Customs Penalty Floor: What the 2026 EO Changes

A mitigated customs penalty used to mean a negotiated outcome. Under the June 2026 Executive Order on Strengthening Customs Enforcement, CBP can no longer reduce most penalties below 50% of the maximum. That floor resets the calculus for compliance teams at every importer.

What the 50% Penalty Floor Means in Practice

Before the EO, CBP had wide discretion to mitigate penalties. A negligence finding on a $200,000 duty shortfall carried a maximum penalty of $400,000 (2x the loss under 19 USC § 1592). Through mitigation, that penalty often settled at 10% to 25% of the maximum, depending on the circumstances and how cooperative the importer was.

The new floor changes that. A 50% minimum on the same $400,000 maximum means the lowest possible outcome is $200,000. Compliance teams that budgeted for penalties in the low five figures are looking at a fundamentally different number.

The EO also directs CBP to impose maximum penalties on customs brokers who fail to conduct due diligence, repeatedly represent noncompliant clients, or don’t respond to CBP information requests on time. Brokers now face real liability exposure under these provisions.

Why the Timing Matters

CBP’s enforcement numbers back up the EO. Through April 2026, CBP collected $182.22 million from just 181 audits, pushing the average recovery past $1 million per case. Full-year FY2025 collections reached $235.46 million, more than double the $117.7 million collected in FY2024.

Part of that acceleration comes from better targeting tools. CBP’s Automated Targeting System uses pattern recognition across thousands of entries to flag classification mismatches, valuation anomalies, and origin patterns that suggest transshipment. More audits now start with data, not tips.

The result for compliance teams: more audits, sharper targeting, and higher minimum penalties when those audits find problems.

What Does This Change for Day-to-Day Compliance?

The EO shifts the economics of three areas:

Entry review cadence. When mitigated penalties landed in the $20,000 to $40,000 range, deferring systematic entry review was uncomfortable but defensible. With a $200,000 floor on the same exposure, the cost of skipping regular reviews exceeds the cost of doing them for most mid-size importers.

Prior disclosure timing. Prior disclosure under 19 USC § 1592(c)(4) still caps penalties at interest on unpaid duties, bypassing the penalty floor entirely. But the disclosure must come before CBP starts looking. Because the floor is higher, the gap between self-correcting and waiting for CBP to find the problem has grown. Filing early matters more now.

Record retention practices. Under 19 CFR 163, importers must retain records for five years and produce them within 30 days of a CBP demand. Failure penalties reach 40% of import value (negligent) or 75% of import value (willful). The EO also directs CBP to enforce liquidated damages claims against bonds, so record gaps that might have been overlooked before now carry real financial consequences.

Frequently Asked Questions

What is the customs penalty floor in the 2026 EO?

The June 2026 Executive Order on Strengthening Customs Enforcement establishes a minimum penalty floor of 50% on mitigated customs violations. CBP can no longer reduce most penalties below half the maximum statutory amount, regardless of circumstances or cooperation.

Does prior disclosure still work after the new EO?

Yes. Prior disclosure under 19 USC § 1592(c)(4) caps penalties at interest on unpaid duties. This mechanism is separate from the mitigation guidelines the EO changes, so a valid prior disclosure filed before CBP begins an investigation still eliminates the percentage-based penalty entirely.

How long must importers keep customs records?

Under 19 CFR 163, importers must retain customs records for five years from the date of entry or the date of the activity that required the record. Records must be produced within 30 calendar days of a CBP demand. Negligent failure to comply carries penalties up to $10,000 or 40% of the import value.

How Tier2 Cargo Supports Compliance Record Keeping

Finding a compliance gap after CBP does is now far more expensive than catching it yourself. That takes consistent visibility into what was declared on each entry across every shipment.

Tier2 Cargo’s AI document extraction captures classification codes, declared values, and origin data directly from commercial documents as they move through the shipment lifecycle. When the same product shows up with different HS codes across entries, or when declared values drift from the commercial invoice, the inconsistency surfaces before it becomes a customs audit finding.

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Compliance teams that build self-correction into their process reduce penalties and build the documented record of reasonable care that influences how CBP handles future interactions with them.