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Although the official policy of U.S. Customs and Border Protection (CBP) is to encourage prior disclosures, its recent activities regarding CBP Form 28 (Request for Information) and CBP Form 29 (Notice of Action) seem to run counter to this policy. In effect, CBP is sometimes using these forms to preclude opportunities to file prior disclosures.
A prior disclosure is a CBP-sanctioned procedure whereby an importer can disclose violations or discrepancies to CBP before the importer has knowledge of the commencement of an investigation and thereby obtain greatly-reduced (if any) penalties. The long-standing Customs regulations provide at 19 CFR 162.74(g) that an investigation is commenced by documenting in writing the facts and circumstances that caused CBP to believe that there is a possible violation.
Form 28 (Request For Information)
A CBP Form 28 (Request for Information) is typically issued by the port to an importer to request information (classification, valuation, etc.) with regard to a particular entry. The importer (or sometimes the foreign seller) must respond in writing within 30 days of the date of the request or within the time provided in extensions granted by CBP. A Form 28 may be an investigative tool for CBP to verify the correctness of the classification, valuation, trade preference or duty exemption claim, etc. At the present time, CBP is reviewing free trade preference issues (NAFTA, CAFTA, GSP, etc.) as well as whether merchandise is being transshipped to avoid antidumping duties (typically from China) where CBP believes there may be a potential violation of Customs laws.
Form 29 (Notice Of Action)
A Notice of Action is often issued by CPB after it has reviewed a response to a Form 28 (Request for Information). The notice will advise the importer of any changes in classification, valuation, duty preferences, antidumping duties, etc.
What Has Changed
In recent months, CBP has been using Form 29 and sometimes Form 28 as the “commencement document” for prior disclosure purposes. The Form 28 may include language that “the failure to provide information could lead to penalties under 19 USC §1592” or “this document will preclude the issuance of a prior disclosure.” This type of language is being included so as to eliminate the opportunity to file a prior disclosure by the importer.
CBP’s Current Policy On The Use Of Forms 28/29 In Connection With Prior Disclosures
In February of this year, the American Association of Exporters and Importers (AAEI) wrote a letter to CBP requesting CBP to “explain the agency’s use of CBP Form 28s and 29s and their relation to the Customs regulations and the ability of the importers to make a valid prior disclosure.” CBP responded in a letter that made the following points:
- As a matter of law, Forms 28/29 may be considered a commencement document for prior disclosure purposes.
- For policy reasons, the Form 29 can and will be used as a document commencing a formal investigation and providing notification to the importer.
- As a matter of policy, the Form 28 alone should not be routinely considered a commencement document.
- CBP will be issuing clarifying guidelines that will set forth circumstances in which the Form 28 may be used.
- CBP is expected to issue a formal response to this request.
CBP’s Prior Position On The Commencement Of A Formal Investigation
Prior to the inception of the apparent new policy of using Forms 28/29 to preclude the submission of valid prior disclosures, CBP generally took the position that these forms were administrative tools to collect information to assist in the classification and valuation of the merchandise. There was usually no “warning” on the forms that their issuance precluded any future prior disclosures regarding the issue involved. Rather, prior to the change in policy, the customs event that cut off a prior disclosure was typically a Report of Investigation (ROI) by a Special Agent or the preparation of a written document by an Import Specialist or CBP Auditor memorializing a visit to an importer’s premises where possible Section 1592 activity was discovered.
What Action Importers Should Take If Forms 28/29 Are Received
There have been indications that CBP has been issuing more Form 28s to importers. Clearly, CBP appears to be more aggressively seeking information that can perhaps result in potential penalty actions. Accordingly, if an importer receives a Form 28, the importer should give careful scrutiny to the Form 28 and ensure that the responses are timely and accurately reported to CBP. In this regard, it may be advisable to seek professional advice by contacting a law firm with customs expertise for assistance and advice in preparing the response to a Form 28 or 29. Further, if the Form 28 raises an issue which may affect other entries (misclassification, undervaluation, omitted assists, etc.), it may be prudent to evaluate whether a prior disclosure should be filed prior to submitting the response.
In summary, importers need to carefully consider and take very seriously their responses to any Forms 28/29 that are issued by CBP.
If you have any questions about these issues, please contact Stephen Spraitzar at (415) 288-0427 or via email at email@example.com or George R. Tuttle at (415) 288-0425 or via email at firstname.lastname@example.org