If you are new to importing, you are likely hearing about customs bonds for the first time. You might know that you will need a customs bond or imports bond before you can bring your shipment or shipments into the United States. This poses a question you might be asking yourself: Why is a customs bond needed?
It’s easiest to first define what a customs bond is, and then you can understand better why it is needed.
What is a Customs Bond?
In its simplest terms, a customs bond is like an insurance policy for the duties and taxes on imported good. Customs bonds are also known as imports bonds or surety bonds. You may ask who is protected by this insurance policy.
The United States Government guarantees that customs duties and taxes will be paid on anything that is brought into the U.S. The customs bond protects the U.S. government from getting “stuck” with the bill for any shipper’s duties and taxes. In the unlikely event that a shipper cannot pay them, such as in the case of a bankruptcy or the closure of a business, the bond holder will make sure that the duties and taxes are paid.
According to U.S. Customs and Border Protection (CBP) regulations, an import bond’s purpose is to protect the interest of the U.S. and to ensure compliance with any laws, regulations, or instructions for duties paid when importing goods.
The importer agrees to meet the following 8 conditions when posting a customs bond:
- Agrees to pay taxes, duties, and other charges in an efficient manner.
- Agrees to complete entry into the U.S.
- Agrees to produce evidence and required documents for a shipment.
- Agrees to re-deliver merchandise if mandated.
- Agrees to resolve non-compliance issues with provision for admission
- Agrees to allow examination and inspection of imported merchandise.
- Agrees to reimburse and exonerate of the U.S. for inspection, handling and storage costs, if necessary.
- Agrees to comply with the special requirements of duty free shipments.
A customs bond must be in place even on “duty free” shipments.
When asking why a customs bond is needed, and required by law, try to imagine the mess that would happen if millions of shipments got tied up in limbo due to duties and taxes not being paid! This would be a nightmare. Having customs bonds in place on every shipment ensures smooth commerce between countries. Shipments can be processed quickly and efficiently into the U.S. with the assurance that all duties and taxes will be paid.
At USA Customs Clearance, there is always a customs bond requirement regardless of the shipment value when we file an electronic customs entry. USA Customs Clearance makes it easy and affordable to obtain a customs bond. You can request a continuous bond online.
Bonds are required on commercial goods that are valued over $2,500, whether traveling by ocean or air. Bonds are also required when importing goods that are subject to other federal agencies requirements. Agencies that oversee common imports include:
- Food and Drug Administration (FDA). The FDA regulates the import of imported merchandise including food, medication, cosmetics, some housewares and food-related items, health devices, and more. The FDA requires prior notice be given for all imported food products. You will need a customs bond when importing FDA-regulated items.
- Environmental Protection Agency (EPA). Chemicals imported into the U.S. are often regulated by the EPA. You will need a customs bond when importing goods regulated by the EPA.
- Department of Transportation (DOT). According to information from CBP, imports regulated by the DOT include cars and motor vehicles. You will need a customs bond when importing products regulated by the DOT.
- Consumer Product Safety Commission (CPSC). Toys and children’s products are among imports regulated by the CPSC. You will need a customs bond when importing merchandise or products regulated by the CPSC.
- U.S Department of Agriculture (USDA). The USDA oversees the import of plants, plant-products, wood, animals and more. In many cases, the USDA requires permits and more. You will need a customs bond when importing goods regulated by the USDA.
- Alcohol and Tobacco Trade and Tax Bureau (TTB). The TTB issues permits for importers of alcohol and tobacco products. TTB permits include the Federal Basic Permit, Certification of Label Approval (COLA), Natural Wine Certificate, and Certification of Age and Origin. These permits are required when importing alcohol. You will need a customs bond when importing goods regulated by the TTB.
Without the proper customs bond coverage, you could possibly face fines and severe delays. Having a bond is part of the price of importing goods. Without a properly executed customs or imports bond, your shipment will likely not clear U.S. customs. When this occurs, agents from CBP will not only assess fines, but might deem it necessary to hold your imports for an extended time period and require an inspection. Inspection and storage can result in additional fees. If a bond is not issued after 30 days of arrival of the imported goods, the custodian of the cargo can resell the goods after obtaining permission from customs in order to cover expenses, such as cross docking and storage fees.
