Do You Pay Duty on Damaged Cargo? 19 CFR 158 Allowance Rules

A container arrives with water in it. Forty cartons are crushed, another pallet is spoiled, and the commercial invoice still says full value. The duty question comes before the insurance question: do you still pay duty on goods that arrived damaged?

Often no, or not in full. 19 CFR Part 158 lets CBP appraise partially damaged goods in their condition as imported and treat worthless goods as never imported. The catch is timing. The allowance is made in the liquidation of the entry, so the evidence has to be in front of CBP before the entry liquidates. After that, the only administrative route left is a protest.

For an import operations lead handling one damaged container a quarter, the allowance is a line item. For a finance team at a multinational importing 2,000 containers a year, unclaimed damage allowances are duty paid on value that never arrived. GingerControl is a trade compliance AI platform; its Tariff Calculator shows the full duty stack on the declared value, which is the number an allowance would reduce.

Last updated: October 2026

Do you owe duty on merchandise that arrived damaged?

Not on the damaged portion, if three conditions line up: the damage existed at the time of importation, CBP finds it, and nothing in law forbids the allowance. Part 158 is titled "Relief From Duties on Merchandise Lost, Damaged, Abandoned, or Exported," and its scope section says it "sets forth general rules for granting relief from duties on merchandise which is lost, damaged, abandoned, or exported" (19 CFR 158.0).

The mechanism is what sets it apart from every refund route an importer usually reaches for. A post summary correction, a protest, a 1520(d) claim or drawback all claw money back after it has been paid. A Part 158 allowance works on the appraisement itself. 19 CFR 158.12(a) states it plainly:

"Merchandise which is subject to ad valorem or compound duties and found by the port director to be partially damaged at the time of importation shall be appraised in its condition as imported, with an allowance made in the value to the extent of the damage."

A lower appraised value lowers every ad valorem line computed on it. Here is the arithmetic on a hypothetical entry line, with a hypothetical combined ad valorem rate chosen only to show the mechanics:

Item	Without allowance	With a 30 percent damage allowance
Invoice value	$200,000	$200,000
Appraised value	$200,000	$140,000
Duty at a hypothetical 25 percent combined ad valorem rate	$50,000	$35,000
Duty difference		$15,000

Bottom line: For an import operations lead filing a damaged-cargo insurance claim on a $200,000 line, the duty allowance is a separate $15,000 decision at a 25 percent combined rate, and it is lost by default if nobody raises it before liquidation. Plug in the real rates for the line, not this hypothetical. GingerControl identifies and documents the opportunity; your licensed broker or counsel files.

Quotable insight: Among the duty relief routes importers reach for, Part 158 is the one that works on the appraisement rather than on a refund claim. Drawback, protest and post summary corrections claw duty back; a damage allowance reduces the appraised value itself. That makes the binding constraint evidence, not paperwork. A damaged container that is unloaded, sorted and landfilled before CBP sees it cannot be reconstructed later by any broker, lawyer or software tool.

What is the difference between partially damaged, completely worthless, and short shipped?

Part 158 splits the problem into separate subparts, each with its own form, test and clock. Picking the wrong one is the most common way a valid claim fails.

Situation	Rule	What CBP does	Form and clock
Partially damaged at importation, ad valorem or compound duty	19 CFR 158.12(a)	Appraises in condition as imported, allowance in value	No separate form deadline in the section; made in liquidation
Partially damaged, specific or compound duty	19 CFR 158.12(b)	No allowance in specific duties, weight, quantity or measure	Worthless segregable part may go under 158.11
Entirely without commercial value, nonperishable	19 CFR 158.11(a)	Allowance on the ground of nonimportation, in liquidation	Segregated under CBP supervision at importer expense
Entirely without commercial value, perishable	19 CFR 158.11(b)	Allowance on what the port director finds worthless	CBP Form 4315 within 96 hours after unlading, before removal from the pier
Perishables condemned by health officers	19 CFR 158.14	Allowance in liquidation	Condemnation within 10 days after landing; written notice within 5 days of condemnation
Lost or missing packages	19 CFR 158.3	Allowance if the goods were not "permitted"	CBP Form 5931, before liquidation becomes final
Short contents inside packages	19 CFR 158.5	Allowance for the deficiency	CBP Form 5931, before liquidation becomes final
Casualty, loss or theft in CBP custody	19 CFR 158.21 to 158.30	Abatement or refund	Form 4315 within 30 days of discovery; evidence within 90 days

Bottom line: For a compliance manager triaging a damaged shipment within the first 48 hours, the first question is not "how bad is it" but "which subpart is this." A perishable shipment runs on a 96-hour clock; a shortage runs on Form 5931; a fire in a bonded warehouse runs on a 30-day application window.

