CBP to Soon Propose Rule to Modernize In-Bond Process

February 8, 2012 by Elizabeth Parker|Top News

U.S. Customs and Border Protection is expected to soon publish a proposed rule that would modernize the in-bond process so that it can go from a paper-dependent entry process to an automated-paperless process, among other changes.

(CBP's in-bond system allows imported cargo intended for either U.S. or foreign markets to move from one U.S. port to another without being assessed U.S. duties or quotas and without officially entering U.S. commerce. CBP has previously stated that the goals of its planned in-bond changes were to (1) improve its oversight and enforcement of the in-bond requirements; (2) enhance accountability and tracking of in-bond movements; and (3) mitigate any security and revenue vulnerabilities that might exist in the current in-bond process.)

CBP Has Been Planning Update to In-Bond Regs for Years

CBP has been discussing plans to change the in-bond regulations (19 CFR Part 18) for several years, and previously expected to issue an in-bond proposed rule at a much earlier date. The last major revision of the in-bond regulations was in the 1930’s.

(See ITT's Online Archives 09092105 for summary of CBP officials stating that an in-bond proposed rule was expected in November/December 2009. See ITT's Online Archives 10072830 for summary of former CBP Commissioner Bersin stating that CBP intended to issue an in-bond proposed rule by the end of 2010. See ITT's Online Archives 11070804 for summary of CBP's Spring 2011 semi-annual regulatory agenda, which included an August 2011 target date for an in-bond proposed rule.)

Proposed Rule Expected to Contain Provisions Announced in 2011

During the April 2011 Trade Symposium, CBP officials provided a summary of the agency's progress with the in-bond proposed rule changes. They stated that CBP was looking to identify all of the systemic shortcomings in the Automated Commercial System (ACS) so that they wouldn't be transferred to the Automated Commercial Environment (ACE). CBP was also looking to (i) continue to update guidance issued to the field; (ii) combat in-bond fraud; and (iii) use technology to track in-bonds.

Proposed Rule Would Automate Entire In-Bond Process, Etc.

According to the April 2011 presentation and CBP sources, the proposed in-bond changes would:

Automate entire process -- Automate the entire process, and require all in-bond applications be submitted to CBP electronically.
Change transit times -- Change the in-bond transit times to 30-days for all modes, except for pipelines, which would have 90 days.
Require notification -- Modify 19 CFR 18.5 to require that CBP be notified prior to diverting to another port.
Require port/FIRMS code combination -- Require all in-bonds to be arrived to a port code/FIRMS code combination.
Require permits -- Require associated permits to be transmitted with the application.
Clarify ISF reqs -- Clarify the Importer Security Filing (ISF) in-bond requirements.
Not allow unknown bill numbers -- No longer allow unknown (UNKN) bill numbers.
Allow FIRMS code for FTZs -- Allow FTZ operators to issue bill numbers for bonds using their FIRMS code number as the bill issuer code.

Changes Would Include Better Tracking, Electronic In-Bond for Air Cargo, Etc.

The CBP officials also stated in April 2011 that significant changes to in-bonds would include: (i) all R4 (ACE e-Manifest: Truck) in-bonds converted to M1 (ACE Ocean and Rail manifest); (ii) a new function to track permits; (iii) better reporting and tracking capabilities for both CBP and the trade; (iv) greater oversight; (v) electronic in-bond for air cargo (QX/WX); and (vi) much more.

GAO & OIG Reports Have Found Weaknesses in CBP's In-Bond System

In 2007, the Government Accountability Office (GAO) issued a report which found that CBP did not adequately monitor and track in-bond goods and did not consistently reconcile in-bond documents issued at the arrival port with documents at the destination port. GAO recommended CBP collect additional information on in-bond shipments, including the six-digit tariff number, a more precise description of the goods, etc. (See ITT's Online Archives 07052205 for summary.)

Additionally, in March 2010, the Department of Homeland Security's Office of Inspector General issued a report on CBP's internal controls. The report found that ports were not completely or properly monitoring the post audit in-bond process; the ACS was limiting CBP's ability to accurately monitor the in-bond process, and that the lack of an automatic compilation and analysis of audit results at the national level made it difficult for CBP to fully determine the effectiveness of in-bond audits, common in-bond errors, and weaknesses in the overall in-bond process. (See ITT's Online Archives 10031515 for summary.)

CBP's April 2011 Trade Symposium presentation on in-bonds is available here.