How Chinese Tariffs Impact Bond Sufficiency
•
1 like•260 views
In a brief webinar presentation, Trade Risk Guaranty explains how the new Section 232 and Section 301 tariffs can impact the bond sufficiency of your U.S. Customs Bond. The presentation covers the following: - What is Bond Sufficiency? - How the Tariffs Impact Bond Sufficiency - What Happens When your Customs Bond is Insufficient? - What is Stacking Liability on a Customs Bond? DOWNLOAD THE HTSUS LOOKUP : https://traderiskguaranty.com/section-301-tariff-htsus-lookup/ Watch the webinar here: https://youtu.be/y91qQS1qyHE
Recommended
Recommended
More Related Content
Similar to How Chinese Tariffs Impact Bond Sufficiency
Similar to How Chinese Tariffs Impact Bond Sufficiency (20)
More from Trade Risk Guaranty
More from Trade Risk Guaranty (12)
Recently uploaded
Recently uploaded (20)
How Chinese Tariffs Impact Bond Sufficiency
- 1. And How to Avoid a Freeze on Your Importing HOW TARIFFS IMPACT YOUR CUSTOMS BOND SUFFICIENCY
- 2. Nick Esposito Business Development Manager Bozeman, Montana Trade Risk Guaranty Brokerage Services, LLC nick.esposito@traderiskguaranty.com 1st
- 3. Ben Ohman, LCB Underwriting Manager Bozeman, Montana Trade Risk Guaranty Brokerage Services, LLC benjamin.ohman@traderiskguaranty.com 1st
- 4. Rachel Bauman Bond Claims Manager Bozeman, Montana Trade Risk Guaranty Brokerage Services, LLC rachel.bauman@traderiskguaranty.com 1st
- 5. Jaron Anderson, LCB Vice President of Underwriting & Production Bozeman, Montana Trade Risk Guaranty Brokerage Services, LLC jaron.anderson@traderiskguaranty.com 1st
- 6. • Located in Beautiful Bozeman Montana • Established in 1991 • Direct-to-Importer Business Model • Over 10,000 U.S. Customs Bond & Marine Cargo Insurance Clients TRADE RISK GUARANTY BROKERAGE SERVICES, LLC
- 7. ON YOUTUBE TRADE RISK GUARANTY - TRG
- 8. WHICH CUSTOMS BOND? Activity Code 1 – C1 – Importer Bond TRADE RISK GUARANTY traderiskguaranty.com
- 9. WHAT IS BOND SUFFICIENCY?
- 10. AN INTRO TO BOND AMOUNT What is Bond Amount? – also known as the ‘Penal Sum’ The maximum compensation a surety bond provides to the Obligee, per bond period, in cases where the bonded entity doesn’t meet its contractual obligations towards the Obligee. In the case of a U.S. Customs Bond: • Bonded Entity = Importer of Record • Obligee = U.S. Customs and Border Protection TRADE RISK GUARANTY traderiskguaranty.com
- 11. AN INTRO TO BOND AMOUNT Calculating Bond Amount The penal sum of the bond is determined by the obligee and the type of surety bond it is. The minimum amount an importing business must be bonded is determined by U.S. Customs and Border Protection. Total Annual Duties, Taxes, & Fees x 10% The minimum bond amount is 50k for an importer bond TRADE RISK GUARANTY traderiskguaranty.com
- 12. AN INTRO TO BOND AMOUNT What else is included in Bond Amount? There are some specific components included in the ‘annual duties, taxes, and fees’ portion of the Bond Amount calculation: • Duties, Taxes, & Fees • Antidumping Duties • Countervailing Duties • Newly Imposed Tariffs (301, 232, etc.) TRADE RISK GUARANTY traderiskguaranty.com • Harbor Maintenance Fees • Merchandise Processing Fees • Excise Taxes
- 13. AN INTRO TO BOND SUFFICIFIENCY What is Bond Sufficiency? Bond sufficiency refers to whether or not the bond is adequate to protect CBP’s revenue and ensure compliance with applicable law and regulations. • CBP considers a period of the past 365 days from the current date when calculating bond sufficiency. TRADE RISK GUARANTY traderiskguaranty.com
- 14. AN INTRO TO BOND SUFFICIFIENCY Bond Sufficiency = Does your Bond Amount cover 10% of the Total Annual Duties, Taxes, & Fees you have paid over the past 365 days? TRADE RISK GUARANTY traderiskguaranty.com
- 15. EXAMPLE OF HOW SUFFICIENCY WORKS TRADE RISK GUARANTY traderiskguaranty.com
- 16. EXAMPLE OF HOW SUFFICIENCY WORKS TRADE RISK GUARANTY traderiskguaranty.com
- 17. AN INTRO TO BOND SUFFICIFIENCY In determining whether the amount of a bond is sufficient, CBP will consider: • The principal’s prior record of paying duties, taxes, and fees in a timely manner • The principal’s prior record in complying with CBP demands for redelivery, holding unexamined merchandise intact, and other requirements relating to the enforcement of CBP regulations • The value and nature of the merchandise involved in the transaction(s) to be secured TRADE RISK GUARANTY traderiskguaranty.com
- 18. AN INTRO TO BOND SUFFICIFIENCY In determining whether the amount of a bond is sufficient, CBP will consider (continued): • The degree and type of supervision that CBP will exercise over the transaction(s) • The prior record of the principal in honoring bond commitments, including the payment of liquidated damages • Any additional information contained in any application for a bond TRADE RISK GUARANTY traderiskguaranty.com
- 19. AN INTRO TO BOND SUFFICIFIENCY Customs and Border Protection 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. TRADE RISK GUARANTY traderiskguaranty.com
- 20. HOW TARIFFS IMPACT BOND SUFFICIENCY?
