Notice of Liquidated Damages from CBP
If you’ve received a “Notice of Penalty or Liquidated Damages Incurred and Demand for Payment” on CBP Form 5955A, you may be facing a significant financial claim. Liquidated damages arrive on the same form as penalties and 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 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 the importer provides to ensure they 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.
Customs Penalty
A punitive charge assessed directly against the importer for a violation of customs law — for example, a 19 USC 1592 penalty for misclassification or undervaluation.
Liquidated Damages
A contractual claim against the customs bond for breach of a bond condition — the importer failed to do something the bond obligated them to do.
How Customs Bonds Work
Every importer is required to post a customs bond before bringing goods into the United States. The 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 among the importer, CBP, and a surety company. Under the terms of the bond, the importer agrees to fulfill a range of obligations.
- 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. Five of the most common triggers account for the vast majority of claims we see:
Failure to Redeliver Merchandise
When CBP demands that an importer return goods (for example, because they were found 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 Non-Compliant Imports
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 under the bond’s recordkeeping and entry-timing conditions.
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.
Liquidated damages accrue interest from the date of assessment. 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 — delays cost money directly.
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.
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. The financial exposure from liquidated damages is often smaller than the business exposure from damaged bond relationships.
Can Liquidated Damages Be Reduced?
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. This is where experienced legal representation makes a significant difference.
CBP evaluates mitigation petitions for liquidated damages based on factors similar to those used in penalty cases. A well-prepared petition will address each of these factors directly with supporting documentation.
- 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. Familiarity with FP&F offices at ports nationwide — and understanding of how individual offices evaluate these cases — allows us to craft petitions that address the specific factors most likely to result in mitigation.
Received a Notice of Liquidated Damages?
The response deadline is short, interest accrues from the date of assessment, and the claim involves both your business and your surety relationship. Great Lakes Customs Law has reduced or eliminated liquidated damages claims for hundreds of importers. Attorney Jason Wapiennik can evaluate your notice and build the petition that gives you the best chance at a favorable outcome.