For new importers, or just importers who are new to importing into the US, the concept of an ‘estimated duty’ on a customs broker’s invoice for duty can sometimes be a bit of a challenge to understand. After all, how and why are duties and taxes being estimated? Aren’t they comparable to a ticket price? The short answer is no, and the process at play is one referred to as ‘liquidation.’ 

The way liquidation works is, essentially, that the amounts owed to US Customs and Border Protection (CBP), in the form of duties and taxes, remain an ‘estimate’ until they are ‘liquidated’ by CBP. This means that you pay this  estimated amount, and the goods are then released. However, there is still a significant period after that during which CBP can adjust the final accounting if necessary. 

We’ll get into the details in a moment, but the bullet point to take away from this process is this: even though your goods are released, you and your obligation to CBP may not be. 

What is CBP Liquidation?

Importers are required to declare goods to CBP in the form of an entry, most often prepared by a customs broker. Then, based on the value of the goods and the tariff classification, duties and taxes are calculated and ultimately paid to the CBP by the Importer of Record (IOR)  themselves or the broker on behalf of that IOR. 

This part should not seem strange - it is the standard process of declaring goods when crossing. What could potentially come as a surprise to some importers is that you are essentially paying an estimate. A well-calculated, almost always correct estimate, but an estimate nonetheless. 

For up to 314 days after your goods have crossed, CBP is free to review the entry for duty and tax accuracy, up to and including qualifications for Free Trade Agreements (FTAs) like USMCA. This is particularly important because, as we discussed last week, the actual certification process is largely self-declared, and far more important are the ways in which you may be called upon by CBP to prove it. The proving may happen AFTER you have already paid duty and taxes during this liquidation process. 

Once CBP assesses your import, they either agree with the calculations or inform the IOR directly what the recalculated amounts and any owing or payable amounts are. Once all funds have been collected or returned, depending on the scenario, CBP will continue with liquidation. If the duty is not paid, the entry will not be liquidated, and the importer will then be placed on National Sanctions and be unable to import until the bill is paid.

It is worth noting that interest accrues on amounts owed to you and owed to CBP, so accuracy and compliance remain among the most effective ways to save money at Customs. 

When is Liquidation Complete? 

As mentioned above, liquidation typically occurs within 314 days of the day the goods were imported into the US, unless the Customs entry is suspended or extended by the IOR or the CBP. 

The 314-day window is an operational aspect of the law, but CBP can liquidate early if they wish, most often when there is a post-entry correction or some other reason to review, after which they can confirm that everything is in order and liquidate early. 

Liquidation, if necessary, can be extended upon request; however, the IOR must provide a reasonable reason to do so. These extensions are granted in one-year increments and cannot be extended beyond three years.

Generally speaking, CBP can also extend or suspend liquidation. Extension, in this instance, refers to simply moving the date, while a suspension suspends that date until further notice. 

Typical reasons for extensions include: 

• An IOR has requested one and, upon review, CBP has granted it. Often, this is related to the IOR needing more time waiting for a determination from a different legal body.
• Customs is seeking additional information regarding the entry. 

Typical reasons for suspension: 

• Antidumping and/or countervailing duties require more time to properly account for.
• On rare occasions, waiting for a pending ruling in a court of law, typically related to antidumping/countervailing regulations or the legality of a tariff or duty.  

If you have issues or concerns around your invoice from Customs before and even after liquidation, we have you covered, and have written a two-part series covering protests and post summary corrections, along with petitions for mitigation and prior disclosure. 

Like everything in the world of international trade, the process of liquidation can seem complicated, and often it is, but with the help of a skilled broker and the right information, you are in good hands and prepared to tackle its complexities. If you are surprised by your notice, a good broker can help you clarify and even work to protect your legal rights to protest. 

Don’t be afraid to get in touch with our team today if you need help!