Importers often use “penalty” as a catch-all for any money CBP demands, but customs law draws a sharp line between two very different things: a penalty and liquidated damages. They arise from different failures, rest on different legal footing, and are defended in different ways. Confusing them — or treating a liquidated damages claim as if it were a penalty — can lead to the wrong response. Here is the distinction, and why it matters.
One is about false statements; the other is about broken promises
A penalty (such as one under 19 U.S.C. 1592) punishes a false statement or omission about imported goods. Liquidated damages, by contrast, are a pre-set amount owed for breaching an obligation of the customs bond — like failing to redeliver merchandise or missing a required deadline. A penalty is about what you said; liquidated damages are about what you promised to do and didn’t.
Two Different Kinds of Claim
| Penalty | Liquidated damages | |
|---|---|---|
| Triggered by | A false statement or omission about the goods | Breach of a customs bond obligation |
| Rooted in | The penalty statute (e.g., 19 U.S.C. 1592) | The terms of the import bond |
| Common example | Undervaluation or misclassification on entry | Failing to redeliver goods on CBP’s demand |
| Amount | Tied to culpability and the value or lost duties | A pre-set sum fixed by the bond condition |
The practical upshot is that liquidated damages flow from the bond, not from any accusation that you lied. When an importer posts a customs bond, it promises CBP that certain things will happen — duties will be paid, deadlines met, merchandise redelivered if demanded. When one of those promises is broken, the bond specifies the damages, and CBP issues a claim for that amount. Our page on the notice of liquidated damages covers how these claims work in detail.
The Most Common Trigger: A Redelivery Demand
One of the most frequent sources of liquidated damages is a failure to redeliver. After goods are released, CBP can demand them back — because they are improperly marked, fail an admissibility requirement, or raise another issue discovered after release. If the importer cannot return the goods, the bond condition is breached, and liquidated damages follow, often measured against the value of the merchandise.
The goods are often already sold or gone
Redelivery demands frequently arrive after merchandise has entered commerce — sometimes already sold and shipped to customers. When the importer cannot physically return the goods, the liquidated damages claim is essentially unavoidable on its face, which makes the timing of the response and a petition for relief all the more important.
How Liquidated Damages Are Defended
The good news is that liquidated damages, like penalties, can be mitigated. CBP issues the claim, but the importer can file a petition for relief asking CBP to cancel or reduce the amount under its mitigation guidelines. Whether the underlying obligation was truly breached, whether there were mitigating circumstances, and whether the claim was correctly calculated are all fair grounds to raise. As with penalties, the deadline on the claim is firm, and a timely, well-supported petition is what drives a reduction.
Because a liquidated damages claim and a penalty call for different arguments — one aimed at the bond obligation and its breach, the other at the alleged false statement and culpability — identifying which you are facing is the first step. A customs and international trade lawyer can determine the nature of the claim, file the right petition, and pursue the largest reduction available. For the broader picture, see our penalty defense and mitigation practice.
Frequently Asked Questions
What is the difference between a customs penalty and liquidated damages?
A penalty punishes a false statement or omission about imported goods, under a statute such as 19 U.S.C. 1592. Liquidated damages are a pre-set amount owed for breaching a customs bond obligation, such as failing to redeliver merchandise. One concerns what was represented; the other concerns a broken bond promise.
What are liquidated damages in customs?
They are a fixed sum, specified by the customs bond, that becomes owed when an importer breaches a bond condition — for example, failing to pay duties on time or failing to redeliver goods on CBP’s demand. CBP issues a claim for the amount, which can be contested through a petition for relief.
Can liquidated damages be reduced?
Yes. An importer can file a petition for relief asking CBP to cancel or mitigate the claim under its guidelines. Grounds can include whether the obligation was actually breached, mitigating circumstances, and whether the amount was correctly calculated. The claim’s deadline is firm, so a prompt response matters.
What is a redelivery notice?
It is a CBP demand that released goods be returned to its custody, often because they are improperly marked or fail an admissibility requirement. If the goods cannot be redelivered, the bond condition is breached and liquidated damages typically follow, measured against the value of the merchandise.
Got a liquidated damages or redelivery claim?
Liquidated damages and penalties call for different defenses. A customs attorney can identify the claim, file the right petition, and pursue a reduction.