May 09, 2019
Tariff Increases and Bond Sufficiency
The U.S. and China have been in negotiations since the beginning of the year; however, due to a lack of progress in discussions, the President has directed the Trade Representative to increase the rate of additional duties. The Federal Register Notice indicates that there will be an exclusion process for list 3 and a separate notice will be published describing the process. According to President Trump’s May 8th tweet, he and China’s Vice Premier Liu will be in Washington for further discussions this week “to make a deal.”
New tariffs have been causing significant increases in bond limits.We continue to see requests from CBP to increase Activity Code 1 Continuous Bonds from the $50,000 minimum to more than $25 million with very little time to get the bonds underwritten and a new bond in place. Because CBP looks back 12 months at duties, taxes and fees, sureties have received over 3,500 insufficiency notices so far this year.
Importers are ultimately responsible for making sure their bonds are sufficient and meet CBP’s requirements. They may risk additional costs and delays of their shipments should their bond be deemed insufficient. Therefore, encourage your importers to review their expected import activity to determine if they might need a higher bond limit.
Make sure your bond is sufficient
- Allow ample time, reach out to your customers who import goods from China that are included on list 3 to determine if their continuous bonds will require increases depending on their plans to continue importing these commodities.
- For those importers that may require increase, start gathering of any underwriting requirements that may be needed, such as a Bond Application and Indemnity, and Financial Statements.
- When applying for a new bond, you are encouraged to consider the duties, taxes and fees anticipated for the next 12 months to avoid a bond insufficiency letter from CBP and potential disruption to your import activity.
- Avalon receives duty information and can send out bond insufficiency emails when applicable on bonds written by Avalon. If you use Avalon’s Merlin software, you can sign up for Bond Sufficiency Email Notifications. You can also use its Bond Sufficiency Calculator to help determine the bond limit that your import clients may need.
A bond with egregious deficiencies will be rendered by Customs as insufficient immediately. What should you do if your bond is deemed insufficient? You can review insufficient bond procedures from our last Quest here .
Avalon is here to assist you in helping your clients manage their bond needs. If you have any concerns about bond sufficiency or the effects of these ongoing tariffs, please contact your Avalon representative to determine bonding needs or our underwriting department at email@example.com.