Prior Disclosures

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An important part of the legal puzzle is call a 'Prior Disclosure.'  This involves informing the government of a violation before the government learns of the violation itself and provides some form of "notice of investigation"  to the importer.  One purpose of such an action, is that the law provide for favorable legal treatment; specifically, the law provides the importer with a shield against the harsh civil penalties that would otherwise be imposed by U.S. Customs.

Without a prior disclosure, U.S. Customs is allowed to assesses civil penalties under the 'gross negligence' provisions of 19 U.S.C. section 1592 at 4 times the duty loss, or if no revenue loss is calculated, at an amount equivalent to 40% of the domestic value of the imported goods.  These penalties are even higher where facts may be present establishing a culpability of "fraud", in which case, the government may levy civil penalties in an amount equal to the domestic value of the imported goods.  

If a Prior Disclosure is timely filed and "perfected" (via payment of the monies owed, plus interest) then the violation can be properly remedied by the importer, and the penalties averted.

On the export side, Prior Disclosures do not always provide a similar level of legal protection - however, there may nevertheless be some benefits for an exporter to come clean, for example, the BIS has published charging guidelines that are followed to arrive at often mitigated penalty amounts.  

The decision of whether to file a prior disclosures to protect a company can be complex, and time sensitive.  Further, the filing and perfection of the disclosure can be a complex undertaking.   Experienced legal guidance is highly recommended.