THE COMMON MISCONCEPTION ABOUT BOND SUFFICIENCY
Bond Spotlight - Summer 2022
The common Misconception about bond sufficiency. Seeing sufficicency through CBP’s lens may help importers get it right the first time.
U.S. Customs and Border Protection has just issued your importer a Bond Insufficiency Letter. This letter states the bond will need to be terminated and replaced with a larger bond that is sufficient to satisfy CBP’s minimum bonding requirements. The Customs formula for determining the minimum bond amount is 10% of the total duties, taxes, and fees paid by the principal over the previous 12 months.
CBP’s insufficiency letter will recommend a new bond amount only at the minimum amount needed to be sufficient. It is critical for your importing customers to understand this recommendation is merely the minimum requirement based on the prior 12 months of activity and in no way takes into account future trends. CBP will continue to conduct a monthly review of your importer’s previous 12 months of import activity to determine if the bond is still sufficient. This review happens monthly regardless of how saturated the recently filed bond is at the point of review. Put plainly, a bond’s sufficiency is NOT based on the saturation percentage of that specific bond. Customs will look at whatever bond limit is on file at the time of their monthly review, even if the bond was just filed a month ago.
To reiterate, the sufficiency level does not reset upon the filing a new bond. At IB&M, we continue to see a prevalence of importer’s who choose to bond at the minimum amount, only to receive another insufficiency notice soon after filing the initial required bond increase.
Filing multiple bonds in the same annual period can create bond stacking liability issues and in instances of collateral, can cause collateral to be tied up unnecessarily.
Your customer should, to the best of their ability, forecast their import activities for the next 12 months to determine if a bond amount greater than the minimum required is more suitable.
Additionally, you can keep track of sufficiency levels & duty payment trends for all your bonds with our easy-to-use sufficiency tool found in our proprietary web tool Bond Catalyst TM.