A prior disclosure is the importer walking into CBP and reporting its own violation before CBP finds it. The trade is explicit: candor in exchange for a lower penalty. A negligence violation that would cost up to twice the lost duties, or 20 percent of the dutiable value, drops to interest on the unpaid duties. A gross negligence violation that would cost up to four times the lost duties, or 40 percent of value, drops to the same interest. The difference is the difference between a survivable bill and a business-ending one.
The rule is 19 CFR 162.74, and the penalties it reduces are under 19 USC 1592. Fraud is the exception that proves the rule: a valid disclosure caps a fraud penalty at 100 percent of the unpaid duties or 10 percent of the dutiable value, instead of the full domestic value of the goods. Even fraud gets a discount for candor, which tells you how much CBP values the disclosure.
The trade only works if the disclosure is complete. A partial disclosure, one that names the classification error and hides the valuation error, is not a prior disclosure. It is a confession with the interesting part left out, and CBP treats it as no disclosure at all.
The usual candidates are undervaluation, wrong classification, wrong origin, and a missed trade program claim. The common thread is that the importer knows, or has reason to know, the entry was wrong, and the wrongness cost CBP duties.
A typo with no duty consequence is not a violation worth disclosing. A systematic undervaluation across fifty entries is. The Section 301 forced-labor duty is the kind of change that creates disclosure candidates: a 12.5 percent duty since July 24 that stacks on top of the existing rates, and entries filed without it are underpaid from the first day.
First, timing: the disclosure must come before the importer knows, or has reason to know, that a formal investigation has started. A disclosure filed the week after CBP opens an investigation is not prior to anything.
Second, completeness: the disclosure must identify the entries, the violation, and the loss of duties, and the importer must tender the actual loss of duties at disclosure, or within 30 days of CBP calculating it.
An oral disclosure counts, but it must be confirmed in writing within 10 days, and missing information must follow within 30 days. The deadlines are short and they are enforced. Tariffs stack, and the loss calculation has to stack them the same way: MFN plus 301 plus 232, applied to the transaction value, not a single blended number.
The disclosure goes to the port director or the Fines, Penalties, and Forfeitures office, in writing, with the entries identified and the loss calculated.
The statute of limitations is five years, which is the window CBP has to bring the penalty case, and the reason a disclosure that covers five years of entries is worth more than a disclosure that covers one. Drawback will not rescue a penalty case: some duties are never refunded, and a disclosure is the only route that cuts the penalty itself.
The decision to disclose is a legal one, not a clerical one, and the importer should make it with counsel, because a disclosure that is late or incomplete costs the importer the protection and hands CBP the facts. Confirm the approach with a licensed customs broker and counsel before filing, because the disclosure is irrevocable once made.
A voluntary report of a customs violation under 19 CFR 162.74, made before CBP starts a formal investigation. A valid disclosure caps the penalty at interest on the unpaid duties for negligence or gross negligence.
Negligence drops from up to twice the lost duties or 20 percent of dutiable value to interest on the unpaid duties. Gross negligence drops from up to four times or 40 percent to the same interest. Fraud drops from full domestic value to 100 percent of unpaid duties or 10 percent of dutiable value.
When the importer knows, or has reason to know, that a formal investigation has started. A disclosure filed after that point is not a prior disclosure, and the penalty caps do not apply.
The entries, the violation, and the loss of duties, with the actual loss tendered at disclosure or within 30 days of CBP calculating it. An oral disclosure must be confirmed in writing within 10 days, and missing information must follow within 30 days.