Probably, you could be wondering what continuous customs bond is all about.
Well, in today’s guide, I will answer all questions you have been asking about continuous customs bonds.
By the end of this guide, you will be an expert in this important freight term.
Keep reading to learn more.
- What is Continuous Customs Bond?
- What is the Importance of Continuous Customs Bond?
- What does a Continuous Customs Bond Cover?
- When is a Continuous Customs Bond Required?
- Who are the Parties to a Continuous Customs Bond?
- How is Continuous Customs Bond Calculated?
- How does the Continuous Customs Bond Work?
- Who is Responsible for obtaining the Continuous Customs Bond?
- What are Examples of Continuous Customs Bond?
- How do you Apply for a Continuous Customs Bond?
- Where is the Continuous Customs Bond Filed?
- How Long will it Take the Continuous Customs Bond to come into Force?
- What are Continuous Customs Bond Limits and How are they Set?
- What is the Difference Between Continuous Customs Bond and Single-Entry Bond?
- How long is a Continuous Customs Bond good for?
- Is the Continuous Customs Bond Refundable?
- What are the Importer’s Obligations for the Continuous Customs Bond?
- What Happens if you Fail to Meet the Obligations of the Continuous Customs Bond?
- How do you Renew a Continuous Customs Bond?
- What does ‘Termination’ of a Continuous Customs Bond mean?
- What does ‘Insufficient’ Bond Status mean?
- Why do you Need to Sign a Power of Attorney for Continuous Customs Bond?
- How Much does Continuous Customs Bond Cost?
- How Often are the Charges for Continuous Customs Bond?
- Are there Surcharges to the Continuous Customs Bond?
- What are the Typical Credit Terms for Continuous Customs Bond?
- How is Continuous Customs Bond Approved by the Surety?
- What is an Indemnity Agreement for Continuous Customs Bond?
- How do you Secure the Surety’s Liability under the Continuous Customs Bond?
- Why do I Need a Customs Broker for Continuous Customs Bonds?
- What is does ‘Reconciliation’ mean in Customs Bonds?
- Is Continuous Customs Bond Eligible for Reconciliation?
What is Continuous Customs Bond?
US Continuous Customs Bond
A Continuous Customs Bond covers all the cargo that you are importing for one year.
As long as you are making the required payments, the continuous bond will not expire.
Continuous Customs Bond is a guarantee that applies to international trade.
It comes as a financial guarantee and it is continuously renewed until it is cancelled.
In the U.S, the customs bond is necessary when importing cargo into the United States.
It acts as a form of insurance that protects the United States Treasury.
What is the Importance of Continuous Customs Bond?
In case you have been purchasing single-entry customs bond, you should consider importing using the Continuous Customs Bond.
Here are some of the benefits you will enjoy by using Continuous Customs Bond terms:
a) Less Hassle
Whenever you are importing a container into the United States, you must purchase a customs bond.
For this bond to become active for the next shipment, you are required to file a filled form with U.S Customs.
It can be a tiring process to be done every time you are importing a container.
To ease the process, you should consider purchasing a Continuous Customs Bond.
This means you will save yourself some valuable time.
Importing through the Continuous Customs Bond can be very cheap in the long run compared to the Single-Entry customs bonds.
c) Better Communication
You are able to achieve better communication when you have fewer documents as well as emails.
You should focus on important matters at hand and matters to do with the customs bond may be the last thing.
Having to bother the freight forwarder with purchasing and filing the single transaction customs bond may distract.
The Continuous Customs Bond tends to offer a very easier way of handling the whole process.
What does a Continuous Customs Bond Cover?
Continuous Customs Bond is a necessary document that acts as an insurance policy.
It is a guarantee of payment of custom duties when importing goods into the US.
It applies to any goods being imported to the United States whether by air or by sea.
A Continuous Customs Bond will ensure that no matter the situation or the condition, the duties and taxes are paid for.
