If you’re importing goods into the United States, you’ll need to become familiar with customs bonds, and the process for obtaining them. Their purpose is simple: to guarantee that the shipper, or importer of record, pays all relevant duties, taxes and fees on imported goods, and the government gets its due.
When a Customs Bond is Required
A customs bond is required by U.S. Customs and Border Protection (CBP) for any imported items valued at $2,500 or more, including shipments of duty-free goods. An import customs entry cannot be filed until the bond is posted and confirmed.
How a Customs Bond Works
The bond is a contractual agreement between the importer of record, the surety company that issues and backs the bond, and CBP. The bond facilitates faster customs clearance because it guarantees that CBP will be paid if any import duties, taxes, or fees need to be assessed.
This arrangement allows CBP to release the shipment for entry at port without having to wait for the importer to submit payment of duties, taxes, and fees. Typically, a trusted customs broker is used to facilitate the entire process and obtain the bond.
The Role of CBP with Customs Bonds
The former U.S. Customs Service was renamed Customs and Border Protection in 2003 and falls under the jurisdiction of the Department of Homeland Security, which was created in response to the Sept. 11, 2001 terrorist attacks.
CBP oversees 328 domestic ports of entry, as well as 14 pre-clearance locations in Canada, Ireland, the Middle East, Bermuda, and the Caribbean, screening all arriving passengers as well as cargo entering the U.S.
CBP is responsible for reviewing and approving all customs bonds, including verifying the surety company’s financial stability and ability to meet its obligations. It also monitors how importers comply with customs regulations, ensuring that they’re fulfilling their obligation to pay customs duties, taxes, and fees.
The agency also assesses the duties, taxes, and fees owed by importers, based on information provided in customs declaration forms and other documentation.
If CBP identifies that an importer is in non-compliance, or finds any discrepancies between customs paperwork and importing activities, enforcement action is taken. This includes penalties, fines, or liquidation of imported goods to recapture the lost revenue. CBP uses various tools to police imports, including audits, monitoring and examining import activities, and reviewing documentation.
When CBP discovers an importer failed to pay duties, taxes and fees on a shipment, it sends the importer a notification demanding payment. If voluntary payment isn’t made, CBP can then liquidate the bond and receive reimbursement for the unpaid revenue from the surety company. The surety company will then seek to recover these funds from the importer of record.
If an importer consistently fails to meet its obligations, or if the surety company cannot fulfill its obligation, CBP can terminate a bond. The importer is then forced to apply for a new bond with a different surety company and may have to put up collateral.
CBP also provides educational resources to help importers, brokers, and surety companies understand their obligations, including bond requirements and customs compliance.
Types of Customs Bonds
There are two primary types of customs bonds – single transaction bonds (also known as single entry bonds) and continuous bonds. As the name implies, a single transaction bond is issued for one shipment only, so it’s generally used for one-off shipments vs. regular importing. They’re generally equal to the value of the merchandise, plus duties, taxes, and fees.
A continuous customs bond, which covers multiple and ongoing import shipments, is good for a year from the date of issuance. These bonds are usually equal to 10% of duties, taxes and fees paid by the importer over the previous twelve-month period. Shippers can enter multi-year agreements with a provider of customs brokerage services for a continuous bond, which is renewed on an annual basis. In addition to covering imports for a year, a continuous customs bond can be used at multiple ports of entry, depending on the scale and reach of the business.
Specialty Customs Bonds
While standard single transaction and continuous bonds are used by the majority of companies importing into the U.S., there are two specialty bonds used in specific situations. Here’s what you need to know about each.
An FTZ bond is used when you are importing goods into one of 197 designated Foreign Trade Zones (FTZ) in the U.S. An FTZ is a secured location where imported goods are designated as being within “international commerce” and therefore outside of CBP territory and not subject to import duties, fees, and taxes. This means businesses set up in an FTZ can defer, reduce or eliminate those fees and take advantage of other benefits, encouraging foreign commerce within the U.S. An FTZ bond acts the same as a standard or continuous customs bond, guaranteeing payment to Customs when goods leave the zone and enter U.S. commerce. They also ensure that the importer complies with all applicable customs laws, regulations, and requirements.
Duty drawback is the refund of duties, taxes, and fees that Customs collects when goods are imported and later refunded if the merchandise is exported or destroyed under Customs supervision. It covers finished goods, merchandise manufactured in the U.S. with imported materials, and any merchandise that is rejected by the importer due to defects, not being ordered or not meeting their specifications.
While a bond is not required to participate in duty drawback, it is required to participate in CBP’s Accelerated Payment Privilege (APP) program. This greatly reduces the time an importer must wait to receive a refund, taking about 4-6 weeks instead of a year or more.
Partner With a Reliable Customs Broker
If you’re importing goods into the U.S. or considering doing so to grow your business, you’ll need to find a reliable partner to help you navigate all the requirements and ensure a seamless process. With more than 35 years of experience, I.C.E. Transport ensures compliance with all aspects of customs clearance, including posting a customs bond, payment of duties and fees, and preparation of all necessary import documents. To learn more or to get a quote, contact the experts at I.C.E. Transport today.