Focused Assessment, a Bad Certification and the Prior Disclosure Clock
Ridgeway Outdoor LLC, a US importer in Denver, claimed USMCA preference on 22 entries of Mexican-made aluminium camping cookware (HS 7615.10) between January 2023 and September 2024. Total entered value was USD 4.6 million, and duty savings were USD 211,600 against the 4.4% MFN rate. Every entry carried a blanket USMCA certification from the Mexican producer. In October 2024 an internal audit found that the producer had switched to Chinese aluminium discs (HS 7606) in 2023 and that, on the producer's own cost data, regional value content had fallen to 58% against the 60% required by the applicable rule. The producer has offered to reissue corrected certifications showing a higher RVC. CBP has issued a CF 28 requesting certifications and cost worksheets for six entries but has not opened a formal investigation. Ridgeway's file contains no cost worksheets of its own, and counsel estimates the duty loss at USD 211,600.
1. Is prior disclosure still available, and what must the disclosure contain to be effective?
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Yes, provided it is filed promptly. A prior disclosure is effective if it is made before CBP has received information about the violation from a source outside the importer's own disclosure, or before CBP has commenced a formal investigation. A CF 28 is a routine request for information; it is not a formal investigation. The six entries covered by the CF 28 do not close the door, but the window narrows the moment CBP signals that it has identified the discrepancy, and further delay converts a voluntary correction into a contested one.
The disclosure must be specific: it should identify the importer, the entries and the merchandise, describe the nature of the error (reliance on a certification that the producer could no longer support after switching to Chinese discs, with RVC at 58% against 60%), state the loss of duty of USD 211,600, and tender that amount with interest computed from the date of entry. A disclosure that names the problem but withholds the calculation, the entries or the payment is incomplete and can be treated as ineffective.
Two things must not happen. Ridgeway should not accept the producer's offer to reissue certifications with an engineered higher RVC - a certification must reflect actual cost data, and a knowingly false certification creates exposure for the importer as well as the producer. And it should not file a disclosure that stops at the six entries; a partial disclosure while the remaining sixteen entries are known to be affected undermines credibility and invites a broader penalty assessment.
2. Quantify the penalty exposure Ridgeway avoided by disclosing, and explain how the entries should be corrected.
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For a negligent violation, the statutory maximum is the lesser of the domestic value of the merchandise or two times the loss of duties. The domestic value of USD 4.6 million is well above two times the duty loss, so the ceiling is 2 × 211,600 = USD 423,200. Gross negligence would raise the ceiling to four times the loss (USD 846,400) and fraud to the domestic value, though neither fits on these facts; the importer relied on a producer certification and had no reason to know of the sourcing change until the audit. A valid prior disclosure eliminates the penalty and leaves the duties and interest.
Correction route: entries still within the 300-day post-summary correction window can be fixed by a PSC. Older entries cannot; they must be handled through the disclosure tender or a protest, depending on liquidation status. In practice, group the entries by liquidation status before filing so the disclosure and the PSC filings do not contradict each other.
Separately, CBP may pursue the Mexican producer, but that does not reduce Ridgeway's liability as importer of record. The commercial recovery route is the supply agreement: check whether it contains an origin warranty and an indemnity covering duty, interest and penalties, and whether it survives the producer's own certification failure.
3. What control failures does this case reveal, and what would you put in place to prevent recurrence?
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The root failure is that the importer outsourced the origin determination entirely. A blanket certification was accepted with no cost worksheet, no bill of materials, and no trigger requiring notification when the producer changed a material source. Reasonable care is the importer's obligation and cannot be delegated by signature.
Controls to install:
- Material-level data, not certificates alone. Require an annual bill of materials with HS classification, origin status and value for each component, plus the RVC or tariff-shift worksheet behind the certification. Certificates without worksheets are treated as unverified.
- Change notification clause. The supply agreement should oblige the producer to notify any change of supplier, material origin or production location before shipment, with a right to suspend the certification until the origin position is re-tested.
- Re-test on trigger events, not just annually. A sourcing change, a plant move, a cost shock or a new part number should force a recalculation of the specific rule before the next entry.
- Entry-level reconciliation. A monthly check that the HTS codes, values and origin claims in the entry data match the supporting file, with a sample re-performance of the RVC calculation each quarter.
- Documented escalation. A named owner for origin compliance, a defined path for questions to counsel, and a rule that no certification is accepted from a supplier that cannot explain its own calculation.
Finally, close the loop: after the disclosure, review whether other product lines from the same producer or region are affected, since a single sourcing change rarely stays confined to one part number.