CBP and the industry continue to bring clarity and control to a significant import process through regulatory changes and automation.
On the surface, the in-bond process sounds simple enough — imported merchandise moves under bond within the U.S. without paying taxes and duties until it’s either cleared by Customs and Border Protection at an approved inland destination or re-exported to another country.
However, it’s been anything but that, and for the past 20 years CBP has wrestled to gain clearer oversight of the in-bond process.
With the development of the agency’s Automated Commercial Environment (ACE) and working with importers, carriers, customs brokers, foreign trade zones and warehouse operators through the Commercial Customs Operations Advisory Committee (COAC) in recent years, the process of managing the country’s diverse in-bond activities has become more efficient for both CBP and the industry.
Leading that effort on behalf of CBP is James D. Swanson, the agency’s director of cargo security and controls. One of his first jobs at CBP headquarters 20 years ago was serving as the agency’s in-bond program manager.
“In-bond exists because the trade wants it,” Swanson said in a recent interview. “It didn’t exist necessarily because CBP wants it. If we had our way, we would’ve done away with in-bond and made everybody file at the first port.”
But the reality is that cargo would pile up in the nation’s seaports, airports and land border ports of entry without allowing a certain amount of it to be transported to an approved inland destination where it’s then cleared by CBP and duties are paid on the imported merchandise or it’s moved to another port where the goods are then re-exported. The agency estimates that for fiscal year 2018 it processed more than 43 million in-bond transactions.
There are three general types of in-bonds: immediate transportation (IT), which allows merchandise upon its arrival at a U.S. port to be transported to another U.S. port, where a subsequent entry must be filed; transportation and exportation (T&E), which allows merchandise that entered a U.S. port to transit the country to another U.S. port, where it’s exported without the payment of duties; and immediate export (IE), which allows cargo that has arrived at a U.S. port to be immediately exported from that port without the payment of duties.
CBP has been working to automate the in-bond process since the mid-1990s and conducted a pilot program in the early 2000s. The agency came under further pressure to automate in-bonds after the Government Accountability Office (GAO) pointed out weaknesses in the program, including concerns related to fraud, to Congress back in 2007.
For nearly two decades, CBP’s Automated Broker Interface (ABI) module has offered filers the ability to create in-bond records in the agency’s database via electronic data interchange sets, QP and WP. QP is the application identifier that creates the records, while WP allows the ABI filer to electronically report the arrival and export of in-bond cargo. The application allowed not only customs brokers to initiate the in-bonds, but also the ocean carriers, airlines and trucking companies transporting this merchandise.
On Sept. 28, 2017, CBP with input from COAC published a final rule for changes to the in-bond process. These changes, which took effect Nov. 27, were developed to further enhance CBP’s ability to regulate and track in-bond merchandise and ensure it is properly entered or exported.
The final rule required, with the exception of pipelined commodities and truck shipments transiting the U.S. from Canada, that the agency’s paper 7512 (Transportation Entry And Manifest Of Goods Subject To CBP Inspection and Permit) must be eliminated and carriers or their agents going forward will be required to electronically file the in-bond application.
In this final rule, CBP established a standard 30-day maximum transit time for all modes, except for pipeline and barge (which has 60 days) to transport in-bond merchandise between U.S. ports. If a carrier must divert an in-bond shipment to another destination port or export port, it’s required to electronically request and receive permission from CBP before doing so.
The final rule also required that carriers report the arrival and location of the in-bond merchandise within 48 hours of arrival at the port of destination or port of export, and that additional information on the in-bond application will include the six-digit U.S. Harmonized Tariff Schedule (HTS) number, if available.
Prior to the rulemaking, about 85 percent of the in-bond process was automated.
“But it wasn’t mandatory that it be automated, so we were dealing with a lot of paper transactions. We also were dealing with [CBP] officers being involved in, basically what boiled down to largely clerical tasks … Doing clerical work, which was simply inputting data in order to close out in-bonds,” Swanson said. “We just didn’t think that was an efficient or effective use of our time.”
Truckers provided the bulk of paper 7512 in-bond documents to CBP officers prior to the Sept. 28, 2017 rulemaking, mostly due to the incompatibility of their processes with the systems of the ocean carriers and airlines.
However, among CBP’s list of ABI software vendors are about 40, such as CustomsNow, Wise Tech Global, Integration Point, Descartes and Questa Web, that offer in-bond filing capability to all modes of transport.
If a trucking company decides to self-file in-bonds, it must first submit a request with CBP’s Office of Information Technology to obtain a filer code. CBP also will assign an ABI client representative to the company to help with any ABI transmission difficulties.
“Because we were working with them to identify pain points and trying to alleviate some of those pain points in our enforcement, we’ve found that for the most part the pieces that we’ve mandated they’re able to meet,” Swanson said. “We hope that that continues.”
However, CBP has been flexible with enforcing certain aspects of the in-bond rule changes. Early last year, for example, the agency extended its deadline for the complete elimination of paper 7512s until July 2, 2018.
Programming changes also allowed CBP to expand its number of Facilities Information and Resources Management System (FIRMS) Codes. These codes identify to CBP the location of the in-bond shipment’s arrival. The agency now has about 14,700 active FIRMS Codes. “We continue to issue FIRMS Codes as needed,” Swanson said.
About 40 percent of the in-bonds handled by CBP today are T&E bonds, which transit the U.S. on route to another foreign destination.
The trade often associates U.S. in-transit bonds with Mexico-to-Canada and Canada-to-Mexico freight moves, but one of the biggest areas for this activity involves the so-called “land bridge” or containers that are railed from one U.S. coast to the other.
“It’s expensive to ship through the Panama Canal,” Swanson said. “So, [the containers] unload in places like Long Beach, Seattle, and Oakland. They get put on a train, ran across the country, and on the East Coast are put on a ship again for Europe and Africa. … That’s a big chunk of what we do in terms of in-bonds.”
Last summer, CBP indefinitely postponed the inclusion of the six-digit HTS number on Immediate Transportation (IT) in-bond transportation entries. It was prescribed as a way for CBP to better identify the cargo moving in bond. However, it’s been a difficult procedure for both CBP and the industry to make work, since it’s not consistent with the way manifesting is performed, Swanson said.
“With all the other issues we ran into getting people on board [with the in-bond changes], we’ve deferred that,” Swanson said. “I think we’re going to throw it back in the hopper for some our regulatory discussion as to whether that’s still valid.”
Once the latest in-bond regulations are fully implemented and enforced, CBP foresees continued changes with this trade activity in the years ahead.
One of those influences for possible changes is the voluminous increase in e-commerce-generated imports of single packages of goods with values of less than the $800 de minimis.
“If I clear it at the first port with limited data sets, is an in-bond even valid anymore?” he said.
Swanson doesn’t expect in-bond to disappear from the U.S. trade landscape.
“There is something intrinsic in an in-bond transaction,” he said. “We know there’s going to be places where large amounts of cargo are going to have to move from point A to point B.”
“What’s the future of in-bond look like? I wouldn’t even hazard a guess at this point,” Swanson added. “We’ve made so many changes in the way we do business. I don’t think it’s quite caught up with us yet on the back end.”
More details about recent changes to the in-bond program are available on CBP’s website.
Automation of in-bond processes has taken decades
