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?
Having customs bonds in place on every shipment ensures smooth commerce between countries. 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.
It’s easiest to first define what a customs bond is, and then you can understand better why it is needed.
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 bondholder 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:
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 purchase a continuous bond online.
Agencies that oversee common imports include:
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!
Not sure whether or not you need a customs bond? Check out our article What Does a Customs Bond Cover?
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. They 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. Additionally, a 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:
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.
Still need help securing a customs bond? Check out our article How to Get A Customs Bond: A Guide for New Importers.
Like with any insurance policy, when buying a customs bond 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.
There are two primary 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.
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!
There are many types of customs bonds out there and it can be difficult to determine which one you need. Check out our article Types of Customs Bonds - Activity Codes And Uses to learn more.
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 you choose the 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.
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:
Your Licensed Customs Broker can help you obtain and manage a TIB.
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 the customs bond verification process?
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. They can even help you with full truckload shipping and other freight transportation options.
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.