CBP's Guidelines for Assessing, Mitigating Liquidated Damages Claims for PMS Late/NonPayment

These new guidelines are effective on October 17, 2008.

(Prior to October 17, 2008, if the bond principal was late with a PMS payment by more than two business days, CBP notified the bond principal and the surety on the affected bond that the bond principal was immediately required to file entry summary documentation with estimated duties and fees attached before its merchandise would be released from any CBP port. The bond principal would only be released from such a requirement upon full payment of any unpaid estimated duties and fees that had come due under the PMS test.)

Both CBP's "description of the changes" and its guidelines are highlighted below:

Notification if Duties and Fees Not Paid

When a PMS payment is not timely paid in full, as a matter of policy and before issuing any claim or claims, CBP will notify the statement filer (either the importer principal and/or their customs broker) electronically or by paper notice on or before the first day of the month following the month that the payment was due that those estimated duties and fees have not been paid.

Two Working Days to Pay

The statement filer will then have two working days from the date of notification to pay the estimated duties and fees or correct the situation.

Not paid in two days. If the estimated duties and fees are not paid or the situation is not corrected after this two-working day period, then CBP will issue liquidated damages claims to bond principals and sureties, jointly and severally, for non-payment of the estimated duties and fees.

Paid in two days. If the estimated duties and fees are paid in an untimely manner, but prior to the expiration of the two working-day period, then CBP may issue liquidated damages claims or a broker penalty claim (see below for details).

(Payment of the estimated duties and fees within the two working-day period does not relieve any charged party from incurring a claim for late payment of those estimated duties and fees.)

Repeated Incidents by Brokers

Any customs broker who is responsible for repeated incidents of late or non-payment of estimated duties under the PMS test may be subject to penalties for violation of the provisions of 19 USC 1641. In the most serious cases of repeat non-compliance, license revocation or suspension actions may be brought.

Non-Payment of Duties and Fees

CBP describes the following actions and available options when duties and fees under the PMS test are not paid:

Liquidated damages. When duties and fees due under PMS are not paid, liquidated damages in an amount equal to two times the unpaid estimated duties and fees or $1,000 (whichever is greater) may be assessed. No claim for liquidated damages can be issued for an amount in excess of the bond obligated to guarantee payment of these estimated duties and fees.

CBP will provide notification of claims for liquidated damages to the bond principal and surety.

Note: The importer/bond principal is responsible for payment of estimated duties and fees, and the bond amount does not limit their liability for payment of those duties and fees.

Petition for relief. A petition for relief may be filed in accordance with the provisions of 19 CFR 172.2 and 172.3, except that the time period to submit the petition when estimated duties have not been paid shall be 10 days from the date of notification.

Suspension from test. If estimated duties and fees due under the PMS test are unpaid and a claim for liquidated damages for non-payment of estimated duties and fees is assessed, CBP may deny the bond principal the privilege of paying estimated duties and fees via the PMS process.

CBP will have the discretion to either require the bond principal to pay estimated duties and fees on an entry-by-entry basis or require the bond principal to file entry summary documentation with estimated duties and fees attached before its merchandise may be released from any CBP port.

Any bond principal that is denied the privilege of paying estimated duties and fees via the PMS process will be so denied for a minimum of three months.

If during that three-month period the bond principal establishes a record of timely payment of estimated duties and fees on an entry-by-entry basis, it may petition CBP to participate again in the PMS test. CBP states that it will notify the surety of any bond principals removed or reinstated to the PMS test.

Mitigation once payment made. Unless a petition for relief shows that the duties and fees were not owed or that the duties and fees were paid, there will be no relief afforded from a claim for liquidated damages for failure to pay estimated duties and fees under the PMS until the estimated duties and fees are paid.

Once estimated duties and fees are paid, CBP will re-issue liquidated damages as a claim for untimely payment of estimated duties and fees, as described below.

