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What's New: Advocacy

SFAA Addresses Concerns with Proposed Changes to Customs Bonds

Wednesday, September 19, 2018  

SFAA Addresses Concerns with Proposed Changes to Customs Bonds

SFAA submitted comments to U.S. Customs and Border Protection (CBP) to address surety industry concerns with CBP’s proposed revised regulations that would implement the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA). The comments focused on challenges presented by the proposed rule’s new customs bond condition that would establish joint and several liability for disallowed drawback claims to be shared by the drawback claimant and the importer of the imported merchandise. Specifically, the proposed rule provides that if a person who is not the importer of record and, therefore, not the principal on the customs bond, makes a drawback claim with respect to merchandise imported under that bond, the bond principal and surety agree to pay jointly and severally any erroneous drawback payment made by CBP to the third-party claimant. We explained the impracticality of asking a surety to assess and underwrite risks associated with the behavior of third-parties, unknown to it at the time the customs bond is furnished. We further cautioned that this entirely undermines the surety’s prequalification process and the role of indemnification in a claim. As proposed, the rule could negatively impact the availability of the bonds due to the increased risk and exposure as sureties are likely to tighten their underwriting requirements in response. SFAA recommended that CBP should create a new customs bond or a rider for existing bonds that would address refund liability for any disallowed third-party drawback claims if CBP wants surety protection for this liability. SFAA has offered to assist in developing these forms.

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