CBP Announces Five Bond Formulas for AD/CV, Unpaid Bills, Etc.

New Formulas Amend Bond Amount and Sufficiency Directives

CBP states that this document further amends CBP Directives 3510-004 (Monetary Guidelines for Setting Bond Amounts) and 3510-005 (Bond Sufficiency), and that a new comprehensive CBP Directive will be issued at a later date.

CBP has been working with COAC on re-writing/updating CBP Bond Directives 3510-004 and 3510-005 in order to consolidate various amendments, telexes, and procedures for managing the CBP bond process into one directive. At the October 2010 COAC Bond Subcommittee conference call, discussed CBP’s draft bond directive and a CBP official stated that CBP would continue to work with COAC and other interested trade associations on additional revisions to the draft. (See ITT’s Online Archives or 05/03/10 and 11/24/10 news, 10050306 and 10112405, for BP summaries on CBP’s work with COAC on the bond directive re-write/update.)

Prior Bond Formula

In this document, CBP lists its prior Activity Code 1 bond formula,based on past CBP directive (termed the “Field” formula), as follows:

Duties, Taxes, and Fees of the previous calendar year x 10% = the minimum bond amount or $50,000 (rounded up or down by increments of $10,000 up to $100,000 and then by increments of $100,000).

“Basic” Bond Formula

The amended “basic” bond formula (termed the “Reviewers (1)” formula) is as follows:

Duties, Taxes, and Fees of the previous 12 months x 10% = the minimum bond amount or $50,000 (rounded up by increments of $10,000 up to $100,000 and then by increments of $100,000).

(Note that this bond formula is based on the prior 12 months, rather than prior calendar year, and that bond amounts will only be rounded up now.)

Bond Formula if Unpaid Bills, Surety Pays, Etc.

The amended bond formula in cases of payment delinquency (termed the “Analytical (2)” formula) is as follows:

Duties, Taxes, and Fees of the previous 12 months x 10% = the minimum bond amount or $50,000 (rounded up by increments of $10,000 up to $100,000 and then by increments of $100,000), plus the addition of:

• 10% - unpaid bills not protested and less than 210 days (exact amount)
• $ for $ - delinquent bills not protested and over 210 days or denied protest (exact amount)
• $ for $ debit vouchers unpaid (exact amount)
• $ for $ bills paid by surety (exact amount)

When all of the above are added together, they are to be rounded up by increments of $10,000 up to $100,000 and then by increments of $100,000.

Bond Formula if AD/CVD Order

The amended AD/CV order bond formula (which CBP states amends CBP’s prior agriculture/aquaculture goods bond formula) is as follows:

Duties, Taxes, and Fees of the previous 12 months x 10% = the minimum bond amount or $50,000 (rounded up by increments of $10,000 up to $100,000 and then by increments of $100,000), plus the addition of:

• DOC AD/CV order rate x the value of imports of merchandise subject to the case by the importer in the previous 12 months (exact amount).

When the above two are added together, they are to be rounded up by increments of $10,000 up to $100,000 and then by increments of $100,000.

Bond Formula if AD/CVD Prelim Rate (with History)

The amended AD/CVD preliminary determination (with history) bond formula (which CBP states amends CBP’s prior agriculture/aquaculture goods bond formula) is as follows:

Duties, Taxes, and Fees of the previous 12 months x 10% = the minimum bond amount or $50,000 (rounded up by increments of $10,000 up to $100,000 and then by increments of $100,000), plus the addition of:

• DOC preliminary rate x the value of imports of merchandise subject to the case by the importer in the previous 12 months (exact amount).

When the above two are added together, they are to be rounded up by increments of $10,000 up to $100,000 and then by increments of $100,000.

