Importers Face Bond Insufficiency, Compliance Hurdles Amid New Tariffs, Brokers Say

As additional tariffs are implemented and stacked upon each other, importers' bonds will become saturated, according to Joanne Slapinski, vice president of retail insurance broker servicing for International Bond & Marine Brokerage. And the tariffs also can lead to the stacking of liability for sureties -- where multiple bonds remain open for different periods covering the same unliquidated entries -- which then leads to heightened underwriting requirements, she said.

And as tariff liability for importers increases, they'll face more requests for financial statements, and will be subject to higher collateral requirements to cover their higher bonds, Slapinski said.

To ensure bond sufficiency, brokers and importers should have an understanding of the customs bond limit formula, as well as realize that saturation has nothing to do with the bond period, she said.

While CBP's insufficiency notices will note the importer's current dollar amount of tariffs, importers also need to forecast their future duty spend, Slapinski said. “Customs does not have a magic crystal ball that they can see into the future. They do not know how much that importer is going to pay in the months to come. They don’t know if their imports are going to surge in next month or in three months or in six months. Customs only knows the duties that they paid in so far.”

Beyond bond issues, the additional tariffs will "undoubtedly" cause an increase in Customs Form 28 Requests for Information and Customs Form 29 Notices of Action that importers receive from CBP, said Ryan Raynak of HG Enterprises. The agency will be on the lookout for situations where, for example, an importer of USMCA goods suddenly starts adding the USMCA Special Program Indicator (S or S+) to qualify for the exemption from Mexico and Canada International Emergency Economic Powers Act tariffs, or suddenly starts putting on a different country of origin for its goods.

Brokers should make sure their importers see those CF-28s and CF-29s as soon as possible, whether by monitoring them via their own ACE reports, or having the importer clients sign up for ACE to monitor them on their own, Raynak said.

“If we’re going to see a flood of requests coming in, we want to make sure that our clients are getting those on day one and they’re not coming through Postal Service and they’re getting them on day 28 and it’s ending up in the wrong person’s desk,” said Karen Damon, vice president of regulatory compliance for Mohawk Global Logistics and NCBFAA treasurer. “So, encourage them to go in and elect that indicator to receive them electronically.”

And all that's not to mention the daily uncertainty that plagues the industry. Damon noted that the initial news reports on a tariff action aren't what actually ends up happening, and brokers need to wait for a published proclamation, and then a CSMS message that often includes additional details, before they can start client outreach.

“I know it’s hard when the phone is ringing off the hook and the clients are calling for all of those answers, but one thing that we have learned [is] we’ve seen some things change from what’s published in the proclamation to when it gets down to the CSMS message,” Damon said.

Compliance is especially important because CBP has indicated that it expects full compliance from the trade community for accurate reporting and payment of the additional duties, including the proper application of the Chapter 99 number, and that the agency will take enforcement action for noncompliance, according to Slapinski.

This also includes ensuring that all staff members of a customs brokerage understand how to implement the tariffs, she continued. That's even more important with limited edits in ACE to guide the correct application of Chapter 99 subheadings, she said.

“Check in with them. Make sure they're doing okay,” Slapinski said.

“Part of maintaining reasonable supervision and control within a brokerage is obviously to ensure that we disseminate information and train our staffs,” said Raynak. “I know that in this room, it’s preaching to the choir when I mention the importance of classification, origin and evaluation. But what about our staffs? Do they understand the importance of it as well, or at least to the level that we need them to?”

Brokers may also need to assess their policies on outlaying duties on behalf of their clients, as there are currently a lot of uncertainties on how the trade policy changes might affect clients’ businesses, Raynak continued.

“But even if you don’t outlay duties for your clients, this is something that [could affect how] their cash flow is going to … be changed in some way, shape or form,” Raynak said. “It might change how you’re getting paid for your freight charges or anything else on your invoice, even if it’s not the duties. So even though it might not be as large of an amount as $150,000 duty bill, they still might not pay you as quickly as you wanted it to.”