Don’t Let Bond Increases Spook You. It’s an Opportunity in disguise!
Customs Brokers are generally busy and don’t have a lot of time to explain why financials are needed just to get a bond. Things get a little tricky when importers with low limit bonds in the range of 50k-60k all-of-a-sudden need a bond for 500k-600k due to newly imposed tariffs. Don’t be worried, this a great opportunity to show off your customer service skills, dressed for Halloween as a problem.
The landscape we operate in is rapidly changing and the changes keep coming. CBP is getting very serious about bond increases as of late. A few years ago, it was identified that CBP had been grossly under-bonded for the risks at hand. It comes as no surprise to us at IB&M to see these increases being requested by the agency now with ACE in full swing and newly imposed tariffs kicking in. Although bond limits are still determined by the prior 12 calendar months of duties, taxes, and fees, CBP is asking importers to look forward and forecast the bond amount they most likely need based on the next 12 months. This means lots of bond increases and coordination of effort between Sureties, Brokers, and Importers to get it done right, avoid costly lapses in bond coverage, and unnecessary stacking liability.
Customs brokers have been under attack in the last decade by direct bond marketing companies trying to cut out the so-called “middle man”. This is a golden opportunity for brokers to again show the value in dealing with a licensed CHB for all customs-related matters such as the very instrument that gets cargo released fast, the Bond! When placing high limit bonds, sureties are generally looking for financial viability from an importer and that isn’t always easy to demonstrate.
For one thing, importers like their privacy and don’t enjoy sending sensitive financial information to a party they barely know. It is important to explain to your importing customer that their information will not be shared and the surety is open to signing a non-disclosure agreement to set aside any concerns. At times, sureties may even require collateral to file the bond. The important thing is to give your customer different options in the way they post collateral that may best suit their individual needs. Some importers opt for a letter of credit while others would rather post cash than pay high bank fees. Either way, presenting options is important.
Not all sureties underwrite the same way. There are many different factors that play into any bond risk and achieving a favorable approval from the surety with competitive terms is important. At IB&M, we look at some of the following:
- Audited financials
- History of liquidations
- Broker relationship with the importer (payment habits)
- Commodities Involved
- Estimated duty margins and taxes
Showing your importer available options is key to establishing a strong relationship. Controlling the bond is also important to your broker/importer relationship and allows you to monitor entry activity and claims nationwide. In addition, it also allows you to monitor bond sufficiency as the landscape continues to change. Take a look at the bonds you may have lost over the years and use these current increases as a way to resurrect new opportunities. Our Bond Catalyst TM platform gives brokers easy access to bonds they have lost over the years as well as bond sufficiency monitoring tools to keep brokers ahead of the curve.
At IB&M, our motto has always been about writing bonds, not rejecting them. Our code of conduct is consistent, fair underwriting practices that help our brokers win business and look good doing it.
These increases are a great way to show your importer why they started doing business with you in the first place - great customer service!
Happy Halloween from all of us at IB&M!