What an Offer in Compromise Is

The authority to compromise a customs claim comes from section 617 of the Tariff Act of 1930, codified at 19 U.S.C. 1617. The statute authorizes the government to compromise a claim arising under the customs laws based on a report showing the facts underlying the claim, the probabilities of recovery, and the terms on which the claim may be settled — and only where the compromise is recommended by the General Counsel for the Department of the Treasury or a delegee.

The procedural rules are found in 19 C.F.R. 161.5, with parallel provisions at 19 C.F.R. 171.31 and 171.32 for fines, penalties, and forfeitures, and at 19 C.F.R. 172.31 through 172.33 for claims for liquidated damages and penalties secured by a bond. Three requirements run through all of them:

• The offer must be in writing and addressed to the Commissioner — it is a formal submission, not a phone call or an informal negotiation with a Fines, Penalties & Forfeitures officer
• The offer must expressly invoke section 617. Both 19 C.F.R. 171.31 and 172.31 require the submission to state on its face that it is being made under 19 U.S.C. 1617. A settlement proposal that does not say so may be treated as something else entirely
• The amount offered must be deposited in the name of the party making the offer before CBP will consider it

The regulation also draws a hard boundary around scope: the offer is limited to the civil liability of the party making it. A compromise resolves the government’s civil claim against that party. It does not resolve criminal exposure, it does not bind other agencies, and it does not settle claims against co-liable parties who have not made their own offers.

When an Offer in Compromise Makes Sense

An offer in compromise is rarely the first move. In most cases the sequence begins with a petition for relief, and where the petition decision is unsatisfactory, a supplemental petition. Those remedies ask CBP to apply its own mitigation guidelines to the facts. They cost nothing to file beyond the work of preparing them, and in a large share of cases they produce meaningful reductions without any need to go further.

The offer in compromise becomes the right tool when the ordinary mitigation framework has run out of room. Common situations include:

• The mitigation guidelines produce a number the party cannot pay. CBP’s published guidelines set mitigated ranges tied to the culpability level and the loss of revenue. Where even the low end of the range exceeds what the party can realistically pay, a compromise supported by financial documentation may be the only path to a resolution the government can actually collect
• The government’s case has genuine legal weakness. Where there is a real dispute about culpability, about the loss of revenue calculation, about whether the statute of limitations has run, or about whether the elements of the violation are met, the probability of recovery is a factor the statute expressly directs the government to weigh
• The cost of litigating exceeds the value of the claim. Penalty claims are enforced by the government in an action at the Court of International Trade. Where the amount at stake is modest relative to the cost of proving the case, a certain settlement has obvious appeal on both sides
• The party wants finality now. A compromise that is accepted ends the matter on defined terms, which can matter enormously to an importer trying to close a financing round, sell a business, or clear a liability off the books

The Deposit Requirement — Money Up Front

The single most misunderstood feature of the offer in compromise is the deposit. Under 19 C.F.R. 161.5(b), no offer tendering a specific sum will be considered until due notice is received that the sum has been properly deposited in the name of the person submitting the offer. A party at a distance from a Federal Reserve bank may perfect the offer by tendering a bank draft for the amount offered, payable for collection and deposit. If the offer is rejected, the money is returned to the party who made it.

This requirement changes the entire posture of the negotiation. A petition costs nothing to file and can be revised. An offer in compromise requires the party to commit funds before the government evaluates the proposal, which means the number has to be right the first time. Offer too little and the deposit sits with the Treasury for months before coming back rejected, with the case no further forward and the deadlines still running. Offer too much and the money is gone.

How CBP Evaluates an Offer

Section 617 frames the analysis around two things: the facts on which the claim is based, and the probabilities of recovery. In practice, CBP and Treasury are asking a version of the question any creditor asks — what is this claim actually worth, and what will it cost to collect?

