What Ever Happened to "Courteous Service"?

Just as US Customs and Border Protection (“CBP”) is seeking new enforcement actions to protect and increase import revenues, the agency also has proposed to take away a simple, highly effective, free tool that importers use (or be should using) to improve compliance and decrease errors.

Citing the costs of paper, postage, labor and machine maintenance, CBP is proposing to discontinue its long-standing practice of mailing paper "courtesy notices" of liquidation to importers of record whose entry declarations are filed in the Automated Broker Interface (“ABI”). This change would impact the overwhelming majority of US commercial cargo entries, since such entries usually are filed by a licensed customs broker, on behalf of the importer, using the ABI system. 

Entries of merchandise into the United States are, in a sense, provisional, when made. They are subject to revision and challenge by CBP until finally "liquidated." In most cases, CBP liquidates an entry, without any changes, 314 days after entry. The liquidation date of each entry triggers binding legal deadlines for that entry, such as a 90-day clock for CBP to change the amount collected (voluntary reliquidation) and a 180-day clock for the importer to protest the result. If actions are not taken within those deadlines, the entry is final and cannot be changed by the importer or by CBP, even if the entry was incorrect.

Currently, for each and every entry filed through the ABI, CBP (1) electronically updates the ABI system to show the liquidation date and (2) mails a paper notice (captioned "COURTESY NOTICE") to each importer for each entry scheduled to liquidate. CBP has always made quite clear (correctly) that the agency is under no obligation from US law to provide these notices, hence the caption “COURTESY NOTICE”. Nonetheless, CBP's automated system has, for many years, generated and mailed one of these notices for each and every entry made. If this proposal is adopted, CBP would continue to update the ABI system to show the date of liquidation but importers of record no longer would receive the paper notice directly from CBP.

Courtesy notices are a dependable, effective and free (to the importer) tool for compliance. Any importer currently not aware of receiving courtesy notices should investigate where they are arriving and see to it that they are routed to the company personnel responsible for import compliance. At first blush, some importers mistakenly do not pay much attention to these notices because they are always captioned “THIS IS NOT A BILL - NO ACTION REQUIRED." It is true that a courtesy notice is "not a bill" and that CBP does not require any action upon its receipt but it may be in the importer's interest to take some action.  Indeed, because of the 180-day deadline for protest, it may be critical for the importer to note the liquidation date and act promptly in order to protect its right to a refund. The courtesy notice also allows the importer to confirm the most fundamental data regarding its shipments such as the entry number, entry date, and liquidation date. Most importantly, the courtesy notice shows the difference (if any) between the total amount of duties paid by the importer at entry and the total amount of duties CBP found to be owing. The regular receipt of the courtesy notice means the importer essentially is being prompted by mail to reopen its compliance file and add this notice in order to complete the story of that entry. This creates the perfect opportunity for the importer briefly to review and confirm that CBP has not made any change in the amount owing on the shipment. If CBP has made a change, the courtesy notice allows the importer to catch the very first time that change happens, to investigate and, if necessary, to correct how future shipments are declared. Such steps are low-cost, require only the most basic training of company personnel, and can be quite effective at eliminating errors before they are repeated and accumulate enough to create a substantial penalty risk.

If CBP decides to proceed with abolishing the paper courtesy notice, importers should reassess their compliance procedures. Importers should consider making arrangements with their customs brokers to forward liquidation data from the ABI system on a regular basis. It remains to be seen whether brokers would charge additional fees for such a service. 

If this plan is adopted, even though importers of record no longer will receive a paper courtesy notice, they would, of course, remain liable for any unpaid duties, and potentially for penalties, in connection with any errors in the entry documents, regardless of how those errors arose.

In short, if CBPs proposed rule is adopted, importers will have one less free and easy compliance tool and may have to spend more time, money and effort to track the resolution of their entries. Unfortunately, this comes at a time when CBP is under pressure to increase both compliance by and collections from importers.

CBP’s Notice of Proposed Rulemaking is available at: http://edocket.access.gpo.gov/2010/pdf/2010-5635.pdf.

Interested parties have until May 17, 2010 to submit comments on the proposed rule by mail or online at www.regulations.gov.

“Life be not so short but that there is always time for courtesy.”
Ralph Waldo Emerson

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If you have any questions on US Customs or import procedures, please contact:

Greg McCue at gmccue@steptoe.com and 202.429.6421.

Special thanks to Charles Morris for assistance with this advisory.