Monetary Guidelines for Setting Bond Amounts for Importations Subject to Enhanced Bonding Requirements, 62276-62278 [E6-17885]

Agencies

• DEPARTMENT OF HOMELAND SECURITY
• Bureau of Customs and Border Protection
• Customs and Border Protection Bureau

[Federal Register Volume 71, Number 205 (Tuesday, October 24, 2006)]
[Notices]
[Pages 62276-62278]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-17885]



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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection

[USCBP-2006-0119]


Monetary Guidelines for Setting Bond Amounts for Importations 
Subject to Enhanced Bonding Requirements

AGENCY: Customs and Border Protection, Department of Homeland Security.

ACTION: General notice; request for comments.

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SUMMARY: This Notice serves to provide additional information on the 
process used to determine bond amounts for importations involving 
elevated collection risks and to seek public comment on that process. 
The process published in this Notice is in effect. Public comments will 
assist CBP in identifying factors that may further improve the process 
to ensure the bond amounts protect the revenue and facilitate trade. 
After consideration of the comments, a revised version of the Monetary 
Guidelines for Setting Bond Amounts Customs Directive 99-3510-004 July 
23, 1991 (1991 Monetary Guidelines) will be published.

DATES: Comments must be received on or before December 26, 2006.

ADDRESSES: Commenters must submit comments, identified by docket 
number, by one of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments via docket number 
USCBP-2006-0119.
     Mail: Trade and Commercial Regulations Branch, Office of 
Regulations and Rulings in the Office of International Trade, Bureau of 
Customs and Border Protection, 1300 Pennsylvania Avenue, NW. (Mint 
Annex), Washington, DC 20229.
    Instructions: All submissions received must include the agency name 
and docket number for this Notice. All comments received will be posted 
without change to https://www.regulations.gov, including any personal 
information provided. For detailed instructions on submitting comments, 
see the ``Public Participation'' heading of the SUPPLEMENTARY 
INFORMATION section of this document.
    Docket: For access to the docket to read background documents or 
comments received, go to https://www.regulations.gov. Submitted comments 
may also be inspected during regular business days between the hours of 
9 a.m. and 4:30 p.m. at the Office of Regulations and Rulings in the 
Office of International Trade, Bureau of Customs and Border Protection, 
799 9th Street, NW., 5th Floor, Washington, DC. Arrangements to inspect 
submitted comments should be made in advance by calling Joseph Clark at 
(202) 572-8768.

FOR FURTHER INFORMATION CONTACT: David Genovese, Office of 
International Trade at David.Genovese@dhs.gov, Tel: (202) 863-6020.

SUPPLEMENTARY INFORMATION:

Public Participation

    Interested persons are invited to submit written data, views, or 
arguments on all aspects of this Notice. CBP also invites comments that 
relate to the economic, environmental, or federalism effects that might 
result from this Notice. Comments that will provide the most assistance 
to CBP in developing these procedures will reference a specific portion 
of this Notice, explain the reason for any recommended change, and 
include data, information, or authority that support such recommended 
change.

