There is simply no other way to put it, for Customs and Border Protection, trade is at the forefront of their focus, and that means at ports of entry there is increased enforcement against non-compliance. The means of detecting infractions are becoming increasingly sophisticated, and mistakes that may have gone undetected in the past are being brought to light with even greater effectiveness. This means, particularly if you are not working with a skilled broker, the odds of you having to contend with a penalty has never been higher.

This is part two of a series. Last time, we discussed how an importer can make changes to their entries after the goods have already been imported to correct a mistake or omission. Today, we are discussing something a bit more serious - what happens when you aren’t just incorrect in your declaration entry, but the issues facing your import are more widespread than you imagined? Knowing how to contend with them when you discover them is of vital importance.

Depending on when you discover your mistake, you may need to engage in a Prior Disclosure or a Petition for Mitigation - the two primary forms of addressing this, the most dreaded of all CBP consequences. 

What is a Prior Disclosure in Customs Compliance?

Prior Disclosure is one of those terms that is often confused with other processes, and is regularly invoked when it doesn’t actually apply to the situation at hand. However, when it is explained, it is a process that makes sense. 

Prior disclosure is an admission of a legal or regulatory error on the part of the importer ahead of an audit by CBP. It is essentially a request to indicate and correct a violation of a regulation before CBP discovers it. A mea culpa to Customs in this way follows a formal process, and by the end, typically, CBP reduces or waives any potential penalty that might have applied to those who submit one of these disclosures before the infraction is discovered.

It’s easy to see how this might be confused with something like a post summary correction or a protest, but the difference between them lies in intention and timing. The intention of a prior disclosure is to show CBP that you are actively working to stay compliant even when an error has been detected, while the intention of a PSC or a protest is to correct a clerical or administrative error before or after a shipment is liquidated. 

The timing is also different; a PSC must occur before a good is liquidated, a protest after, and a prior disclosure can be made any time within five years, so long as the violation being corrected is not already actively being investigated by CBP. 

We discuss prior disclosure in some detail in one of our more recent blogs, regarding a company that was struggling with corporate identity theft. It is a process that you want right when you go through it, which is why we always encourage our readers to work with a skilled trade advisor before embarking on it. Alternatively or in addition to, a trade lawyer can offer real insight into how this process unfolds and what you can do to protect yourself.

What is the Petition for Mitigation Process at Customs? 

A petition for mitigation is, essentially, a request for leniency from CBP. There is a formal process for this request, and certain internal rules and mitigation guidelines for CBP when dealing with penalty petitions. However, it is, in nearly every sense, a request extended to CBP, backed with reasoning and, potentially, evidence to have them reduce or remit your penalty. 

This is available to anyone with a few caveats, which are listed in the relevant section 19 USC 1618:

“…anyone who has incurred a fine or penalty [files] a petition for the remission or mitigation of such fine, penalty, or forfeiture…CBP can reduce the fine, forfeiture, or penalty if they find that such fine, penalty, or forfeiture was incurred without willful negligence or without any intention on the part of the petitioner to defraud the revenue or to violate the law, or finds the existence of such mitigating circumstances as to justify the remission or mitigation of such fine, penalty, or forfeiture,” 

Who receives mitigation or remission is entirely up to CBP. They work off internal policies called ‘Mitigation Guidelines,’ which cover the details of each scenario and offer guidance on how to proceed. Using these guidelines, CBP assesses your petition and determines how to proceed, i.e., approval, denial, or a request for further details. 

In time, you will receive a written response with the verdict and further instructions if they are warranted. In most cases, the response outlines your options, which can include a supplemental petition. 

Supplemental Petitions

What happens if you are not satisfied with the answer you got from CBP? What happens if you were denied because of insufficient information, and CBP needs more to approve your petition? 

In those cases, and any other where you need to respond to the original petition in some way, a supplemental petition is called for. It is, for all intents and purposes, a second petition, but it is vitally important to understand that it is not simply a reiteration of the previous petition. With this supplemental petition, you are reframing or restating your case with added context, information, or support for the original in an effort to increase your chances of a desirable outcome. 

If you are still not satisfied, the petition escalates from there, going through CBP Headquarters all the way to, potentially, the Director of Border Security and Trade, but it is unlikely that it will get to this point. 

Do You Need Help With This?

Like everything we discuss on the Trading Post, there is a lot more detail to be covered in these topics than a blog post allows, and you are always encouraged to speak with an expert about your specific situation and the options that are available to you before beginning with any complicated trade action. 

In the same way that you don’t need a lawyer to defend you in court, you don’t necessarily need help with either of these processes, but saying it is highly recommended to have a Customs broker or a trade lawyer help you through the process is beyond an understatement. The chance of success when you have licensed representation like a Customs broker or a lawyer is significantly higher than going it alone.

A skilled broker or trade advisor can help confirm whether a situation even calls for a prior disclosure or a petition for mitigation, or if those processes are likely to be effective. They can then assist you with the actual steps involved in mitigating Customs penalties, including submitting forms and ensuring that your case is represented as effectively as possible. A skilled trade advisor or lawyer is also incredibly useful when things go wrong and is invaluable in resolving any issues you may encounter. 

PCB is ready to assist you with every step of this process, and our Trade Advisory team has experienced experts available to guide you through the submission process for a prior disclosure or a petition for mitigation. If you need help identifying if a situation seems like it would fit one of these scenarios or applying for either, be sure to get in touch with our team today!
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