Beware the Quota
We live in uncertain times. Now more than ever, trade has moved to the forefront of the 24-hour news cycle with new policies and a looming trade war - it’s hard to keep up. As if it wasn’t enough work staying on top of new tariffs being threatened daily by the current administration, customs brokers must also be aware of new quotas being enforced and the liability exposure involved. Regardless of what side of the isle you are on, customs brokers are all in the business of catering to their clients. Brokers need to protect client interests as much as they need to protect their own.
Import quotas were created to protect domestic suppliers from overseas competition. The way these work shouldn’t be foreign to any of us. Quota FAQ The burden of complying with quota windows often falls squarely on the shoulders of the broker. Today it’s aluminum and steel, tomorrow it may be different commodities. This brings us to our initial statement - we live in uncertain times.
To provide you with a hypothetical example; a client who is importing 500k worth of sugar in a given period of time will expect that amount of sugar to be at their facility by a certain date. Their business may depend on it. For one reason or another, whether that be a trade war or a policy change, the government reduces the import quota on sugar and your window to get their goods into the U.S. narrows. Should you miss that quota, clients may pursue legal action against the broker.
This is an extreme example, however is not completely egregious to entertain. With the recent Section 232 Presidential Proclamation adjusting quota requirements on steel and aluminum, this is a serious reality. It’s important to note these quotas are “absolute” and not “tariff rate.” This means that brokers need to submit timely entries to ensure goods are released prior to the quota filing. If not, goods will not be able to enter the U.S.commerce at all. In a “tariff rate” quota error, brokers could be held liable for the higher duty amounts. An “absolute” quota error could make the broker liable for other consequential losses such as shipping costs, storage charges, and loss of market.
Customs brokers need to protect themselves from the potential of missing import quotas and facing potentially large legal suits as a result. All it takes is a shift in international relations or even an inter-office error to miss a quota window. Taking out an errors & omissions policy (E&O) is the first step in protecting a broker’s interests.
We always say, if a doctor wouldn’t perform surgery without malpractice insurance, a customs broker shouldn’t clear an ounce of freight without an E&O policy. International Bond & Marine provides unparalleled E&O insurance policies that can be tailored to fit any sized brokerage operation. Do yourself a favor and allow yourself to focus more on the customer and less on the 24-hour news cycle – we have you covered.
Find out more about IB&M’s E&O insurance and submit an application at www.intlbondmarine.com/Insurance/eo-freight-legal-liability . In addition, stay up to date on quota information by visiting U.S. Customs and Border Protection’s Quota Bulletins here: https://www.cbp.gov/trade/quota/bulletins.