If you’ve received a “Notice of Penalty or Liquidated Damages Incurred and Demand for Payment” (CBP Form 5955A), you may be facing a significant financial claim from U.S. Customs and Border Protection. Liquidated damages can be confusing — they arrive on the same form as penalties and can feel just as punishing — but they work differently, and understanding that difference is critical to mounting an effective response.
Great Lakes Customs Law has helped hundreds of importers successfully reduce or eliminate liquidated damages claims at ports across the country. We understand how these claims are assessed, what CBP’s Fines, Penalties & Forfeitures (FP&F) offices look for in a petition, and how to position your case for the best possible outcome.
What Are Liquidated Damages?
Liquidated damages are monetary claims that CBP assesses when an importer breaches a condition of their customs bond. While they are often confused with penalties — and are issued on the same CBP Form 5955A — they are legally distinct. A penalty is a punitive charge assessed directly against the importer for a violation of customs law. Liquidated damages, by contrast, are a claim against the customs bond itself — the financial guarantee that importers provide to ensure they will meet their obligations.
The confusion is understandable. Liquidated damages can be substantial, they arrive on an intimidating government form, and they often have what feels like a punitive effect. But because they are technically a breach-of-bond claim rather than a statutory penalty, the legal framework for assessing and mitigating them is different — and an experienced customs attorney can use those differences to your advantage.
How Customs Bonds Work
Every importer is required to post a customs bond before bringing goods into the United States. This bond — either a single transaction bond for a one-time shipment or a continuous bond covering all imports over a 12-month period — is an agreement between the importer, CBP, and a surety company. Under the terms of the bond, the importer agrees to fulfill a range of obligations, including:
- Paying all duties, taxes, and charges owed on imported merchandise
- Completing entry and providing all documentation required for classification, valuation, and statistical purposes
- Redelivering merchandise to CBP upon demand
- Complying with all applicable laws and regulations governing the importation
- Rectifying non-compliant imports (such as correcting country of origin marking)
If the importer fails to meet any of these obligations, CBP can declare a breach of the bond and assess liquidated damages.
When Are Liquidated Damages Assessed?
CBP assesses liquidated damages in a wide range of situations. Some of the most common triggers include:
- Failure to redeliver merchandise — When CBP demands that an importer return goods (for example, because they were found to be inadmissible or in violation of a regulation), the importer must comply within a specified timeframe. Failure to redeliver is one of the most frequent causes of liquidated damages.
- Failure to rectify a non-compliant import — If merchandise does not meet marking requirements, labeling standards, or other regulatory conditions, CBP may give the importer an opportunity to bring it into compliance. Missing that deadline triggers a bond breach.
- Missing entry or documentation deadlines — Importers who fail to file entry documentation on time, or who fail to produce records requested by CBP, can face liquidated damages.
- Failure to hold merchandise intact — In some cases, CBP requires that imported goods be held in their original condition pending inspection or a decision. Distributing or altering the goods before receiving clearance can trigger a claim.
- Shortfalls in duty payment — When duties owed exceed what was deposited at the time of entry — particularly in antidumping and countervailing duty (AD/CVD) cases — the resulting shortfall can give rise to liquidated damages against the bond.
How Much Can Liquidated Damages Be?
The amount of liquidated damages depends on the specific bond condition that was breached and the terms of the bond itself. Claims typically range from one to three times the value of the merchandise, though they can also be assessed at the full value of the bond. In cases involving continuous bonds, multiple breaches can result in cumulative claims that far exceed the face value of the bond.
Additionally, liquidated damages accrue interest over time. The longer a claim remains unresolved, the more the importer will owe. This makes it essential to respond quickly and strategically once a notice is received.
Impact on the Importer and Surety
When CBP assesses liquidated damages, the claim is made against both the importer (as the bond principal) and the surety company that issued the bond. If the importer does not pay, the surety is liable to CBP for the amount assessed, up to the value of the bond.
This creates a secondary problem for the importer: if the surety pays CBP on the importer’s behalf, the surety will seek reimbursement from the importer — and may refuse to issue new bonds in the future. Losing access to a customs bond effectively means losing the ability to import, which can be devastating for a business that depends on international trade.
Can Liquidated Damages Be Reduced?
Yes — and this is where experienced legal representation makes a significant difference. Just like customs penalties, liquidated damages can be mitigated through the administrative petition process. After receiving a notice on CBP Form 5955A, the importer has a limited window to file a petition requesting that the amount be reduced or cancelled entirely.
CBP evaluates mitigation petitions for liquidated damages based on factors similar to those used in penalty cases, including:
- Whether the importer acted in good faith and made reasonable efforts to comply
- The importer’s prior compliance record
- Whether there were extraordinary circumstances that contributed to the breach
- Whether CBP itself contributed to the violation through delayed processing or unclear instructions
- The importer’s corrective actions taken since the breach
We have a strong track record of achieving substantial reductions in liquidated damages claims. Our familiarity with FP&F offices at ports nationwide — and our understanding of how individual offices evaluate these cases — allows us to craft petitions that address the specific factors most likely to result in mitigation.