The importer is still responsible for paying the duties and taxes on the shipment. Like any insurance policy, the bond is just there for “in case” something goes astray.
A customs bond is the “safety net” for importing!
Now that I Know Why a Customs Bond is Needed, Where Do I go From Here?
The easiest thing to do is to contact a customs broker or a freight forwarder. They have years of experience at making sure the proper paperwork is executed and correct filings are done. Your current shipping provider, if you have one, probably has an in house customs brokerage.
If your current shipping provider does not offer these services, make sure and get recommendations, and choose a reputable provider who has proven capabilities and experience.
You will find there are many advantages to working with a Licensed Customs Broker. Your Licensed Customs Broker can likely be a great asset during the import process. Your Licensed Customs Broker will make sure that the goods you are importing cross borders safely and efficiently and arrive at the port of entry in a timely matter. Your Licensed Customs Broker will help you make sure that your shipment of imported goods follows all customs-related rules and regulations when entering the U.S.
Your Licensed Customs Broker can provide a variety of services when importing goods. The services offered by your Licensed Customs Broker might include:
- Arrangement of customs clearance for imported goods at the terminal or port of entry.
- Preparation for the release of your imports.
- Ensuring that that all imported merchandise and products enter the U.S. safely and efficiently.
- Working with CBP agents to ensure that all government duties, taxes and fees are paid as needed.
- Determining which federal agencies’ permits are needed to import your goods.
- Helping you obtain any needed permits.
- Advising you throughout the entire import process, including navigating free-trade agreements, figuring out other entry options for your goods, and determining eligibility for tax or duty deferment.
Your Licensed Customs Broker can put their experience and knowledge in your side to make the import process simple and seamless. You can find out more about working with a Licensed Customs Broker from USA Customs Clearance.
Think how much simpler the importing process will be if the same person that efficiently handles your domestic transportation needs also handles your customs and imports. After all, they already have your credit and billing information in place, and you are known to them. This eliminates a lot of repetitive questions and delays in setting up your customs bond.
How much do Customs Bonds Cost?
Like with any insurance policy, when buying a customs bond you are you are purchasing a certain amount of coverage. The costs, and type of bond depend on what type of importing you are seeking to do.
Choosing the right kind of Customs Bond
There are two types of Customs Bonds, “single entry” and “continuous bond.”
As their names imply, a single entry is good for one import shipment only, and a continuous bond covers you for a 12 month period.
- Continuous bonds are usually considered simpler than single entry bonds. To obtain a continuous entry customs bond, you must pay for at least $50,00 in coverage. You might find that it is more economical to purchase a continuous bond if you plant to import multiple shipments during a one-year period. A continuous bond will also cover the Importer Security Filings (ISF) rules you might be subject to when importing goods by sea. In this case, no additional bond is required to meet ISF rules. You’ll likely find that prices for continuous bonds can vary by surety company. USA Customs Clearance makes this process easy by offering online services.
- Single entry customs bonds might be considered a little bit more complicated than continuous bonds. At a minimum, the single entry bond you obtain must be worth at least the value of the goods, plus the duties, taxes and fees you will owe on the items you are importing. Additionally, if the goods you are importing are subject to another federal agencies requirements, the bond must be worth at least 3 times the value of the goods imported. For example, if you are importing $10,000 worth of medical devices that are subject to regulations from the FDA, you will be required purchase a bond worth at least $30,000 to fulfill this obligation. Additionally, the cost of a single entry bond can vary by surety company. You will find that when using a singly entry bond and shipping your imports by sea, you are required to have have supplementary bond coverage to meet ISF regulations.
If you are only doing a few import shipments a year, a single entry bond is probably right for you. If you will be importing goods more frequently, the continuous bond is likely a better investment.