This will apply even in extreme circumstances such as closure of business or bankruptcy.
When is a Continuous Customs Bond Required?
You must provide a Continuous Customs Bond whenever you are importing goods that are valued to costs more than $2,500.
You will also need Continuous Customs Bond if you are importing commodities that are subject to some requirements of other federal agencies.
Other than the documents you will be required to produce for the ATF, you will also need to have Continuous Customs Bond.
Other agencies that will ask you to provide a Continuous Customs Bond include:
- Environmental Protection Agency
- U.S Department of Agriculture
- U.S. Fish and Wildlife Service
- Food and Drug Administration
- Consumer Product Safety Commission
If you are a domestic carrier, you will need to have a Continuous Customs Bond.
This is if the cargo you are transporting is “IN BOND.”
It will also be required of you as facility or warehouse operator storing exported or imported goods to have Continuous Customs Bond.
You must apply for it from your closest port director.
Before issuing, the port director will inspect the kind of warehouse you intend to have for imported goods.
Who are the Parties to a Continuous Customs Bond?
There are three parties that are key in a Continuous Customs Bond. They include:
- The Surety/Insurance company that issues the bond
- The Principal who is the the importer that is required to file the bond
- The Customs and Border Protection
Parties to Continuous Customs Bond
During the bond application process, the Continuous Customs Bond is also referred to as the import bond.
The purchasing entity or person is known as the principal.
Also, the Customs and border protection agency is referred to as the beneficiary.
The company issuing the bond will be referred to as the surety.
How is Continuous Customs Bond Calculated?
Continuous Customs Bond is calculated as 10 percent of the fees, duties and taxes that you paid the previous year.
In case you do not have any importing history to go by, the customs and border protection will estimate.
They will calculate the estimated fees, taxes and duties that may be chargeable for the next 12 months.
The bond amount will be rounded off to the nearest $10,000 up to $100,000.
If the figure is above $100,000, it will be rounded off to the nearest $100,000.
You will be required to provide a $50,000 bond as the minimum amount of bond.
How does the Continuous Customs Bond Work?
Continuous Customs Bond will be required whenever you are importing to the United States.
As an importer, you need to get the bond through a reputable and reliable company.
Working with a Continuous Customs Bond is quite easy.
Once you apply for a bond application, the indemnity will be reviewed and approved.
The bond will be submitted electronically within minutes and right from there, you can start using it.
The continuous bond will be renewed every year on the anniversary date that it was approved.
Also, the renewal process is there to give the importer and the surety the chance to review the bond.
They can then come up with a decision on whether there is an adjustment to be made on the bond.
Who is Responsible for obtaining the Continuous Customs Bond?
If you are an importer of record from the United States, you are responsible for obtaining the Continuous Customs Bond.
Whenever it is necessary, the customs authority will not release the cargo until you post the Continuous Customs Bond.
Other regulatory requirements must also be met alongside having an importer number.
What are Examples of Continuous Customs Bond?
The bond amounts are always rounded off to the nearest whole dollar figure.
It can either be in multiples of $10,000 to $100,000 before the limit is raised by $100,000.
Examples of Continuous Customs Bond include:
- For More than $500,000 yearly fees and duties, a limit of $50,000 minimum bond will be enough.
- For annual duties ranging between $500,000 and $600,000, then you will be required to pay $60,000 in bond
- For annual duties ranging between $1,000,000 and $2,000,000, then you will be required to pay $200,000 in bond.
How do you Apply for a Continuous Customs Bond?
The following process applies when you are applying for a Continuous Customs Bond:
First, you have to decide if you need a Continuous Customs Bond.
You will be required to have the bond if you are importing into the United States goods that will be used for commercial purposes.
The goods must be valued to be $2,000 or greater.
For textile imports, the value required will be over $250.
Any products that require federal regulations such as food and firearms will require you to have a customs bond.
