If you have been keeping abreast of the news over the past few months, you’ll know that there is a possibility of a refund on overpaid tariffs. In contemplating what the process of managing this refund might look like, we are brought to a highly relevant topic, namely, how the US Customs and Border Protection (CBP) processes corrections related to your imports. This is important information not only because it is a vital tool for ensuring accurate filing and the proper payment of duties, but also because it will likely be the mechanism used to process any potential refunds. 

It’s not impossible or even improbable that at some point during your importing career, you are going to make a mistake, a clerical error, or an omission that is going to need correcting. Importers of all shapes, sizes, and experience will almost certainly need to engage with the systems that CBP has in place to manage these corrections effectively, and being familiar with the tools available before you need them can offer a significant benefit for importers.

Broadly speaking, there are two processes available to assist with issues related to corrections, but the differences and mechanisms involved are more complex than one might imagine, both in how these systems actually work and in terms of selecting the right one for the right situation. To that end, this week, we are going to dive into the ways importers can correct mistakes or have mistakes corrected for them, and what the key differences are between those processes.

What is Liquidation? 

If you are new to importing into the US, liquidation can be a somewhat complex concept to grasp. However, the timing associated with it is crucial when discussing what comes next, so it’s worth examining and understanding before proceeding further.

In the simplest terms, ‘liquidation’ is the closing of accounting on an entry by CBP. Essentially, it gives them time to examine a file and correct it as needed, while also granting themselves the space to review and return any overpaid funds on an entry. It operates similarly to a tax return in that you may pay taxes all year, but at the end of that year, it is determined whether you paid too much, too little, or just the right amount. 

For most, this is already a confusing prospect because the final determination occurs 314 days After your goods have been examined, your declarations accepted, your duties paid, and your goods cleared. The confusion arises from the fact that this initial payment, when you actually cross, is referred to as an ‘estimated duty’ and is factored into the liquidation, but it's not necessarily the same number CBP will ultimately determine. 

It should be pointed out that, if you use a broker, the number will almost certainly be the same, as expert attention to compliance and regulations often means more consistent outcomes. 

Essentially, this 314-day window between the estimated duty and liquidation is there to allow CBP time to review and ensure that their estimated duty was correct. At its conclusion, they either confirm that the amount you paid was accurate, refund an overpayment, or make a correction. Notably, any refund or duty increase that is paid is done so with interest, which can sometimes surprise people because it works both ways. Both the money you may end up owing CBP and the money they owe you are paid with interest, so once again, it behooves you to be very diligent in your compliance and work with a broker whenever possible. 

For the purposes of this blog, there are two different areas of interest surrounding this moment in the importing process. The first is what happens when you’ve discovered a mistake or, in some cases, need to request a refund, after you’ve paid the estimated cost, but before liquidation.

The second is what happens when you’ve discovered a mistake after liquidation is already complete, and what steps are available to argue with CBP’s final determination.

What is a Post Summary Correction?

The Pre-Liquidation Process 

A post summary correction (PSC) is a correction that takes place after the initial summary filing but before liquidation. Before we get into further detail than that, it is important to understand a few key terms: 

• An ‘entry summary’ is, according to US CBP, “the documentation necessary to enable U.S. Customs and Border Protection to assess duties, collect statistics, and determine whether other requirements of law have been met.” It is the final filing of the entry after its release, and must be filed within 10 business days (excluding federal holidays) after release. 

• A “statement” is the filing where the initial duties, taxes, and government fees are paid. 

• A “post summary” is a filing on an entry after the initial entry summary filing. This is made within the post-summary window, which we discuss in a moment, and essentially allows you to make corrections on errors or omissions.

• A post summary correction (PSC) is described by CBP as “the sole method for trade to electronically correct entry summaries prior to liquidation.” 

A PSC, in simple terms, effectively works as a new entry summary and a way to fix import valuation errors before liquidation. It allows importers 300 days or up to 15 days ahead of the scheduled liquidation date (whichever is earlier) to get their corrections in. 

There are a few official criteria related to filing a post summary correction with CBP, as quoted from the CBP website: 

• An entry summary must be in accepted status.
• An entry summary cannot be under CBP review.
• An entry summary must be in CBP control.
• An entry summary must be paid in order for the PSC to be successfully submitted.
• If the entry summary is on a Periodic Monthly Statement (PMS), the entry must be “truly” paid in order for the PSC to be accepted. It may be up to 45 days following the entry date before CBP receives payment for the statement.
• The entry summary cannot be liquidated. If it’s liquidated, the filer's options to correct the entry summary are to file a prior disclosure or a protest.

Notably, a PSC is most often used to correct declared attributes or other largely administrative issues related to your import summary. 

Of course, there are a few caveats to this, and, as with everything in the world of international trade. For example, if you are filing an informal entry, i.e., a shipment under $2500, it liquidates upon entry, so while it can provide government fee relief in some circumstances, it does not allow for the option to do a PSC.

There are a hundred corner cases like this, and that is why it is always recommended that you work closely with your broker to determine the best course of action for your specific case. 

What is a Protest? 

The Post-Liquidation Solution

A protest occurs after liquidation and answers the question: What if you believe that the results of that liquidation are incorrect? There is both good news and bad news. The bad news is that a PSC is no longer a valid option. However, the good news is that if you are requesting a refund, you have 180 days (90 if you aren’t requesting a refund) to make a protest in an effort to correct that error. 

The CBP protest process differs from what happens with a PSC in a few key ways:

1. Protests can only be initiated after liquidation has passed.
2. Protests are limited in scope, with only a few key areas being eligible for reassessment: 

• The appraised value of merchandise.
• The classification and rate, and amount of duties chargeable;
• All charges within the jurisdiction of the U.S. Department of Homeland Security;
• Exclusion of merchandise from entry or delivery, or demand for redelivery;
• The liquidation or reliquidation of an entry; and
• The refusal to pay a claim for a drawback

A protest MUST be filed within 180 days after either: 

1. The date of liquidation. 
2. The date of a decision not regarding liquidation, such as the date of extraction, or the date of a written notice, etc. 
3. A surety can file a protest 180 days after the date of mailing a notice of demand for payment against its bond.

It is worth knowing that, once a protest has been filed, CBP has up to two years to review it starting at that point, so, all told, an issue with an import could take up to three years from the time of its crossing to the moment you reach a final resolution - and it may not be the result you want. 

Quite often, protests are related less to mistakes made and more to disagreements with CBP about certain aspects of your final liquidation. A protest is more of a formal legal proceeding as opposed to the more automated PSC. It is an in-depth process that should not be undertaken lightly, or in most cases, without the assistance of a skilled broker or trade lawyer.

With a very real potential for refunds on the horizon, along with increased scrutiny and enhanced enforcement measures designed to recoup lost revenue, understanding the value of these systems to your imports, along with knowing when to best apply them, can be vitally important. Understanding the use case of a PSC vs a protest could save you a lot of time and potentially money, and they are useful tools in any importer’s arsenal. 

As is always the case, when things get complicated, PCB is the team you can trust to help. We can not only help you determine which of these processes make the most sense for your specific situation, but we can also help you with the actual application of those processes. To see what we can offer your import, be sure to get in touch with our US brokerage team today.Next week, be sure to come back and read the companion article to this discussing what happens when you disagree with a penalty that has been applied to your business. We are delving into the CBP processes of mitigation, petitions for relief, and prior disclosure, and it’s not going to be one to miss.