Hot Topics in International Trade – February 2022: 2022: Advance Disclosure Issues | Braumiller Law Group, PLLC

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And now the proverbial “BUT”.

“BUT”, be prepared to complete this comprehensive internal review, optional statistical sample, lost revenue quantification, applicable tender, and finely crafted pre-disclosure narrative in 60, 90, or 120 days.

Just in time for the new year, U.S. Customs and Border Protection has adjusted its policies regarding advance disclosure extension requests. The only problem is that most ports interpret the policy very differently, and it’s unclear if the extension will be granted or how many extensions you’ll get.

For those unfamiliar with the term, an advance disclosure is a mechanism established by law that an importer can use if they discover that they have committed an unintentional customs violation.

  • Although a prior disclosure may be oral, it generally takes the form of a letter disclosing the facts and circumstances of a violation and the resulting associated amounts owed to CBP.
  • A written disclosure can be a one-step disclosure, or a two-step disclosure, in which an initial notice is submitted, and a subsequent letter is submitted with more comprehensive findings.
  • The second letter with final details that includes a submission of the total amount owed to CBP is considered the “advanced advance disclosure.”
  • The statute of limitations for customs violations is 5 years, which means that once a problem is disclosed, it is normal for customs to review your import history to determine if the problem occurred retroactively.

Here’s what we know:

The new policy aims to shorten the time needed for importers (mainly companies) to perfect a two-step advance disclosure, as prior disclosures move towards a route to the corresponding Center of Excellence and Expertise (CEE) for exam. For example, although extension requests are always sent to the port where the disclosure is recorded, the request is sometimes forwarded to the EWC, which has the power to be the final arbiter. To complicate matters further, as mentioned above, the results were mixed.

Our experience is that the longer the extension request, the more scrutiny the port and EWC will give it. For example, we were told that requests for 90-day extensions must be forwarded to the ERC for approval. Therefore, it may be incumbent on you to request extensions in 60 or 30 day increments. Although there is no guarantee of the type of response you will get, our advice is to reinforce the reasons for your request for an extension, in all cases. A good extension request should be narrow and specific as to why the request is being made. Include information regarding the scope of the task at hand, what stage of the process you are currently at, and remind CBP of your progress to date.

BUT, even if you can execute the perfect extension request and provide updates and specific details on next steps, you may still get pushed back on the extension. Or, they could say it’s the latest expansion. Or, they could outright say no. It really is the Wild West here. This could be for several reasons.

The more extensions you have requested previously, the more likely CBP will start to push back. In the end, it can be interpreted that the more the number of extensions granted can delay the review system.

When granting extension requests, the ERC will consider the time remaining on the Statute of Limitations Waiver (“SOL,” the document that grants CBP an additional two years in order to have more time for the examination and treatment). The closer the current SOL is to expiration, the probability of getting an overtime may decrease. This could be a good negotiation tool depending on the need for an extension and, of course, if the importer is willing to execute an additional waiver.

CBP could also interpret the new policy differently than other ports. While we like to think of the agency as a cohesive being, our experience has taught us that CBP is not a one-size-fits-all solution. What works for some ports may not work for others. The bottom line is to try to work with CBP to achieve an outcome acceptable to all.

So who is affected?

Stakeholders in this new era of extensions are importers or businesses that realize they have a trade compliance risk, are not being investigated, and want sanction protection while ‘they take the time to assess the risks and identify if there are any other issues that may need to be disclosed to customs. For large companies that import large volumes daily, this new policy is like trying to put out the flames of a burning building with a bucket of water. The task is not only arduous but almost impossible.

Trade professionals tasked with helping companies conduct these large-scale reviews amid the new crisis of the times are also concerned. Additionally, these trade professionals, whether law firms or consultants, are often the ones requesting advance disclosure extensions and increasingly having to defend their clients.

how to cope

Advance disclosure remains the best mechanism to protect importers from penalties. With the new extension policy, if possible, importers and trade professionals should work together to plan a review up front and complete most of it before submitting an initial disclosure notice, so that delays are not a big problem. If this is unavoidable, detailed extension requests outlining progress and reasons for extending in smaller increments are perhaps the surest route to obtaining approval for additional time.

Again, the key is to try to work with customs to resolve an extension dispute and reiterate that your company is making an active effort to comply with customs.

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