Pay duties while protest is pending? Importers may not have a choice

protest cbp form

Eye-opening piece by Susan Kohn Ross, Esq. of  Mitchell Silberberg & Knupp LLP:

Due Your Duty

With the ever-increasing scrutiny being brought to compliance and the payment of duties on imported goods by Customs and Border Protection (CBP), it is worth commenting that any duties which are due when an entry liquidates may, in fact, end up having to be paid even if the related protest remains pending due to the legal and contractual relationship between the importer and his surety company.  Simply put, if a surety insists on receiving payment of any amounts demanded by CBP upon liquidation, the importer does not have any solid grounds to object.  Why would the surety do so if a protest is pending? Because the surety is looking to mitigate its risk. If the importer does not pay, the surety will have to do so, at least up to the face amount of any bonds it has written, and sureties try their best not to be put in that position.

Pursuant to the provisions of 19 U.S.C. 1514(a), when CBP liquidates an entry, that decision is final and so any monies owed are due, unless a protest is filed.  While the protest is pending, the importer is not obligated to pay any additional funds to CBP as the liquidation is not final.  However, as mentioned above, the mere possibility of financial exposure resulting in the surety having to pay the monies owed results in the surety typically demanding upfront payment. If the protest is granted, CBP reliquidates the entry accordingly.

The outcome could be as simple as the entry being reliquidated with nothing more due. Alternatively, the protest could be granted but with additional monies due related to the approved change(s). At that point, the liquidation becomes final, unless there are grounds to again protest if there is a belief the reliquidation was done incorrectly (see the reliquidation limitation in 19 U.S.C. 1514(d)).  If the protest is denied, the importer must, of course, pay all that is due, including interest, even if he desires to further challenge CBP in court. Given it generally takes 2+ years to get a decision on a protest once referred to Regulations and Rulings, the amount of interest owed can be staggering.  In fact, it is not unusual with antidumping and countervailing duty cases to have the amount of interest be equal to 50% or more of the principal amount owed and that is just at time of liquidation!

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