Background

    A key CBP mission is to collect all import duties determined to be 
due to the United States. Under customs statutes and regulations 
release of merchandise prior to the determination of all duties that 
may be owed is ordinarily permitted, provided the importer posts a bond 
or other security to insure payment of duties and compliance with other 
applicable laws and regulations. Estimated duties are collected at 
entry, a bond is posted, and final duties await liquidation at a later 
point in time.
    In the case of antidumping (AD) or countervailing duties (CVD) 
determined by the Department of Commerce (DOC) (which administers the 
AD/CVD laws in conjunction with the U.S. International Trade 
Commission), the administrative and judicial process for determining 
the appropriate rate of duty for AD/CVD merchandise may significantly 
delay the liquidation of an entry of AD/CVD merchandise. At 
liquidation, CBP follows DOC instructions regarding the applicable AD/
CVD rate. CBP must collect the duties owed of whatever nature. However, 
importers have increasingly failed to pay additional AD/CVD duties 
determined to be due at liquidation. Recent defaults for AD/CVD 
supplemental bills are substantially higher than defaults that were the 
previous norm and are unprecedented. This troubling trend caused an 
internal policy review of revenue protection strategies at CBP.
    During the review, CBP reconsidered its general continuous bond 
formula which provides that the minimum continuous bond may be in an 
amount equal to the greater of $50,000 or ten percent of the amount of 
the previous year's duties, taxes and fees. In response to the growing 
collection problem, CBP announced an enhanced customs bonding 
requirement for those continuous bonds that secure the promise to pay 
all duties finally determined to be due on certain merchandise subject 
to AD/CVD. Amendment to Bond Directive 99-3510-004 for Certain 
Merchandise Subject to Antidumping Countervailing Duty Cases (July 9, 
2004) (July 2004 Amendment to the Bond Guidelines); see also 
Clarification to the July 9, 2004 Amended Monetary Guidelines for 
Setting Bond Amounts (August 10, 2005) (August 2005 Clarification). 
Application of the enhanced bonding requirement thus far has been 
limited in scope--having been applied to merchandise subject to the 
first antidumping orders involving aquaculture merchandise imposed 
after issuance of the July 2004 Amendment to the Bond Guidelines. 
Aquaculture is the industry sector with the highest share of total 
defaults in recent years.
    CBP commenced its policy of reviewing the sufficiency of continuous 
bonds related to imports of AD/CVD merchandise with the release of its 
July 2004 Amendment to the Bond Guidelines. That document and the 
August 2005 Clarification were posted on CBP's Web site.
    The bond guidelines are designed to ensure the amount of the 
continuous bond reflects a reasonable amount necessary to secure 
against non-payment of any additional revenue ultimately legally owed 
and not paid in cash deposits at entry. As noted earlier, U.S. laws and 
regulations afford importers the opportunity to post such bonds in 
order to facilitate prompt release of the goods at the border without 
creating an undue burden on importers or international trade and 
commerce.
    CBP includes guidelines on determining sufficient bond amounts in 
its regulations at 19 CFR 113.13. The regulations direct CBP to review 
bonds periodically and to notify the principal in writing if CBP 
determines the bond amount is insufficient to adequately protect the 
revenue and ensure compliance with U.S. laws and regulations. The 
principal has 30 days from date of notification to remedy the 
deficiency. During those 30 days,

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principals have frequently requested CBP to adjust its bond 
determination.
    This Notice seeks public comment on the procedures for setting bond 
amounts on merchandise subject to increased default risk and, 
therefore, designated as Special Category Merchandise that may be 
subject to enhanced bonding requirements. An explanation of Special 
Category Merchandise appears later in this document under ``Procedures 
for Setting Bond Amount.'' History of compliance with customs laws and 
regulations, ability to pay, existence of assets available as recourse 
for nonpayment, past payment history, similarity to previous 
circumstances giving rise to uncollected revenue problems, and other 
relevant factors will be considered in determining whether to reduce 
the bond amount otherwise required under the enhanced bond formula. 
Importers will be offered the opportunity to submit information on 
their financial condition related to the risk of non-collection for 
that importer and CBP will determine bond amounts based on that 
information, the importer's compliance history and other relevant 
information available to CBP. In the absence of a submission by the 
importer, CBP would calculate the bond amount using the formulas set 
forth below.
    This document will be incorporated into the 1991 Monetary 
Guidelines and represents the comprehensive and exclusive statement of 
the policy and processes expressed in the July 2004 Amendment to the 
Bond Guidelines, the Bond Formulas posted on CBP's Web site, and the 
August 2005 Clarification. After consideration of any comments 
received, an incorporated policy will be published.

Procedure for Setting Bond Amount

    In order to provide a consistent bond formula and to ensure the 
bond amounts protect the revenue and facilitate trade, CBP issued bond 
guidelines. Under the August 2005 Clarification, CBP indicated that it 
would designate Special Categories of Merchandise and designate Covered 
Cases within those Special Categories. CBP will continue to evaluate on 
an industry wide basis those types of merchandise where additional bond 
requirements may be needed. However, because importers are only 
affected when merchandise is subject to different bond requirements, 
CBP will only designate Special Categories, that is, merchandise for 
which an enhanced bond amount may be required.

