CBP Offer in Compromise: Settle Debt | JustForPetStore

CBP Offer in Compromise: Settle Debt | JustForPetStore

A CBP offer in compromise is the tool for a customs debt you cannot pay, not one you disagree with. Under 19 U.S.C. 1617 and 19 CFR 161.5, an importer may offer a specific sum to settle a penalty, duty bill or fee, and CBP accepts only in writing after the money is deposited. It is a separate remedy from a protest or a penalty petition, and confusing the three wastes the window you have.

What is a CBP offer in compromise?

Section 617 of the Tariff Act of 1930, codified at 19 U.S.C. 1617, authorizes the government to compromise a customs claim. The statute describes the mechanics: a customs officer or a U.S. attorney in charge of the claim submits a report showing the facts the claim is based on, the probabilities of recovery, and the terms on which it could be compromised. The Secretary of the Treasury may then compromise the claim if the General Counsel for the Treasury recommends it. Customs functions now sit with CBP, but the statutory text still names Treasury.

The implementing rule is 19 CFR 161.5. An offer must be in writing, addressed to the Commissioner of Customs, and it is limited to the proponent’s civil liability in the matter that is the subject of the claim. That limit matters: an offer resolves a civil claim, not anything else that may be running in parallel.

How is it different from a protest or a penalty petition?

Three remedies, three questions. A protest asks whether CBP’s decision was right, and it is the route for a liquidation you believe miscalculated duties; the window is 180 days under 19 U.S.C. 1514. A petition for relief asks CBP to mitigate a penalty based on your culpability, and under 19 CFR 171.2(b)(2) it must be filed within 60 days of the mailing of the notice of penalty. An offer in compromise asks CBP to accept less because collection is doubtful or litigation is risky, not because you were blameless.

The regulations draw the line explicitly. Appendix B to 19 CFR Part 171 states that settlement offers “do not involve ‘mitigation’ of a claim or potential claim, but rather ‘compromise’ an action or potential action where Customs evaluation of potential litigation risks, or the alleged violator’s financial position, justifies such a disposition.” Part 171 also treats petitions and offers as parallel remedies rather than substitutes.

When can you file an offer?

Earlier than most importers assume. Appendix B addresses offers in connection with “any section 592 claim or potential section 592 claim,” which covers the period before a penalty notice is even issued. Part 171 sets no filing deadline for the offer itself, unlike the 60-day petition clock.

That flexibility has a limit that is not in the regulation: interest and collection activity do not pause while you assemble financial statements. An offer filed in month nine of a dispute is worth less than one filed in month two, because the balance it is compromising has grown and the field office has already invested in the case. Treat timing as a practical constraint even when the rule is silent.

What must the offer actually say?

Start with form, because a defective offer is not considered at all. Section 171.31 requires the offer to state expressly that it is submitted under section 617, and section 161.5(a) requires it in writing to the Commissioner. An offer that reads like a negotiation letter, without the statutory citation, gives CBP a reason to send it back rather than evaluate it.

Then comes substance: what you are offering, what claim it covers, and why the number is the right one. The statute’s reference to “probabilities of recovery” is the hinge. CBP is being asked to weigh what it would actually collect against what you can pay, so the financial picture you submit has to be complete and consistent with your tax filings and bank statements. Inconsistent numbers end the conversation faster than a low number does.

Why must you deposit the full amount you offer?

This is the step that surprises first-time filers. Under 19 CFR 161.5(b), no offer accompanied by a specific sum will be considered until CBP receives notice that the sum has been deposited in the offeror’s name with the Treasurer of the United States or a Federal Reserve bank. A proponent far from a Federal Reserve bank may perfect the offer with a bank draft payable to the Secretary of the Treasury for collection and deposit.

Appendix B explains where the money sits: it is deposited with the field office handling the section 592 claim and held in a suspense account pending acceptance or rejection. Nothing is applied to the debt until the offer is accepted. If it is rejected, the field office initiates a refund of the deposited amount. The practical consequence is that an offer has to be funded before it is evaluated, which is why the number must be one you can actually raise.

When does CBP accept or reject an offer?

