On November 13, 2015, U.S. Customs and Border Protection (CBP) issued a Final Rule in the U.S. Federal Register regarding changes to its bond program. The rule states that the customs bond insufficiency notification period will be shortened from 30 days to 15 days. So what makes a customs bond insufficient?
Continuous bonds may be rendered insufficient for the following reason(s):
- Outstanding debit issues related to any of the entries on the bond (ex: unpaid bills and debit vouchers)
- Failure to comply in a timely fashion with a formal demand letter from CBP to increase the bond
- Use of an invalid or ‘non-deliverable’ address for any entity using the bond
- Failure to comply with the rejection of a termination request
- Missing or misplaced bond paperwork
- Use of an invalid importer of record number on the bond (ex: an entity using an EIN that is not assigned to that party by the IRS)
- Failure to provide any required bond paperwork (ex: Reconciliation rider, bond rider for importation into the U.S. Virgin Island, surety approval for participation in deferred tax payment, etc.)
- Failure to annually deposit the required cash-in-lieu of surety for a continuous bond obtained under 19 CFR 113.4
- Failure to comply with specific mandates / requests from the Office of Administration
Additionally, a customs bond can be deemed insufficient if the client has imported more product and paid more duty than is allowed by their current bond valuation. A bond is valued at 10% of the total duty paid annually. Therefore, if the imported value surpasses the 10% mark, the bond will be considered insufficient.
Here is an example to explain further: If a client has a $50,000 bond, and they pay $550,000 in duty and taxes, customs would render this bond insufficient. The importer would then be required to increase the value of their bond to $60,000 (to cover the 10% of the total duty paid, which in this case is $550,000).
Importers should note that once a bond value reaches $100,000, CBP requires bonds to be increased in $100,000 increments, instead of $10,000 increments.
Customs bonds are required for any import shipment which has a value of $2,500 or greater or if the commodity is subject to other federal agency requirements (FDA, USDA, BATF, etc.). A customs bond is a contractual agreement between Customs, the importer and the surety company, ensuring that CBP will be paid the duty and taxes owed to them and that the importer will comply with the rules and regulations of U.S. Customs and Border Protection.