Issue 249, February 25, 2000
Articles subject to duty and/or the Merchandise Processing Fee (MPF) and are imported temporarily for a specific purpose may qualify for a temporary import bond (TIB) entry. A TIB entry requires that the importer post a bond, normally for twice the normal duty, as guarantee that the imported articles will be exported or destroyed within the time frames allowed by the regulations, and that appropriate proof of such export or destruction will be filed with Customs.

For example, an importer receives a shipment having a value of $100,000 and subject to 5% duty. The importer intends to test the imported articles and return them to the foreign shipper. Instead of paying $5,000 in duty, the importer can file a TIB entry backed by a bond in the amount of $10,000. On completion of the testing, the importer sends the articles back to the foreign shipper, cancels the bond and saves $5,000. In addition, the TIB entry will be exempt from the MPF, so the importer saves another $210.

Saving duty costs through use of TIBs is an advantage, but there are some disadvantages. For one, there are other costs. A TIB will require additional steps at the time of import and export, and each one of those steps will have a cost associated with it. Once the TIB entry has cleared and the importer has taken delivery of the imported articles, the importer will need to track those articles closely so that they can be properly documented at the time of export. The importer will also need to stay on top of the one-year validity period of the TIB and file any requests for extensions before the year ends. The broker can do some of these things on behalf of the importer, but will charge an appropriate fee for these services.

Another primary factor to consider before filing a TIB entry is the potential liability if things go wrong. There are several ways an importer can breach a TIB bond. For example:

If the importer decides to keep the articles, the importer can?t simply elect to pay duty on them. Once under a TIB, paying duty is not an option.
Most TIB entries are valid for one year from the date of import. If the importer needs to keep them beyond this time, the importer must make a timely request for a one-year extension (up to a maximum of three years). Extensions cannot be granted after the fact. One of the most common errors with TIB entries is failure to properly document the export or destruction of the articles and submit appropriate evidence to Customs. So, even though the articles in fact were exported or destroyed, Customs must have proof that it happened.

Some alternatives to a TIB to consider are a carnet, Foreign Trade Zone entry or claiming drawback upon exportation.

Please note that due to the complex nature of the subject matter, AEI cannot be responsible for actions taken by the reader in reliance on the information contained herein without prior consultation with AEI.