Navigating the Impact of Tariffs: Maintaining Adequate Insurance and Bonding for Your Business

The Impact of Tariffs

You understand how tariffs work, but the current unpredictable environment of tariffs being levied, pulled back, and put on hold is likely a new experience. Here are a few concerns to ponder as you attempt to plan ahead for your insurance and bonding needs.

• Many imported goods will now be facing increased tariffs when they arrive at U.S. ports. That increases the price of your goods, so your cost to insure those goods goes up.
• If you maintain a Continuous bond with U.S. Customs and Border Protection, they calculate (monthly) the previous rolling 12 months of duties, taxes, and fees that clients owe to the customs department, and set your minimum bond amount at 10% of that.
• If increased tariffs cause your prior rolling 12 months calculation to exceed the value of your existing bond, you may receive a Sufficiency Notice from U.S. Customs. That means you need a higher bond value, or else face the inability to import certain goods.

Example

You import millions of dollars of equipment or inventory. If a 25% tariff is placed on that equipment or inventory, these products are now worth 1.25 times their previous value. Your existing insurance limits may now be too low, and the extra duties, taxes, and fees may cause your bond amount to be too low as well. This could cause underinsurance in the event of a property claim, and your goods could be held up at the port if your bond value is too low.

What You Should Do

Review your property insurance policies to make sure your limits are adequate for the increased values. This includes property, marine, stock throughputs, and possibly others. Scheduled limit policies, Per-location limits, Occurrence limitations of Liability Endorsement, Inland Transit, Cargo, and Misc Unnamed Location and Newly Acquired.

Additionally, make sure you are calculating what the next rolling 12 months of duties, taxes, and fees will be to ensure that your Continuous U.S. Customs bond is adequate for the next 12 months.

Oswald can perform a thorough analysis of the impact of tariffs on your business.