INTERNATIONAL TRADE LAW
CBP Liquidated Damages: What They Are & Relief
CBP liquidated damages are claims Customs assesses when you break a condition of your customs bond — they are a contract remedy, not a penalty for fraud or false statements. That distinction drives everything: the amount comes from the bond’s terms, the authority comes from the bond and 19 U.S.C. § 1623, and the relief process runs through 19 CFR Part 172. If you received a “Notice of Penalty or Liquidated Damages Incurred” (CBP Form 5955A), this is the claim it describes.
What Liquidated Damages Are — and Aren’t
Every importer of record posts a customs bond, a guarantee to CBP that you will meet your obligations: file entries on time, pay estimated duties, redeliver goods when demanded, and follow the rules tied to your import. When you breach one of those promises, the bond’s terms set a pre-agreed sum CBP can claim — the “liquidated damages.” The idea is the same as a liquidated-damages clause in any commercial contract: the parties fix the measure of loss in advance instead of litigating actual damages.
Because the mechanism is contractual, liquidated damages differ sharply from a § 1592 civil penalty, which punishes a material false statement on entry. You can incur liquidated damages with no fraud, no false statement, and no lost duties at all — simply by missing a deadline the bond required you to meet.
Common Triggers
Most liquidated-damages claims come from a handful of routine breaches:
- Failure to redeliver merchandise CBP demanded back (often for a labeling or admissibility problem found after release).
- Late filing or late payment of estimated duties, taxes, and fees.
- Failure to file required entry or entry summary documents within the allowed time.
- In-bond violations — goods moving under bond that are not properly exported or entered.
- Missing or defective documentation required as a condition of release.
Notice what is missing from that list: intent. A good-faith administrative slip can trigger the claim just as a careless one can.
How the Amount Is Set — and Where the Mod Act Fits
The starting amount is dictated by the bond condition that was breached, as set out in 19 CFR Part 113. Many bond conditions tie the claim to the value of the merchandise plus duties, which is why a single missed redelivery can produce a large number on the notice.
A common misconception is that CBP’s liquidated-damages authority comes from the Customs Modernization Act of 1993. It does not. The Mod Act reshaped importer responsibility by introducing the “reasonable care” and “informed compliance” standards — concepts central to § 1592 penalties — but CBP’s power to claim liquidated damages flows from the bond contract and 19 U.S.C. § 1623, which long predate the Mod Act.
Petitioning for Relief
The number on the notice is rarely the number you pay. CBP has broad authority to cancel or mitigate liquidated damages, and the regulations expressly allow it.
| Step | What happens | Timing |
|---|---|---|
| Notice issued | CBP Form 5955A states the breach and the claim amount | — |
| Petition for relief | File under 19 CFR Part 172, explaining the breach and asking for cancellation or mitigation | Generally within 60 days of the notice |
| CBP decision | FP&F office cancels, mitigates to a lesser amount, or sustains the claim | Varies |
| Supplemental petition | If unsatisfied, request further review | Within the time CBP specifies |
The key standard works in the importer’s favor: under the regulations, CBP may cancel a liquidated-damages claim — even without payment — if the evidence shows the bond violation happened without any intent to evade the law or regulation. Demonstrating that the breach was inadvertent, promptly corrected, and not part of a pattern is the heart of a strong petition. Mitigation is available under 19 U.S.C. § 1623, and where the matter also involves a penalty, under § 1618.
Reducing the Risk
Liquidated damages are among the most preventable customs costs. Calendaring entry and payment deadlines, confirming bond sufficiency before peak import periods, and acting immediately on any redelivery notice eliminate most claims. A periodic review of your bond conditions and broker workflow — the kind of review captured in a compliance memo — catches the gaps before CBP does.
Frequently Asked Questions
Are liquidated damages a penalty? Not in the § 1592 sense. They are a contractual claim under your customs bond for breaching a condition of it. No fraud or false statement is required.
Can liquidated damages be reduced to zero? Yes. CBP can cancel a claim entirely if you show the breach occurred without intent to evade the law and the circumstances justify relief.
What is CBP Form 5955A? It is the “Notice of Penalty or Liquidated Damages Incurred” — the document CBP uses to notify you of a claim and start your petition clock.
Do I still owe duties if the claim is mitigated? Yes. Any actual duties, taxes, or fees you owe are separate from the liquidated-damages claim and remain payable.
Facing a liquidated-damages claim or unsure your bond is sound? Reidel Law Firm prepares flat-fee import/export compliance memos and represents importers in bond and liquidated-damages matters with direct attorney access. Get an import compliance memo →
