On Wednesday, February 22, 2012, U.S. Customs and Border Protection (CBP) released a Notice of Proposed Rulemaking (NPRM) that would strengthen “transportation in-bond” procedures, a widely used practice by which merchandise can be brought into the country and transferred to another port before duties, if any are owed, are paid, or the merchandise is exported.  Interested parties are encouraged to submit to CBP comments on the proposed change by April 23, 2012.

At present, an importer may transport merchandise throughout the United States without payment of duties after posting a bond and filing a transportation entry with CBP (Form 7512).  Once the in-bond merchandise reaches its destination, the items must be entered for consumption and duties paid, unless the merchandise is entered for warehousing or exported.  The in-bond system allows importers flexibility in the timing and location of entry of merchandise into the United States, and to transport items through the United States and export them without needing to pay duties and apply for a refund (through drawback procedures) upon export.  

CBP’s proposed changes are designed to address “certain weaknesses in the in-bond system identified by the Government Accountability Office (GAO) in a report to Congress dated April 2007,” which concluded CBP’s monitoring and tracking of in-bond shipments are inadequate.  The rules proposed in the NPRM are meant “to enhance CBP’s ability to regulate and track in-bond merchandise and to ensure that the in-bond merchandise is properly entered and duties are paid or that the in-bond merchandise is exported” in response to the GAO’s 2007 report.  

The amendments to CBP’s in-bond system are broad. They include:

  • The elimination of Form 7512 in favor of an all-electronic system for most transportation modes
  • Greater information requirements for in-bond shipments, including the six-digit Harmonized Tariff Schedule number (if available) and other information
  • Uniform 30-day maximum timeframe required of all in-bond shipments (excepting pipeline transit)
  • New requirements that carriers obtain CBP permission before diverting an in-bond shipment to a new destination and report the arrival and location of merchandise that has been transported in-bond within 24 hours of its arrival at its destination port

Except for the new 30-day limit on transportation time, the proposed rules will not affect the in-bond procedures for air commerce.  

Other substantive changes in the NPRM would affect entries arriving by truck and destined for immediate export, and would require that conveyances in-bond be sealed and the seal number be reported to CBP.