You will then be required to find the licensed surety authorised by the Treasury Department.
The list of authorised companies can be found on the website of the Treasury’s Financial Management Services.
You may also contact the treasury directly using their registered phone number.
If you are planning to make many entries on different ports across the year, you need self-renewing Continuous Customs Bond.
With this type of bond, you will be required to have $50,000 as the minimum bid amount.
You may as well pay 10 percent of fees and taxes depending on which one is greater.
To complete your application, you are required to give the company name, your name, Social Security number or Employer Identification Number (EIN).
Other than these, you will also provide information about:
- The type of business entity,
- Years in business,
- Business address,
- Imports description as well as the value of the imported goods.
You will need to grant the power of attorney to the surety so that they can file the entry on your behalf.
You can now pay for all the fees due. In this case, you will be required to pay the annual premium.
The surety broker will proceed and file the bond at the location that is best appropriate for you.
If you do not intend to purchase a bond from a surety, you will be required to pledge cash.
Until all the dues are satisfied, the funds may not be released.
Where is the Continuous Customs Bond Filed?
A Continuous Customs Bond is filed at the customs and border protection of the United States.
This can be filed by the freight forwarder, the customs broker or even the importer themselves.
Application of Continuous Custom Bond
How Long will it Take the Continuous Customs Bond to come into Force?
The duration of the Continuous Customs Bond is determined by Customs and Border Protection.
This time may vary.
However, the common $50,000 Continuous Customs Bond for imports will typically require 15 calendar days before becoming active for use.
What are Continuous Customs Bond Limits and How are they Set?
The minimum bond limit for a Continuous Customs Bond is set at $50,000.
The Continuous Customs Bond is calculated by taking the taxes, duties and fees paid within the last year and adding them together.
The final figure will be achieved by calculating 10% of the total sum.
If 10% is less than $50,000, then the minimum bond amount ($50,000) is considered.
If 10% is more than $50,000, then the minimum bond amount will not be used.
What is the Difference Between Continuous Customs Bond and Single-Entry Bond?
Single-entry bond is used to cover the transaction of a single shipment on a very specific shipment.
It will only be beneficial at the port in which the shipment will enter.
If you are an importer who will import once or twice a year, then a single-entry bond may perfectly meet your needs.
It is calculated as the total value of the goods.
This will include any fees, duties and taxes.
Continuous Customs Bond applies when you import frequently and may import through a single or different port of entry.
With this, you tend to benefit greatly from the cost-saving and the convenience of using a Continuous Customs Bond.
Continuous Customs Bond is renewable annually.
However, for single-entry bond, you need to apply every time you have a shipment.
Moreover, Continuous Customs Bond is calculated at 10 percent on estimated fees, duties and taxes that were paid for the last year.
Even with this, the minimum Continuous Customs Bond is taken to be $50,000.
How long is a Continuous Customs Bond good for?
A Continuous Customs Bond is good when you intend to make more than two shipments in a year.
The bond is set to expire on every anniversary and the date that the Continuous Customs Bond was issued.
It runs through 12 months before it is renewed.
After one year, the calculations are taken again to determine the new Continuous Customs Bond amount based on the last year’s figures.
The amount can therefore go up and down but not below $50,000.
Is the Continuous Customs Bond Refundable?
The customs and border protection will require you to have the bond even if the goods are duty-free and are not refundable.
With the drawback payment bond, you have a chance of recovering 99 percent refund for duties you paid on imported goods.
This will only happen as long as you can prove that you exported the goods.
What are the Importer’s Obligations for the Continuous Customs Bond?
Importer will have different obligations to the state compared to custodian like warehouse operator or cartage operator, who does not own the merchandise.
You will be required to pay all the relevant duties and submit the entry documents whenever they are required by law.
Furthermore, you are supposed to redeliver the merchandise to customs and border protection whenever there is request to do so.
What Happens if you Fail to Meet the Obligations of the Continuous Customs Bond?
