Most importers treat a CBP audit as an accounting exercise. Gather the paperwork, answer the questions. That works until the report arrives and the message changes from “you owe some duties” to “you may owe a penalty.”
That change is becoming more common. U.S. Customs and Border Protection (“CBP”) completed 465 audits in fiscal year 2025 and collected about $235.5 million from them. Some were full reviews of a company's import controls, called Focused Assessments. Others zeroed in on a single issue, such as how one product line was classified.
This article explores how audit findings become enforcement cases, what happens at each stage after the audit, when seizure and prosecution come into play, how prior disclosure works, and which choices during the audit affect the outcome of the situation you are facing.
Key Takeaways:
An audit can end with a bill for unpaid duties or with a civil penalty case, and the difference usually comes down to how careless CBP thinks you were.
Penalties can be several times larger than the duties you underpaid, and they can apply even when no duties were lost.
Missing records carry their own penalties and can cost you a lower duty rate you claimed.
Reporting your own mistake before CBP formally investigates it can reduce most penalties to interest only.
Signing off on CBP's sampling method early can limit what you can challenge later.
How Do CBP Audit Findings Turn Into Penalties?
Auditors are answering two questions. Did you underpay duties, taxes and fees? And can the way you file entries be trusted? A yes to the first produces a bill. A no to the second is what opens a penalty case.
That case runs under 19 U.S.C. § 1592. It penalizes bringing goods in through a false statement or omission that is “material,” meaning it could affect CBP’s decisions about your goods. CBP grades the violation by how careless, or deliberate, it believes you were. For negligence, the maximum is twice the lost duties. For gross negligence, it's four times. Either way, it's capped at the goods’ domestic value, which is roughly what they would sell for in the U.S. Fraud can reach that full domestic value.
Here’s what that looks like: say an audit finds $50,000 in underpaid duties on misclassified goods, and CBP calls it gross negligence. Your exposure can reach $200,000 before any reduction, plus the $50,000 itself. CBP often allow for the opportunity to negotiate that number down, but it’s where the conversation starts.
No duty loss doesn’t mean no penalty. A wrong country of origin on duty-free goods, for example, can still be a violation. In those cases the penalty is figured as a share of the goods’ value instead: up to 20% for negligence and up to 40% for gross negligence. Mistakes in tariff classification or country of origin are the most common way an audit finding turns into this kind of case.
Missing records are a separate trap. Most import records must be kept for five years. During an audit, CBP will ask for many of them, and failing to produce one has consequences of its own.
Under 19 C.F.R. § 163.6, a negligent failure can cost up to $10,000 or 40% of the goods’ value for each shipment released, whichever is less. A willful failure can cost up to $100,000 or 75%. There’s a second hit, too. If the missing record supported a lower “special” duty rate, such as a free trade agreement claim, CBP can recalculate recent entries at the regular rate.
That’s why country-of-origin documentation still matters long after the goods have sold. A supplier’s certificate in a drawer is worth very little if you can’t find it when the auditors ask, particularly when CBP questions whether goods were properly declared or transshipped through a third country.
What Happens After the Auditors Find a Problem?
The audit report itself doesn’t impose a penalty. It’s the start of a separate process, and knowing the sequence helps you see where you still have leverage.
If the auditors found unpaid duties, CBP will ask you to pay them. That demand can come on its own, even if no penalty ever follows. When the findings suggest a § 1592 violation, the file goes to CBP's Fines, Penalties and Forfeitures (“FP&F”) office, the unit that decides penalty cases.
The FP&F office usually starts with a pre-penalty notice. It tells you what CBP believes you did wrong, the culpability level it has in mind and the penalty it proposes. You get a chance to respond in writing, and that response is often the best moment to argue culpability. Moving a case from gross negligence to negligence can cut the maximum penalty in half.
If CBP still goes forward, it issues a formal penalty notice. You can then file a petition asking CBP to reduce or cancel the penalty, under the relief process in 19 C.F.R. Part 171. A penalty that stays unpaid doesn’t simply disappear. The government can sue to collect it in the U.S. Court of International Trade (“CIT”), where the importer can contest the case.
So an audit report is rarely the last word. Each notice comes with a deadline, and each response shapes what CBP sees next.
Can a CBP Audit Lead to Seizure, Forfeiture or Prosecution?
It can, though less often than people fear. A seizure for a § 1592 violation is allowed only in narrow situations, such as an importer who is insolvent or outside U.S. jurisdiction. Other laws let CBP seize goods brought in contrary to law. That’s how counterfeit merchandise ends up in forfeiture proceedings. It’s also why goods still in your supply chain can become the problem once an audit uncovers something like transshipment through a third country.
When findings look intentional, the case can leave CBP altogether. The Justice Department’s Trade Fraud Task Force, launched with the Department of Homeland Security in August 2025, passed $1 billion in recoveries, penalties, forfeitures and charged losses in under a year. CBP added in the same announcement that it has assessed more than $2.1 billion in commercial trade penalties so far this fiscal year.