That means a persuasive offer has to be built on evidence, not argument alone. The submissions that succeed generally address some combination of the following:

• Doubt as to liability. Documentation, entry records, correspondence with brokers or suppliers, ruling letters, and prior treatment that undercut the government’s theory of culpability or its calculation of the loss of revenue
• Doubt as to collectibility. Financial statements, tax returns, bank records, accounts receivable aging, and evidence of secured debt showing that the full claim cannot be collected regardless of whether it is legally sound
• Litigation risk. Legal analysis of the weaknesses in the government’s case, including statute of limitations problems and evidentiary gaps that would surface if the claim were enforced at the Court of International Trade
• Corrective action. Evidence that the underlying compliance failure has been fixed — new procedures, new personnel, a compliance audit, a prior disclosure covering related entries — which speaks to the government’s interest in future compliance rather than punishment

Under 19 C.F.R. 172.32, the authority to accept an offer generally resides with the same official who has authority to decide a petition for relief, subject to the recommendation of the Treasury General Counsel or a delegee. That layered structure is why the quality of the written submission matters so much: the decision-maker is working from the paper record, and the recommendation has to survive review by counsel who never met the importer.

An Example of a Compromise

Consider an importer assessed a penalty under 19 U.S.C. 1592 for negligence in connection with undervalued entries, with a loss of revenue of $180,000 and a penalty claim set at two times the loss of revenue. The importer petitions for relief. CBP mitigates the claim, but the mitigated figure still substantially exceeds the company’s liquid assets and its capacity to pay out of operating cash flow.

The same framework applies to liquidated damages claims, broker penalties, and forfeiture matters, though the supporting evidence differs. What stays constant is that the offer succeeds or fails on the strength of the record submitted with it.

Offer in Compromise vs. Petition for Relief vs. Protest

These three remedies are routinely confused, and choosing the wrong one wastes time that the deadlines do not give back.

Petition for relief

A request that CBP mitigate or remit a penalty, a claim for liquidated damages, or a forfeiture, decided under the agency’s mitigation guidelines. No deposit is required, and the outcome is a discretionary reduction rather than a negotiated settlement. This is the starting point in most penalty and seizure matters.

Offer in compromise

A funded proposal to settle the government’s civil claim for a stated sum under 19 U.S.C. 1617. It requires a deposit, it must expressly invoke section 617, and acceptance requires a recommendation from Treasury counsel. It is a settlement tool, not an appeal.

Protest

A challenge to an underlying CBP decision — classification, appraised value, liquidation — under 19 U.S.C. 1514, subject to a 180-day deadline and preserving the right to judicial review at the Court of International Trade. A protest disputes what CBP decided; a compromise settles what CBP is claiming.

Acceptance, Collateral Agreements, and Finality

Under 19 C.F.R. 171.32 and 172.33, an offer in compromise is considered accepted only when the offeror is notified in writing. Silence is not acceptance. Neither is a favorable comment from a Fines, Penalties & Forfeitures officer, and neither is the government’s continued retention of the deposit. Until the written notification arrives, the claim remains live and the party remains exposed.

The regulations also permit the government to impose conditions. As a condition of acceptance, the offeror may be required to enter into a collateral agreement or to post security deemed necessary to protect the interest of the United States. Collateral agreements commonly obligate the party to pay an additional amount if income exceeds defined thresholds over a set period, and they can carry reporting obligations that outlast the payment itself. These terms are negotiable, and they deserve as much attention as the headline number — a compromise that looks favorable on its face can become expensive under a poorly negotiated collateral agreement.

Why Legal Representation Matters

An offer in compromise is the one customs remedy where the party has to commit money before learning whether the strategy will work. Getting the number right requires an accurate read on how CBP values the claim, where the government’s proof is thin, what the mitigation guidelines would have produced, and what a collection action at the Court of International Trade would realistically cost both sides. Customs brokers, however capable on the compliance side, are not positioned to make that assessment or to negotiate collateral agreement terms.

Great Lakes Customs Law handles the full arc of penalty and claim resolution — petitions, supplemental petitions, offers in compromise, and defense of collection actions. Attorney Jason Wapiennik has practiced customs law exclusively for more than 15 years and has longstanding working relationships with Fines, Penalties & Forfeitures officers at ports across the country, which matters a great deal when the question in front of the agency is what a claim is actually worth.