Details on CBP's Interim Final Rule on 10+2 for Maritime Cargo (Part IV - Bonding Requirements)

This is Part IV of a multi-part series of summaries of the details of the interim final rule and highlights bonding requirements. See future issues of ITT for additional summaries.

SF Importer or Agent Must Have Bond

In the interim final rule, new 19 CFR 149.5(b) states that the ISF Importer must possess a basic importation and entry bond incorporating all the necessary provisions of 19 CFR 113.62, a basic custodial bond incorporating all the necessary provisions of 19 CFR 113.63, an international carrier bond incorporating all the necessary provisions of 19 CFR 113.64, a foreign trade zone (FTZ) operator bond incorporating all the necessary provisions of 19 CFR 113.73, or an ISF bond as provided in new Appendix D to 19 CFR 113. If an ISF Importer does not have a required bond, the agent submitting the ISF on behalf of the ISF Importer may post the agent's bond.

Changes to Basic Importation/Entry, Custodial & FTZ Operator Bond Conditions

The interim final rule will modify the Customs bond conditions sections of 19 CFR Part 113 by amending the provisions regarding basic importation and entry bond conditions (113.62), basic custodial bond conditions (113.63), and FTZ operator bond conditions (113.73) to add a new paragraph which states that the principal agrees to comply with all ISF requirements set forth in new 19 CFR Part 149 including but not limited to providing SF information to CBP in the manner and in the time period prescribed by regulation. If the principal defaults with regard to any obligation, the principal and surety (jointly and severally) agree to pay liquidated damages of $5,000 for each violation.

The interim final rule will also amend the basic importation and entry bond conditions in 19 CFR 113.62(j) (which is being redesignated (k)) regarding the agreement to comply with electronic entry and/or advance cargo information filing requirements by revising it to read as follows:

(1) If the principal is qualified to utilize electronic entry filing as provided for in part 143, subpart D, of this chapter, the principal agrees to comply with all conditions set forth in that subpart and to send and accept electronic transmissions without the necessity of paper copies.

(2) If the principal elects to provide advance inward air or truck cargo information to CBP electronically, the principal agrees to provide such cargo information to CBP in the manner and in the time period required, respectively, under 122.48a or 123.92 of this chapter. If the principal defaults with regard to these obligations, the principal and surety (jointly and severally) agree to pay liquidated damages of $5,000 for each violation.

(The amended text reflects the replacement of the phrase "$5,000 for each regulation violated" with the phrase "$5,000 for each violation.)

Changes to International Carrier Bond Conditions

CBP's interim final rule will amend the international carrier bond conditions in 19 CFR 113.64 by adding the following new sections:

(c) Agreement to provide advance cargo information. The incoming carrier agrees to provide advance cargo information to CBP in the manner and in the time period required under 19 CFR 4.7 and 4.7a. If the incoming carrier, as principal, defaults with regard to these obligations, the principal and surety (jointly and severally) agree to pay liquidated damages of $5,000 for each violation, to a maximum of $100,000 per conveyance arrival.

(e) Agreement to comply with ISF requirements. If the principal elects to provide the ISF information to CBP, the principal agrees to comply with all ISF requirements set forth in new 19 CFR Part 149 including but not limited to providing SF information to CBP in the manner and in the time period prescribed by regulation. If the principal defaults with regard to any obligation, the principal and surety (jointly and severally) agree to pay liquidated damages of $5,000 for each violation.

(f), (g) Agreement to comply with vessel stow plan and container status message requirements. If the principal causes a vessel to arrive within the limits of a port in the U.S., the principal agrees to submit a stow plan and container status messages in the manner and in the time period required pursuant to 19 CFR Part 4.7c (vessel stow plan) or Part 4.7d (container status messages). If the principal defaults with regard to this obligation, the principal and surety (jointly and severally) agree to pay liquidated damages of (1) $50,000 for each vessel arrival in the case of a vessel stow plan, or (2) $5,000 for each violation, to maximum of $100,000 for vessel arrival in the case of container status messages.

