The general rule for calculating a Customs bond amount is 10% of the amount of duties, taxes and fees paid by the importer of record in the previous twelve months. Because of the significant additional duties imposed on products subject to tariff sanctions, bonds can become saturated pretty quickly these days. Saturation occurs when the total duties, taxes and fees paid to Customs equal or exceed the bond amount prior to the bond anniversary or renewal date. The Customs Revenue Division, Office of Finance, Bond Team is aggressively monitoring this situation, which has resulted in a significant number of insufficiency bond letters issued to importers as of late.
Currently, the following sanctions are in place:
- Section 201 – Washing Machines/Parts; Solar Cells/Modules
- Section 232 – Steel and Aluminum from certain countries
- Section 301 for designated products from China under the so called Lists 1, 2 and 3
The Customs regulations at Part 113 Subpart 13 (6) (c) and (d) state the following:
“Periodic review of bond sufficiency. CBP will periodically review each bond on file to determine whether the bond is adequate to protect the revenue and ensure compliance with applicable law and regulations. If CBP determines that a bond is inadequate, the principal and surety will be promptly notified in writing. The principal will have 15 days from the date of notification to remedy the deficiency. Notwithstanding the foregoing, where CBP determines that a bond is insufficient to adequately protect the revenue and ensure compliance with applicable law and regulations, CBP may provide written notice to the principal and surety that, upon receipt thereof, additional security in the form of cash deposit or single transaction bond may be required for any and all of the principal’s transactions until the deficiency is remedied”.
“Additional security. Notwithstanding the provisions of this section or any other provision of this chapter, if CBP believes that acceptance of a transaction secured by a continuous bond would place the revenue in jeopardy or otherwise hamper the enforcement of all applicable laws or regulations, CBP may immediately require additional security”.
Customs may issue a bond insufficiency letter with a 15 day notice to replace the existing bond with the appropriate amount, or without a previous notice at all in the case of egregiously insufficient bonds in order to protect the government revenue. Both of these scenarios may present significant challenges to the importer because depending on the required new bond amounts, the surety company most likely will request a financial statement and may require a collateral in the form of cash or irrevocable letter of credit in order to issue the bond. In the meantime, if the bond has already been cancelled and new shipments arrive, each entry will have to be covered by a Single Transaction Bond (STB), which means that not only significant additional expenses will be incurred by the importer, but each of the STB may be subject to approval by the surety company prior to issuance.
We recommend that you take a closer look at your business projections over the next 12 months to calculate your duties, taxes and fees exposure, especially if your goods are affected by the current sanctions, and take a proactive role in determining the proper amount of your bond, including the filing of a replacement bond with Customs so that your importations can be adequately protected. By doing your due diligence up front, you may save yourself a lot of time and money down the road.
If your Customs bond was processed by Customs and Trade Services or Taggart International, and if you have imported goods subject to sanctions, you will be contacted by our team in the next few days to review your bond status. If your bond was not processed by us, please contact your surety company directly because they would not provide any information to us due to confidentiality reasons. If you have any questions or concerns about this topic please feel free to contact us.