Most people, even many industry professionals, are not very familiar with this term. Learn more about stacking exposure to ensure that you avoid delays in your supply chain, as well as unforeseen and costly changes to your customs bond.
WHAT IS STACKING EXPOSURE?
Stacking exposure, or stacking liability, occurs when a surety company has open exposure over multiple bond periods for a particular importer.
In addition to the current bond that is on file with Customs, there can be prior bonds or bond periods that have unliquidated entries keeping that liability open.
A bond period remains open as long as there are unliquidated entries from that bond. The liability adds up, or stacks, and creates significantly more risk to the surety company issuing the bonds.
WHY IS STACKING EXPOSURE IMPORTANT TO CONSIDER?
Sureties are liable for the full bond limit until all entries for that bond period have been liquidated for 90 days (subject to no open claims).
This means that for a minimum $50,000 bond that was terminated five years ago, but still has one unliquidated entry on it, the surety could still be on the hook for the full $50,000!
It is important to consider liquidation patterns when making changes to a bond. Most entries liquidate within a year. By keeping a consistent 12 month bond period cycle, an importer will minimize the stacking of their bond periods.
HOW CAN YOU PROTECT YOURSELF?
It is critical to forecast duty volumes as accurately as possible for the year to ensure you get a bond large enough to last the entire year.
Working with a reputable broker to determine the proper bond amount at each renewal will help alleviate unforeseen and untimely changes to your bond after the renewal.
To learn more about stacking exposure and how to protect yourself, download our free white paper below.