If you are unable to meet your obligations under Continuous Bond, the customs and border protection may file claim against you and surety.
Such claims may be for breaching the obligation to pay duties.
In this case, the Customs and border protection will claim the duties not paid.
If you have breached different condition set on the Continuous Customs Bond, the CBP will then issue a claim for liquidated damages.
The conditions of the Continuous Customs Bond will determine the value of the liquidated damages.
Even with this, the liquidated damages claim can never exceed the total bond amount on the Continuous Customs Bond form.
If you are not willing to meet your obligations, the customs and border protection will demand payment from the surety.
The CBP has the right to make a demand for payment from the importer/principal and the surety.
Both are jointly liable for any claims that may be made under the bond.
The CBP can therefore expect any of the two parties to settle the claim.
You will then be placed on the CBP’s sanction list and no other approvals for entry will be made for you.
How do you Renew a Continuous Customs Bond?
The Continuous Customs Bond to the CBP does not have an expiry date.
The bond continues to be valid/active until it is terminated or placed into insufficient status.
You will however be required to pay the annual premium charged to the insurance company (surety).
Otherwise, they may release the termination of the bond.
What does ‘Termination’ of a Continuous Customs Bond mean?
The ‘termination’ of a Continuous Customs Bond is used to mean the term has ended for the bond.
As such, there will be no more liability for the bond for any new transactions.
The termination of the Continuous Customs Bond does not affect any transaction/entry that occurred before the termination.
The Continuous Customs Bond can be terminated by the principal or the surety.
However, appropriate notification must be issued to the customs and border protection.
This notification of termination should be made at least 15 days before it can be accepted.
What does ‘Insufficient’ Bond Status mean?
When CBP places a bond into the insufficient statues, it means that the bond is still in existence.
But you cannot be able to place an entry until the CBP places back the bond into sufficient status.
Among the reasons that can make a bond become insufficient include:
- Too many outstanding debts or claims
- A risky or huge entry
- An Incorrect address
- Inadequate limit on the bond
The insufficient status can come in place without any notice from the CBP.
They may however provide a 15 days’ notice for you to be able to plan yourself.
Nonetheless, it is worth noting that Continuous Customs Bond cannot be subjected to any deficiency due to import duties or value of imports.
If the bond is sufficient you will be able to make imports of any volume or value.
The bond limit cannot be subjected to depletion.
Why do you Need to Sign a Power of Attorney for Continuous Customs Bond?
You will be required to sign the power of attorney to allow the surety to file the entry on your behalf.
By doing this, you will be giving your powers and any decision taken by the surety will be deemed to have come from you.
Therefore, no complaint should be expected from you.
How Much does Continuous Customs Bond Cost?
On average, the cost of a Continuous Customs Bond may range from $400-$500 annually or more if purchased from registered broker.
This is calculated as the percentage of the total bond amount you are required to pay the customs and border protection.
US Continuous Customs Bond
How Often are the Charges for Continuous Customs Bond?
The charges for the Continuous Customs Bond will require an initial amount paid to the insuring company as per your agreement.
Thereafter, an annual charge will apply.
You may also enjoy a discounted rate on the charges if you are making pre-payments for several years like five or so.
Are there Surcharges to the Continuous Customs Bond?
Yes, several surcharges may apply.
They include the Periodical Monthly Statement usage, reconciliation riders and the anti-dumping entries.
What are the Typical Credit Terms for Continuous Customs Bond?
The invoice terms for Continuous Customs Bond can either be charged by the surety in advance or utmost 15 days of invoice date.
Once it is settled, the request for renewal will be sent to you after one year.
The invoice will be sent to you between 2 to 3 months prior to the renewal date.
The date of payment should be due at least 30 days before the anniversary date.
If Continuous Customs Bond has not been paid, the surety is expected to provide you with a minimum of 15 days’ notice.
How is Continuous Customs Bond Approved by the Surety?
