Source: http://itctradelaw.com/articles/liquidated-damages.html
Timestamp: 2019-04-26 16:41:08+00:00

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In addition to the risk of imposition of civil penalties—and to criminal jeopardy and seizures as well, when the circumstances support such consequences—the importer and others involved in the entry of merchandise also run the risk of liquidated damages being assessed.
These are not penalties, in a technical sense, but rather demands in defaults of contractual obligations. That may be true but it is also true that they have the same practical effect as a penalty. The transgressor must still dig into its pockets and make a payment to CBP. We should pay attention to them, because they are imposed on an expedited basis and are really in the nature of fines levied because of the party’s failure to meet its bond obligations.
And that brings us to bond requirements.
Most actions associated with importation require the posting of surety bonds by the subject party. The purpose of the bond is to protect the revenue and to assure compliance with the customs laws.5 The bond itself is a three-party contract, with the principal being the importer or other party, the surety which must be a company selected from an approved list being the underwriter of the debt and the beneficiary being CBP. The principal and surety are joint and several obligors. For my non-lawyer readers, “joint and several liability” means that multiple parties can be held liable for the same event or act and be responsible for all restitution required. In other words, the liable parties would be required to pay the entire damage award, which might be split among multiple parties or might come from just one party. CBP could demand full payment from the importer or, if the importer has “disappeared” or is insolvent, CBP could demand full payment from the surety.
Bonds can be either single entry or continuous, in the latter case it will cover all transactions during a set period, usually a year. The amount of the bond is usually a function of the type and value of the merchandise, with the lowest level of a continuous importer’s bond set at $50,000. Bond premiums are typically 1% of the coverage, thus there would be an annual premium of $500 for a $50,000 bond coverage.
The presence of a surety bond is a major reason why CBP can be relaxed about importers and others meeting their obligations, since a failure to do so will trigger a liquidated damage claim. What customs matters are covered by surety bonds?
Note that the obligation to make a timely entry will trigger a liquidated damage claim for a delayed entry filing, while the importer’s failure to pay duties and fees in full will first trigger a demand on the surety to pay those duties and taxes up to the amount of the bond. That demand could be followed by a liquidated damage claim.
If there has been a bond violation, such as a failure to file a timely entry, to take a simple example, CBP can issue a liquidated damages claim. The statute of limitations for the vast majority of such claims, including an untimely entry, is one year from the date the right of action accrued.8 The statute does not run if the violator is outside the US. Thus, if the principal in an import/entry bond is a non-resident importer of record, the statute of limitations will not run. Nor will the statute run if facts material to the right of action are not known by CBP.
There is a degree of forgiveness at play in the process. As has been recounted in a 2011 ruling,11 the customs regulations12 provide that extensions of the time for exportation of merchandise imported under a TIB may be granted by the appropriate district director upon written application on CBP Form 3173. Section 10.37 provides that untimely requests for an extension of time for exportation are to be referred to CBP Headquarters.
If CBP issues a liquidated damage claim, typically through a CBP Form 5955A (CBP 5955A), it is not subject to review under the protest procedure of 19 USC § 1514.17 Instead, the importer or other concerned party may either pay the specified amount within 60 days or file a petition and seek to pay a lesser amount.18 In the latter case, the importer or other concerned party would invoke mitigating circumstances (e.g., new and inexperienced importer, cooperation with CBP, small number of violations, contributory CBP error, low value import).
Perhaps it would be helpful to think of liquidated damages as payments demanded by CBP for failures to meet the administrative or procedural obligations that are created by surety bond commitments rather than penalties levied on substantive violations such as false or erroneous tariff classification, customs valuation or origin declarations connected with an entry. Still, as noted, the effect is the same. The importer or other affected party must pay for its inaction.
1. In the US, the statutory basis for the imposition of civil penalties for a failure to meet “reasonable care” standards is 19 USC § 1484 (a).
2. To be sure, there are other specific penalty statutes, such as for failure to manifest controlled substances and those which apply to specific persons (brokers) or activities (e.g., duty drawback and recordkeeping).
3. There are three levels of culpability-- negligence, gross negligence and fraud.
4. 19 USC § 1592 (c) (4).
5. 19 USC §1623, 19 CFR Part 113.
6. See 19 USC § 141.113, ruling no. 962748 (4/24/00).
7. 19 CFR §§ 113.62 (a)- (k).
8. 28 USC § 2415.
9. See ruling no. 225110 (4/20/94).
10. 19 CFR §§ 10.31-.40.
12. 19 CFR § 10.37.
13. See ruling no. 222843 (12/10/90).
14. See ruling no. 219659 (7/8/87).
15. See ruling no. 223699 (5/15/92).
16. See ruling no. 222800 (2/4/91).
17. See, e.g., ruling no. 228844 (9/18/00) (A demand for liquidated damages is not listed in the statute as protestable. Indeed, the United States Court of International Trade (Halperin Shipping Co., Inc. v. United States, 14 CIT 438; (1990 CIT); Pope Products v. United States, 15 CIT 279, (1991 CIT); Playhouse Import & Export v. United States 18 CIT 41 (1994 CIT)), and the United States Court of Appeals for the Federal Circuit (United States v. Toshoku America, Inc., 879 F. 2d 815, 818 (Fed. Cir. 1989)); have acknowledged that a demand for liquidated damages is not a Customs decision that is protestable under 19 U.S.C. §1514).
18. Pursuant to 19 CFR § 172.2.

References: § 1514
 § 1484
 § 1592
 §1623
 § 141
 § 2415
 § 10
 v. 
 v. 
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 §1514
 § 172