cbp 301 bond form – guidance and information for ...© 2011 roanoke trade services, inc. page 3...

© 2011 Roanoke Trade Services, Inc.

CBP 301 Bond Form –Guidance and Information for Completing Correctly!

CBP 301 Bond Form –Guidance and Information for

Completing Correctly!

Roanoke Trade Services, Inc. presents

Presenter:Kathleen Dorman, Bond Manager



Welcome NTCBFFA



• Kathleen Dorman, Roanoke Trade’s Bond Manager -Houston office

• Sheila Skipper, Regional Vice President, manages Roanoke Trade’s Houston and Miami offices

• Roanoke Trade writes customs bonds and marine cargo insurance

• Member of Munich Re Group and affiliate of Watkins Syndicate at Lloyd’s of London

• 11 US locations and resources worldwide

• Providing transportation-related insurance solutions since 1935

Welcome…a Little About Us!



Customs Bond FormCBP 301 “101”



So What’s the Big Deal?

U.S. Customs and Border Protection (CBP) Headquarters Office recently provided field offices with guidelines on proper completion of single transaction bond (STB), with instructions for increased review and scrutiny by local CBP ports

U.S. CUSTOMS & BORDER PROTECTION File: PH-OFO-09-13TRADE INFORMATION NOTICE Date: July 27, 2009



It May Become a Bigger Deal!

• CBP has “noticed numerous single transaction bonds (STBs) that are not in compliance...”

• In addition to requesting corrected STBs, CBP advised:

– Tracking instances of non-compliance

– Repeat violations will result in issuance of warning letters and possible penalty action

U.S. CUSTOMS & BORDER PROTECTION Pipeline 10-18APort of Chicago - Pipeline Date: October 5, 2010



Customs Bonds

What is a customs bond?– Required by law/regulation

– Guarantees:

• Payment of duties/taxes/fees

• Compliance with law/regulations applicable to goods or activities

– Parties are:

• USA (CBP) = obligee

• Importer or other party promising to pay/perform = principal

• T-Listed insurance company who will pay if principal does not = surety



Customs Bonds

So, since a customs bond – PROTECTS THE REVENUE OF THE UNITED STATES

and

– ASSURES COMPLIANCE with any pertinent law, regulation or instruction

then

– Information on bond can affect both CBP’s ability to collect, as well as surety’s ability to subrogate because customs bonds are NOT insurance; they’re an alternative to posting “CASH” with CBP (Cash-in-Lieu of Bond)

Our discussion will focus on preparing Import bonds, both Single Transaction (STB) and Continuous Bonds (CTB)



CBP 301 Bond Form

American Alternative Insurance Corporation(A Delaware Corporation)555 College Road EastPrinceton, NJ 08540-6616

036



Completing the Bond

4 digit port codePort code:

Entry dateDate of transaction:

Transaction entry number; complete only for STB — must match entry number on CBP 3461 & CBP 7501

Identification of transaction:

Mark with X

Line out Continuous Bond and Effective date below Single Transaction Bond selection

Single Transaction Bond:

Execution date (signed) by either principal or AIF Execution Date:

Section I - Single Transaction Bonds

X

02/01/2011

5301QQQ-12345678 02/01/2011



Completing the Bond

All Continuous Bonds = Port code 9900 but do not show on bond, per Revenue Division

Port code:

Date bond coverage begins

Old rule = bond must be filed 10 business days in advance of effective date. NOW new CTBs can generally be processed in 5 business days.

Effective date:

Mark with X

Line out Single Transaction Bond and Identification of transaction above Continuous Bond selection

Continuous bond:

Execution date (signed) by either principal or AIF Execution Date:

Section I - Continuous Bonds

X

02/01/2011

02/15/2011



Completing the Bond

Section II – Activity Code (Bond Type) and Amount

• Mark appropriate Activity Code with X, only one activity code marked per bond

• Insert bond amount required by CBP (Customs Directive 3510-004, Monetary Guidelines for Setting Bond Amounts, July 23, 1991: Bond amount should be set at one times entered value plus duties, fees and taxes, OR three times entered value for merchandise submitted with other agency requirements if risk/threat to public health and safety)

• Line out areas in Section II not used and not already lined out

X $2,344



Completing the Bond

• Only for listing trade names and/or unincorporated divisions permitted to use bond. Division’s “HQ” generally listed in principal section with importer number ending in suffix “00”. Suffixes for divisions can be numeric or alpha characters but can not include letters “I”, “O” or “Z”

• Total number of trade names or unincorporated divisions listed in Section III must be entered - if none, mark zero (0)

• List additional trade names or unincorporated divisions on back of bond if all do not fit on front of bond

Section III – Unincorporated Divisions / Trade Names

12-11111111 02

13-11111111 03

XYZ Importing Company

ABC Clothing Corporation

2



Completing the Bond

Section III – Unincorporated Divisions / Trade Names

• Section III continued on back of bond

• Additional unincorporated divisions / trade names listed on back of bond

• Back of bond REQUIRED but can be blank



Completing the Bond

Witnesses (back of bond)– Only necessary when signed as individual or partner

– If broker signs on behalf of importer, section does not need to be completed



Completing the Bond

ABC Corporation of America(A Delaware Corporation)9 Main StreetHuntsville, AL 30325