Three distinctions deserve attention.

Worthless means worthless. 19 CFR 158.11(a) applies when goods are found "entirely without commercial value at the time of importation by reason of damage or deterioration." If the goods can be sold as salvage, the route is a partial damage allowance under 158.12, not nonimportation.

Segregation has to happen under CBP supervision. For a worthless portion of a nonperishable shipment, the allowance covers a portion "segregated from the remainder of the shipment under Customs supervision at the expense of the importer." Sorting on your own dock first and asking later does not satisfy that text.

Shortages are a different problem from damage. Packages that never arrived, and cartons short of their invoiced contents, sit in Subpart A. For an unconcealed shortage, 19 CFR 158.5(b) requires Form 5931 executed by both the importer and the carrier. For a concealed shortage, the importer executes it alone and CBP must be satisfied the claim is valid.

When does the allowance have to be claimed, and what happens once the entry liquidates?

For nonperishable damage under 158.11(a) and 158.12, the regulation sets no separate filing window. It says the allowance is made "in the liquidation of the entry." In practice that makes liquidation the deadline: once the entry liquidates at full value, the allowance has not been made, and the remaining route is a different one.

Entries that CBP does not liquidate within one year of entry are "deemed liquidated by operation of law at the rate of duty, value, quantity, and amount of duties asserted by the importer of record" under 19 CFR 159.11. If the entry summary declared full value and nobody raised the damage, full value is what liquidates. CBP can extend the liquidation period under 19 CFR 159.12, so check each entry's actual status rather than assuming the one-year date. The method is in our guide to checking entry liquidation status.

After liquidation, the route is a protest. 19 CFR 174.11 lists "the appraised value of merchandise" and "the liquidation or reliquidation of an entry" among the decisions that may be protested. Under 19 CFR 174.12(e), a protest on an entry made on or after December 18, 2004 must be filed within 180 days of the date of liquidation. The mechanics are in our guide on how to file a customs protest.

A protest is a fallback, not an equal alternative. It still has to prove that the goods were damaged at the time of importation, which is hard to show months later if the goods were never examined.

Stage of the entry	Route available	Primary source
Before release, perishable	Form 4315 within 96 hours of unlading	19 CFR 158.11(b)
Before liquidation, nonperishable	Port director finding, allowance made in liquidation	19 CFR 158.11(a), 158.12
Before liquidation becomes final, shortage	Form 5931	19 CFR 158.3, 158.5
After liquidation, within 180 days	Protest of appraised value or liquidation	19 CFR 174.11, 174.12(e)
Goods released, defective, to be exported or destroyed	Rejected merchandise drawback	19 CFR 190.41, 190.42

Bottom line: For a finance lead reviewing open entries at quarter end, any entry with a known damage claim and no allowance on file is on a clock that ends at liquidation, then 180 days after it. GingerControl identifies and documents the opportunity; your licensed broker or counsel files.

Which goods get no allowance at all, and why is rust on steel the classic exclusion?

Part 158 carries its own limit: an allowance is made "except when forbidden by law or regulation." 19 CFR 158.12(a) names the best-known example, and the source is the tariff schedule itself. Additional U.S. Note 3 to Chapter 72 of the HTS (Revision 20, 2026, retrieved 8 October 2026) reads:

"No allowance or reduction of duties for partial damage or loss in consequence of discoloration or rust occurring before entry shall be made upon iron or steel or upon any article of iron or steel."

Two points follow. First, the exclusion reaches articles of iron or steel, not only raw Chapter 72 product. Second, it is limited to discoloration or rust. A steel coil crushed in a handling accident is not excluded by this note on its face; a steel coil that rusted in transit is.

The second structural exclusion is specific duty. Under 19 CFR 158.12(b), goods dutiable at specific or compound rates get no allowance in the specific duty, or in the weight, quantity or measure, for partial damage. A product dutiable per kilogram that arrives half spoiled still pays per kilogram on the specific component, unless a totally worthless portion can be segregated and treated as a nonimportation.

The third is the casualty subpart's own scope. Under 19 CFR 158.22, Subpart C procedures do not apply where an allowance is made under Subparts A or B. Under 19 CFR 158.21a, a casualty in a bonded warehouse qualifies only if it occurs within 3 years from the date of importation.

When is rejected merchandise drawback the better route than an allowance?

When the defect was not visible at entry, the goods have already been released, and the realistic plan is to send them back or destroy them. Part 158 itself closes the door on a refund for exporting released goods: 19 CFR 158.45(b) says no refund or allowance is made for exportation after release "unless a drawback of duties is expressly provided for by law."

