Trade is a significant focus of the Trump Administration. With changes and new tariffs being discussed, it is difficult for a principal to be fully prepared for the impacts of these potential shifts. While some of these tariffs have been delayed, it remains crucial for importers to understand the effects that increases in duties, taxes, and fees (DTF) can have on their Importer bonds.
Impact on Importer Bonds and Trade Compliance
Our office recommends that any importer of goods subject to these changes reassess their Importer bond amounts to ensure compliance with Customs and Border Protection (CBP) guidelines. Currently, the bond amount for a continuous Importer bond is set at 10% of the DTF paid to CBP over the previous 12 months. However, potential increases in tariffs may lead to substantial changes in bond requirements.
If an importer anticipates a significant increase in DTF, it is essential to take a proactive approach. Instead of solely relying on past 12-month DTF figures, the importer should project expected DTF obligations over the next 12 months and adjust their bond accordingly.
CBP Periodic Review
CBP regularly reviews bond sufficiency of active bonds they have on file. If they determine that an Importer bond is not sufficient according to their published directive, based on the principal’s import activity, they may take one of two actions:
- Sufficiency Letter Issuance – The most common action taken by CBP is to issue a sufficiency letter requiring the bond to be rewritten at a higher amount within 15 days. Failure to comply will result in the bond being deemed insufficient and rendered inactive. In such cases, timely response is critical, as missing the deadline may leave the importer unable to import goods until a new bond is in place.
- Immediate Bond Inactivation – If CBP finds the bond to be grossly insufficient, they may immediately deem the bond inactive, requiring the principal to terminate the current bond and file a new bond, which could take 15 days to process. During this period, the principal would need to either wait until the new bond takes effect or post single transaction bonds for each entry made.
Proactive Bond Management
To avoid these complications, we recommend that importers estimate the total amount of DTF they anticipate paying in the next 12 months and determine the corresponding bond amount required. Taking a proactive approach can prevent disruptions in trade and reduce overall financial exposure.
For example, an importer currently operating under a $100,000 bond may see their total DTF increase to $5,000,000 due to new tariffs. This would necessitate a minimum bond of $500,000. If the importer fails to adjust their bond proactively, CBP may require incremental increases—first to $200,000, then to $300,000, and so on—leading to a cumulative bond liability of $1,100,000 to the surety. Conversely, if the importer adjusts their bond proactively to $500,000 at the outset, they may significantly reduce the surety’s financial exposure to just $600,000. Failure to proactively adjust the bond amount could result in the surety company being unable to approve the subsequent bond increases because of accumulated liability.
Key Takeaways for Importers
- Monitor Your DTF: Regularly review the impact new tariffs would have on your total DTF.
- Estimate Future Payments: Use projected data to try and determine an adequate bond amount based on expected DTF over the next 12 months.
- Avoid Stacking Liability: Look to re-write bonds proactively to avoid multiple incremental re-writes that could lead to greater financial exposure.
- Stay Compliant: Ensure that your bond remains sufficient to meet CBP requirements and avoid potential disruptions in trade operations.
If you have any questions regarding how these tariffs impact your Importer bond, please contact our Bond Department at (908) 879-0990.