In this guide, you will find all information you’re looking for about customs bond.
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- What is a Customs Bond?
- Who are the Parties to a Customs Bond?
- What are the Obligations of the Parties and where are they found?
- When do you need a Customs Bond?
- How does a Customs Bond work?
- What provides the Security on a Customs Bond?
- Why do Importers need a Customs Bond?
- What Customs Bond types are there?
- What is an ISF Bond?
- Which Customs Bond is best for your Business?
- How much is a Customs Bond?
- Who is Responsible for Getting Customs Bond during Importation?
- How do you get a Customs Bond?
- What is the Customs Bond Application Process?
- How Long does it Take to get Customs Bond?
- Does Customs Bond have Fees?
- How is Customs Bond Calculated?
- Are Customs Bonds Refundable?
- What is Customs Bond Insurance?
- What are some Customs Bond Limits and how are they Set?
- What does a Customs Broker do in relation to Customs Bond?
- Do you need a Power of Attorney for a Customs Bond?
- What is Customs Bond Execution?
- Are Customs Bonds Renewable?
- How can you Renew a Customs Bond?
- How do you Determine the Right Customs Bond size for you?
- What is a Customs Bond Claim?
- How many types of Customs Bond Claims are there?
- What are the Importer Obligations in a Customs Bond?
- What Happens if you don’t Meet your Customs Bond Obligations?
- What is the Maximum Liability for a Customs Bond?
- What is a Customs Bond Termination mean?
- What does Customs Mean by ‘Insufficient’ Bond Status?
- What Formalities are Associated with a Customs Bond?
What is a Customs Bond?
A customs bond is a binding contract between a surety, the importer (a principal) and the customs.
The Customs bond is a mandatory requirement for all importers in the US in compliance with the customs rules and regulations.
Most bonds will be issued through the registered customs brokers. The customs brokers work together with the surety agencies on behalf of the principal.
Who are the Parties to a Customs Bond?
Generally, there will be three parties involved in a customs bond. They include:
The principal can appear as:
- Proprietor of a warehouse
- Operator of a foreign trading zone among others willing to transact with CBP.
The surety is the insurance company that has the authority from CBP’s Treasury Department to receive surety’s bonds on behalf of the treasury.
Customs and Border Protection is the core beneficiary of all bonds that it approves.
What are the Obligations of the Parties and where are they found?
Customs bonds are meant to show the duties and obligations that are linked to every entry that the principal of the bond engages in.
The merchandise importer will have separate duties to the authority.
Their obligations are different than those of a custodian like the warehouse operator or a cartage operator.
The warehouse operator for example does not have ownership of the goods being transported or stored.
Any individual claiming for a drawback on the summary procedure of the exporter will have a different set of responsibilities to the government.
Their responsibilities are different from those of a vessel’s master getting into the United States coming from another country.
When do you need a Customs Bond?
There are several situations when you will be required to have an import bond. Such situations include:
- When you have imports that are for commercial purposes
- When the goods you are importing are required to meet certain federal regulations
If the goods you are importing are subjected to government agency rules and regulations, the bond will be three times the value of the imported goods.
How does a Customs Bond work?
A customs bond is meant to cover the CBP against any risk of not getting the taxes and duties paid. The customs bond will insure the goods being imported into the U.S.
Once they arrive, the principal will be expected to remit all due to the customs. If they are not paid for, the CBP can initiate the legal process of recovering the dues through the bond.
What provides the Security on a Customs Bond?
The normal security method on a customs bond is the corporate surety.
The corporate surety bears the authorization of a Financial Management Service who acts as surety for the government bonds.
Cash and Others
The other alternative to the corporate surety bond is the use of cash.
The principal pledges cash or other obligations of the Government of the United States such as treasury bonds, bills or even notes apart from the U.S. Savings Bonds.
If the principal or pledger pledges treasury bonds, bills or notes, they will receive a discount or interest.
Pledged cash will not attract any payment of interests.
The bond document is normally modified so as to show the changes made from a surety to the pledge of assets.
