30-day limit, electronic filings are key provisions By Peter A. Buxbaum, AJOT Ten years ago, the Government Accountability Office issued a report criticizing how U.S. Customs and Border Protection handled in-bond shipments. CBP’s reaction at that time was to propose abolishing the practice. That did not sit very well with the trade and the proposal was never carried out. A series of other GAO reports ensued—most recently in 2007, which identified “persistent weaknesses in the in-bond cargo system”—in response to which CBP has finally taken action. On February 22, CBP published a proposed rule that would significantly change how in-bond shipments are processed. The in-bond cargo system allows cargo to be transported from an arrival port, without appraisal or payment of duties, to another U.S. port for entry into U.S. commerce or for export. An appropriate bond must be obtained and a transportation entry—which accounts for the cargo while en route in the U.S.—filed with CBP. One of the weaknesses in the system is that the carrier initiates the the bond and then cancels it once the process has been completed. This has led to abuse of the in-bond process and losses of revenues to the government, according to the GAO. In-bond transportation accounts for a significant proportion of the country’s incoming cargo. The 2007 GAO report estimated that 30 percent to 60 percent of all imports move in bond with over 70 percent of shipments arriving at Newark and 50 percent at JFK and Buffalo falling into that category. CBP’s proposed rule would tighten up the in-bond process by limiting to 30 days the time in which cargo may remain in bond. The proposed rule also mandates that entries be filed electronically to enable better tracking of cargo and ensure the payment of duties. The electrically-filed in-bond application must include the six-digit Harmonized Tariff Schedule (HTS) number. The proposed rule does not apply to air commerce; specific provisions for air commerce will be the subject of a separate rulemaking process. Many in the trade believe that the new rules cover the GAO criticisms pretty well. As with any proposed government regulation, some of the provisions provoke concern as well. The crux of GAO’s case against CBP over in-bond transport was that, according to the 2007 report, “CBP cannot assess the extent of program use because it collects little information on in-bond shipments and performs limited analysis of data that it does collect.” The major weakness, according to the GAO, is that CBP “does not consistently reconcile in-bond documents issued at the arrival port with documents at the destination port….CBP records show that many in-bond cargo shipments remained unreconciled, or open, with one port reporting that 77 percent of its in-bond transactions were open.” “The new regulations are a step in the right direction but do little to improve enforcement of trade regulations or to act as a deterrent against fraud,” said Robert DeCamp, director of regulatory affairs and consulting at Deringer Logistics Consulting Group. “For a number of years now, trade has been free to file, report and then cancel what they want. With little or no revenue collection, in-bond movements have lost attraction for government.” “The basic problem has always been the disconnect between the point when the goods are placed in bond and the point at which the bond was closed,” said Ken Bargteil, vice president and corporate compliance officer at Kuehne + Nagel and chairman of the customs committee of the National Customs Brokers and Forwarders Association of America (NCBFAA). “The proposed rules align pretty well with the GAO criticisms.” The lax practices of the past have led to abuses of the system, according to Bargteil. “The obvious difficulties in enforcement have invite parties to get around the laws and regulations,” he said. “One way to get goods into the country in violation of the law would be to place them in bond and move them from the port and then unload them.” The pr