Surety Seeing Increase in Mandated Bond Increases From CBP

Roanoke Trade has seen a recent increase in the number of CBP notices mandating increased customs bond amounts, Patrice Lafayette, assistant vice president-client services at Roanoke, said during a July 25 webinar. "On average we normally see anywhere from 30 to 60 mandated increases issued on a monthly basis, but I can tell you that since the new tariffs have come out, this number practically tripled ... in June," she said. CBP has been expected to start taking a more aggressive stance on bond sufficiency as new tariffs take effect (see 1807020017).

That's still a small percentage of the overall bonds on file with CBP, "but if you as the importer or one of your clients are issued a notice, it can certainly be a major headache," Lafayette said. According to nationwide statistics sent to Roanoke from CBP's Revenue Division, the agency issued 525 demands for larger bonds in June and 183 so far in July. CBP looks at duties, taxes and fees based on the previous 12 months to evaluate bond sufficiency.

CBP has also recently started rendering bonds insufficient without a mandated increase letter due to gross insufficiency, Lafayette said. "This means your bond is turned off right away, the bond is fully saturated, and customs doesn't want to have any more entries done against that bond because it doesn't feel like the revenue is protected." That was the case recently for a Roanoke customer that imported steel and had a $400,000 bond on file, she said. "We received a notice demanding a $1.1 million replacement bond and the current bond was rendered immediately insufficient by customs. The notice was received right after the renewal date of the bond and this caused an aggregate concern for the surety on top of just having the steel be part of the commodity and the new tariffs."

The risks for bond insufficiency issues are likely rising as importers rush to avoid tariffs by bringing in goods sooner than later, said Cameron Roberts, a lawyer at Roberts & Chairs, who also spoke on the webinar. "The vast majority of importers have a very small bond in place, only $50,000," he said. "With this increase in consumption, that stockpiling of inventory, in the near time in this current quarter," there will be a spike in duty payments, Roberts said. "If they are subject to the review during this quarter" that "will result in a dramatic increase in the bond amount," he said. That could be particularly difficult on importers that don't have a pre-existing relationship with a bank to provide a letter of credit if one is necessary, he said.