CBP Announces New Procedures for Terminating, Replacing Continuous Bonds
U.S. Customs and Border Protection has issued a notice announcing that effective immediately, requests to terminate and replace continuous bonds meeting certain conditions will be processed according to new procedures to avoid "terminate and replace" processing problems.
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Terminate and replace problems occur when the termination of an existing continuous bond is not synchronized with the approval of a replacement bond, resulting in a 'gap' in bond coverage (e.g., the old bond is terminated before the new bond is approved).
New Procedures
CBP's new procedures for the termination and replacement of continuous bonds are as follows:
Principal can request CBP implement termination on date before replacement bond is made effective. The principal may specifically request that CBP not implement the termination on the primary termination date and instead implement the termination on the date before the replacement bond is ready to be made effective (conditional termination date) (i.e., usually a later date than the primary termination date), in the event that the replacement bond cannot be made effective on the day after the primary termination date (as specified in the termination request or determined by regulation).
Despite request, principals likely to have to continue using single transaction bonds. Current operational limitations will not always allow CBP to unset or override a termination after it has been input into the system (i.e., the Automated Commercial Environment (ACE) bond module). Therefore, principals will probably be compelled to continue to utilize single transaction bonds in many instances.
CBP states that it will investigate the possibility of rendering the ACE bond module more flexible to address the problems of 'gaps' in continuous bond coverage as a result of terminate and replace requests. This would include the ability to allow CBP to unset or override a primary termination date and replace it with a conditional termination date under any circumstance.
CBP will employ conditional request solution whenever possible. CBP notes that those concerned with the problems that could arise from a 'gap' in continuous bond coverage should endeavor to submit a replacement bond as far in advance as possible of the termination date of the terminated bond. This will not eliminate the possibility of those problems arising, but this will reduce the frequency and impact of such problems. As indicated above, CBP will employ the conditional request solution whenever possible, but it does not expect it to be possible in many instances.
Conditions
According to CBP, continuous bonds must meet all of the following conditions in order to be processed using the new procedures:
The termination and replacement bond must be filed together in a single submission to CBP's Bond Team, and that submission must include a specific request from the surety to forebear from implementing the termination (as described above).
The existing bond cannot be the subject of an active bond sufficiency letter issued by CBP.
The 'final' termination date and the new, replacement bond effective date must be consecutive calendar days.
Conditional Termination and New Bond Request Template Posted, Etc.
CBP also posted a conditional termination and new bond request template to its Web site.
In addition, CBP posted a sample continuous bond application (CBP Form 5106), a sample continuous bond filing cover sheet, and general instructions for filing continuous bonds. CBP notes that these sample documents are advisory only and are not binding.
(See ITT's Online Archives or 05/22/08 news, 08052205, for BP summary of CBP officials discussing the fix for 'gaps' between bonds at the May 2008 COAC meeting.
See ITT's Online Archives 11/08/07 news, 07110805, for BP summary offering a voluntary process to prevent 'gaps' in continuous bond coverage.)
Questions about this posting should be directed to the Revenue Division Bond Team via email to cbp.bondquestions@dhs.gov
CBP notice (dated 11/1/7/08 available at http://www.cbp.gov/xp/cgov/trade/priority_trade/revenue/bonds/pilot_program/news_develop/bond_procedures.xml
Conditional template (posted 11/17/08) available at http://www.cbp.gov/linkhandler/cgov/trade/priority_trade/revenue/bonds/pilot_program/news_develop/bond_templates.ctt/bond_template.doc
Sample application, cover sheet, instructions (posted 11/17/08) available at http://www.cbp.gov/xp/cgov/trade/priority_trade/revenue/bonds/pilot_program/news_develop/gen_instruct/