As the author has been preaching, beware the potential evils of making a prior disclosure to Customs. Isuzu attempted a prior disclosure which Customs apparently did not accept. Isuzu has now had to sue Customs in the U.S. Court of International Trade. There is a good article in the Journal of Commmerce on the Isuzu case at the following link: http://www.joc.com/issues/990706/p1age1/e50939.htm.

In theory, Customs encourages importers to voluntarily disclose any errors or mistakes they made on their entries as a way to avoid the imposition of penalties and seizures. 19 U.S.C. §1592(c)(4). The disclosure must be complete; it must be prior to the commencement of a Customs investigation; and, lost revenues must be deposited.

If an importer does not make a disclosure and Customs becomes aware of what it considers violations of the laws it administers, then the penalties can be quite severe.

However, the pitfalls of a disclosure can also have severe consequences. For example, if an importer makes a full and complete disclosure and Customs does not accept it as a prior disclosure, then the maximum penalties are not avoided and the importer has made a case for Customs on a, "silver platter".

If entries have been liquidated and become final and, an importer subsequently discovers additional duties should have been paid, then a real dilemma arises. The finality of the liquidation prevents Customs from billing for additional duties. However, Customs may try to collect the additional duties through a 1592(d) proceeding, claiming importer negligence or worse.

In making a prior disclosure regarding liquidated entries where the importer has exercised, "reasonable care" and it truly believes the loss of revenue was caused by a clerical error or mistake of fact, then an importer should be able to claim this, "defense" pursuant to 1592(a) (2) and not have to pay any duty. However, the, "law enforcement" mentality of Customs considers prior disclosures an admission of negligence, regardless of the representations made by the importer. Such a defense will prob- ably not prevail at the port level, may find support at the Customs Headquarters level, and, as a last resort, in the U.S. Court of International Trade, if the Department of Justice accepts the collection case.

There is an, "axiom" in Customs and reported court cases that any voluntary payments made to Customs, such as duty, penalties, liquidated damages, etc. will not be refunded no matter the lack of culpability of the person making the payment. The only sure method an importer has to defend his claim of inno- cence is not to make any voluntary payments but to pay only when forced to. The pressure to pay may be by a billing, penalty notice, seizure or other similar means at the disposal of Customs.

Probably the worst pitfall of a prior disclosure is one that is not accepted and leads to a criminal prosecution. While there is some current legal thinking that being pro active, prior disclosure, is the proper strategy, some times this can backfire.

While there may be occasions when prior disclosures are beneficial, such disclosures should be carefully considered.