Foreign goods arriving at a U.S. port must normally first have U.S. Customs duties and other formalities satisfied before the goods can enter the commerce of the United States. An exception exists for foreign goods destined for a foreign country that arrive at a U.S. port for through transport and subsequent export at another U.S. port. Since these goods are not intended to enter the commerce of the United States, they can be transported in bond through the United States by a bonded carrier.
This type of entry, known as a Transportation & Exportation Entry (T&E), imposes a custodial responsibility on the bonded carrier for any loss of Customs Duties or taxes that may be incurred due to shortages or loss of the transported goods. A recent decision for the Court of International Trade (CIT) is a reminder to bonded carriers handling T&E entries that their obligation on such shipments is not only to show that the carrier delivered the goods at the U.S. export port, but that they also have records showing that the goods were actually exported.
In United States v. C.H. Robinson, apparel from China was handled by a bonded carrier for T&E transport from Lost Angeles to Laredo. The bonded carrier provided proof to Customs that the carrier delivered the bonded cargo to a broker at the port of export. However, a subsequent audit by Customs determined that the carrier could not provide evidence of exportation of the goods, or otherwise account for their whereabouts. Although the bonded carrier asserted that its obligation under its bond ended when it demonstrated that it had notified Customs of delivery of the goods at the port of export, the CIT held that under a T&E bond the exporting carrier’s obligations extended to maintaining records showing that the goods had, in fact, been exported. While the Court held that the U.S. Government has the initial burden of showing that the location of the goods are not accounted for, once it has done so there is a presumption that they have been lost or diverted into the commerce of the United States by the bonded carrier. If the T&E bonded carrier cannot provide evidence regarding the location or exportation of the goods, or that it tendered them to a bonded warehouse or another exporting carrier, the bonded carrier will be liable for liquidated damages, duties, taxes, and other associated costs related to the goods.
The C.H. Robinson decision is an important reminder of the responsibilities, including record-keeping, imposed upon bonded carriers. This responsibility will increase in the future. A current Customs rulemaking would revise and tighten the regulations governing U.S. in-bond transportation of freight. These proposed rules would address what a GAO Study found was an inefficient oversight of in-bond movements by Customs. The proposed new rules would automate the opening and closing of carrier bonds and would tighten the time frames for their use. However, as the C.H. Robinson decision illustrates, bonded carriers must also tighten their internal controls on how they account for bonded shipments, since the fact that the bonded carrier can prove proof of delivery of a bonded shipment may not – at least on T&E shipments – relieve if of liability for a subsequent diversion of the goods.