Continuous bonds must have a minimum coverage value of $50,000, or a value of 10 percent of the fees and taxes you paid on imports in the previous year. Generally speaking, continuous bonds can be quite cost effective if you import goods frequently. Don’t walk the importing tightrope without a safety net!
Customs Bonds Alternatives
Though obtaining a customs bond and working with your Licensed Customs Broker might be the easiest way to get your imported goods into the U.S., it’s not the only way. There are a few ways you can import goods into the U.S. without obtaining a customs bond.
One alternative to obtaining a customs bond is choosing to post cash in lieu of a surety bond. Selecting the cash in lieu of a surety bond option can be quite expensive. In this case, you’ll need to post cash as collateral for the full value of the bond — usually $50,000 or more. There are no additional fees or interest when posting cash in lieu of a bond. However, you will have to post the same amount of collateral each year to keep the cash-in-lieu of bond active. Additionally, your funds will be held for several years after the bond is terminated. Simply put, when option to post cash in lieu of a customs bond you are securing your own transaction and guaranteeing that any duties, taxes and fees will be paid.
If you are importing for a small or medium sized business, you might find that posting cash in lieu of a bond ties up a lot of capital. Getting a customs bond from a licensed surety company and working with a Licensed Customs Broker can save money, make the process simple, and doesn’t require a significant capital investment.
What if I Need a Temporary Imports Bond?
Under a few, rare circumstances, you might be able to import your goods under a temporary import bond (TIB). According to information from CBP, you might elect to use a TIB when you are importing goods into the U.S. for a limited time. In this case, the importer pays for a bond that is double the amount of duties, taxes and fees that would be owed when the item is imported. When using a TIB, the importer agrees to either export or destroy the merchandise within a certain period of time, usually one year. Following this rule is important as damages can result in being responsible for twice the normal duty amount.
According to information from CBP, there are 14 subheadings for goods that can be imported with a TIB. These items include:
- Items being to be processed, repaired or altered in some way.
- Models of women’s clothing to be used only as models at a place of business.
- Artwork and photographs to be used as displays or in illustrating advertising materials, pamphlets or catalogs.
- Samples of merchandise to only be used for taking orders for merchandise.
- Items to be used for reproduction, like printing plates.
- Items only intended to be used for experimental, testing and review purposes. These might include items for study or research.
- Vehicles including cars, motorcycles, planes, boats and other crafts being imported into the U.S. for racing purposes or for taking part in specific contests.
- Trains and other railroad equipment being brought into the U.S. temporarily to clear obstructions, fight fires, or make repairs.
- Containers designed to hold compressed gases, either filled or empty and items used to cover or hold merchandize during transport.
- Tools of the trade or professional equipment to be used to complete a job or serve a purpose by nonresidents of the U.S.
- Articles designed for temporary use in the manufacture of items for export.
- Poultry and animals brought into the U.S. for exhibition, breeding, or competition for prizes.
- Artwork, engravings, scientific equipment, photos and similar items brought into the U.S. by artists, scientists or lecturers arriving from abroad for exhibition or promotion of science, art, or industry.
- Cars, car bodies, car chassis for show purposes.
Your Licensed Customs Broker can help you obtain and manage a TIB.
Sound Complicated? Seek professional help!
There are a lot of compelling reasons to use a third party to handle your Customs Bond. Sure, you can file for it yourself through a surety licensed by the Treasury Department. But do you want to risk delays that can be caused by errors in paperwork? Do you want to try to navigate through forms and make dozens of phone calls and be up to your elbows in bureaucracy?
Let your shipping professionals handle the paperwork! They have the training and expertise to make your customs bond processing smooth and easy, and leave your time free to cultivate new business and take care of the everyday tasks that make your company successful.
Your Licensed Customs Agent or freight forwarder will also notify you when your continuous bond is about to expire, so that you can put a new one in place before experiencing a delay on a shipment. Because they are your shipping partner, it is in their best interests to make sure your shipments continue to move problem free!
Get started importing goods with USA Customs Clearance today. We can help you through the bonding and import process. Click the chat window in the bottom right corner to get started today.