Customs Bonds
Customs bonds, also known as Surety bonds, are a type of insurance policy for the protection of Customs and or other government agencies that govern imported products. A customs bond has no protection for you or your freight.
What customs bonds do is guarantee payment to Customs or any other government agency as necessary. The bond guarantees that duty payment will be made if there is a penalty assessed on the shipment, the shipment is recalled, or there is any other type of infraction committed. It also guarantees payment if the importer is unable or unwilling to fulfill its obligation.
If the importer does not respond to Customs requests, then Customs would assess a claim against the importer and the surety company. The insurance company will then go after the importer to make sure the obligations under the bond are met; and will take legal action against the importer if the importer does not pay Customs. If the importer is no longer in business then the insurance company will have to pay the penalty.
Purchased price is not refunded
Just like any other type of insurance policy once you buy a customs bond you do not get your money back for the purchase of the bond.
Requirement from Customs
Customs bonds are required by Customs to clear an imported shipment when a formal entry is submitted. The bond is required regardless if there is any duty or taxes due on the shipment or not. Without a customs bond the only other way to clear a shipment is if the importer uses as collateral cash, a letter of credit, treasury bills, notes, or bonds other than U.S. Saving Bonds. When cash is used as collateral no interest is paid on the cash.
Regardless whether a Customs bond is used, or some type of collateral is used to clear a shipment, the obligation of the bond or collateral is not terminated until two years after the entry has been liquidated by Customs. An entry is liquidated when Customs has determined the final computation of duties and or drawback, and when Customs has finished their review and or investigation on the shipment. It can take a year or longer for an entry to be liquidated.
Type of Bonds
The most common bonds used for imported merchandise by all importers nationwide are the single entry bond and the continuous bond.
The single entry bond is used, obviously, for a single shipment. It does not cover the ISF for the same shipment if filing is required. If the shipment is via ocean cargo an ISF bond is required when the ISF is entered into the Customs system. The amount of the single entry bond required by Customs is the value of the shipment plus any duty or taxes. If the shipment is subject to any other government agencies requirements then the amount of the single entry bond is at least three times the value of the merchandise.
The continuous bond is a yearly bond that covers all of the shipments into any city nationwide that an importer imports into. The duration of a continuous bond is of one year. Unlike the single entry bond the continuous bond also covers all ISF transactions for ocean shipments for the holder of the bond.
Most continuous bonds are for $50,000 which is the least amount allowed by Customs. The way the amount of the continuous bond is calculated is by taking 10% of the duties paid by an importer for one year. So if you pay over $500,000 in duties in one year, then Customs will demand that you increase your bond amount when renewing it for the following year.
Other bonds that are somewhat common are
- Bonds for Drawback
- Accelerated drawback bond allows the importer to immediately collect a refund of the Customs duties they paid.
- Same Condition Drawback is for merchandise that is unused and is exported under the same condition as when it was imported.
- Custodian of bonded merchandise is a bond for a bonded warehouse.
- International carrier bond is used for foreign flag vessels or aircraft.
- Local and Interstate trucking of bonded merchandise bond.
The rest of the customs bonds are uncommon:
- Instruments of International Traffic
- Foreign Trade Zone Operator
- Public Gauger
- Wool & Fur Products Liability Act
- Bill of Lading, Detention of Copyrighted Material, Neutrality
- Court Costs of Condemned Goods
Cap International can help you with all your Customs Bond needs
Cap Intl has been helping importers with their Customs bonds needs for thirty years. When a single entry bond is needed we will automatically write the bond. If an importer needs a continuous bond we will negotiate for a highly competitive rate. We assure you that if you purchase your customs bond through Cap Intl your shipments will have the appropriate bond as well as adequate coverage. Any question you have on bonds or any other aspect of importing feel free to contact us at 832-649-4392 or email us at logistics@capcustomsbroker.com