Rejected merchandise drawback is that law. 19 CFR 190.41 covers duty-paid goods that do not conform to sample or specifications, were shipped without the consignee's consent, or were "determined to be defective as of the time of importation," when exported or destroyed under CBP supervision. "The total amount of drawback allowable will be 99 percent of the amount of duties paid."

The conditions in 19 CFR 190.42 are strict:

1. Export or destruction must happen within the statutory 5-year period, or drawback is denied.
2. The claimant must document the nonconformity, lack of consent, or defect as of importation.
3. A Notice of Intent to Export, Destroy, or Return Merchandise for Purposes of Drawback on CBP Form 7553 must be filed at least 5 working days before the intended return to CBP custody, unless a waiver applies.
4. If CBP says it will examine the goods and they are exported or destroyed without examination, the claim must be denied.

Question	Part 158 damage allowance	Rejected merchandise drawback
When it works	At entry, before liquidation	After duty is paid and goods released
What it changes	Appraised value or quantity	Refund of duty already paid
Maximum relief	Extent of the damage found	99 percent of duties paid
What happens to the goods	Importer keeps damaged goods or segregates worthless portion	Exported or destroyed under CBP supervision
Clock	Liquidation (nonperishable), 96 hours (perishable)	5 years; Form 7553 at least 5 working days before return

Bottom line: For a quality team that discovers a defect three months after release, the allowance window has usually closed and drawback is the route. For a receiving dock that sees water damage on day one, the allowance is cheaper because the goods never leave. Our duty drawback guide covers the wider program. GingerControl identifies and documents the opportunity; your licensed broker or counsel files.

What evidence does CBP expect, and who has to produce it?

The regulations put the burden on the importer and the party in charge of the goods, and they spell out the evidence where it matters most.

• Partial damage or worthless goods. The test is what "the port director" finds. That means CBP needs the chance to see the goods, and any worthless portion must be segregated under CBP supervision. Survey reports, photos and the insurer's appraisal support the finding; they do not replace it.
• Casualty in CBP custody. 19 CFR 158.27 requires a declaration from the master, driver or warehouse proprietor stating the time, place and nature of the casualty, the bill of lading, entry summary and invoice, and "a copy of the insurance appraiser's report, if any." For partial destruction, 19 CFR 158.25 sets the method: compare "the market value of comparable sound merchandise with the net salvage value of the injured merchandise."
• Shortages. Form 5931, with the dock receipt or other evidence of nonreceipt, and the carrier's signature for an unconcealed shortage.
• Review. Under 19 CFR 158.30, the importer may petition the Commissioner within 30 days of the port director's casualty decision.

The broker usually files. The importer owns the facts. GingerControl builds trade compliance AI; it does not file entries, act as Importer of Record or give legal advice.

Where software helps is upstream of the filing. The allowance rarely fails on law. It fails because the damage report lives in a warehouse email, the insurance claim lives with risk management, and the entry lives with the broker, and nobody joins them before liquidation. A damaged-goods allowance not claimed is a form of duty leakage, and it sits beside the other channels in our guide to recovering overpaid import duties.

Where this fits in your entry review

GingerControl's Tariff Calculator returns the full U.S. tariff stack for an HTS code and value, with each component broken out, so a team can see what a damage allowance is worth on a given line before asking the broker to pursue it. GingerControl's HTS Classification Researcher reasons through Section and Chapter Notes, which is where exclusions such as the Chapter 72 rust note sit. Neither files anything with CBP.

For importers who want a documented view of where duty is leaking across entries, freight and purchase orders, the two-week Trade Spend Assessment runs import entries through GingerControl's audit layer and returns findings with the evidence attached. GingerControl identifies and documents the opportunity; your licensed broker or counsel files.

References

1. Office of the Federal Register and U.S. Government Publishing Office, eCFR, 19 CFR Part 158, Relief From Duties on Merchandise Lost, Damaged, Abandoned, or Exported. Sections 158.0, 158.3, 158.5, 158.11, 158.12, 158.14, 158.21, 158.21a, 158.22, 158.23, 158.25, 158.27, 158.30, 158.45. eCFR up to date as of 5 October 2026, retrieved 8 October 2026.
2. eCFR, 19 CFR Part 190, Modernized Drawback. Sections 190.41, 190.42, 190.43. Retrieved 8 October 2026.
3. eCFR, 19 CFR Part 174, Protests. Sections 174.11 and 174.12(e). Retrieved 8 October 2026.
4. eCFR, 19 CFR Part 159, Liquidation of Duties. Sections 159.11 and 159.12. Retrieved 8 October 2026.
5. U.S. International Trade Commission, Harmonized Tariff Schedule of the United States, Revision 20 (2026), Chapter 72, Additional U.S. Note 3. Retrieved 8 October 2026.