Transit Under Bond and a Broken Seal
A transit declaration covers 40 pallets of consumer electronics moving under bond from the port of entry to an inland customs office 600 km away, with a 5-day transit period. On day 3, the driver reports that the customs seal on the trailer door was found broken at a roadside checkpoint; the cargo appears intact. The carrier continues to the inland office and presents the goods on day 4 with the broken seal. The transit document lists the carrier as the principal's agent. The inland office asks the broker to explain the discrepancy and to advise on the principal's liability. The goods are subject to a 15% duty and a licensing requirement.
1. What is the legal significance of the broken seal, and what should have happened at the checkpoint?
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A broken customs seal creates a presumption that the transit procedure has been compromised, because the seal is the guarantee that the goods remain unaltered. The correct course was to report the broken seal immediately to the nearest customs office and have the goods examined and a new seal applied, with the incident recorded on the transit document. Continuing to the destination without notifying customs leaves the principal unable to rebut the presumption that the goods were tampered with. The carrier's roadside report to the driver is not a substitute for notification to customs.
2. Who is liable if the goods are found to be short or substituted, and what is the measure of liability?
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The principal under the transit procedure is liable for the duties and taxes on goods that are not delivered in accordance with the transit declaration, and the carrier as agent may also be pursued. The measure is the duty and tax that would have been payable on the missing or substituted goods at the rate applicable, here 15%, plus any other charges. Because the goods are subject to licensing, a shortfall or substitution may also trigger a licensing violation independent of the duty. The principal cannot rely on the carrier's assurance that the cargo 'appears intact'; the burden is on the principal to prove the goods were delivered as declared.
3. What should the broker do now to protect the principal?
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The broker should immediately notify the inland office of the broken seal, request a physical examination and reconciliation of the 40 pallets against the packing list and transit document, obtain a written incident report, and preserve the broken seal and photographs as evidence. The broker should also check whether the checkpoint recorded the incident, since a contemporaneous record supports the principal's account. If the count reconciles, the broker should seek discharge of the transit procedure with the incident documented; if not, the broker should advise the principal of the duty and licensing exposure and cooperate with the investigation to mitigate penalties.