When U.S. Customs and Border Protection (CBP) assesses a claim against your business — whether for unpaid duties, a penalty, antidumping or countervailing duties, or liquidated damages — the amount demanded can be staggering. In many cases, importers simply cannot afford to pay the full amount. An Offer in Compromise (OIC) provides a path to resolve these claims by negotiating a settlement for less than what CBP is demanding.
Great Lakes Customs Law has extensive experience evaluating, preparing, and negotiating Offers in Compromise with CBP. Sometimes an OIC is the best strategic option. Other times, it’s the only option left. Either way, the process requires careful preparation, detailed financial documentation, and a clear understanding of how CBP evaluates these proposals internally.
What Is an Offer in Compromise?
An Offer in Compromise is essentially a settlement proposal. The importer asks CBP to accept less than the full value of a claim in exchange for a guaranteed payment and the avoidance of further administrative or legal proceedings. Courts have described it as a request that the government agree to accept less than the full value of a claim in exchange for avoiding the expense and uncertainty of contested proceedings.
Under 19 USC § 1617, an OIC must be submitted in writing, must expressly state that it is being made as an “offer in compromise,” and in most cases must include a proposed payment amount. The reviewing customs officer or U.S. attorney is required to prepare a report evaluating the facts supporting the government’s claim, the probability of recovery, and the terms being offered before any compromise can be approved. The detailed regulatory framework is set out in 19 C.F.R. Part 172, Subpart D.
When Is an Offer in Compromise Appropriate?
An OIC is most effective in two broad categories of situations:
Doubtful Liability
If the facts or the law do not clearly support CBP’s claim, an OIC can be an effective way to resolve the matter without the cost and risk of formal proceedings. This might apply when CBP’s legal theory is weak, when the evidence supporting the claim is thin, or when there are legitimate defenses that would make it difficult for CBP to prevail if the case were challenged. In these situations, the OIC essentially says: your case isn’t strong, but we’re willing to pay something reasonable to put this behind us.
Doubtful Collectability
Even when CBP has a strong case on the merits, an OIC may be the right approach if the importer genuinely cannot pay the full amount. This commonly arises when a business has become insolvent, has filed for bankruptcy, has experienced unexpected financial hardship, or when the duties or penalties assessed were so large relative to the company’s resources that full payment would be impossible. CBP recognizes that collecting a portion of a claim is better than pursuing a judgment that can never be satisfied.
What Types of Claims Can Be Compromised?
An Offer in Compromise can be used to resolve a wide range of CBP claims, including:
- Unpaid duties — Including shortfalls discovered after liquidation, particularly where the importer disputes the amount or cannot pay
- Antidumping and countervailing duties (AD/CVD) — These assessments can be enormous and often come as a surprise to importers. An OIC is sometimes the only viable path to resolution when AD/CVD bills arrive years after importation at rates far exceeding what was deposited.
- Penalties under 19 USC § 1592 — While petitions for mitigation are usually the first line of defense, an OIC can be appropriate when the petition process has been exhausted or when the importer’s financial situation makes full payment impossible
- Liquidated damages — Claims against the customs bond can also be compromised through the OIC process
- Other monetary claims — Including fees, charges, and exactions assessed by CBP
How the OIC Process Works
Submitting an Offer in Compromise is not as simple as writing a letter with a dollar figure. CBP expects a well-documented proposal that demonstrates why compromise is justified. The process generally involves:
- Financial disclosure — The importer must provide detailed financial information, including income statements, balance sheets, tax returns, and documentation of assets and liabilities. CBP uses this information to assess the importer’s actual ability to pay.
- Legal analysis — If the OIC is based on doubtful liability, the proposal should include a thorough analysis of the weaknesses in CBP’s case, supported by relevant law and facts.
- Proposed terms — The offer must specify the amount being offered, the payment timeline, and any conditions. Some offers include lump-sum payments; others propose installment plans.
- CBP review — The reviewing officer evaluates the offer against the strength of the government’s claim and the realistic prospects for collection. This review can take time, and CBP may counter with different terms.
A poorly prepared OIC — one that lacks adequate financial documentation or fails to make a compelling case for compromise — is likely to be rejected. This is why professional representation matters: we know what CBP expects to see and how to present the strongest possible case for acceptance.
Offer in Compromise vs. Petition for Mitigation
Importers sometimes confuse an Offer in Compromise with a Petition for Mitigation, but they serve different purposes and are appropriate in different situations. A petition asks CBP to reduce a penalty based on mitigating factors — good compliance history, lack of intent, corrective actions taken. An OIC, by contrast, is a settlement negotiation based on either the weakness of CBP’s case or the importer’s inability to pay.
In many cases, the petition process is pursued first. If the petition is denied or the resulting mitigation is still more than the importer can afford, an OIC becomes the logical next step. We help clients evaluate which approach — or which sequence of approaches — gives them the best chance of a favorable resolution.