Prior disclosures are the means by which importers may report violations of customs laws and in almost all cases avoid the imposition of monetary penalties, with the exception of the interest on the duties and fees which should have been paid at the time of interest. The following represents 10 items to consider when thinking about, and after filing, a prior disclosure.
1. Be certain that you know or reasonably believe that you have included all of the violations committed by the company within the five years preceding the prior disclosure (PD), whether or not these errors resulted in a loss of revenue to the government. Customs and Border Protection may perform an investigation of the company following any disclosure and any non-reported violations discovered would not be covered by the PD provisions.
2. Know how the details of the disclosure will be gathered so that you can reasonably estimate the time that will be necessary to gather the facts to perfect the initial PD. An importer does not have to have all of the details in hand at the time of the initial disclosure.
3. If you are not a member of the Automated Commercial Environment -- Customs' electronic entry system -- you should consider obtaining your import data (ITRAC data) through a Freedom of Information Request Act (FOIA) request. This is a simple and relatively fast process that will give you access to all of your import data and will allow you to check your initial conclusions or ascertain the facts necessary to a successful PD.
4. When preparing the PD be certain to include all of the statutory requirements:
a. Entry numbers and dates OR the date range encompassing your disclosure. Contrary to the belief of many, an importer is not required to list all entries and dates. See 19 C.F.R. 162.74. Each port of entry should also be listed.
b. The class or kind of merchandise involved in the disclosure. More than one class or kind of merchandise can be included in the PD.
c. The error(s) committed and the correct information.
d. The plan to correct the problem that caused the errors.
5. Tender the duties (and interest) due. This may be done at the time the initial PD is filed if all information is contained in the initial PD. Alternatively, you may wait for Customs to agree with your calculations, in which case you should advise the agency that you will deposit the duties upon their confirmation. Although reasonable minds may differ, I suggest that you deposit the duties and interest due at the time of the initial PD. Normally, this will close the matter and you will not hear further from Customs unless they have questions. Some professionals will also differ on whether you should deposit the interest due at the time of the initial deposit of duties or wait for Customs to calculate it and advise you of the amount. The latter view is normally taken with the hope that Customs will not ask for the interest, which does happen from time to time. The deposit of duties, and, yes, interest, is normally required to perfect the PD.
6. If all of the information is not known, advise Customs that you will be updating your disclosure within 30 days (permitted by statute) or such other period that you deem reasonable under the circumstances. You will need to provide a justification for any extension beyond the 30 days granted by law. Make sure that you update your disclosure within the 30-day period allowed or such other period that you were provided by Customs.
7. If you have not completed your review within the extended time provided, advise Customs of what you have discovered and request an additional period of time. Once again, you will need to provide Customs with justification for the extension. Providing Customs with meaningful updates and checks for the loss of revenue discovered, where applicable, will go a long way towards having Customs grant your extension request and otherwise be cooperative.
8. Provide the following certification, or something similar at the end of your disclosure:
"The Importer makes this disclosure without the knowledge of the commencement of any formal investigation of the disclosed information. In addition, should CBP determine that any additional lawful duties or fees, etc., are due in excess of those calculated by the Importer, those amounts will be tendered within 30 days of the date on which the lawful revenue and fees are determined by the Port Director and communicated to the Importer."
This certification is required to make your prior disclosure valid.
9. If you discovered errors but do not believe they rise to the level of violations of the law or regulations, consider filing the PD and asserting your defense to a section 1592 claim, e.g., that the importer acted with reasonable care.
10. Have your customs advisor review your PD before filing. It is quite possible he or she will think of questions or positions that you may not have considered or articulated, which will leave the door open for Customs to raise them. The objective is to make your submission and not hear from Customs again except for a closing letter.