Sufficiency Monitoring Takes On New Urgency

As many of you are aware, CBP has published amendments to Part 113 (bond provisions) of the Customs Regulations. The changes take effect on December 14, 2015. While the bulk of the revisions are of a minor/technical nature, the modified provision for time allowed to file a new continuous bond in response to an “insufficiency letter” issued by the Revenue Division is of immediate concern to importers, brokers, and sureties. The provision in question, 19 C.F.R. § 113.13(c), has been modified to read:

“CBP will periodically review each bond on file to determine whether the bond is adequate to protect the revenue and ensure compliance with applicable law and regulations. If CBP determines that a bond is inadequate, the principal and surety will be promptly notified in writing. The principal will have 15 days from the date of notification to remedy the deficiency.” (Emphasis added.)

This section previously allowed 30 days to cure an insufficiency. The proposed rule, originally published six years ago, discussed CBP’s concern “that in some instances 30 days is too long to permit the condition to continue” (emphasis added) and included a proposed new version of the rule without specific reference to a “standard” amount of time to remedy an insufficiency.

The 15 day remedy period in the final rule is highly problematic because, for practical purposes, the minimum notice time for termination is 15 days, leaving the principal no meaningful opportunity to obtain and file a new bond without a gap in coverage.

In response to concerns expressed by the International Trade Surety Association (ITSA) and the Customs Surety Executive Committee (CSEC, of which ITSA is a member), CBP’s Revenue Division has provided the following clarification:

• The deadline indicated in “demand letters” will be 15 days, as required by regulation.
• As has been the case for a number of years, the Revenue Division “will add in an additional 15 day ‘buffer’ period” before they “actually turn the bond off.” This gives the principal a total of 30 days from demand letter date to remedy the deficiency.
• The Revenue Division commented that “This (i.e., the adding of a 15 day buffer period) is the same practice we use today, as the letter states a 30 day deadline, but it is actually 45 days.”

Under the new deadline scheme, it will be more important than ever for importers and their brokers to play an active role in monitoring bond sufficiency. For a number of years, Roanoke has sent its broker clients an email heads-up when, according to information provided by CBP, the importer/principal duties/taxes/fees (DTF) in the past 12 months have reached or exceeded 90% of the bond capacity. It is our hope that brokers and importers will take maximum advantage of this standard service to contact Roanoke as far in advance as possible to address ongoing continuous bond needs prior to imposition of difficult time constraints by CBP under the new insufficiency regulation.