The Quest
Inside this issue:

Single transaction bonds required for suspected AD/CVD shipments

Appeals court reverses case involving ‘independent contractor’

$5.2 million verdict against a transportation broker and driver in negligent hiring case

C-TPAT and AEO to be mutually recognizable in June 2012

Goods from Argentina to lose GSP benefits

Claims Review:
International Coverage



Single transaction bonds required for suspected AD/CVD shipments

Further to our November 2011 Special Quest regarding transshipments of honey from China, Avalon continues to see requests from CBP for additional STBs even when importers already maintain an active continuous bond. These requests are typically triggered by CBP suspecting that goods are transshipped from China to circumvent payment of higher AD/CVD margins, in some cases as high as 356%. These rates could actually double if the goods are found to be subject to AD/CVD, and a non-reimbursement statement is not provided prior to liquidation.

If CBP is specifically requiring STBs in addition to a valid continuous bond, there is typically a compliance-related issue that CBP is targeting, posing additional risk for the surety. Recently, we’ve seen CBP request additional STBs and larger continuous bonds on wooden bedroom furniture suspected to be transshipped form China, as well as STBs on TIB shipments when a continuous bond is on file.

As a reminder, Avalon must be contacted for prior approval in such instances, given the additional risk these bond situations present to the surety. Our Web Merlin portal can assist our clients with managing this exposure by alerting users if a bond principal already has an active continuous bond on file. These features were announced in our October 2011 Special Quest, along with other value added features such as tracking bond aggregations and prompting users for approval if an importer has a “hold” for underwriting reasons.

AD/CVD Exposures
Any STBs or continuous bonds required by CBP to secure suspected AD/CVD activity (whether entry type 01, 03 or otherwise) is considered an AD/CVD Bond for underwriting and rating purposes. Avalon will require the following information to approve these bond requests and higher AD/CVD rates may apply:

  • If not already on file, a Bond Application and Indemnity Agreement signed by a corporate officer.
  • AD/CVD questionnaire with details on the case number, supplier, and information to substantiate origin including lab test results from CBP as necessary.
  • Historical information regarding the importer’s entry activity and any background on the customs broker’s relationship with the importer.
  • Financial statements including Balance Sheet, Income Statement, and Statement of Cash Flows.

Through Avalon’s involvement with the International Trade Surety Association (ITSA), we support concerns raised over the legality of targeting certain industries in this manner without full transparency or prior notice to the trade. Especially since the legality of CBP’s use of enhanced bonding formulas was successfully challenged in the National Fisheries case, which resulted in a May memo that CBP issued cancelling and superseding certain enhanced bonding requirements.

Although CBP has not published any notice or directive regarding any enhanced STB bonding initiative, based on written testimony to the Senate Finance Committee in May 2011, CBP stated the following:

“Illegal transshipment involves the manipulation of documents and shipping logistics to disguise the true country of origin of a product.  Transshipment is often built into production by design, with false markings and packaging devised to purposefully mimic legitimate production in other countries. Determining a product’s country of origin through visual inspection or through verification of shipping documents can be very difficult, especially if cargo has been manipulated prior to import, completely masking the connection back to the true country of origin... The bonding system is a key tool in our administration of the import process... For Example, we can use our existing regulations to levy Single Transaction Bonds against any importer when we suspect a risk to revenue, and... ensure that Single Transaction Bonds are required whenever we suspect that a risk of revenue loss exists.”

We understand that illegal transshipments of this nature adversely affect legitimate companies and place an increased burden on the trade. We encourage you to contact Avalon so we can work with CBP to properly underwrite and secure any increased bonding they may require. Through proactive education, we can work together to mitigate risk and support compliance for you and your clients. 


For more information, please contact your local Avalon office or Andriana Davis at (847) 700-8087 or at adavis@avalonrisk.com. A list of our offices may be found at www.avalonrisk.com.

Avalon Risk Management


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