The main disadvantage with the cash alternative is the customs service having to hold the pledge until that time when the bond has been satisfied or cancelled.
If a bond is given to satisfy the requirements for entry, the period of pledge will not end until there is a liquidation of the entry.
For entries of merchandise that are valued at not more than $500, then the pledge will be returned after liquidation. This is with the assumption that the bond has not been breached.
If the merchandise has been imported temporarily under the Chapter 98, Subchapter XIII, Harmonization Tariff Schedule of the U.S (19 U.S.C. 1202), the pledge will be sent back.
The pledge will be sent back to the bond principal after proving that the goods were destroyed properly or exported.
Why do Importers need a Customs Bond?
As per the Information from the Customs and border protection (CBP) of the U.S, you will be required to have a customs bond.
That is if you are importing goods that are valued to be more than $2,500.
A customs bond will also be required when the importer is importing goods that are subject to the requirements of other federal agencies.
For example, you will need to have a customs bond apart from the other documents that are required by the ATF.
The other government agencies that require the importer to have a customs bond include:
- Consumer Product Safety Commission
- Department of Transportation
- Environmental Protection Agency
- Food and Drug Administration
- United States Department of Agriculture
- United States Fish and Wildlife Service
According to CBP, if you are a domestic carrier and you are transporting cargo by sea, air or vehicle and the cargo is “IN BOND”.
You will need to have a customs bond.
This will apply even if you are transporting “IN BOND” cargo across different states.
What Customs Bond types are there?
There are two types of customs bond that an import can choose from. They are:
- Single entry
- Continuous bond
The type of bond you choose will depend on the frequency with which you plan to be importing goods to the United States.
A single entry customs bond will only cover one import shipment.
A continuous customs bond on the other hand will be valid for a whole year covering all imports into the U.S for the whole year.
What is an ISF Bond?
The Importer Security Filing (ISF) is a filing that is required by the CBP which documents importing details and information when the shipment is moving from point to point.
ISF is also referred to as “10+2”.
For importers who fail to comply with the ISF requirements before the shipment of their goods, they will be penalized with a US$5,000 fine.
The transmission of ISF must be transmitted at least 24 hours earlier before the departure of the shipment into the United States.
Some of the importer or supplier’s information contained in an ISF is:
- Supplier or Manufacturer’s address and name
- Seller or owner’s Name and address
- Owner or Buyer’s Name and address
- Ship-to Name and address
- Country of origin
- Location of Container stuffing
- Address and Name of the Consolidator or stuffer
- Number of the Importer of record
- Consignee number
- The Country of origin
Some of the carrier’s information contained in an ISF includes:
- The vessel’s stow plan
- Messages of the container status
Which Customs Bond is best for your Business?
The type of customs bond should be determined by the nature of your trade. If you intend to only have one shipment, then it makes sense to have a single-entry bond.
If you will be importing several times in a year, then it is only economical to have a continuous customs bond.
The continuous customs bond is a one-off thing. It runs through the year until it’s time to renew.
Continous customs bond
This also saves you time. If you are sure that you will not have other shipments, then you only need a single-entry customs bond.
How much is a Customs Bond?
The pricing of the customs bond will depend on the volume of your shipment.
It is necessary to contact your carrier for advice on the correct type of bond as well as the price. However, the pricing of a customs bond will follow the following:
Single-transaction Customs Bond
The pricing of a single-custom bond will change depending on the value of your shipment. While choosing the right customs, you should also consider the value of your shipment other than just the volume.
Most of the single-transaction customs bond is normally priced at 0.5% to 2% of the total values of the goods.
However, you have to note that the number will keep fluctuating depending on other variety of factors.
Such factors include the risk of transport, liability, type of goods, and country of origin amongst others. They can cause an increase or a decrease in the pricing structure of the single customs bond.
Continuous Customs Bond
Unlike the single-transaction customs bond, the continuous customs bond is charged as a one-time flat-rate fee.
The charges will be valid for 12 months from the date it was purchased.
