Higher Bonds for Importers due to Tariff Hike

Importers must ensure they have sufficient bonds to meet Customs Border Protection’s (CBP) requirements that are enough to cover ever-increasing Customs Duties and Taxes. Those could be in the form new tariffs that have been increased under section 201, section 232 and section 301; 10% tariffs on aluminum and 25% tariffs on steel; as well as Anti-dumping duties or Countervailing duties. Since the duties and taxes paid by an importer accumulate against their bond limit, this escalating tariff environment affects most importers; potentially affecting those taking advantage of trade programs under considerations or negotiations.

What is the implication of this new tariff policy to importers?

Importers must take these factors into consideration:

  • Any product imported under the new increased tariffs will reflect an equal increase in any existing bond’s aggregation.
  • If US Customs must advise importers of bond inefficiencies, not only must the continuous bond premium and value increase, but the risk assessment evaluation of the importer is for the worse.
  • If the revised bond amount is still not sufficient for import operations; CBP will issue an additional insufficiency notice – resulting in considerably higher premiums and additional surety requirements.

Currently, importers are advised to review their individual situations and make provisions if their continuous bonds may be insufficient for the ongoing and potential tariff hikes.

How does a bond become insufficient?

As the aggregation of duties and taxes increases against existing bonds, customs evaluate accumulation and speculate for the remaining bond period; or upcoming renewal. When the duties and taxes resultant from increased activity or increased dutiable rates drive the aggregate accumulation near the bond’s limit, the importer is responsible for ensuring their bond limit increases to cover their actual level of dutiable activity. US Customs will monitor and formally demand bond increases if they deem the bond’s coverage insufficient for continued importation.

Increased bond limits.

It’s important to know that importers affected by tariff increases will also be affected by increasing the bond limit requirements. This means that importers may have to raise their insufficient bonds, if their activity or planned activity may exceed prior bonding expectations. CBP has already sent out letters to the importers, but they are acting in enforcement rather than prevention. Importers need to decide whether to raise their existing bond to higher coverage values or if the existing bond is sufficient for their circumstances. In all cases, this ought to be done before CBP officers are forced to take action.

If a bond increase is appropriate, bear in mind that the higher the bond amount, the longer the process before it may take effect.  This is due to multiple parties and multiple steps involved in the approval process. For example, if you want to apply for a bond exceeding $1,000,000; it will require a paper submission to the National Finance Center (NFC) and can take a minimum of five days for processing.

Documents required include:

  • Surety bond application and indemnity agreement (1 document)
  • Most current fiscal year-end financial statements (in English). This should include an income statement of cash flow and accompanying accounting notes. If you do not have current audited financials, the surety has accepted unaudited financials signed by an officer of the company.
  • Potential collateral in the form of cash, check or instructions for letters of credit. Must be a Federal Deposit Insurance Corporation (FDIC) insured U.S. Bank with a financial rating of 40 or higher.
  • General Indemnity agreement (if liability amount exceeds $1,000,000)

Note when evaluating bond limits, regular duties and anti-dumping/countervailing duties are considered when calculating the bond limits. Therefore adequate knowledge is required to know the correct bond amount needed.

Still have questions?  We can help. Contact Gallagher Transport for more information or guidance concerning continuous bond increases.

Call 303-365-1000 or email us anytime.