3.5 Allowances for Shortage, Damage, Casualty, and Abandonment (19 CFR Part 158)
Key Takeaways
- 19 CFR Part 158 is organized into four subparts: Subpart A lost or missing packages and deficiencies in contents (158.1–158.7), Subpart B damaged or defective merchandise (158.11–158.14), Subpart C casualty, loss, or theft while in customs custody (158.21–158.30), and Subpart D destroyed, abandoned, or exported merchandise (158.41–158.45).
- An allowance in duty for merchandise entirely without commercial value at the time of importation by reason of damage or deterioration is made in the liquidation of the entry (19 CFR 158.11).
- For perishable merchandise found entirely without commercial value, the claim must be filed with the port director on CBP Form 4315 within 96 hours after unlading.
- Part 158 relief depends on the condition existing at or before importation, or on a casualty while the goods were in customs custody; a price concession negotiated after importation is disregarded under 19 U.S.C. 1401a(b)(4)(B).
- Relief for shortage or non-delivery turns on whether the merchandise was ever imported: duty is not owed on goods that never arrived, but the claim must be substantiated against the manifest and the entry.
3.5 Allowances for Shortage, Damage, Casualty, and Abandonment (19 CFR Part 158)
Why this sits in the valuation chapter: Transaction value is built on the price actually paid or payable, and 19 U.S.C. § 1401a(b)(4)(B) disregards any rebate or price decrease effected after the date of importation. That rule creates a hard question: what happens when the merchandise really was short, broken, or worthless when it arrived? The answer is not a valuation adjustment — it is an allowance under 19 CFR Part 158.
The Architecture of Part 158
| Subpart | Sections | Subject |
|---|---|---|
| A | 158.1–158.7 | Lost or missing packages and deficiencies in contents |
| B | 158.11–158.14 | Damaged or defective merchandise |
| C | 158.21–158.30 | Casualty, loss, or theft while in customs custody |
| D | 158.41–158.45 | Destroyed, abandoned, or exported merchandise |
The subparts answer four different factual questions, and the first step in any Part 158 problem is to identify which one is presented: Did it arrive? Did it arrive in sound condition? Did something happen to it while CBP still had it? Or is the importer giving it up?
Subpart A: Shortage, Non-Delivery, and Deficiencies
The organizing principle is that duty is assessed on merchandise imported into the United States. If a package on the manifest never arrived, or arrived with less in it than declared, the duty base should reflect what actually came in.
- Packages not imported: where packages covered by the entry were never landed, an allowance is made for the missing packages, supported by the carrier's records and the manifest discrepancy.
- Deficiencies in contents: where the packages arrived but contained less than the invoiced quantity, the importer must establish the shortage. A shortage claim asserted without documentary support against the manifest, the packing list, and a tally or survey report is routinely denied.
- Timing: the claim is made in connection with the entry, and CBP reflects the allowance in the liquidation.
A recurring trap distinguishes shortage from theft after release. Once merchandise has been released from customs custody, a later loss is the importer's commercial problem, not a duty question. Subpart C, not Subpart A, addresses losses occurring while the goods remained in customs custody.
Subpart B: Damaged, Defective, and Worthless Merchandise
Merchandise Entirely Without Commercial Value (19 CFR 158.11)
Where a shipment is found to be entirely without commercial value at the time of importation by reason of damage or deterioration, an allowance in duties is made in the liquidation of the entry. The provision splits by commodity type:
- Non-perishable merchandise: the allowance is made in liquidation upon satisfactory proof that the merchandise was worthless when imported.
- Perishable merchandise: an application for the allowance must be filed with the port director on CBP Form 4315 within 96 hours after the unlading of the merchandise, and the merchandise must in fact be entirely without commercial value by reason of damage or deterioration.
MEMORIZE THE 96 HOURS. The perishable window is short, it runs from unlading rather than from entry or release, and it is measured in hours rather than days — three features that make it a favorite exam fact. Missing it forfeits the allowance even where the produce was genuinely worthless on arrival.
Partially Damaged or Defective Merchandise
Where the merchandise is not worthless but is partially damaged or defective at the time of importation, relief is available on a proportionate basis rather than in full. The claim requires proof that the condition existed at or before importation — typically a survey or inspection report, photographs, and the carrier's exception notations on the bill of lading.