The costs will vary depending on the factors such as risk, liability, goods, and hazardous features among others.
The charges can be as low as $500 but may rise depending on the mentioned factors.
There are no fixed costs for the customs bond.
The best decision should be based on the frequency of importing.
Who is Responsible for Getting Customs Bond during Importation?
Any importer of record in the United States must obtain a Customs Bond.
When the customs require a Customs Bond from you, they will not release the shipment until have posted it.
Other regulatory requirements must also be met other than just having a customs bond.
All other requirements by other regulatory bodies must be submitted together with the customs bond.
Importer of record
How do you get a Customs Bond?
You will get a customs bond if you are importing into the U.S. To get a customs bond, you must first have an importer number.
The simplest way to obtain a customs bond is through a customs broker.
You can also get it through an international freight forwarder who will assist you with all the paperwork.
If you intend to purchase the bond by yourself, do it from a surety who is licensed by the treasury department.
What is the Customs Bond Application Process?
If you are applying for a Continuous Customs Bond the following process will be followed:
- To start with, you have to decide if you require a Customs Bond.
You will need to have the customs bond if you are bringing goods to the United States goods that are will be used for commercial purposes.
The goods must be valued at $2,000 or greater.
For the case of textile imports, the value required must be over $250.
You will also be required to have a customs bond if you are importing products that require federal regulations such as food and firearms.
- At this point, you will be required to find a licensed surety that is authorized by the Treasury Department.
The list of authorized 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.
- To complete your application, you will need to give the company name, your name, Social Security number or the Employer Identification Number (EIN).
You will also have to provide information pertaining to the:
- Type of business entity
- Years of trade
- Business location
- Description of imports as well as the value of the imported goods
For the surety to file the entry on your behalf you must grant the power of attorney to them.
- At this point, you can pay all the fees due depending on the type of customs bond that you chose.
- Your surety broker will go ahead and file the customs bond at a location that is best appropriate for you.
- In a situation where you do not intend to purchase a customs bond from a surety, you will be required to pledge cash. Until all the dues are satisfied, the funds may not be released.
How Long does it Take to get Customs Bond?
The time that is taken to get the Customs Bond will be determined by Customs and Border Protection.
The time may vary depending on the prevailing circumstances.
However, the average time frame for acquiring Customs Bond for imports will typically require 15 calendar days before becoming active for use.
Does Customs Bond have Fees?
The surety for the customs bond will always have an initial charge and thereafter an annual charge.
You can choose to have a discounted rate if you intend to pay for several years in advance.
Generally, the surety will charge for the reconciliation riders, anti-dumping entries and Periodical Monthly Statement usage
How is Customs Bond Calculated?
For a first time importer that does not have any importing history to go by, the customs and border protection will estimate the fees, taxes and duties.
Of course, that may be chargeable for the next 12 months.
This works for the continuous customs bond.
The Continuous Customs Bond will be calculated as 10% of the fees, duties and taxes that you as the importer paid the previous year.
The bond amount will then rounded off to the nearest $10,000 up to $100,000.
For the figures above $100,000, the bond will be rounded off to the nearest $100,000. In any case, there will be a minimum of $50,000 as bond.
The single-entry bond will be equal to the total value of commercial goods including fees, taxes and duties.
The total amount of the CBP bond must be $100 or more.
Are Customs Bonds Refundable?
No, the customs bond are not refundable.
The customs and border protection will however require the importer to have the bond even if the goods are duty-free and are not refundable.
For the drawback payment bond, you may have a chance of recovering a 99% refund for the duties you paid on the imported goods.
As long as you can prove that you exported the goods.
What is Customs Bond Insurance?
The customs bond insurance is a financial instrument that is meant to secure the liability of the surety under the bond.
The surety will only release the bond after they have received the collateral.
This applies to all the entries for the entire bond period.
What are some Customs Bond Limits and how are they Set?
The amounts for the single entry bonds are set by the port director after accepting the bond.
