely review and respond to CBP demands for liquidated damages.

This information has been provided by Edward A. Ackerman of Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt for the benefit of our clients. If you have any questions, please contact our office.