The interim final rule also amends existing 19 CFR 113.64(c) (which is being redesignated (d)) regarding non-vessel operating common carriers (NVOCCs) and other parties by revising it to read as follows:

If a slot charterer, non-vessel operating common carrier (NVOCC) as defined in 19 CFR 4.7(b)(3)(ii), or other party specified in 19 CFR 122.48a(c)(1)(ii)-(c)(1)(iv), elects to provide advance cargo information to CBP electronically, the NVOCC or other party, as a principal under this bond, in addition to compliance with the other provisions of this bond, also agrees to provide such cargo information to CBP in the manner and in the time period required under those respective sections. If the NVOCC or other party, as principal, defaults with regard to these obligations, the principal and surety (jointly and severally) agree to pay liquidated damages of $5,000 for each violation, to a maximum of $100,000 per conveyance arrival. (The amended text reflects the replacement of the phrase "$5,000 for each regulation violated" with the phrase "$5,000 for each violation, to a maximum of $100,000 per conveyance arrival.")

New Appendix D for ISF Bond

The interim final rule will add a new Appendix D to 19 CFR Part 113 which contains the language for the new ISF bond. Among other things, this language states that the ISF bond remains in force for one year beginning with the effective date and for each succeeding annual period, or until terminated. The ISF bond constitutes a separate bond for each period in the amount listed therein for liabilities that accrue in each period.

CBP's Responses to Comments Regarding Bonding Issues

The following are highlights of CBP's remarks in response to comments it received from the publication of its 10+2 proposed rule (see interim final rule for additional responses to comments).

ISF Importer is ultimately liable for the timely, accurate & complete submission of ISF. In response to a comment that when an agent submits an ISF on behalf of an importer, both parties should not be required to obtain bonds, CBP agreed and stated that the regulations have been changed to remove the requirement that the filer have a separate bond. CBP states that the ISF Importer is ultimately liable for the timely, accurate, and complete submission of the ISF.

Requests to file STBs will be evaluated on case-by-case basis. In response to a question as to whether a continuous or single transaction bond (STB) will be required, CBP states that generally, continuous bonds will be accepted for the ISF. Continuous bonds are verifiable electronically and will give CBP more transparency into the party and bond's existence. CBP states that requests to file STBs for ISFs will be evaluated by CBP on a case-by-case basis consistent with current practices.

CBP is not increasing bond amounts in interim final rule. In response to a question on whether CBP will change the required bond amounts, CBP states that it is not increasing bond amounts through the interim final rule and if it does increase bond amounts in the future, it will do so through established procedures.

Demands for liquidated damages will be subject to mitigation on case-by-case basis. In response to a comment regarding the lack of risk assessment associated with CBP's proposed liquidated damages amounts, CBP states that any demand for liquidated damages will be subject to mitigation on a case-by-case basis. However, CBP states that mitigation will be the exception and not the rule.

CBP officials recently noted that mitigation guidelines are being prepared and will be made available to the public.

¹The interim final rule is intended to fulfill the requirements of Section 203 of the Security and Accountability for Every (SAFE) Port Act of 2006 and Section 343(a) of the Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002.

See ITT's Online Archives or 11/25/08, 11/26/08, and 12/03/08 news, 08112505, 08112605, and 08120305, for Parts I, II, and III of BP's series of summaries on the details of CBP's 10+2 interim final rule.

See ITT's Online Archives or 11/24/08 news, 08112400, for BP summary announcing the publication of CBP's 10+2 interim final rule, with links to other recent BP summaries on 10+2.

CBP contact - Richard DiNucci (202) 344-2513

Interim final rule (D/N USCBP-2007-0077, CBP Dec. 08-46, FR Pub 11/25/08) available at http://edocket.access.gpo.gov/2008/pdf/E8-27048.pdf.

DHS fact sheet on interim final rule (dated 11/24/08) available at http://www.dhs.gov/xnews/releases/pr_1227548591399.shtm.

DHS press release on interim final rule (dated 11/24/08) available at http://www.dhs.gov/xnews/releases/pr_1227546762516.shtm.

DHS frequently asked questions on 10+2 interim final rule available at http://www.cbp.gov/linkhandler/cgov/trade/cargo_security/carriers/security_filing/import_faq.ctt/import_faq.pdf.