August 25, 2014 | Industry Insights

Customs Bonds: The Deficiency Is in the Details

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Customs Bonds: The Deficiency Is in the Details

In April 2014, U.S. Customs and Border Protection (CBP) re-instituted the procedure of rendering continuous bonds insufficient due to returned mail. A bond with an insufficiency status cannot be used to make entry or for Importer Security Filings. That, warns Roanoke Trade account executive Jason Palumbo, could lead to professional liability claims against the customs broker. Palumbo, writing in a web post for the National Customs Brokers & Forwarders Association of America, notes that continuous bond insufficiencies could cost an importer the unanticipated expense of single transaction bonds to make entry as well as ISF single transaction bonds to cover ISF.

“If the importer is unwilling or unable to procure the single transaction bond or ISF bond in a timely manner, the company could face demurrage charges and ISF penalties including cargo holds, inspections imposed by CBP and/or liquidated damages. ISF liquidated damages begin at $5,000 and have limited mitigation, so a simple mistake such as an omitted suite number resulting in returned mail could be a costly one,” Palumbo says.

You can attempt to have the bond’s sufficiency restored by submitting a rider to the CBP processing team to correct the address for a principal whose mail is returned undeliverable. While that’s some consolation, it can take seven or more business days from the time you notify CBP to get bond sufficiency restored. If the rider is rejected, the delays can mount. Keep in mind that a rider must be sent for all bonds in force for the same principal because CBP will reject a rider if it is sent to update one bond but not others for that principal.

The best option is scouring forms and databases for errors. Every line should be checked for even the slightest mistakes – out-of-date company names or missing pseudonyms can cause returned mail just the same as incorrect addresses, Palumbo notes. Since customs brokers with customs power of attorney can reasonably be expected to help bond principals monitor and update data with the CBP and to work with sureties to maintain accurate information on file at all times, brokers need to be exercising deep diligence at all times in form filings and database monitoring. The key is regular procedural communications with clients to remind them of their role in keeping data current.

Implementing a consistently applied, documented data-review process that seeks information from clients for continuous bonds can go a long way in helping cull outdated records and keep track of where data are needed. Documented processes can also help establish where the fault lies when an error is made and can be used to defend against professional liability complaints. Making routine updates a part of your professional relationship is a best practice with risk-management payoffs that clients, sureties and brokers can appreciate!

We invite you to learn more about us, our experienced talent in this highly specialized area, our creative solutions, and the value we will bring to you and your clients. Please contact us at 1-800-ROANOKE.

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