CBP advisory committee recommends launch of AD/CVD bond pilot

The “initial formula” for bond calculation is expected to be finalized by late April, according to a document submitted prior to a quarterly meeting of U.S. Customs and Border Protection’s Commercial Operations Advisory Committee.    U.S. Customs and Border Protection’s (CBP) Commercial Customs Operations Advisory Committee (COAC) on Wednesday voted to approve a recommendation for the agency to pilot the assessment of separate, supplemental continuous bonds on importers subject to antidumping and/or countervailing duties.
   While the official recommendation adopted during the quarterly COAC meeting in Miami proposes a “pilot,” committee member Vincent Iacopella said the pre-regulatory phase of the bonds’ rollout could resemble more of a “proof-of-concept” deliverable – or “tabletop” exercise – among surety members of the COAC Trade Enforcement & Revenue Collection (TERC) Bond Working Group.
   In materials posted to CBP’s website prior to the hearing, the TERC Subcommittee said that CBP is “on track” to finalize the “initial formula” to calculate the bonds and start the “pilot” by late April.
The TERC document describes the tabled formula as: “Exposure rate * Base Rate * (Relevant Factors) = Bond amt.”
   The AD/CVD bond formula would take into account historical data related to duty collection and sureties’ payments, CBP Office of Trade Executive Director for Commercial Targeting and Enforcement Troy Riley said during the meeting.
   “The exposure rate [itself] has to deal with the amount of potential AD/CVD risk that’s out there, and then our ability to actually collect under that risk,” Riley told American Shipper after the meeting. “And it’s looking at our performance as well – not only how much is out there in unpaid, but then also you calculate in the base rate, which talks about using actuarial tables to determine: Based on our performance to be able to collect, here’s what we predict we’d be able to collect in the future.”
   “Relevant factors” refer to calculations based on applicable risk factors, such as countries against whom its more difficult to collect duties, and commodities associated with a higher rate of delinquent payments, Riley added.
   “The key factor here to take away is that it’s a risk-based approach, as opposed to just saying, ‘Ten percent duties, taxes and fees, and you’re covered,’” he said.
   Bond rates/collections applying to subjected entities are expected to naturally decrease over time, as more payments reduce the probability of CBP exposure and payer delinquency.
   The COAC is working with CBP to implement the supplemental bonding mechanism in line with Trade Facilitation and Trade Enforcement Act Section 115, which requires CBP to develop “importer risk assessment guidelines to adjust bond amounts,” according to a COAC document drafted by the TERC Subcommittee Bond Working Group.
   The proposed “pilot,” or proof-of-concept deliverable, “will provide valuable input to CBP to help establish policy, automation requirements in ACE, and provide a smooth transition for the trade,” the COAC-approved recommendation says.
   Another recommendation approved by the COAC in November says the supplemental bond should have a separate activity code and “be required to secure the potential shift” in AD/CVD rates for active AD/CVD orders.
   CBP is reviewing historical data on AD/CVD losses in order to achieve refinement of the bond formula, for which “further discussions are necessary,” according to a TERC Subcommittee report of the work of the COAC for February 2018.