Highlights of Comments on CBP's Proposed Rule on Centralization of Continuous Bond Program

The regulatory changes proposed would also encourage a uniform approach to the approval, maintenance, and periodic review of continuous bonds. In addition, the proposed changes would update 19 CFR to accommodate the use of information technology and modern business practices.

Numerous Comments from Trade Associations, Etc.

Comments on CBP's proposed rule were due by March 8, 2010. Numerous sureties and surety associations, as well as brokers associations and other organizations filed comments in response to CBP's proposed rule. Highlights of the comments submitted by two of these groups - the Departmental Advisory Committee on Commercial Operations of U.S. Customs and Border Protection and Related Homeland Security Functions (COAC) and the National Customs Brokers and Forwarders Association of America (NCBFAA) - include:

30-Day Response Time for Bond Insufficiency Notices Should Remain

In its comments to CBP, both NCBFAA and COAC expressed concern about the proposal to delete the language in 19 CFR 113.13(c) which provides the bond principal with 30 days to respond to a written notice of insufficiency. The comments note that the proposed change would provide CBP with the authority to deactivate a bond and or require additional collateralization almost immediately.

Needed for the ISF bond. NCBFAA and COAC also note that the 30 day notice period has taken on new importance in the context of the Importer Security Filing (ISF). NCBFAA states that before the ISF was implemented, a bond insufficiency notice would only cause delays in the filing of entries for release after the arrival of cargo at terminals in the U.S.; however, if an ISF transaction is rejected for not having an active bond on file, the problems for maritime cargo will begin overseas before the cargo is laden on the vessel. NCBFAA notes that the sudden cancellation of a bond from an importer, large or small, opens the door for the possibility of substantial delays, and disruptions in the supply chain, with inevitable negative impacts on commerce and multiple claims for liquidated damages.

CBP Should be Responsible for Accuracy of Bond Applications It Accepts

COAC also objected to proposed language that would allow CBP to presume, without verification, that submitted bond applications and related documentation, which include the bond, are properly executed, complete, accurate, an in full compliance with applicable laws.

COAC notes that this is a substantive change that was not highlighted in the summary of CBP's proposed rule and that it believes this broad authority is inappropriate and unlawful. According to COAC, if a bond is submitted and accepted by CBP, then CBP must also take responsibility for the problems, errors, or deficiencies in the bond which is accepted.

Proposed Application Changes Would Increase Paperwork Burden

COAC and NCBFAA expressed concern that the detail proposed to be required on bond applications is vastly expanded in comparison with current application requirements. COAC notes that this translates to an additional cost of doing business for a substantial number of entities.

Allowing Individuals to Act as Sureties Increases Risk

CBP is proposing to allow an individual to act as a surety on a bond. However, COAC notes that the criteria that CBP requires of the individual surety are not sufficient to properly protect the revenue of the U.S. COAC recommends that this section be removed from the proposed regulations.

(See ITT's Online Archives or 01/05/10 and 01/11/10 news, 10010505 and 10011105, for BP summaries on CBP's proposed rule.)

Comments on CBP's proposed rule available at http://www.regulations.gov/search/Regs/home.htmlsearchResults?Ne=118805380988074806680841&Ntt=USCBP-2006-0013&Ntk=All&Ntx=modematchall&N=0.