Appendix B gives the standard in one sentence: litigation risk, or the alleged violator’s financial position. Those are the two arguments an offer can make. If the claim rests on a legal theory that would be expensive or uncertain to defend, that is a litigation-risk argument. If collection would yield little because the business has no assets left, that is a financial-position argument. Neither is an argument that the penalty was unfair; that belongs in a petition.

Section 171.32 controls acceptance. An offer “will be considered accepted only when the offeror is so notified in writing,” and CBP may require a collateral agreement or security as a condition. A verbal indication from a case officer is not acceptance, and a collateral agreement can outlive the payment, so read it before signing.

What changes after acceptance?

Three things, and the acceptance letter is the document that governs. First, the letter may identify the portion of the offered amount that represents unpaid duties, taxes and fees, per Appendix B. Those are not being forgiven; they are the government’s money and typically a large share of the total. Second, any collateral agreement or security you signed remains an obligation with its own terms. Third, the scope of what is settled is what the letter says is settled, so keep it with your entry records for the full five-year retention period under 19 CFR 163.

Do not assume an accepted offer carries the same effect as a paid mitigation decision. For a mitigated penalty, 19 CFR 171.23(b) states that payment acts as an accord and satisfaction of the government claim. Part 171 does not attach that language to an offer in compromise, which is another reason to read the acceptance letter rather than the regulation.

What happens if CBP rejects the offer?

Your deposit comes back, promptly, by the field office’s own procedure. What does not come back is the time. The claim survives rejection, collection resumes, and your options narrow to a higher offer, a petition if a window is still open, or litigation if the amount justifies it. Part 171 does not describe an accepted or rejected offer in compromise as a protestable decision, which is why the remedy has to be structured correctly the first time.

That is the argument for sequencing rather than guessing. If culpability is genuinely contestable, a petition is the cheaper first move; it also produces a written decision you can respond to. If liability is clear and the problem is cash, an offer is the right instrument, and a petition filed first only delays the financial presentation that will decide the case.

What should you prepare before filing?

Four documents decide most offers: current financial statements, a list of assets and encumbrances, evidence of the claim’s litigation risk if that is your argument, and a clear allocation between the duty portion and the penalty portion. Build them with your broker or counsel before you approach the field office, because the report CBP relies on has to show both the facts and the recovery probability.

Then protect the business that has to keep importing. An offer does not fix the compliance failure behind the claim, and a second penalty during an open compromise is a much harder conversation. If the goods at issue are part of your regular assortment, sort the paperwork before the next shipment: our dog, cat and dog feeding ranges are the kind of repeat orders that keep a small importer exposed to entry errors, and a low-MOQ program keeps the volume small enough to fix a process before it scales. If you need entry documentation re-sorted before the next purchase order, tell us what you import and we will map the file.

Frequently asked questions

What is an offer in compromise with CBP? A written offer to settle a customs claim, made under 19 U.S.C. 1617 and 19 CFR 161.5, for a specific sum that CBP accepts only in writing. It is a compromise of a civil claim, not an admission or a protest.

Does an offer in compromise cancel the penalty? It settles the civil claim on the terms stated in the acceptance letter. The letter may identify a portion representing unpaid duties, taxes and fees, and that portion is not forgiven.

How much should you offer? Enough to be credible against what CBP could actually collect, and no more than you can fund, because the full amount must be deposited before the offer is considered.

Can you file an offer before a penalty notice arrives? Yes. Appendix B to 19 CFR Part 171 covers offers connected with a section 592 claim or a potential one, which includes the period before formal notice.

Is a rejected offer subject to protest? Part 171 does not describe an offer in compromise as a protestable decision. If you believe the underlying decision was wrong, that argument belongs in a protest or a petition, filed within its own deadline.

Sources: 19 U.S.C. 1617, Compromise of Government claims by Secretary of the Treasury, https://www.law.cornell.edu/uscode/text/19/1617; 19 CFR Part 161, section 161.5 Compromise of Government claims, https://www.ecfr.gov/current/title-19/section-161.5; 19 CFR Part 171, including sections 171.31 and 171.32 and Appendix B, https://www.ecfr.gov/current/title-19/chapter-I/part-171.