Generally, the minimum continuous bond of $50,000 will be subjected to immediate approval.
Other bonds of larger limits will require that you submit a filled and signed application.
You will also need to provide a financial statement before obtaining the approval.
This approval process is likely to take between 2 to 5 working days.
As a rule, the surety should seek to first secure its interest against any possible loss before issuing the bond.
This loss may be experienced if the principal is not able to meet the bond obligations.
As such, the customs and border protection will settle on the surety to recover the charges.
This makes the surety to only approve bonds that are fully secured.
They can be secured using collateral which is the instrument that is meant to recover any unpaid amounts.
However, it is also possible for the surety to obtain some degree of “comfort”.
This will allow them to release the bond with less or no collateral.
Some of the factors that may influence this may include but not limited to:
- Type of commodity
- Existing history
- The principal’s financial responsibility to meet the financial obligations to CBP
- Any Additional indemnitor etc.
What is an Indemnity Agreement for Continuous Customs Bond?
An indemnity agreement for Continuous Customs Bond surety is a binding contract.
It is entered between the principal together with the surety company that is transferring risk to the principal from the surety.
An indemnity is a very separate contract that the principal is required by the surety to append their signature.
They do this before the bond is issued to guarantee that they will pay any money that the surety may pay to settle a claim.
The surety companies will normally issue bonds hoping that there will be no risk of losing money on their end.
A bond is like a line of credit, it prevents you as the importer/principal from tying your own money.
In case you are unable to meet your obligations, the indemnity agreement will give the surety right to take any legal action.
They will collect the repayment as well as the incurred expenses.
How do you Secure the Surety’s Liability under the Continuous Customs Bond?
To secure the surety against any financial loss, you will be required to provide collateral security.
If any claim is filed and you are unable or are unwilling to pay back the surety, they will follow the indemnity agreement.
It will give them the right to take any legal action to collect the repayment as well as the incurred expenses.
Whenever you sign an indemnity, you are transferring the liability for any damages that may occur from the surety to yourself.
The surety will take the collateral security and use it to recover his dues.
For valuable assets, they may be auctioned and all expenses recovered.
Why do I Need a Customs Broker for Continuous Customs Bonds?
It is not a legal requirement that you hire a customs broker to help you in the clearance of goods.
However, most importers will choose to do so due to the convenience that it offers.
Custom brokers must be approved and licensed by the Customs and Border Protection of the United States.
This allows them to conduct customs business on behalf of the importers.
The custom brokers will handle all the paperwork relating to obtaining of the Continuous Customs Bond.
The work may be cumbersome and the customs brokers will specialize in the work thus making the work easier for importers.
The principal is however ultimately responsible for all the information relating to the CBP requirements.
They should also ensure that they fully comply with all the federal rules and regulations.
Since mistakes may occur, customs broker may come in handy to prevent you from making unnecessary mistakes that may otherwise be costly.
What is does ‘Reconciliation’ mean in Customs Bonds?
Reconciliation is one of the processes in obtaining a customs bond.
Here, you will be required to have an additional special rider to the Continuous Customs Bond.
This allows you to have an estimate on the value of the goods you are importing.
You should then be able to pay any fees, taxes and duties as per the estimated amount.
After 18 to 21 months after when the principal must verify the actual value of the goods they imported.
The principal can then inform the customs and border protection of the total they have.
The CBP will then recalculate the fees, duties and taxes based on the given information.
The entry will then be liquidated by either a refund to you or with a bill.
Sureties will always surcharge for any additional risk.
Is Continuous Customs Bond Eligible for Reconciliation?
Yes, Continuous Customs Bond is eligible for the reconciliation rider.
With this, the importer is able to have an estimate of the value of goods they are shipping.
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At BanSar, we will help you with all your freight forwarding needs from China.
Whether you want the best shipping rates from China to any global destination.
Contact us today for all your shipping needs from China.