Do You Need a Larger Customs Bond?
The answer could very well be yes, according to information provided by Tennessee-based transportation company Averitt Express.
A lot of new tariffs have come into effect in 2018, and more are scheduled. These increases are substantial, and if they affect the goods your company imports, you are well aware of how this impacts your business operations.
One area, however, might have escaped your notice. Because your customs bond amount is based on how much duty you pay each year, the new duties could have a tremendous impact on your bond's size and cost. Customs requires that bond amounts represent at least 10 percent of the duties you will pay in one year. For most companies, the $50,000 minimum bond amount has always been sufficient, as this was ample coverage for any importer who paid no more than $500,000 in duty over one year.
The new duties on steel (25 percent) and aluminum (10 percent) imposed earlier this year, followed by significant tariff actions against China (25 percent), have resulted in some companies paying a lot more duty than they ever have before.
In some cases, these increases have resulted in a company paying more than $500,000 in duty for the first time. When this happens, Customs will send a bond insufficiency notice to the importer and the bonding company, advising them they must secure another, larger bond (carrying a larger premium cost) to cover the increased exposure.
In most cases, once Customs sends the notice, the importer has 30 days to secure the new bond. Where the increase is substantial, however, Customs may require quicker action. This can have an immediate impact on your import operation because securing a new bond can take as long as two weeks. Many supply chains simply cannot afford to have this kind of disruption, so they are forced to pay for what are known as single transaction bonds for each entry. These are quite expensive compared to the use of a continuous bond.
If you receive a bond insufficiency notice from Customs, contact your service provider immediately. It is vital that you resolve this issue as soon as possible to ensure your supply chain continues to move without any hiccups.