Prior Disclosure to CBP
A prior disclosure is one of the most powerful tools available to importers who have discovered — or suspect — that they have violated customs laws. When done properly and at the right time, a prior disclosure can dramatically reduce penalty exposure and, in many cases, eliminate penalties entirely.
Great Lakes Customs Law has extensive experience advising importers on whether and how to make prior disclosures to CBP. The decision to disclose is consequential, the timing is critical, and the process has specific legal requirements that must be met for the disclosure to be valid. We guide clients through every step — from evaluating whether a disclosure is appropriate, to preparing and filing it, to managing the follow-up with CBP.
Why Prior Disclosures Matter
When importers fail to exercise reasonable care in their import operations — whether through incorrect tariff classification, undervaluation, misstatement of country of origin, or other errors — they face potential penalties under 19 USC § 1592. These penalties can be severe, reaching up to the domestic value of the merchandise in fraud cases, or significant multiples of the lost revenue in cases of gross negligence or negligence.
A prior disclosure fundamentally changes the calculus. CBP actively encourages importers to self-report violations because it reduces the agency’s enforcement burden. In return, importers who make valid prior disclosures receive substantial penalty reductions that are not available through any other mechanism.
Timing Is Everything
A prior disclosure must be made before the disclosing party has knowledge that CBP has commenced a formal investigation into the potential violation. This is what makes it “prior” — the disclosure comes before the investigation, not after. Once CBP has begun a formal investigation and the importer knows about it, the disclosure loses its “prior” status and the most favorable penalty reductions are no longer available.
Filed Before Investigation
Full prior disclosure benefits apply. Negligence penalties may be reduced to interest only or eliminated entirely if entries are not yet liquidated.
Filed After Investigation Begins
A disclosure made after the importer knows of a formal investigation loses its “prior” status. Some benefit may still apply, but the most favorable reductions are no longer available.
A disclosure made after an investigation has begun can still provide some benefit — it just won’t qualify for the full prior disclosure reductions. This distinction requires careful legal analysis based on what the importer knows and when they learned it.
Watch for CBP Form 28 and CBP Form 29
Importers should be particularly attentive to signals from CBP that may indicate growing scrutiny. While these forms do not necessarily mean a formal investigation has started, they are a strong indication that the time to consider a prior disclosure is now — not later.
How to Make a Valid Prior Disclosure
A prior disclosure is a formal notice, typically submitted in writing to the appropriate CBP port. To be valid under the regulations, the disclosure must include specific information.
- Identify the merchandise The class or kind of merchandise involved in the violation.
- Identify the entries The specific importations by entry number, or by indicating the port of entry and approximate dates of entry.
- Describe the violations The material false statements, omissions, or acts — including an explanation of how and when they occurred.
- Provide corrected information The true and accurate information that should have been provided in the original entry documents, to the best of the disclosing party’s knowledge. If some information is not available at the time of disclosure, the disclosing party must commit to providing it within 30 days.
If the amount of duty loss is known, the importer should also tender payment of the lost duties, taxes, and fees to CBP. However, the issues involved in calculating duty loss can be complex, and when properly handled, a prior disclosure can be validly made without immediate payment if the full amount is not yet determined.
Making a prior disclosure does not necessarily require admitting that a violation occurred. The disclosure can present the facts and circumstances while preserving the importer’s position on contested legal questions. This is an area where experienced legal counsel is essential.
Penalty Reductions Under Prior Disclosure
The penalty reductions available through a valid prior disclosure depend on the level of culpability involved. Here is what each tier looks like — with and without a prior disclosure.
Negligence Violations
For negligence-level violations — the most common category — a valid prior disclosure can reduce the penalty to just the interest on the unpaid duties at the prevailing rate under the Internal Revenue Code. If the entries have not yet been liquidated, the penalty may be eliminated entirely.
Gross Negligence Violations
For gross negligence violations where liquidation has already occurred, a valid prior disclosure similarly reduces the penalty to the interest on the duty underpayment (19 CFR § 162.73(b)(2)). This is a significant benefit given the magnitude of unmitigated gross negligence penalties.
Fraud Violations
Even in fraud cases, a prior disclosure provides meaningful relief. Without a disclosure, fraud penalties can equal the full domestic value of the merchandise. With a valid prior disclosure, the penalty is reduced to the amount of lost duties, taxes, and fees — or if there was no duty loss, 10% of the dutiable value.
When to Consider a Prior Disclosure
Importers should consider making a prior disclosure when they discover or suspect any of the following:
- Goods have been misclassified under the HTSUS, resulting in underpayment of duties
- Invoice values have been understated or manipulated
- Country of origin has been misstated, potentially affecting duty rates or trade remedy obligations
- Free trade agreement claims were made for goods that did not qualify
- Assists, royalties, or other dutiable charges were not declared
- An internal audit or compliance review has uncovered systematic errors in past entries
The decision to disclose involves weighing the benefits of reduced penalties against the risks of self-reporting. In most cases, when violations exist or are likely, the math strongly favors disclosure — but the analysis depends on the specific facts, and legal counsel should be involved from the outset.
How We Can Help
The prior disclosure process is deceptively simple in concept but complex in execution. Determining the scope of the violations, calculating duty loss, preparing the disclosure in a way that meets the regulatory requirements while protecting the client’s interests, and managing CBP’s follow-up questions all require experience and judgment.
Great Lakes Customs Law has been guiding importers through prior disclosures since 2009. If you believe your company may have customs violations that should be disclosed — or if CBP has already started asking questions — contact us at our Michigan office at (734) 855-4999, our Chicago office at (773) 920-1840, or reach us by WhatsApp.
Considering a Prior Disclosure?
The decision to disclose — and how to frame it — shapes the outcome. If you’ve discovered potential customs violations, or if CBP has started asking questions through a Form 28 or Form 29, the timing of your next move matters. Attorney Jason Wapiennik can evaluate your situation and build the disclosure strategy that maximizes penalty reduction while protecting your legal position.