There are four key developments in the commercial surety bond industry captured in this new edition:

1. Marine commerce is more prominent.

With cargo ships sitting offshore awaiting entry into port, the public is more aware of the importance of ocean-going commerce. Admiralty law and customs bonds are front and center in today's economy because supply chain logistics and inflation are affecting international commerce. These two areas are covered extensively in the third edition.

Federal admiralty law governs contracts and torts over navigable waters and has been a well-settled area in surety, with cases dating from centuries past. Suretyship under admiralty law ensures that "maritime commerce continues unimpeded by freeing up cargo movement and the use of vessels while securing the rights of those impacted by maritime torts or contracts," says the book.

One area of dispute has been whether agreements related to international commerce are actually maritime contracts. A 2018 decision from the Fifth Circuit Court of Appeals established a two-part test defining a maritime contract. In departing from its prior six-part test, the judges ruled a maritime contract must 1) "be for services to facilitate activity on navigable waters," and 2) provide that "a vessel will play a substantial role in the completion of the contract."

Customs bonds, which cover risks related to the import and export of goods, are designed to secure payment of government customs in international trade. They also are intended to guarantee compliance with Customs and Border Protection (CBP) requirements. Since the last edition of the book, in 2015 the E-bond became available, providing for electronic filing of many customs bonds with the CBP. At a time of rising international commerce, the E-bond facilitated growth in customs bonds.

The basic customs bond, known as a CBP importation and entry bond, "secures the release of imported merchandise" pending determination by CBP about the product's admissibility into the United States, as well as CBP's final determination of liability for duties (i.e., import taxes).

2. Medicare creates bid bonds.

A recent change in health care regulation created new bond opportunities for sureties and insurance agents. In 2021, Medicare required bidders to provide a $50,000 surety bond when bidding; this new bid bond is distinct from traditional Medicare bonds.

In the area of Medicare and Medicaid bonds, one type of Medicare bond is used to guarantee the availability and proper billing of durable medical equipment by providers, which bid to provide that equipment to health care patients. Medicare's 2020 spending on durable medical equipment totaled about $9 billion for wheelchairs, oxygen, and other durable medical equipment, according to the Government Accountability Office.

3. Cannabis comes to license and permit bonds.

Another recent change in bonds has come in the license and permit bonds arena. With the advent of cannabis distribution, cannabis dispensaries are being required to have a permit bond to sell their products. Processors and warehouse operators likewise may have to provide bonds for goods held on behalf of dispensaries.

However, there are conflicts between state laws that permit the sale of cannabis and federal law that classifies cannabis as a banned substance. Due to the nature of the product and the fact that marijuana products are not legal under federal law, some sureties do not write those bonds. Hemp processors' bonds, by contrast, are now commonly available since hemp was removed from the federal schedule of controlled substances by The Agriculture Improvement Act of 2018.

4. Sports betting gets bonded.

Another new bond is for sports betting, which has been legalized in a number of states over the past several years. Government regulators want to assure payment of taxes on sports betting transactions in their jurisdictions, so they require sports betting operators to guarantee payment of taxes using a surety bond.

With the breadth and depth of commercial surety bonds, any professional in the surety business needs a reference for answers and information. An experienced practitioner in license and permit bonds, for instance, may have no familiarity with judicial bonds. The content covered in The Law of Commercial Surety and Miscellaneous Bonds is both a starting point for those less familiar with commercial surety and miscellaneous bonds and a deep reference for those who specialize in these instruments.

These views are the author's own.

Kathryn Truman, J.D., is Commercial Surety Leader for Westfield and co-editor of the new third edition of The Law of Commercial Surety and Miscellaneous Bonds, published by the American Bar Association. She is a graduate of the University of Akron School of Law. Truman can be reached at [email protected].