Furthermore, the amount should be more than the total value entered taxes, fees and duties.
The bond amount will be three times more than the total value of goods entered if they are subject to other federal agency requirements.
Only a registered customs broker can be able to obtain this bond for you.
Continuous Customs Bond
The lowest bond limit for this bond is set to be $50,000. The Continuous Customs Bond will be calculated by taking the taxes, duties and fees that were paid for the last year.
They are then added together.
The final figure will be achieved by getting the 10% of the total sum.
If the 10% figure is less than $50,000, then the minimum bond amount ($50,000) will be taken into consideration.
If 10% is more than $50,000, then the minimum bond amount will not be used.
What does a Customs Broker do in relation to Customs Bond?
There is no legal requirement for you to hire a customs broker to help you in the clearance of goods.
However, most importers will choose to have customs brokers so due to enjoy the convenience that they offer.
All Custom brokers must be approved and acquire a license from the Customs and Border Protection of the United States.
Only then can they be allowed to conduct customs business on behalf of the importers.
The work of the customs broker is to handle all the paperwork that relates to the obtaining of the Customs Bond.
This work may be cumbersome.
The custom brokers normally specialize in all works pertaining to customs thus making the work easier for importers. This also saves importers their precious time.
The importer is however responsible for all the information that they submit to the CBP.
They will also be required to ensure that they are fully compliant with all the federal rules and regulations.
Considering that errors may occur, the customs broker will help in preventing you from making unnecessary mistakes that may otherwise be costly.
Do you need a Power of Attorney for a Customs Bond?
Yes, the U.S. customs regulations will be required you to sign the power of attorney to allow the surety to file the entry on your behalf.
This way, you will be giving your powers away.
Any decision taken by the surety will be taken to have come from you.
Therefore no complaint should be expected.
What is Customs Bond Execution?
Custom bond execution with any group, individual or authorities will seek to bind the executor of the bond.
It shows that they have legally committed to meet all the terms and conditions as indicated on the customs bond.
Are Customs Bonds Renewable?
Yes, customs bond is renewable in what is known as surety bond renewal.
Every surety bond has a validity term within which the bond is enforceable.
This means that the surety company will take the risk of the bond for a given period.
During the renewal, the underwriter of the surety will re-evaluate the risk associated with the bond.
This is done just like it is done during the execution of a new bond.
The principal will however not be required to sign a new indemnity agreement.
Also, a new bond will not be executed unless the obligee needs it. For the bond to be renewed, the principal will have to pay a new premium so that the bond can be renewed.
How can you Renew a Customs Bond?
The continuous Customs bond will have an expiry date. The customs bond will continue being valid/active until it is put into insufficient status or terminated.
You however will be required to pay your annual premium charged to the insurance company (surety). Failure to this, they will release the termination of the bond.
How do you Determine the Right Customs Bond size for you?
The right customs bond is determined by the registered customs broker.
For the single-entry customs bond, the bond amount must be more than the total value of the shipment plus the fees, duties and taxes.
It is good to remember that it will only serve for one shipment.
If you are planning to have several entries on different ports over the year, then you will need a continuous customs bond.
A continuous customs bond is self-renewing. You will be required to have $50,000 as the minimum bond amount.
It can also be 10% of the fees and taxes depending on which one is greater.
Continuous customs bond
What is a Customs Bond Claim?
A customs bond claim is a claim against a surety bond that had been provided as an assurance that the payment will be made.
You will need to make a customs bond claim when you need to get back your bond.
To file a customs bond claim, you should contact your surety.
How many types of Customs Bond Claims are there?
There are four different types of bond claims that you should pay attention to:
The liquidated damages claims specify the amount of money that one should expect to receive in case of a broken contract.
You should dispute the damages at the port entry.
This should be done where the issue happened through a petition.
It would be good if you choose a licensed customs broker to assist you in handling the petition.
Supplementary Duty Bills
Supplemental duty bills are issued whenever the paid duties are less than the liquidated duties. They issued to cater for the difference.
