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CBP Tightens Time Limit, Alters Calculations for Late Petitions Seeking Relief from Liquidated Damages

Wednesday, January 09, 2013
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CBP Tightens Time Limit, Alters Calculations for Late Petitions Seeking Relief from Liquidated Damages

U.S. Customs and Border Protection plans to publish in the next Customs Bulletin and Decisions a notice limiting the time period and circumstances in which late petitions for the cancellation and mitigation of claims for liquidated damages will be considered or accepted. CBP is also changing the formula through which late petition mitigation is calculated. These new guidelines, which will be applicable to all liquidated damages claims for which a late petition is filed on or after Jan. 9, are applicable only to petitions for relief and do not apply to offers in compromise submitted pursuant to 19 USC 1617 and 19 CFR 161.53.

“It is critical that all parties to customs bonds understand and assert their rights, as necessary, consistent with these changes,” said ST&R attorney Lenny Feldman. “Some CBP ports already have rejected late petitions outright and others have not accepted or recognized certain submissions, or parts of them, as submitted timely via facsimile or due to CBP’s own processing glitches.”

New Limits for Accepting Untimely Petitions. Under existing regulatory authority, to be considered timely petitions for relief in response to claims for liquidated damages must be filed (a) by bond principals within 60 days from the date of mailing of the notice of liquidated damages or any lawful extension thereof or (b) by sureties within 60 days of the demand for payment by CBP or any lawful extension thereof. No petition for relief is considered on a claim filed after (a) the commencement of sanctioning action against the bond principal or (b) the issuance of a notice to show cause against the surety. If a petition is submitted late the CBP Fines, Penalties and Forfeiture officer first considers the petition as though it had been filed on time and then determines the amount of mitigation that would have been afforded had the petition been filed timely. Once this base amount is determined the FPF officer charges an additional amount calculated by determining the number of calendar days that the petition was late and adding an additional 0.1% for each day, with a minimum additional amount of $400.

CBP is now announcing new guidelines in an attempt to encourage the timely filing of petitions for relief and promote the timely resolution of liquidated damages claims. Under these guidelines untimely petitions will be accepted or considered only if the petitioner is able to demonstrate the existence of extraordinary circumstances that prevented it from filing a timely petition or timely seeking a lawful extension of time in which to file a petition. Extraordinary circumstances may include some intervening event beyond the petitioner's control resulting in a justifiable inability to timely address or respond to the claim. According to ST&R attorney Lenny Feldman, CBP officials have said that not receiving notice of a liquidated damages claim will be considered an extraordinary circumstance. FPF officers will exercise their discretion in determining whether circumstances existed so as to warrant CBP' s consideration or acceptance of a late petition.

Subject to the exception noted below, no untimely petition will be accepted in any circumstance if it is filed:

a. more than 180 days after the date of mailing of the notice of claim to the bond principal or, in the case of a surety, the date of mailing of the first demand on the surety;

b. after the petitioner has previously submitted a petition in the same case and/or been offered mitigation in the same case and such mitigation amount was not paid within the prescribed period;

c. after the claim has been referred to CBP’s Office of Chief Counsel for collection action;

d. after the commencement of sanctioning action against the bond principal; or

e. after the issuance of a notice to show cause against a surety.

However, untimely petitions for relief of liquidated damages claims issued for the late filing of an entry summary, the late payment of estimated duties (including under the periodic monthly statement test), the late payment of passenger processing fees or the late filing or late payment of reconciliation entries may be accepted without regard to the limitations expressed in paragraphs a and b above at any time prior to the circumstances described in paragraphs c through e.

CBP notes that (a) an untimely petition is not a supplemental petition described in 19 CFR 172.41, (b) a supplemental petition must be timely filed following a decision on an original petition filed in accordance with the established regulatory time frames, (c) the rejection of an untimely petition does not constitute a “decision” for purposes of 19 CFR 172.41, and (d) petitions that are filed untimely and not accepted for consideration will be rejected. A party responsible for a liquidated damages claim may submit an offer in compromise to CBP pursuant to 19 USC § 1617 and 19 CFR 161.5.

New Calculation of Mitigated Amounts. In calculating the mitigated amount on a late petition CBP will first determine the base amount (i.e., the amount of mitigation that would have been afforded on a timely petition or the previously available option one amount) and then determine the additional mitigation amount by multiplying the full assessed amount of the claim by 0.1% and then multiplying by the number of days the petition is late. The result will be the additional amount added to the base amount to produce the mitigated amount applied to the untimely filed petition. In no case will the additional mitigated amount be less than $400.

However, for untimely petitions submitted in response to a claim for liquidated damages for the late filing of an entry summary, the late payment of estimated duties (including under the periodic monthly statement test), the late payment of passenger processing fees or the late filing or late payment of reconciliation entries, the additional mitigated amount calculation will not use the actual liquidated damages assessed amount as described above. Instead, CBP will multiply two times the duties, taxes and due in payment fees (or $1,000, whichever is greater) by 0.1% and then multiply by the number of days the petition is late. Here too the minimum additional mitigated amount will be $400. 

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