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Warning for Importers: New Tariffs Will Impact Import Bonding Requirements and Increase Costs

 

The recent escalation of U.S. tariffs under President Trump’s administration creates significant financial challenges for importers. While much of the focus has been on rising product costs, an often-overlooked consequence is the impact on import bonds—specifically, how surety companies will require larger bonds due to the increased duty obligations.

Understanding Customs Bonds

As a matter of process, importers must post a Customs Bond, which is a financial guarantee ensuring compliance with U.S. Customs and Border Protection (CBP) regulations and the payment of duties, taxes, and fees. The most common type is the Continuous Bond, which covers all shipments over a 12-month period. The required bond amount is typically 10% of the total duties, taxes, and fees paid over the past year, rounded up to the nearest $10,000 above $100,000.

How Are Tariffs Driving Up Bond Requirements?

The administration’s new tariffs on Chinese, Canadian, and Mexican imports have sharply increased duty obligations for importers because of the direct correlation of duties and bond requirements.

Higher Duties = Higher Bond Requirements

For example, if an importer previously paid $1 million in duties per year, their bond requirement would have been $100,000 (based on the 10% rule). With a 25% tariff increase, that same importer would owe $1.25 million or more in duties annually, pushing the bond requirement to $130,000+.

It should be noted that CBP monitors importers’ bond sufficiency and may issue a demand for a larger bond if the current amount is deemed too low. And, when an importer’s duty payments exceed 10 times their bond amount, CBP may require an immediate bond increase to ensure compliance.

How Surety Companies Are Responding

Surety companies, which underwrite customs bonds, are adjusting their risk assessments in light of higher tariffs. This has three primary effects:

  • Increased Scrutiny: Sureties are conducting more thorough financial evaluations of importers before issuing bonds.
  • Higher Premiums: Rising risk is leading to increased bond premiums, meaning importers will pay more for the same bond coverage.
  • Collateral Requirements: Some surety providers are requiring additional collateral for high-risk importers before issuing larger bonds.

What Should Importers Do?

Importers can take several actions to minimize the cost impact of higher bond requirements.

The first is to monitor import activity by regularly reviewing total duties paid to anticipate necessary bond adjustments. It is also important to engage with surety providers to ensure bond sufficiency and address potential increases proactively.

Because the tariff landscape remains fluid, reviewing supply chain sources needs to be a regular practice. As tariffs come into focus, increasing costs on Chinese imports and exploring alternative sourcing options in countries like Vietnam, India, or Mexico may reduce duty exposure. Restructuring supply chains can also minimize reliance on high-tariff goods, potentially improving cost efficiency.

Caution: DOJ Scrutiny on Importers Switching to DDP Terms

Some importers may attempt to mitigate tariff impact by switching to Delivered Duty Paid (DDP) terms, making suppliers responsible for duties. Here are some words of caution:

  • If suppliers underdeclare values or alter invoices to reduce tariff costs, U.S. importers can still be held liable under DOJ trade fraud investigations.
  • DOJ has intensified enforcement on misdeclared customs values, and penalties for violations can include significant fines, import bans, and legal action.
  • Importers should ensure that any shift to DDP arrangements is fully compliant and that suppliers maintain accurate commercial invoicing.

Moving Forward In An Uncertain Tariff Landscape

With tariffs increasing duty obligations and leading to higher bond requirements, importers must plan ahead to avoid financial and compliance risks. Proactively monitoring bond sufficiency, engaging with sureties, reviewing supply chain alternatives, and ensuring customs compliance will be key to successfully navigating the evolving trade landscape.