Customs Bonds Latest News and Challenges August 24, 2018 Presented by: Christie Brush – Avalon Risk Management

Air Cargo Advance Screening (ACAS) Went into effect on June 12, 2018 Latest News Air Cargo Advance Screening (ACAS) Went into effect on June 12, 2018 Requires the submission of advanced air cargo information on shipments arriving in the United States from a foreign location Previously a voluntary process in which many airlines already participated globally Now mandatory for airlines flying to the United States

Shipper Name and Address Consignee Name and Address Cargo Description Latest News ACAS data elements: Shipper Name and Address Consignee Name and Address Cargo Description Total Quantity Total Weight Air Waybill Number

Challenges

Import Bond Calculation https://www.cbp.gov/sites/default/files/documents/bond_form_7.pdf Reviewers 10% of duties, taxes and fees paid or payable in previous 12 months Analytical Reviewers plus Open bills, surety payments, etc.

CBP Revenue Division Review Monthly review (import continuous bonds) Forecasting a large increase in letters by 4th quarter CBP will be sending a CSMS out advising to forecast bond amounts. STB Insufficiency GAO Audits

Termination/Replacement 15-day termination time frame What is the process? Termination/Replacement 15-day termination time frame Bonds rendered insufficient “Fast Terms” Only one continuous bond allowed

Aggregate Liability Issues “Stacking” or Aggregate Liability Surety Requirements Underwriting Financial Guarantee Collateral Issues Aggregate Liability Issues “Stacking” or Aggregate Liability

Relationship with customs broker Historical review Underwriting Tools Relationship with customs broker Historical review Automated Surety Interface Data CBP information availability ACE Portal Information (Importers/Brokers)

ADD/CVD Estimated Duty Sections 232 and 301 Free Trade Agreements FDA Surety Highest Risks ADD/CVD Estimated Duty Sections 232 and 301 Free Trade Agreements FDA

Redelivery issues (FDA, Quota, or Marking) Bond Claims Liquidated Damages Redelivery issues (FDA, Quota, or Marking) Non-filing/Non-Payment of Duty Debit Vouchers TIB Issues Increased Duty Bills ADD/CVD Classification/Rate Advance Preferential Treatment Denial

Liquidated Damage Claims FDA Once refused by FDA, must be exported or destroyed within 90 days Customs will issue a demand for redelivery within 30 days Failure to redeliver such products will ordinarily result in Customs issuing a claim for liquidated damages Broker E&O Exposure

CBP’s Focus on AD/CVD as PTI CBP protects U.S. national economic security at our borders The U.S. Government levels the playing field for U.S. manufacturers by collecting AD/CVD duties on imports sold at unfair low prices and/or subsidized by foreign governments CBP enforces AD/CVD laws and penalizes those who attempt to evade AD/CVD duties

Top 10 Countries for AD/CVD 100 80 60 40 20 ADD Cases CVD Cases Information based from US ITC website www.usitc.gov There are over 40 countries that have active AD/CVD cases; China represents 40% of all active AD/CVD cases.

Evasion Methods & Challenges Goods mimic legitimate production, use established routes to add legitimacy Transshipment Falsifying documents, product marking, and/or trans-loading containers to mask true country of origin Undervaluation Falsifying documents to undercut CBP must identify similar non- price and avoid duties arbitrary values, or find clear evidence of false claims Misclassification Incorrect classification and/or misdescription to avoid duties Often secondary to some other scheme, AD/CVD cases determined by “scope,” not classification Smuggling Undeclared or under-declared goods Requires shipment-specific intel Gray Areas Incorrect case claims, Importer/Purchaser arm’s length transactions, product engineering Loopholes are not “illegal,” appearance of compliance, limited response options Parties involved in transshipment are often in foreign countries outside of CBP’s jurisdiction Importers dissolve before action can be taken, and re-emerge under new guise Opportunities for fraud due to: Enticement from producers and competition within industry Overcapacity and B2B networking

Questions?

Thank You! Christie Brush cbrush@avalonrisk.com (713) 343-0893 (713) 343-0893   https://www.avalonrisk.com/quest_news.html