New and increased tariffs have resulted in a significant rise in US Customs continuous import bond insufficiency notices and Bond Stacking Exposure. It is likely that this trend will continue, as importers continue to be impacted by tariff changes.

What is a bond insufficiency notice?

US Customs issues bond insufficiency notices to importers who have exceeded their continuous bond limit, which are based on current bond formulas. US Customs can deem a continuous bond insufficient at any point in the bond cycle. Once a bond is deemed insufficient, the importer has a limited window to terminate the existing bond and apply for a bond with a higher limit, potentially resulting in a gap in bond coverage.

How is bond sufficiency calculated?

Continuous bond limits are calculated based on 10% of an importer’s duties, taxes, and fees over the previous 12 months and are reviewed on a rolling basis. Current bond formulas are available here.

Continuous bond limits start at $50,000.00 and can reach millions, depending on the importer’s needs. In many cases, importers affected by the tariff increases may need to dramatically increase their existing bond limit.

Duties, Taxes, and Fees = $0.00 – $1,000,000.00.

Bond amounts are not limited to the above. This is only an example.

What can I do to protect my company from a bond insufficiency notice?

Check your current bond sufficiency levels.

• This can be done through ACE or by contacting the Broker of Record on your bond. RIM logistics, ltd. regularly updates our bond customers regarding potential insufficiencies.

Forecast ahead. 

• US Customs expects importers to forecast ahead and obtain bond coverage based on projected import activity over the next 12-18 months. When evaluating your bond needs, make sure to take into account how your company will be impacted by the tariff changes. Any anticipated increases to your importing activity should also be included in your forecast.

Be proactive.

• If based on your 12-18 month forecast you determine that your anticipated activity will likely exceed your current bond limit, it is in your best interest to proactively increase your continuous bond.

What are the potential risks of failing to increase my bond?

When US Customs issues an insufficiency notice on a continuous bond, the importer is required to terminate the bond within a specified time period. Typically, US Customs allows importers between 15- 30 days to terminate the insufficient bond and obtain adequate bond coverage. Processing time for replacement bonds can vary based on the requested bond limit.

If appropriate bond coverage is not obtained prior to the termination date, the importer can potentially experience a gap in bond coverage.

Gaps in continuous bond coverage can result in the following:

• Need for costly single transaction bonds
• Removal of paperless cargo release
• Inability to make entries into the US
• Demurrage
• Storage charges

Increased Tariffs & Bond Stacking Exposure

“Bond stacking” refers to the potential for multiple bond periods to overlap, resulting in a surety company having open exposure for multiple bond limits for a single importer, increasing their potential liability.

Bond stacking occurs when an importer has multiple bonds in place, even if they are terminated, and there are still unliquidated entries (import transactions) from those bond periods.

Each year when the bond renews, a new period of liability is created up to the bond limit for which the principal and surety are “jointly and severally” bound to CBP. Each bond period remains open as long as entries that were made during that bond period have not yet liquidated. Once a continuous bond is filed, it will automatically renew every year on its anniversary date until it is terminated. Each year the bond renews, a new period of liability is created and thus “stacking” of bond liability occurs.

Most entries will liquidate within 12 months; however, under 28 USC 2415, the statute of limitations CBP has to take action against Customs bonds is six (6) years from the date the right of action accrues (i.e., the date of breach of the bond condition). Therefore, liability under a bond can remain “open” for several years, especially for AD/CVD entries which can be suspended indefinitely.

Links with more information on Bond Stacking and how to avoid it can be found here:

INCREASED TARIFFS & BOND STACKING EXPOSURE

AVOID BOND STACKING LIABILITY

If you are interested in increasing your continuous bond or have questions regarding continuous bond sufficiency requirements, please contact Bonds@rimlogistics.com.