95-133456800

036

Matthew L. Zehner 005-72-3503

Principal, Co-Principal and Surety Information –bottom half of bond



Completing the Bond

Principal Section - Name, Address and Importer Number

– Principal’s full legal name (certain abbreviations are allowed as CBP limits number of characters)


95-133456800ABC Corporation of America(A Delaware Corporation)9 Main StreetHuntsville, AL 30325

95-133456800



Principal Names

Sole Proprietor’s complete name: John Smith DBA Smith Furniture Company

Incorrect: Smith Furniture Company------------------------------------------------------------------------------------------------------------------------------Partnership - Incorrect: S & J Imports

If a limited partnership: S & J Imports LP(A Partnership)

If a general partnership: S & J Imports(A Partnership comprised of John Smith & David Jones)

If principal’s business type is Limited Partnership, provide copy of complete Partnership agreement to CBP with CTB------------------------------------------------------------------------------------------------------------------------------Corporation’s complete name: S & J Imports LLC OR S & J Imports Inc.

(a California LLC) OR (A California Corporation)

Incorrect: S & J Imports

LLCs may be designated as either corporation or partnership, depending on how they pay their taxes (need to ask although some LLCs indicate this by checking the corporation or partnership box on POA or application)



Completing the Bond

Principal Section – Signature Box

• Authorized signature of principal -– Customs broker may sign as Attorney-in-Fact under POA;,

signature must read: Joan Doe, ABC Broker, Attorney-in-Fact– All information must STAY inside box, NO ENCROACHING – If 301 signed by bond principal, signature must be of officer of

company (President, CEO, CFO, or VP) or owner. Signature line should read: “John Doe, President, ABC Importers, Importer of Record”


-

95-133456800-95 133456800ABC Corporation of America(A Delaware Corporation)9 Main StreetHunstville, AL 30325 Joan Doe, ABC Broker, Attorney-in-Fact

Digital signature image here



Completing the Bond

Co-Principals

• In order to list more than one principal on a CTB, the companies must be related and same business type

• Companies listed as co-principals are separate legal entities and will always have different tax ID numbers as opposed to trade names and unincorporated divisions which have same importer number but different suffixes

• If more than two co-principals, co-principal addendum must be used to list additional subsidiaries (it’s an extension of bond form)

• Customs broker must have separate POA for each subsidiary that’s a separate legal entity (different importer numbers – different legal entities)

ABC Corporation of America(A Delaware Corporation)9 Main StreetHunstville, AL 30325

ABC Corporation of America(A California Corporation)456 Grapevine LaneLos Angeles, CA 90210

95-1334568

Joan Doe, ABC Broker, Attorney-in-Fact

Joan Doe, ABC Broker, Attorney-in-Fact

95-2234568





Completing the Bond

Surety Section (usually pre-printed on bond)

– Complete name and address of surety and surety code

– Surety agent’s name, signature and social security number should be at bottom of form


036

Matthew L. Zehner 005-72-3503



Completing the Bond

Most common errors?• Principal Information (Full legal name, address, state of

incorporation…)

• Broker’s AIF signature must include individual signer’s name, company (CHB) name and AIF

• Information must fit within signature box and not encroach into any other areas or data!

• Facsimile signatures permitted

• Broker A / Broker B



Broker A / Broker B

• No consensus, policy varies?

• CBP says “…there has been some confusion in the trade over the issuance of STBs by out-port customs brokers. An STB is customs business and entry specific and therefore can only be issued by a customs broker permitted in the port of entry.” See copy of HQ Ruling 115336



Determining Bond Amounts

• Determined by CBP Directive 3510-004, not by surety!

• Customs’ website www.cbp.gov excellent resource for staying current as there have been changes in monetary guidelines for determining bond amounts



Import Bond Amounts

• Single Transaction Bond

• Generally, a single transaction, Activity Code 1, Importer or Broker bond (for consumption entry, immediate delivery, to cover articles entered or withdrawn from warehouse, etc.) will be executed in an amount NOT LESS THAN TOTAL ENTERED VALUE PLUS ALL DUTIES, TAXES AND FEES which apply. All taxes and special duties must be included in computation (excise taxes, antidumping, countervailing duties, etc.)