The Line Against Post-Importation Price Adjustments
This is the conceptual heart of the section. Compare two fact patterns:
| Fact Pattern | Governing Rule | Result |
|---|---|---|
| Goods conformed to the contract on arrival; weeks later the buyer negotiates a $20,000 credit for cosmetic scratches discovered in the warehouse | 19 U.S.C. § 1401a(b)(4)(B) — any rebate or other decrease in the price actually paid or payable made or effected after the date of importation is disregarded | Entered value unchanged; no relief |
| Goods were damaged in transit and arrived defective; the importer files a timely claim supported by a survey report establishing the condition at importation | 19 CFR Part 158, Subpart B | Allowance in duty reflecting the damaged condition |
The difference is not the size of the concession but when the condition existed. Valuation law refuses to follow a commercial renegotiation; Part 158 follows the physical facts on arrival.
Subpart C: Casualty, Loss, or Theft in Customs Custody
Subpart C addresses merchandise destroyed, lost, stolen, or injured by casualty while still in customs custody — in a bonded warehouse, a container freight station, a centralized examination station, general order, or in-bond transit. The relevant questions are whether the merchandise was in customs custody at the time, whether the loss was by casualty rather than by the custodian's conduct, and whether the claim was timely filed with supporting proof.
Two consequences run in parallel and should not be confused:
- Duty relief for the importer under Subpart C, where the statutory conditions are met; and
- Bond liability for the custodian under the Activity Code 2 custodial bond conditions of 19 CFR 113.63, which obligate the custodian to hold the merchandise safely and to account for shortages, overages, and damage. A warehouse shortage can simultaneously relieve the importer of duty and expose the warehouse proprietor and its surety to liquidated damages.
Subpart D: Destruction, Abandonment, and Exportation
An importer may relieve itself of duty by giving the merchandise up rather than entering it for consumption:
- Abandonment to the Government: merchandise may be abandoned to the United States, in which case the importer is relieved of duty but also loses any claim to the merchandise or its sale proceeds.
- Destruction under CBP supervision: destruction must be under customs supervision to relieve duty. Unsupervised destruction by the importer generally does not.
- Exportation: exporting the merchandise, again under CBP supervision where required, can relieve duty liability, and in the drawback context supplies the export event that supports a claim under 19 U.S.C. § 1313.
These three dispositions reappear throughout the guide: they are the same options CBP offers on a CBP Form 4647 notice for an unmarked article (mark, export, or destroy), the same options for merchandise refused admission by the FDA, and the same options for excess quota merchandise under 19 CFR 132.5, which may be held for the next quota period in a foreign trade zone or a bonded warehouse, or exported or destroyed under CBP supervision.
Putting the Four Subparts to Work
| The Facts | Subpart | What to Look For |
|---|---|---|
| Two of fifty cartons on the manifest never landed | A | Manifest discrepancy and carrier records; allowance in liquidation |
| Cartons landed but contained 900 units instead of 1,000 | A | Tally or survey establishing the deficiency in contents |
| A container of lettuce arrives spoiled and commercially worthless | B (perishable) | CBP Form 4315 within 96 hours of unlading |
| Machinery arrives with water damage reducing its value by 40% | B (partial) | Survey report proving the condition existed at importation |
| The buyer negotiates a discount after a warehouse inspection | Not Part 158 | 19 U.S.C. § 1401a(b)(4)(B) disregards it |
| A fire destroys goods in a Class 3 bonded warehouse | C | Customs custody at the time; custodial bond exposure under 19 CFR 113.63 |
| The importer decides not to enter the goods at all | D | Abandonment, or destruction or exportation under CBP supervision |
A container of fresh cut flowers is unladen at the Port of Miami at 8:00 a.m. on Monday. On inspection the flowers are found to have been destroyed by a refrigeration failure during the voyage and are entirely without commercial value. The importer's broker wants to obtain relief from duty. What must the broker do, and by when?
An importer enters industrial pumps at a transaction value of $400,000. Eight weeks after release, a warehouse inspection reveals cosmetic corrosion on several units, and the seller issues a $60,000 credit. Separately, the importer can document that four of the sixty crates listed on the manifest were never landed at the port. How should each claim be handled?
A fire destroys a portion of a shipment of imported machinery while it is stored in a Class 3 public bonded warehouse under a warehouse entry, before any withdrawal for consumption. Which statement best describes the legal consequences?