The cases behind those numbers look familiar: charges brought against jewelry importers with allegations of falsely declaring where their goods came from, and the task force’s largest resolution so far is a $549.5 million settlement with an aluminum company. The same report notes that DOJ created a new section focused on trade and customs fraud.
Prior Disclosure: Your Strongest Option, If You Move First
A prior disclosure is a report telling CBP about an error in your entries before CBP formally investigates it. Done in time and done right, it changes the outcome dramatically. For negligence or gross negligence, the penalty drops to interest on the unpaid duties. For fraud, it drops to the amount of duties lost instead of the full value of the goods. CBP also can't seize the goods under § 1592 once a valid disclosure is on file.
Go back to the $50,000 example. If that error was negligent and disclosed in time, the cost would be the $50,000 plus interest. Without a valid disclosure, the same error could carry a penalty of up to $100,000 on top of the duties.
That's the reward. The risk is that a disclosure is easy to get wrong, and a flawed one can hand CBP information without earning the protection. Scope matters just as much. CBP verifies what you report, and violations it uncovers outside the disclosure’s scope get no protection. A disclosure is also an admission, so how you describe the error shapes how culpable you look in every conversation that follows.
Voluntary disclosure now matters beyond CBP, too. The Justice Department and DHS recently released a joint guide that addresses options for companies in some industries that come forward on their own. In an enforcement climate this active, coming forward first can put an importer in a much stronger position.
Timing is where an audit complicates things. A formal investigation begins on the date CBP records in writing that it saw signs of a possible violation, a date you may never see. Problems CBP finds on its own after that fall outside your disclosure.
The regulation also lists events that create a presumption you knew an investigation had started, such as a CBP special agent asking about the issue or requesting related records, or a pre-penalty notice arriving. You can try to rebut that presumption, but the burden of proof is yours.
So if an internal review turns up an error mid-audit, waiting to see whether the auditors notice is usually the most expensive choice. Filing in a hurry isn't much better. Whether a disclosure is still timely, and how far it should reach, depends on the facts. Those are decisions to make with counsel before anything goes to CBP.
Decisions During the Audit That Shape the Ending
Some of the most consequential moments in an audit don't look important when they happen:
The sampling plan. CBP often reviews a sample of entries and applies the results to everything in scope. Once you accept the plan in writing, 19 C.F.R. § 163.11 leaves you able to challenge only math and clerical errors. Whether a plan is fair to your business is a judgment call to make before anyone signs.
Overpayments. Money you overpaid on some entries can be credited against what you underpaid, with exceptions. A duty preference you never claimed on time, for instance, doesn't count. Overpayments CBP never hears about can't help you.
Self-testing. CBP can let an importer review its own transactions under supervision. That can mean more say over how errors are found and explained, and more responsibility for getting it right.
Your written answers. A penalty officer may later read every explanation you give the auditors. A well-meant answer that overstates what went wrong can make you look more culpable than you are.
Each of these is a point where experienced counsel can change the direction of an audit. A strong compliance program helps, and C-TPAT membership can count in your favor, but neither prevents an audit from becoming an enforcement case.
Maybe you've received an audit notice, or a CF-28 that feels like it's heading somewhere. Or you suspect your entries have a problem CBP hasn’t found yet. Either way, the order of your next steps matters. If you’ve received an audit notice, discovered a potential entry error, or are concerned about possible penalties, contact us for a confidential consultation.
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A CBP audit examines an importer's records, transactions, or internal controls to determine whether the business is complying with customs requirements.
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Errors involving tariff classification, country of origin, or materially false statements and omissions may lead to enforcement action, depending on the circumstances.
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Failure to produce required import records can result in separate penalties. It may also prevent your business from benefiting from a preferential duty rate it claimed.
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Yes. CBP may review a sample of import entries and use the results to assess a broader group of transactions. The sampling method can affect the scope of the findings.
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In some circumstances, overpayments on certain entries may be credited against underpaid duties. However, exceptions apply, and not every overpayment qualifies.
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A prior disclosure allows an importer to voluntarily report certain violations to CBP. If the disclosure satisfies the applicable requirements, it may significantly reduce potential penalties.
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No. Protection generally depends on the disclosure's scope and eligibility. Violations outside its scope may remain subject to penalties.
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Yes. When the facts suggest intentional misconduct, a matter may be referred to the Department of Justice for potential criminal enforcement.
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A strong compliance program can help identify errors and demonstrate that a business takes its obligations seriously. However, it does not guarantee that CBP will not conduct an audit or pursue enforcement.
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Review the issue promptly, preserve relevant records, and seek advice from experienced customs counsel before responding to CBP or submitting a prior disclosure. The appropriate next steps depend on the facts and whether an investigation has begun.
This article is intended for informational purposes only and does not constitute legal advice. The content herein is not a substitute for obtaining legal advice from a qualified attorney licensed in the appropriate jurisdiction. Viewing or relying upon this information does not create an attorney-client relationship. Readers should consult with legal counsel regarding their individual circumstances before taking any action based on this material.