Failure to pay. The failure to pay rightfully owed estimated duties and fees will result in removal of the bond principal from the PMS test and may result in the requirement that the bond principal file entry summary documentation with estimated duties attached before its merchandise may be released from any CBP port.

Untimely Payment of Duties and Fees

CBP describes the following actions and available options when the payment of duties and fees under the PMS test is untimely:

Liquidated damages. When duties and fees due under the PMS test are paid in an untimely manner, liquidated damages in an amount equal to two times the unpaid estimated duties and fees or $1,000 (whichever is greater) may be assessed.

No claim can be issued for an amount in excess of the bond obligated to guarantee payment of these estimated duties and fees. Notification of the claim by CBP will be provided to the bond principal and surety. An Option 1mitigation may be offered on the face of the notification of the claim, with Option 1 amount being calculated in accordance with CBP's guidelines.

Note: When estimated duties and fees are paid untimely but prior to the expiration of the two-working day period, in lieu of liquidated damages, CBP may issue a$30,000 broker penalty against a broker for failing to exercise responsible supervision and control over the customs business it conducts, in violation of 19 CFR 1641. If such a claim is issued, an Option 1 mitigation amount may be authorized.

Option 1. An offer of payment of the Option 1 amount in settlement of the claim will be authorized only after payment of estimated duties and fees.

If claim for liquidated damages for failure to pay estimated duties under PMS has not been issued to the bond principal and surety with regard to the untimely payment, the Option 1 amount will be calculated at 1% of the untimely paid duties and fees (but not less than $1,000 nor more than $4,000) plus an amount equal to interest that would have accumulated had it been calculated at the Internal Revenue Service (IRS) rate beginning the time the payment was due until it is paid. The amount equal to the interest charge will accrue against both the principal and surety from the date the payment was due until the date of payment.

However, when a failure to pay estimated duties under PMS has been issued to the bond principal and surety with regard to the particular claim, the Option 1 amount will be calculated at 1 1/2% of the untimely paid duties and fees (but not less than $1,500 nor more than $6,000) plus an amount equal to interest that would have accumulated had it been calculated at the IRS rate beginning at the time the payment was due until it is paid. The amount equal to the interest charge will accrue for both the principal and surety from the date the payment was due until the date of payment.

Option 2.A petition may be filed in accordance with the provisions of 19 CFR Part 172. CBP states that it may remit or mitigate any claim to an amount that exceeds the Option 1 amount if the facts and circumstances so warrant.

Brokers that don't act. If in the time period prescribed, a customs broker fails to pay the Option 1 amount or petition for relief in a 1641 assessment described in the broker penalty note above, liquidated damages claims will be issued against all bond principals and sureties whose bonds were breached.

(CBP adds that any notification of the assessment of claims for liquidated damages for non-payment of estimated duties and fees will be considered to be a demand on the surety for the unpaid estimated duties and fees, despite anything to the contrary in 19 CFR 172.1 and 172.4. Bond principals and sureties will share concurrent petitioning time frames for this violation.)

¹The NCAP (National Customs Automation Program) test is part of CBP's Automated Commercial Environment (ACE)

²PMS allows importers with ACE Secure Data Portal accounts and importers with "non-portal" ACE accounts via a customs broker to deposit estimated duties and fees on an interest-free monthly basis. Deposits are required to be made by the 15th working day of the month following the month in which the goods are either entered or released in order for the statement to be marked paid and treated as a timely payment.

(See ITT's Online Archives or 09/10/08 news, 08091010, for BP summary of CBP terminating its semi-monthly statement processing prototype as participants have moved to PMS. See ITT's Online Archives or 09/04/08 news, 08090405, for BP summary announcing that CBP updated its ACE FAQ, which contains section on PMS.)

CBP contact- Jeremy Baskin Jeremy.Baskin@dhs.gov

CBP notice (FR Pub 10/17/08) available at http://edocket.access.gpo.gov/2008/pdf/E8-24696.pdf