If you’re importing goods into the USA, it’s important to know the answer to the question: When is a customs bond required? The majority of goods being imported into the USA require a customs bond as part of the entry process.
Read on to learn the definition of a customs bond, the three main parties involved with it, and how to obtain one for your importing business.
What Is a Customs Bond?
A customs bond, also known as a surety or import bond, is essentially a legal contract between the importer of record (also known as the principal), a surety company that sells the bond, and Customs and Border Protection, or CBP (aka the obligee). The purpose of a customs bond is to guarantee that the importer follows all applicable customs laws and regulations and, most important, pays the duties, taxes and fees required as part of the importation process.
A customs bond is required when companies import goods valued at more than $2,500, including shipments of duty-free goods. Failure to obtain a customs bond can result in your shipment being delayed by the CBP due to a clearance hold, fines being imposed, and legal issues. Some helpful information for first-time importers is provided by CBP here.
The surety firm is responsible for paying any claim against the importer for defaulting on import fees to the CBP. It then seeks reimbursement from the importer in the amount of the defaulted payments. The CBP, for its part, will not release goods into U.S. commerce without a customs bond being issued, unless the duties, taxes and fees are paid upfront.
Two Main Types of Customs Bonds
There are two primary types of customs bonds. A single-transaction bond, also known as a single-entry bond, is issued for one shipment, making it the perfect vehicle for covering payments on one-off imports. This bond is generally equal to the value of the merchandise, plus duties, taxes, and fees.
The premium for a single-entry bond is typically a small percentage of the bond amount. For example, if the bond is $10,000, the premium might range between $50 and $100, depending on the surety company's rates and its risk assessment of the importer.
A continuous bond covers multiple, ongoing import shipments, and is good for a year from when it is issued by the surety company. The minimum amount for a continuous bond is $50,000, or 10% of the total duties, taxes and fees paid by the importer over the previous year, whichever is greater. If the shipper has higher import volumes or more significant duties owed to the CBP, the bond amount is increased accordingly.
If no imports were made in the previous 12 months, the bond is based on the duties, taxes and fees the importer estimates for the upcoming year. Continuous bond amounts go up in increments of $10,000 up to $100,000, and from there in increments of $100,000.
The annual premium for a continuous bond can start at $450–$550 for a minimum $50,000 bond and go up from there. For example, the premium for a $100,000 bond might cost around $800–$1,000 per year.
An importer can enter multi-year agreements with a provider of customs brokerage services for a continuous bond, and renew it on an annual basis. In addition to covering imports for a year, a continuous bond can also be used at multiple ports of entry. This makes it very convenient for larger businesses that import through several locations.
A continuous customs bond stays on file with CBP until either the customs broker or surety company posts a termination notice. To keep it active, payments to the surety must continue. Some surety companies bill customers on an annual basis, while others offer multi-year payment terms.
How To Obtain a Customs Bond
For a single-transaction bond, importers should contact a customs broker or surety company. They will need you to provide them with specific details about your shipment, including the value and the type of goods. This last part is critical as specific types and categories of goods are either excluded or subject to stricter CBP scrutiny. The broker will explain when a customs bond is required and guide you through the application process to ensure you meet all CBP requirements.
To obtain a continuous customs bond for the first time, the process is pretty much the same, except the broker or surety will need to know your estimated annual duties and taxes, as noted above.
In both cases, working with a reliable customs broker greatly simplifies the application process, helps ensure CBP compliance, and minimizes delays. The broker handles all the paperwork and coordinates with the surety for a smooth and efficient process.
Some Special Considerations with Customs Bonds
There are times when there are customs entry requirements from other government agencies like the FDA, USDA and EPA, such as when restricted products are involved. In those cases, the amount of a single-entry bond is automatically tripled. However, the amount of a continuous bond doesn’t change in those cases. So, if your cargo is going to require additional filings, you’re better off in the long run getting a continuous bond.
Another scenario when a customs bond is required is when cargo is valued below $2,500 but falls under a restricted category. NOTE: this does not apply to anyone shipping personal goods to the USA from overseas; customs bonds are only used to guarantee duty and tax payments to CBP on commercial goods.
A Reliable Customs Broker Is Critical
While the importer is ultimately responsible for duties and tax payments to CBP, the customs broker facilitates the paperwork and payment. There are situations where an irresponsible broker either makes a late payment, an under-payment or fails to pay altogether, and both the surety and the importer are put on notice by CBP. In some cases, this “black mark” against the importer could result in the surety refusing to renew a continuous bond.
This is where an experienced, reputable customs broker becomes invaluable. They can guide you through all the requirements, answer your questions, and inform you when a customs bond is required. Most importantly, they can be trusted to meet all their obligations throughout the process, so your shipment is not delayed and actions aren’t taken by CBP.
With more than 35 years of experience managing global transportation and customs requirements, 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 import documentation. To learn more, contact the experts at I.C.E. Transport today.