− Example: Value of shipment = $1,000,000 + Duties = $3,000 + Fees = $400

– STB Amount for this shipment = $1,003,400



Import Bond Amounts - STB

• Unconditionally duty-free– If not subject to quota visa or other agency requirements, bond

may be reduced to 10% of total entered value– Unconditionally duty-free = free of duty without specific conditions

• Examples: Paintings, books or articles duty-free regardless of country or origin

– Returned American goods are NOT unconditionally duty-free– No prior approval needed; contact Commodity Team if questions– Minimum bond amount: no less than $100 per 19 CFR 113.13(a);

provide add slip showing calculations

• Conditionally duty-free– Conditionally duty-free articles do not meet guidelines for 10%

bond amount• Examples: GSP, NAFTZ, antiques, articles duty-free depending on

country of origin



Import Bond Amounts – STB

• Other Agency Requirements– Merchandise subject to other agency requirements due to public

health and safety require bond in amount not less than three (3)times total entered value of merchandise

• Food and Drug Administration (FDA) – all• Environmental Protection Agency (EPA) – all• Bureau of Alcohol, Tobacco, Firearms & Explosives (BATFE) -

alcoholic beverages and distilled spirits only• Consumer Product Safety Commission (CPSC) – toys and fireworks

if sample by CBP for CPSC testing• Department of Agriculture, Agricultural Marketing Service (AMS) –

subject to marketing orders• Federal Communications Commission (FCC) – all• Toxic Substances Control Act (TOSCA) – all

• Flammable Fabrics – three times total entered value




• Quota / Visa– Bond in amount not less than three (3) times

total entered value of merchandise required for all merchandise subject to quota/visa requirements

• Combination of Merchandise– If entry includes combination of merchandise

falling into multiple categories, Port Director may apply different bond amount calculations to merchandise in each category to arrive at final bond amount




• Permanent Exhibit Bond– Covers articles for exhibitions

– Bond amount equal to estimated duties, as determined at time of entry

– If free of duty, bond liability amount small include one times the Merchandise Processing Fee/MPF or $100 (whichever greater)

• Trade Fair Bond– Bond liability amount fixed to amount Port Director deems necessary

• Temporary Importation under Bond– Bond liability amount fixed to amount Port Director deems necessary to protect

revenue, but not less than amount equal to double estimated duties

– Samples used for taking orders, motion picture advertising films, professional equipment, tools of trade and repair components for professional equipment, bond amount shall be 110 percent (110%) of the estimated duties

– Computations considered for all taxes and special duties (Example: excise taxes, antidumping, countervailing duties, etc. applicable)



Import Bond Amounts - CTBs

• Continuous Bonds

– Minimum bond amount is $50,000, nearest to 10% of duties, taxes and fees paid during last 12 months, subject to one of the following two formulas:

1. If Duties, Taxes and Fees $0 - $1,000,000 – Take 10% and round up to nearest $10,000

Example:

Total Value = $400,000

Total Duties = 0 (duty free commodity)

Total Fees = $2,000

DTF < $1,000,000 so bond amount written in multiples of $10,000, rounded UP to nearest $10,000.

So CTB Amount = $50,000 (CTBs capacity = $500,000)



Import Bond Amounts - CTBs

• Continuous Bonds (continued)

2. If Duties, Taxes and Fees Over $1,000,000 - round up to nearest $100,000

Example:

Total Value = $22,400,000

Total Duties = $1,990,000

Total Fees = $20,000

Total DTF = $2,010,000 ($1,990,000 + $20,000 = $2,010,000)

DTF > $1,000,000 so bond amount written in multiples of $100,000, rounded UP to nearest $100,000

So, CTB Amount should be $300,000 (CTBs capacity is $3 Million in DTF)



Hot Topics



Importer Issues

CTBs can be rendered Insufficient for:• Outstanding debt issues

• Failure to comply with Formal Demand to Increase Bond

• Bad address

• Use of an invalid importer number

• Failure to provide any required bond paperwork

• Failure to comply with rejection of termination request

• Failure to ANNUALLY deposit the required cash-in-lieu of surety for a CTB obtained under 19 CFR 113.40

• Failure to comply with specific mandates/requests



Industry Changes

Changes in bond industry and international trade impact importers and intermediaries

– CBP demands on surety have doubled over a five year period—this is NOT counting 10+2

– Closer scrutiny by sureties and reinsurers watching their AGGREGATE liability (total exposure, all bond amounts combined)

– Very few reinsurers willing to write surety business

• Surety buying insurance to limit/spread risk

• Fewer still willing to write customs bond reinsurance

– Numerous customs bond providers have exited customs bond business

• Long claims “tail” (4 – 7 years)

• Insurers looking for better use of capacity and ROI

– Many corporate bankruptcies



• Many bonding companies use automated online bond issuance programs. If the principal information is entered correctly the first time, many potential errors can be eliminated.

• Bond Manual and Bond Amount Guidelines available online

• Customs bond riders, CBP 301 application and other bond related forms as fillable templates are available through FastBond or from Customer Support section of www.roanoketrade.com

• Never hesitate to contact Roanoke Trade’s experienced staff

Need Assistance?



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About Roanoke Trade

Based in 11 US Cities with a Network of Agents and Service Companies Worldwide

Over 75 years experience in managing the risks associatedwith global trade and transportation

1-800-ROANOKEwww.roanoketrade.com | [email protected]



Questions



Thank you for your time and attention. We hope that you found this seminar productive,

practical and useful!

Thank You!

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