Prior Disclosure to CBP: How It Reduces Customs Penalties

A prior disclosure is a voluntary report to CBP of errors on your entries, filed before CBP opens a formal investigation. Under 19 U.S.C. 1592(c)(4), it sharply reduces the penalty: for negligence or gross negligence, the penalty drops to interest on the unpaid duty. Importers who find underpayments in their own data usually want to disclose them before CBP finds them.

What prior disclosure covers

Section 1592 penalizes material false statements or omissions on entries, such as a wrong classification, value or origin that lowered the duty paid. The penalty depends on whether the violation was negligent, grossly negligent or fraudulent.

How it changes the penalty

• Negligence or gross negligence: With a valid prior disclosure, the penalty is limited to interest on the unpaid duties.
• Fraud: The penalty is limited to one times the lost duties, much less than the penalty without disclosure.
• The unpaid duty itself still has to be paid, generally at the time of disclosure or within 30 days of CBP's calculation.

When it counts as "prior"

The disclosure has to be made before, or without knowledge of, a formal investigation into the violation. Once CBP opens an investigation, the protection is gone. Timing is the whole value.

How to file

• Identify the errors: Which entries, what was wrong, and the duty underpaid.
• Report to CBP: In writing to the port where the entries were filed, describing the circumstances.
• Tender the duty: Pay the underpaid amount, or commit to pay it once calculated.
• Fix the process so the error does not repeat.

Frequently asked questions

Can I file a placeholder disclosure while I investigate? Importers often file an initial disclosure and then perfect it with the full numbers. Customs counsel should guide this.

Does an audit that finds overpayments also find underpayments? It can. A post-entry audit checks both directions.

Where Caspian fits

Caspian's audits find errors in both directions and quantify them entry by entry, so your counsel can decide on a disclosure with real numbers. See our trade audit. This article is general information, not legal advice.

Works Cited:

• 19 U.S.C. 1592, Penalties for fraud, gross negligence, and negligence
• 19 CFR 162.74, Prior disclosure