- 21. RECAP ON IMPORT TARIFFS • Section 232 – Steel & Aluminum • 25% Tariff on Steel Imports into the United States • 10% Tariff on Aluminum Imports into the United States • Section 301 – Products From China • List 1 – 25% tariff on 818 items went into effect on July 6, 2018 • List 2 – 25% tariff on 279 items went into effect August 23, 2018 • List 3 – 10% tariff on 5,744 items went into effect September 24, 2018 • May be increasing to a 25% tariff TRADE RISK GUARANTY traderiskguaranty.com
- 22. HOW TARIFFS IMPACT SUFFICIENCY TRADE RISK GUARANTY traderiskguaranty.com
- 23. HOW TARIFFS IMPACT SUFFICIENCY TRADE RISK GUARANTY traderiskguaranty.com
- 24. WHAT HAPPENS IF YOUR BOND IS INSUFFICIENT?
- 25. RECEIVING AN INSUFFICIENCY LETTER TRADE RISK GUARANTY traderiskguaranty.com The principal and surety will be promptly notified in writing. • This insufficiency letter will inform the importer on what the minimum bond increase must be, when the bond will be deemed insufficient, and a general reason for the insufficiency. • Recently, we have seen the typical timeline for insufficiency change due to the new tariffs.
- 26. RECEIVING AN INSUFFICIENCY LETTER TRADE RISK GUARANTY traderiskguaranty.com Bond has been rendered insufficient: The bond has been deemed immediately insufficient, you will not be able to import into the United States until a new bond has been placed. The current bond still must be terminated before a new bond is placed. Bond must be terminated within 15 (or 30) days from the date of this letter: Imports will still be allowed under that bond until the allotted time has passed at which point the bond will be deemed insufficient.
- 27. INSUFFICIENCY – NORMAL INCREASE TRADE RISK GUARANTY traderiskguaranty.com NormalIncreaseinAnnualImports
- 28. INSUFFICIFIENCY – OUTSTANDING DEBT CBP may require a bond increase for your company if you have an outstanding debt with them. The following is a real-world example of what this may look like. TRADE RISK GUARANTY traderiskguaranty.com OUTSTANDING DEBT BOND INFORMATION Current Bond Amount (C1 Continuous) $200,000 Unpaid and/or Delinquent Bills $1,820,524 Bond Amount needed for Bills + Debt $300,000 NEW BOND AMOUNT REQUESTED $300,000
- 29. INSUFFICIFIENCY – OUTSTANDING DEBT TRADE RISK GUARANTY traderiskguaranty.com OutstandingMoneyOwedtoCBP
- 30. INSUFFICIENCY – SECTION 301 TARIFFS TRADE RISK GUARANTY traderiskguaranty.com Section301Tariffs
- 31. REASONS FOR INSUFFICIENCY LETTERS TRADE RISK GUARANTY traderiskguaranty.com
- 32. REASONS FOR INSUFFICIENCY LETTERS TRADE RISK GUARANTY traderiskguaranty.com • Reviewers (1): • The importer has imported more in terms of duties, taxes, and fees than the current bond’s capacity. • Analytical (2): • The importer has outstanding money owed to Customs and Border Protection.
- 34. WHAT IS STACKING LIABILITY? Stacking liability, or stacking exposure, occurs when a surety company has open exposure over multiple bond periods for a particular importer. • In addition to the current bond that is on file, there can be prior bonds or bond periods that have unliquidated entries keeping that liability open. • In general, a bond period remains open as long as there are unliquidated entries from that bond. TRADE RISK GUARANTY traderiskguaranty.com
- 35. WHAT IS STACKING LIABILITY? The liability of the open bond periods adds up, or ‘stacks’, and creates significantly more risk to the surety company issuing the bonds. TRADE RISK GUARANTY traderiskguaranty.com
- 36. STACKING BOND LIABILITY TRADE RISK GUARANTY traderiskguaranty.com
- 37. STACKING BOND LIABILITY TRADE RISK GUARANTY traderiskguaranty.com NormalIncreaseinAnnualImports
- 38. STACKING BOND LIABILITY TRADE RISK GUARANTY traderiskguaranty.com Section232Tariffs
- 39. LET’S START THE Q&A!
- 41. Alt Email: FB Group: Web: Blog: Facebook: Twitter: YouTube: benjamin.ohman@traderiskguaranty.com International Trade Professionals - TRG www.traderiskguaranty.com www.traderiskguaranty.com/trgpeak/ @traderiskguaranty @trg_bond Trade Risk Guaranty