Bond Formula at AD/CVD Prelim Rate (with no History)

The amended AD/CVD preliminary determination (with no history) bond formula (which CBP states amends CBP’s prior agriculture/aquaculture goods bond formula) is as follows:

Duties, Taxes, and Fees of the previous 12 months x 10% = the minimum bond amount or $50,000 (rounded up by increments of $10,000 up to $100,000 and then by increments of $100,000), plus the addition of:

• DOC preliminary rate x estimated annual import value of imports of merchandise subject to the case by the importer (exact amount).

When the above two are added together, they are to be rounded up by increments of $10,000 up to $100,000 and then by increments of $100,000.

¹The current bond formulas are now being administered by the Revenue Division for all bonds that are reviewed or processed by the Bond Team.

(CBP previously amended its formula for setting continuous bond amounts for special categories of AD/CVD merchandise with elevated collection risks (i.e., agriculture/aquaculture). Frozen warmwater shrimp was the only covered case found to have such elevated risk. See ITT's Online Archives or 07/13/04 news, 04071305, for BP summary of the amendment to 3510-004 regarding agriculture/aquaculture merchandise subject to AD/CV; See ITT's Online Archives or 08/15/05 news, 05081505, for BP summary of CBP’s revision to this amendment.

CBP later issued a general notice ending, effective April 1, 2009, the designation of frozen warmwater shrimp subject to AD/CVD as a special category or covered case subject to the enhanced (high value) continuous bond requirement (EBR). This action was in response to a recent World Trade Organization ruling that found CBP's application of this type of bond to shrimp from Thailand and India inconsistent with U.S. WTO obligations. See ITT’s Online Archives or 04/01/09 news, 09040130, for BP summary.

In 2009, the Court of International Trade (CIT) ruled that CBP’s “high value” bond for shrimp was arbitrary and capricious in National Fisheries Institute, Inc., et al., v. U.S. Bureau of Customs and Border Protection. See ITT’s Online Archives or 08/31/09 and 05/28/10 news, 09083135 and 10052836, for BP summaries.

In October 2010, CIT allowed CBP sixty days from the date that the judgment was entered or five days after a plaintiff tendered a replacement bond, whichever occurred later, to comply with the judgment effectuating the amended remand determination. See ITT’s Online Archives or 10/25/10 news, 10102520, for BP summary.

In December 2010, CIT denied CBP’s request for stay of its judgment in National Fisheries Institute Inc. v. U.S. V, stating that CBP had not made a strong showing that it is likely to succeed on the merits should it bring an appeal. See ITT’s Online Archives or 01/04/11 news, 11010419, for BP summary.)

CBP Directive 3510-004 (dated 1991) available is here.

CBP Directive 3510-005 Bond Sufficiency (dated 1993) is available here.

BP Note

The text of CBP Directive 3510-004 states that the general bond formula was:

None to $1,000,000 duties and taxes - the bond limit of liability amount shall be fixed in multiples of $10,000 nearest to 10 percent of duties, taxes and fees paid by the importer or broker acting as importer of record during the calendar year preceding the date of the application.

Over $1,000,000 duties and taxes - the bond limit of liability amount shall be fixed in multiples of $100,000 nearest to 10 percent of duties, taxes and fees paid by an importer or broker acting as importer of record during the calendar year preceding the date of the application.

In either of these two categories a bond may be demanded with a limit of liability amount greater than that computed using this formula, provided sufficient evidence of high risk is on-hand to support the higher amount.

Bond amounts computed with this 10 percent formula also apply to importations of restricted merchandise unless specific instructions issued mandate otherwise.

If no imports were made during the preceding calendar year, the bond limit of liability amount will be fixed based on the duties, taxes and fees which the applicant estimates will accrue on imports during the calendar year, provided that the district director is satisfied with the accuracy of the estimate. In no event shall the limit of liability amount of any continuous Activity Code 1 bond be less than $50,000.

However, when little or no duties, taxes, and fees are involved and the $50,000 bond minimum amount is not deemed sufficient, as an option, the bond limit of liability amount may be fixed at one-half of 1 percent of the value of importations applicable to an annual period.

It also stated that the bond formula would take into account AD and CV duties in all computations.