Companies that import into the United States may soon have their ability to avoid customs monetary penalties significantly reduced as a result of new guidelines to be imposed by US Customs and Border Protection (CBP). CBP has indicated it will soon issue guidance regarding the use of a CF-28 (Request for Information) and/or a CF-29 (Notice of Action) to inform an importer that it is the subject of a formal investigation covering issues or entries specified in these documents. The effect of this guidance could be to choke off potential prior disclosure benefits that importers enjoy today to insulate against penalties for errors made in their customs entries. Many importers that receive CF-28s and CF-29s rely on these notices to conduct their own internal reviews for the purpose of making prior disclosures if they find material errors in their customs entries.

Importers that do not disclose violations going back five years run the risk of having CBP issue a penalty for these violations. The penalty process typically begins when CBP commences a formal investigation of issue(s) relating to customs entries made by an importer. When an importer receives notice of such an investigation, it effectively removes the ability for the importer to make a prior disclosure to CBP to avoid monetary penalties for these mistakes.

Recently, certain CBP ports have included language in their CF-28s and CF-29s informing importers that the matters subject to these documents are under “formal investigation.” This is contrary to longstanding CBP policy regarding the use of these documents. CF-28s are requests CBP ports routinely use to solicit additional information about a shipment after it has been allowed entry into the United States. CF-29s are used by CBP ports to communicate to an importer that CBP has assessed additional duties on an entry or group of entries and has commenced the liquidation (finalization of entries) process. Neither of these forms historically has been used by CBP to notify importers that a formal investigation that could lead to potential penalties has been commenced by CBP.

What should importers do?

  • First, importers should closely monitor CBP actions on the use of CF-28 and CF-29. Any changes on the use of these forms could come in early 2011.
  • Second, importers should ensure that they have procedures in place that designate company personnel responsible for receiving and reviewing CF-28s and CF-29s, and should inform and monitor its customs brokers regarding these procedures. (We are aware of several instances where the customs broker received the CF-28 form and did not communicate the contents to the importer or overlooked the form all together.)
  • Third, if an importer receives CF-28 or CF-29 prior to CBP issuing its guidance on these forms, it should immediately consider whether filing a prior disclosure is warranted.
  • Fourth, to stay well ahead of the curve, we recommend importers conduct a self-assessment on its high risk transactions in order to determine whether prior disclosures to CBP would be beneficial in advance of the guidance CBP will issue.

A prior disclosure, when it is available, has been a powerful tool to mitigate potential customs penalties. We will be monitoring CBP activities in this area, and will be working with clients to minimize their risks regarding likely future CBP changes in the prior disclosure process.