WHAT IS A CUSTOMS BOND?
Did you know an customs bond is not optional? While other trade-related insurance products give you the option of obtaining a bond, a US customs bond is mandatory in most cases. You need a bond to effectively do business as an importer, so follow our lead to obtain an import customs bond.
There are a number of situations in which you must utilize an import customs bond. These situations include:
- When your imports are for commercial use
- When your imported goods are required to meet federal regulations
If the merchandise is subject to government agency rules and regulations, the bond amount must be equal to three times the value.
First, we will train you on the definition of import customs bonds.
Customs Bonds Ensure Duties are Paid
A bond is a contractual agreement between the U.S. Customs and Border Protection (CBP), the surety company and the importer of record. So what does a customs surety bond do? It ensures the CBP is paid the duty and taxes owed and that the importer will follow the rules and regulations of the CBP.
A customs bond, also known as an import bond, involves three parties. The importer or business purchasing the bond and importing the goods is the principal. The CBP is the beneficiary. The company issuing the U.S. import customs bond is called the surety.
An import customs bond guarantees that the taxes, duties and fees are paid on all imports. The customs import bond ensures that the CBP will collect all import taxes, duties, fines and penalties from the importer. If the importer cannot pay those costs, the company that issued the import customs bond will pay the remaining costs. Reasons an importer might not be able to pay customs fees as required might include closure of a business or bankruptcy.
The importer agrees to meet the following 8 conditions when posting an import customs bond:
- Agrees to satisfy taxes, duties, and other fees in a timely manner
- Agrees to finish entry into the country
- Agrees to furnish required documents and proof of shipment
- Agrees to re-send merchandise if needed
- Agrees to fix non-compliance problems with qualifications for admission
- Agrees to permit inspection of imported merchandise if deemed necessary
- Agrees to reimburse the U.S. for any necessary inspection, handling and storage fees
- Agrees to comply with the rules of duty free shipments
It’s important to know that a customs bond must be in place even when your import shipment is duty free.
So, how do bonds work? We have you covered next.
Explaining the Customs Bond Triangle
The principal purchases an import bond from the surety and pays a premium, or a percentage of the total bond sum. In exchange, the surety extends the principal surety credit, which essentially confirms that this agreement is going to come through. The principal then follows the terms of the bond from start to finish. If no one files a claim, the principal pays nothing more than the agreed upon bond premium.
Customs Brokers Obtain Import Bonds
Sureties licensed by the U.S. Treasury Department access import bonds. You can find a list of customs brokers broken up by state to learn more. Many licensed customs brokers, though, will not issue you a bond without a power of attorney, which files import entries on your behalf.
Customs brokers can work as agents for sureties, sell bonds and assist you with importing your goods into the United States port of entry of your choice.
Continuous vs Single Entry Import Customs Bonds
It is important to know that there are two main types of import customs bonds:
- Single entry import bond
- Continuous import bond
The type of customs bond you select will depend on how many times you plan to import goods. You will find that a continuous bond will cover all the shipments you import during a one year period. A single entry customs bond will only cover a single shipment of imported goods into the U.S. You might choose a continuous bond to get the most out of your purchase.
Single entry import customs bonds cover one shipment into the U.S. A single entry bond can vary in price. The value of the bond you need can vary, too. At minimum, a single entry bond should be worth the value of the goods you are importing, plus any applicable duties, fees and taxes. If your imports are regulated by another federal agency, you’ll need to get a bond worth 3 times the value of the goods imported.This means that if you are importing $8,000 in toys regulated by the Consumer Product Safety Commission, you’ll need a bond worth at least $24,000. Are you shipping your imports by sea and using a single entry bond? You’ll be required to obtain additional bond coverage to meet International Security Filing (ISF) regulations if you are shipping goods by sea.
Continuous import customs bonds work a little bit differently than single entry bonds. A bond that is continuous is allowed for an annual time period and then will have to be renewed. A continuous bond is a good option if you are importing multiple shipments in a year. You must purchase at least $50,000 in coverage when getting a continuous customs bond. It’s important to know that a continuous customs bond will cover ISF rules when shipping goods by seas. Continuous bonds cover all transactions within that year. You can use continuous custom bonds at any port of entry.
With so many stipulations for a single entry bond, many importers find a simpler continuous import customs bond is best for their business.
Calculate an Import Bond
Finally, calculate the import bond amount by factoring in the amount of duties and taxes associated with your imported goods. In most instances, the bond amount must be at least 10 percent of the total duties and taxes paid to the CBP annually at a minimum of $50,000.
Are you ready to obtain an import customs bond and start importing? Get started by clicking the chat icon in the bottom right corner or buying a customs bond online now!
Utilize a Licensed Customs Broker
When you utilize the services of a Licensed Customs Broker, you ensure your bond is correct, complete and you have a secure transaction. Licensed brokers handle the behind the scenes import bond work for you.
Connect with a customs broker that has the experience you need to handle the details so you can focus on your importing business. These experts can help you increase bond amounts and update contact information. Brokers allow you to focus on your business and avoid customs bond hurdles.