What penalty reduction does prior disclosure provide?

For negligence cases, the penalty may be reduced to the interest on unpaid duties. For gross negligence, it can be reduced to 50-100% of the unpaid duties (versus up to 4x the duties without disclosure).

Is there a deadline for prior disclosure?

The disclosure must be made before CBP initiates an investigation. Once CBP has begun investigating, the prior disclosure opportunity is lost.

Compliance

What is Prior Disclosure?

A voluntary disclosure to CBP of a customs violation before an investigation begins, typically reducing penalties. In the context of U.S. customs and tariff recovery, understanding prior disclosure is essential for navigating the CAPE refund process and ensuring accurate duty assessment.

Definition

A prior disclosure is a voluntary notification to CBP by an importer (or their broker) of a customs violation before CBP has initiated an investigation. Under 19 U.S.C. section 1592(c)(4), making a timely prior disclosure can significantly reduce penalties — in cases of negligence, the penalty may be limited to the interest on unpaid duties rather than the full statutory penalty. Prior disclosures must include the entry numbers affected, the nature of the violation, the estimated duty shortfall, and a plan for corrective action. The disclosure must be 'before, or without knowledge of, the commencement' of a CBP investigation.

How Prior Disclosure Relates to Tariff Refunds

Prior disclosures involve duty underpayments (violations), while CAPE addresses duty overpayments (refunds). If an importer discovers that entries were misclassified in a way that resulted in underpaid duties, a prior disclosure may be appropriate. However, if the misclassification resulted in overpaid duties, the remedy is a CAPE claim or protest, not a prior disclosure.

Example

An importer discovers that their broker classified certain goods under the wrong HTS code for 18 months, resulting in $200,000 in underpaid duties. By filing a prior disclosure before CBP discovers the error, the penalty is reduced from $200,000 (the domestic value) to the interest on the underpayment.

Frequently Asked Questions

What penalty reduction does prior disclosure provide?: For negligence cases, the penalty may be reduced to the interest on unpaid duties. For gross negligence, it can be reduced to 50-100% of the unpaid duties (versus up to 4x the duties without disclosure).
Is there a deadline for prior disclosure?: The disclosure must be made before CBP initiates an investigation. Once CBP has begun investigating, the prior disclosure opportunity is lost.

Legal References

19 U.S.C. § 1592(c)(4) — Voluntary Prior Disclosure
19 CFR Part 162 — Penalties

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