You should pay the supplemental duty bills 30 days after the listing of the bill to avoid any issues.
According to the conditions of the bond, the surety and the principal will be responsible for the payment of these bills.
The supplemental duty bills can never be disputed. They can only be voided or cancelled.
This is if there is a liquidated damage claim protest that has ruled in support of the principal/importer.
A debit voucher comes up when the CBP fails to honour a payment that was made. The CBP will issue a debit voucher to the importer.
The payments of the debit voucher are due within 15 days after which they start accruing interest.
The CBP will issue importers with a miscellaneous bill for Harbor Maintenance fees for the Port of entry.
They are also issued for the overtime services offered by employees of the customs among other reasons.
These bills are paid by both the surety and the principal.
What are the Importer Obligations in a Customs Bond?
As an importer, you will have different obligations to the state.
Your obligations will be different from those of a warehouse operator or a cartage operator who does not own the merchandise.
Your bond obligation will require you to pay all the necessary duties and submit the entry documents whenever they are required by law.
They should also redeliver the merchandise to the CBP whenever there is a request by law to do that.
What Happens if you don’t Meet your Customs Bond Obligations?
If you are not able to meet the obligations of the bond, a claim will be filed. It will file against the bond so that the payment can be made.
Next, once the claim for unpaid duties is filed by the CBP, the duties will be covered by the paid claim.
Finally, if there are bond obligations that have not been met, the CBP will have the right to initiate legal charges against the principal.
If you default on a bond, then you will have broken the agreement on the bond that you agreed to when got the import bond.
This is the time when the customs will expect the satisfaction of the amounts on the bond.
What is the Maximum Liability for a Customs Bond?
The customs bond will remain in force from the day it was effected until it is terminated. Regardless of the bond limit, the principal will remain responsible for all the financial obligations.
Besides, the limit of the bond is only a maximum limit for the obligation of the surety on every bond year.
The bond will constitute a separate bond limit for every period of the one year starting with the effective date.
As such the surety’s liability is always “stacked” per year.
For example, a $50,000 bond that is effective on 1/1/19
For all entries starting from 1/1/19 until 12/31/19, then a $50,000 bond limit will apply.
For all entries starting from 1/1/20 until 12/31/20, a different $50,000 bond limit will apply.
Therefore, in this example, the surety will have $100,000 as of the total potential liability.
What is a Customs Bond Termination mean?
A customs bond termination is the end of a bond agreement that had been signed.
Once a bond has been terminated, there will be no new customs that will be charged against the bond.
A bond can be terminated by the surety or the principal.
Appropriate notice must be issued to the CBP for it to be effective.
The notice to terminate must be issued at least 15 days before it to be accepted.
What does Customs Mean by ‘Insufficient’ Bond Status?
Insufficient bond status means that no entries can be made until the bond is put into sufficient status.
It is only the CBP that has the right to either place the bond in insufficient status or restore it. There are many reasons that can put a bond into an insufficient status.
This includes bad address, massive outstanding claims or debts, risky entry or an inadequate bond limit.
Most time the CBP will issue a 15 days’ notice. Sometimes the bond may become insufficient even without notice.
Note: A bond will not be subject to any kind of deficiency of limits as a result of import duties or the value of imports.
No matter the duties paid or the volume of values imported if the bond is sufficient imports can be made. The bond limits will never be subject to depletion.
What Formalities are Associated with a Customs Bond?
A customs bond should be in writing and bear the signature of the bond obligors.
To do away with any errors, the signature of the obligor signing as the individual should be attested by two other persons.
Therefore, a corporation being a legal person, a different identification means will be applied. An officer whose work is to sign on behalf of the corporation is reflected on a document referred to as the power of the attorney.
Sometimes it is required by the state of law that corporate bonds which are signed by a corporate officer of a corporation be sealed. Although some corporate charters need any bonds associated with a corporation to be sealed, customs bonds don t need to be signed.
This can only be done when the corporate charter or the law of the state needs to be sealed. The requirements are only applied to bond sureties and principals.
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