Designation of Special Categories

     Special Categories may be designated when additional bond 
requirements in the form of greater continuous entry bonds or other 
security may be required.
     At least 60 days before new bonding requirements take 
effect, CBP will provide public notice of designation of a Special 
Category in the Customs Bulletin and on the CBP's Web site (https://
www.cbp.gov). The notice will solicit comment from affected parties and 
will provide a description of the reasons for the Special Category. 
Affected parties will have 30 days from the date the designation notice 
is published to submit comments.
     When conditions no longer exist that warrant the Special 
Category designation, the designation will be removed and the public 
will be notified through the Customs Bulletin and the CBP Web site.

Criteria for Special Categories

    In considering which merchandise should be designated Special 
Category merchandise subject to enhanced bond requirements, the 
following criteria shall be considered:
    1. Previous collection problems concerning the industry involved;
    2. The similarity to previous imports or industries experiencing 
uncollected revenue problems;
    3. Payment history;
    4. Indications that liquidated duty rates may exceed existing 
security;
    5. Any other factors that are deemed relevant.
    All Special Categories will be monitored on a regular basis to 
determine whether a material change in factors has occurred so that the 
amount of the required bond for the Special Categories should be 
adjusted up or down or that the conditions that warranted the 
designations no longer exist.

Continuous Bond Formulas for Special Category Merchandise

    CBP will review the sufficiency of bonds covering Special Category 
merchandise. Importers of Special Category merchandise may be required 
to obtain larger continuous bonds. In such circumstances, importers 
will be offered the opportunity to submit information on their 
financial condition related to the risk of non-collection for that 
importer, and CBP will determine bond amounts based on that 
information, the importer's compliance history, and other relevant 
information available to CBP. In the absence of a submission by the 
importer, CBP may calculate the bond amount using the formulas 
determined on the basis of the risk of non-collection posed by the 
Special Category merchandise. These formulas may be adjusted in 
accordance with the revenue risks identified for future importations of 
designated Special Category merchandise.
    For Special Category merchandise which is merchandise subject to 
AD/CVD, the formulas determined on the basis of the risk of non-
collection will be based upon the importer's previous 12 months 
cumulative import value of merchandise subject to the AD/CVD Order and 
the rate that the DOC establishes in its Order or, if the bond amount 
is established after an administrative review, it will be calculated 
using the rate determined by DOC in the most recent administrative 
review. The amount of additional coverage will be calculated using the 
following formula:
     AD/CVD rate established in DOC Order (or the rate 
established in the most recently completed administrative review) x 
previous 12 months' cumulative import value of subject merchandise.
    For example, if an importer has imported $1 million of the subject 
AD/CVD merchandise during the previous 12 months and the DOC rate is 
40%, the importer's continuous bond amount will be increased by 
$400,000.
    For new importers with no prior history of imports who import 
Special Category merchandise subject to AD/CVD, the continuous bond 
will be calculated in accordance with the following formula:
     DOC deposit rate in effect on date of entry x the 
importer's estimated annual value of imported goods subject to the 
case.
    Periodic reviews will be conducted to monitor the sufficiency of 
the continuous bonds for Special Category merchandise. CBP may adjust 
the rates in the formulas set forth above to calculate different bond 
amounts as circumstances warrant. CBP is committed to protecting its 
ability to collect the amount of money determined to be due at 
liquidation and to requiring continuous bonds in an amount reasonably 
necessary to cover its additional financial risk.
    Absent exceptional circumstances, the above formulas will determine 
the bond amounts where a submission has not been made by the principal. 
Nothing in this policy affects the CBP's authority to require 
additional security if CBP believes that acceptance of a transaction 
secured by a continuous bond would place the revenue in jeopardy or 
otherwise hamper the enforcement of customs laws or regulations.

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Notice Timing and Adjustment Factors for Individual Importers

