1. Current Trade Environment & Impact on Bonds Danielle Levine, Roanoke Insurance Group Inc.

2. Today’s Presentation Customs Bond Compliance The Tariffs
Bond Statistics
Bond Sufficiency Review
Cumulative Liability

3. Total Cost of the Tariffs [i]
Value of Affected U.S. Imports (Billions)
Tariff Rate
Additional Cost Burden (Billions)
Section 232, Steel
$15.5
25%
$3.9
Section 232, Aluminum
$9.8
10%
$0.9
Section 301, List 1
$30.2
$8.1
Section 301, List 2
$14.8
$3.4
Section 301, List 3
$212.8[ii]
25%[iii]
$47.2
Section 301, List 4A
$112.3
$11.2
Section 301, List 4B
$160.2
$16.0
Total
$555.6
10-25%
$96.6
[i] Data for this analysis were taken from the U.S. Census Bureau and the International Trade Commission. All import data is from 2018.
[ii] Includes approximately $31 billion of goods that are only partially covered by the tariff action, as indicated by Part 2 of the U.S. tariff list. The inclusion of these goods brings the total value of affected imports close to the value reported by the U.S. Trade Representative at the time the tariffs were enacted ($200 billion in 2017).
[iii] Initial rate was 10% then increased to 25%

4. Historical Bond Increases
: 2,070 average
2018: 5,821
2019: 8,799 (8 months)

5. Bond Amount Calculation - Reviewer
$50,000 minimum bond amount for importers paying up to $500,000 DTF
Multiples of $10,000 nearest to 10% duties, taxes and fees paid
$0 - $1,000,000 DTF
Multiples of $100,000 nearest to 10% duties, taxes and fees paid
Greater than $1,000,000 DTF
All DTF paid/payable (including AD/CVD and 201, 232 and 301 Tariffs)
See more at: Current Bond Formulas
Refunds are not deducted from the DTF

6. Bond Amount Calculation - Analytical
Total duties, taxes & fees in previous 12 months X 10% + B
10% of unpaid/not protested bills less than 210 days OR protested + C
$ of $ of delinquent & not protested bills greater than 210 days OR denied protest + D
$ for $ unpaid debit vouchers + E
$ for $ bills paid by surety

7. CBP Increase Letter New Language
“CBP conducts bond sufficiency review on a monthly basis. To avoid a bond stacking liability issue, it is in the importer’s best interest to forecast their import activities for the next 12 months to determine if a bond amount increase beyond the minimum amount stated above will be more appropriate.”
Importer’s responsibility under Informed Compliance requirements
Broker does not receive a copy of the letter from CBP
Previous 12 months vs Next 12 months
Whichever is higher
Fall of 2018, CBP changed review using entry summary date vs entry date

8. Bond Increases
8,799 total insufficiency letters issued 1st eight months 2019
40% of bonds have already been increased at least once in the past 12 months.
Most of those more than once
Importers must determine the amount of duty they will pay in the future to ensure correct bond amount
CBP Informed Compliance

9. Projecting Bond Amounts
Data Availability 1 2 3
Customs Brokers
CBP
Sureties
ABI Data
(Automated Broker Interface)
ACE Portal Report
(Entry reports & new Section 201, 232, 301 reports)
ASI Data
(Automated Surety Interface)

10. Calculating Bond Amounts
Do your own math to arrive at a prospective 12 month DTF figure taking into account special tariffs, timing of tariff changes, and other factors.
Make sure you select a bond amount that is at least 10% of that
Don’t forget to Round Up

11. Risk of Failing to Increase
No Entries Allowed
Bond Grossly Insufficient? Immediate Shut Off
Demurrage
Storage
STB’s required
Stacking/Aggregate Liability – multiple bonds in one year
Underwriting Scrutiny

12. Stacking Liability Example
$400,000 bond
Eff Feb 2018
CBP letter Sept 2018 for min $500,000 bond
$500,000 bond
Eff Sept 2018
CBP letter Dec 2018 for min $800,000 bond
$3,500,000
liability
Open entries
Open entries
$800,000 bond
Eff Dec 2018
CBP letter July 2019 for min $1,800,000 bond
$1,800,000 bond
Eff July 2019
Open entries
Open entries

13. Risk: Estimated Duty vs ADD/CVD
Estimated Duty is lower risk
Due within 10 days or monthly
Review principal’s ability to pay today
ADD/CVD is highest risk category
Rate can change 3 or more years after entry
The “tail” of liability is long; entries remain unliquidated for years

14. Underwriting Considerations
Subjective review based on bond amount, principal history and aggregate liability
Financial statement review
Collateral and/or Indemnity possible

15. Collateral Letter of credit is most secure form Bank rating approval
Can take around 30 days for bank to process request
Additional collateral may be required yearly due to stacking
Generally held until all entries have been liquidated and past reliquidation timeframe

16. Import Bond Losses

17. 45% Debit Vouchers 1 2 Account Holder has a limit on the account
are a result of… 1
Account Holder has a limit on the account
45%
Account Holder did not inform bank of CBP debiting account 2

18. Thank You! Danielle Levine, Vice President
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