Top Ten Reasons for CBP Bond Transaction Rejects

(Note that Continuous Transaction Bond program has been centralized at the Revenue Division. The bond centralization effort includes the filing, approval and maintenance of all Continuous Transaction and Airport Security bonds. Single Transaction Bonds (STBs) are processed by the Ports¹.)

Bond Document Volume at Revenue Division Increasing

According to statistics provided by CBP, the total number of bond documents (continuous bonds, riders, terminations, terminate & replace) that the Revenue Division has received from 2006 to the present has generally increased. The statistics are as follows:

Rejection Rates of Bond Transactions Have Decreased Since 2009

CBP data shows that the rejection rates of bond transactions have decreased since 2009. In 2009, CBP received 146,207 transactions with 6.3% (or 9,329) being rejected. For 2010, CBP received 147,380 transactions with 4.5% (or 6,708) being rejected. Year to date statistics for 2011 are 35,580 received with a 4.4% rejection rate (or 1,566).

CBP states that the reject rate over the last year (around 4-5%) is a stable reject rate and expects that a number close to this will be the “norm” as there will always be inaccuracies (people make errors, new person on the job, etc.).

CBP provided the following statistics for the last 12 months:

Top 10 Rejection Reasons

The top 10 reasons for the rejection of bond transactions from the trade are:

#1 - Wrong Effective Date. This problem occurs when a company is replacing its existing bond. CBP cannot have overlap in the bond coverage.

CBP urges the trade to query the bond’s anniversary date to coordinate terminate and replace. A common error is to terminate existing bond on the anniversary date, when it should be terminated one day prior for example: the prior bond should terminate 12/31/10 and the new bond be effective 1/1/11.

#2 -- CBP Form 5106 is Incorrect or Incomplete. Common mistakes include (1) not including the legal status of the principal or the incorrect country code (foreign principals); (2) the information on the CBP Form 5106 (Importer ID Input Record) and CBP Form 301 (Customs Bond) do not match; and (3) missing physical address on CBP 5106.

#3 -- Incorrect Bond Riders. Riders must conform to 19 CFR 113.24. Most of these errors are attributed to clerical or user errors. CBP notes that using an automated system avoids most of these errors. They also get riders that include the wrong surety.

(19 CFR 113.24 is available here.)

#4 -- Principal Address. The principal address on the CBP Form 301 must be a physical address -- not a P.O. box. It must match U.S. postal code requirements. If the principal has a foreign address, it must conform to country and postal codes.

CBP notes that it has experienced problems where it gets the CBP Form 301 with a principal address, there is no CBP 5106 provided, and CBP queries its system and the address doesn’t match. In this scenario CBP needs a CBP Form 5106 (assuming the address provided in the bond is correct).

#5 -- Bond Application/Letter is Incorrect. The requirements for the bond application/letter are outlined in 19 CFR 113.12. CBP noted that common mistakes include “various” for commodity or country of origin, or “general merchandise.” CBP notes that the name, address, etc. must match across all bond paperwork.

(19 CFR 113.12 is available here.)

#6 -- Valid Continuous Bond Already on File. To avoid situations where people try to get a continuous bond and already have one, the trade could query the IRS number before sending a bond submission. They should also confirm any existing bond is terminated the day prior to anniversary, not on the anniversary date.

#7 -- CBP Form 5106 is Missing. CBP needs a CBP Form 5106 whenever an importer of record number is being corrected or updated.

#8 -- Incorrect Termination Dates per 19 CFR 113.27. The regulations state that if there is a termination request by the importer or customs broker under a power of attorney (POA), the termination shall take effect on the date requested if the date is at least 10 business days after the date of receipt of the request. Otherwise the termination will be effective on the close of business 10 business days after the request is received. For a surety, they should allow 30 calendar days from the date of their request. CBP notes that the agency does not recognize government holidays for these termination date calculations. (19 CFR 113.27 is available here.)

#9 -- Signatures on Application and CBP Form 301 Bond. CBP notes that signatures must black and not too small or light for imaging. This must include the legible Signature, Printed Name of Signor, Title of Signer, Company Name of Signer (Importer or customs broker as POA).

#10 -- Address Change Rider per 19 CFR 113.24. The most significant cause for this reject is that the new address cannot be validated by CBP’s system (ACE), which uses the same data is www.usps.com (which can be used for zip code lookups). (19 CFR 113.24 is available here.)

¹CBP has previously said that continuous Importer Security Filing (ISF) bonds are currently processed by the Revenue Division. CBP sources noted that both single and continuous ISF bonds should be submitted to the Revenue Division. The Revenue Division receives both types of bonds, but only processes and assigns a number to continuous ISF bonds.