    In implementing the bond requirements for imports of Special 
Category merchandise, CBP shall:
    (1) Provide the principal subject to the revised bond requirements 
with notice of the new bond requirements not less than 30 days before 
the revised requirements will take effect. Such notice will include a 
description of the rationale for the new requirements and offer the 
principal the opportunity to submit information on its financial 
condition related to the risk of non-collection of that principal, 
which CBP will use along with other information, such as the importer's 
compliance history, to determine bond amounts. The notice will inform 
the principal that in the absence of a submission by the principal, CBP 
may calculate the bond amount using the formulas determined on the 
basis of the risk of non-collection for the Special Category 
merchandise. The notice will provide examples of additional information 
that might be submitted in support of the former calculation, how the 
bond amount would be calculated if the formula were applied, and a 
description of the procedures for responding to the notice.
    (2) Provide the principal 30 days from the date of the mailing of 
the notice to respond, including by providing evidence of factors that 
could support a bond amount other than that resulting from the formula. 
Such responses may be filed individually or by groups of principals who 
share common characteristics. Principals who import from the same 
foreign manufacturer/exporter share common characteristics. Depending 
upon available resources and workload, CBP shall endeavor to issue 
decisions to those who respond within 45 days of receipt of a complete, 
legible response and, in any event, shall issue decisions within a 
reasonable time. The new bond requirement will not take effect with 
respect to a principal until 14 days after the date of CBP's reply to 
the principal's response. The reply to the principal will include the 
rationale for the determination. In the absence of a submission by the 
principal, CBP may calculate the bond amount using the formulas 
determined on the risk of non-collection posed by the Special Category 
merchandise as provided in the notice. The bond requirement will take 
effect with respect to that principal 30 days after the date of the 
mailing of the notice.
    (3) Consistent with 19 CFR 113.13(b), consider the following 
factors when determining a bond amount, other than the amount resulting 
from the formula, for a principal who has responded in accordance with 
(2) above:
    (a) The prior record of the principal regarding timely payment of 
duties, taxes and charges with respect to the transactions involving 
such payments;
    (b) The prior record of the principal in complying with CBP demands 
for redelivery, the obligation to hold unexamined merchandise intact, 
and other requirements relating to enforcement and administration of 
CBP and other laws and regulations;
    (c) The value and nature of the merchandise involved in the 
transaction(s) to be secured;
    (d) The degree and type of supervision that CBP will exercise over 
the transaction(s);
    (e) The prior record of the principal in honoring bond commitments, 
including the payment of liquidated damages and AD/CVD;
    (f) Any additional information contained in any application for a 
bond, or contained in any request for adjustment of the bond amount, 
including information that provides proof of ability to pay such as 
independently audited financial statements, tax returns submitted by 
the principal, availability of assets, including securities in the 
United States and elsewhere, credit rating, and length of time in 
business; and
    (g) Any other relevant information.
    (4) If CBP determines that the principal has a record of compliance 
with customs laws and regulations and that the principal has 
demonstrated an ability to pay, CBP may decide not to require an 
increased bond amount even though the principal imports Special 
Category merchandise.
    A request for reconsideration may be made by submitting a new bond 
application and CBP Form 301 at any time after six months from the date 
of the notice of new bond amount set forth in paragraph (1) above, if 
no response to CBP's notice was received under paragraph (2). If the 
principal filed a response under paragraph (2) requesting a bond amount 
other than that resulting from the formula, the principal may request 
further reconsideration at any time after six months from the date of 
the decision issued under paragraph (2). A request for reconsideration 
of the bond amount based on a material error by CBP that affects the 
bond amount may be made at any time.
    At any time after CBP determines a bond amount for a principal 
below that provided by the formula, if the principal fails to remain 
compliant with customs laws and regulations, CBP will recalculate the 
principal's bond amount in accordance with the formulas outlined in 
this notice.

Affected Parties

    This Notice affects only continuous bonds for imports of Special 
Category merchandise. This Notice does not affect laws and regulations 
regarding cash deposits or other security with respect to merchandise 
subject to AD/CVD proceedings. CBP notes those initial deposits and 
bonds sometimes are not sufficient to cover the final assessed duty 
liabilities. Defaults on such additional duty liability have increased.
    Congress has provided CBP authority to require security in order to 
ensure the payment of all duties determined to be due to the United 
States, including any revenue collection gaps between estimated duty 
deposits and final assessed duties that the importer fails to satisfy. 
Please note that this Notice does not limit CBP's authority to require 
additional security under 19 CFR 113.13(d) and the requirements of the 
1991 Monetary Guidelines remain in effect consistent with this Notice.

    Dated: October 20, 2006.
Deborah J. Spero
Acting Commissioner, Customs and Border Protection.
[FR Doc. E6-17885 Filed 10-23-06; 8:45 am]
BILLING CODE 9111-14-P