Prior Disclosures Becoming More 'Fraught' as CBP Emphasizes Enforcement, Lawyer Says

NEW ORLEANS -- Submitting prior disclosures to CBP has recently been more “fraught,” and customs brokers need to consider all available options before advising their clients to move forward with the process, Heather Litman, a customs lawyer with Grunfeld Desiderio, said at the National Customs Brokers & Forwarders Association of America annual conference April 25.

CBP has said in its informed compliance publications that “the official CBP policy is to encourage the submission of a valid prior disclosure,” Litman said during a panel discussion. “And that’s its official policy, but in practice lately, my experience has been that prior disclosures have become more fraught,” she said. It’s now “harder to get extensions of time, even when a valid waiver has been executed,” she said, adding that she doesn’t “quite understand” the issue but is “working through it.”

Another panelist agreed. Robert Stein, senior vice president-regulatory compliance at Mohawk Global Logistics, said he’s noticed a difference “in terms of the way Customs reacts these days to the filing, and particularly to the extension of filing of prior disclosures.”

Litman thinks the change could be the result of the “bifurcation” of jurisdiction between the ports and the Centers of Excellence and Expertise, and perhaps the involvement of the CBP Office of Field Operations. There’s “a lot, I think, that went on there,” she said.

As a result, Litman said, customs brokers “really need to ask themselves, do I want to encourage my client to file a prior disclosure without seeking additional input?”

“Once you file a prior disclosure, you’re really acknowledging that there has been a violation, a lack of reasonable care,” she said. And the disclosure could open up the importer to penalties for other violations that weren’t disclosed. “Everybody's filed a disclosure on one issue,” then spoken with their clients and seen it “mushroom into something else that you didn't anticipate,” Litman said. It’s “not a fun position.”

Especially when filing a prior disclosure that could have major ramifications, such as a disclosure of mistakes related to valuation that could extend to “an entire range of an importer’s entries,” the broker may want to “put on the brakes” and extend liquidation to seek more information on the issue. That could come in the form of a ruling request or a request for internal advice from CBP, she said. “Something before a disclosure” to show “where are we really with it?” Litman said.

Stein added that CBP has also recently started looking at voluntary tenders differently. “There is an exposure where they sometimes think this voluntary tender could be a prior disclosure because, in many cases, you’re tendering due to a mistake that could be something where there could be a penalty for liquidated damages,” Stein said. “So you might want to think about that carefully. And if you're not really sure, that's a good occasion to maybe engage a lawyer to say if there is exposure there,” he said.