Introduction
As per US laws, importers are mandated to furnish financial security to US Customs and Border Protection (CBP) against payment of applicable duties, taxes, and fees. Customs bond is a preferred option for the importers as it permits importers to import goods having a commercial value exceeding $2500 and provides a guarantee to the CBP for collection of such duties, taxes, and fees. However, what if the importer regularly imports the shipments? Will he need to furnish a customs bond every time import takes place? The answer lies in a continuous customs bond.
What is a continuous customs bond?
Customs bonds are of two types. While a single-entry customs bond is valid for a single shipment, a continuous customs bond covers all the shipments that are imported within one year after the purchase of the bond. The bond can be renewed upon expiry to ensure continuity. This relieves the seasoned importers of going through the hassle of repeating the same procedure repeatedly and is cost-effective as compared to single-entry bonds.
Why do we need a continuous bond?
A single-entry bond will suffice if your company imports a handful of shipments in a year. However, if imports are frequent, single-entry bonds would prove to be cumbersome and costly. In such cases, it is far better to opt for continuous bonds to ensure uninterrupted imports and a hassle-free process and operations throughout a period of one year. Subsequently, it can be renewed after expiry and the renewal again shall be valid for one year. This makes continuous customs bonds a preferred choice for seasoned importers.
Parties and Mechanism of the Continuous Customs Bond?
All the goods imported in the country, whether by sea or air, shall be covered by the customs bond. A continuous bond can be used for an annual period and covers the ongoing shipment of imports within that year. A continuous bond involves three parties: the importer (principal) who is required to furnish the bond, the surety who issues the bond, and the CBP. In case the principal fails to pay the applicable duties, fees, and taxes to the CBP, the surety becomes liable to make such payments. Eventually, the surety can use legal recourse to recover the amount from the principal. The continuous bond, unless terminated by either party to the bond, gets renewed automatically each year upon expiry.
How do you calculate a continuous bond?
A continuous bond is calculated based on the amount of duties, fees, and taxes paid in a year by the importer. The total is then multiplied by 10% and rounded off to the nearest $10,000. This shall be the bond amount that you will require. However, where the duties, taxes, and fees paid exceeds $1,000,000 for the 12-month period, then the value derived as 10% shall be rounded off to the nearest $100,000. A minimum of $50,000 bond is mandatory in the case of continuous bonds.
Examples of continuous customs bonds
Continuous customs bonds can be issued by any authorized insurance and surety company as per the standard terms issued by the government. The bond submissions are approved by the CBP and can be used in any port. $50,000 is the most commonly used bond among the importers and may take up to 6-10 days to be effective.
How do you obtain a continuous customs bond?
Continuous customs bonds can be obtained by two means viz.
a.) Through an international freight forwarder or a licensed customs broker in the US
b.) On your own from a US Treasury Department licensed surety
In case of bond acquisition through a customs broker, the broker takes care of all the formalities on behalf of the importer. He files the US customs bond application form and obtains a unique bond number on the importer’s behalf.
The continuous customs bond is verified for all the relevant details. The legal name of the importer, designation, address of the company, state of incorporation, CBP Identification number, etc., is verified.
Customs broker agent ID number shall be provided.
The signature of the party is required who, for the bond contract, is authorized to bind the surety.
While verification, an application letter along with a customs bond shall be sent to the CBP along with the details such as CBP ID of all the parties to the bond, an estimate of duties, taxes, and fees paid for the past 12 months, and the nature of the goods imported.
How much does a continuous customs bond cost?
Continuous customs bonds are relatively affordable as compared to the single entry bonds when it comes to frequent imports. However the cost of a continuous customs bond varies according to the customs broker. An importer can normally get a continuous customs bond within $400-$500.
What is the difference between a single-entry bond and a continuous customs bond?
While the single-entry bond is for occasional imports, continuous bonds are suitable for frequent imports undertaken within a year. The differences between a single-entry bond and a continuous customs bond can be further elaborated as follows:
How does Trade Credit Insurance Compare with these two bonds?
Trade credit insurance is the protection provided by the insurance companies against credit risks faced by business owners. It covers the situations of non-repayment and defaults against delivery of goods and services to the customers.
A single-entry bond covers the situation of non-payment by the importers to CBP and is valid only for a single consignment.
A continuous bond also provides protection to CBP however, is applicable for a period of 12 months. Both these bonds can either be issued by an insurance company or a customs broker.
What are the benefits of a continuous customs bond?
A continuous bond offers the following benefits to the importers:
1.) Hassle-free import: For every import, a customs bond is required, for which a form must be filled and filed with the ACE system of US Customs. Repeating this process for every import will lead to unnecessary wastage of time and increased costs. It's better to go for a continuous bond than dragging yourself through this cumbersome process for each import.
2.) Affordable: If you are a regular importer, then continuous bonds will be a lot more affordable than single entry bonds. While a single entry bond may cost anywhere between 0.2%-0.5% of the commercial value of imported goods, a continuous bond can be obtained for $500 (subject to associated factors).
3.) Convenient: As the compliance and procedural aspects get reduced when you opt for a continuous bond in place of a single-entry bond, the import process gets easy and convenient. This leads to faster communication and timely processing.
If you are a regular importer, then a single entry bond may just add to the complexities and burden of transactions. Instead of repeating the entire process of applying and getting a single-entry bond issued and getting it associated with a federal ID number, it’s far easier and more convenient to use the continuous bond. The time saved can be channelized by the importers for productive activities.
FAQs On Continuous Customs Bond
How does the bond renewal process work for continuous bonds?
After 12 months expire from the date of issue of the continuous bond, the bond still remains on file with CBP till the issue of a surety notice by the customs broker or the surety. The bond will remain inactive till renewal. Modifications are allowed by both the importer and the surety at the time of renewal. To renew the bond, payment of surety shall be required.
Where can a continuous bond be used, and who can use it?
Continuous bond can be used for all the goods entering through sea and air by the importer.
How long does it take to put the continuous customs bond into force?
A continuous customs bond can come into force within 4 working days if done through a professional customs broker.
What are continuous customs bond limits, and how are they set?
Continuous customs bond limit is the size of the bond that needs to be issued. The limit is set at 10% of the total duties, taxes, and fees paid over a period of 12 months.
What does a continuous customs bond cover?
A continuous customs bond covers the taxes, duties, and fees that are applicable on the importer on import shipments and need to be paid to Customs & Border Protection.
How much does a continuous customs bond cost?
While the cost of a continuous customs bond varies according to the customs broker, an importer can normally get a continuous customs bond within $400-$500.
How long does it take to get a continuous bond?
The time limit to get the continuous customs bond will vary depending upon the customs broker. If you go with a professional and expert customs broker, it may take anywhere between 2-4 working days. Otherwise, it may extend accordingly as the broker takes the responsibility to send paperwork for approval to the customs. Eventually, the bond is registered in the CBP database after the electronic filing of the same.
