A US Customs Bond is a mandatory document for importing goods into the US, as stated under the US Customs Regulations. A Customs Bond is a contractual agreement between three parties -- the Importer of Record, the surety bond company that issues the Customs Bond, and the US Customs & Border Protection (CBP).
Customs Bonds are designed to ensure faster customs clearance as it guarantees the CBP the payment of any additional import duties, taxes, or fees that need to be assessed. With this assurance, the CBP can immediately clear the shipment without waiting for the importer to pay. The surety company clears all the dues with the CBP after which the importer reimburses the surety.
As stated above, the import bond guarantees that the CBP can collect all the duties, taxes, fines, or penalties associated with importing goods into the US. However, in case the importer for some reason such as bankruptcy cannot pay these amounts on time, the CBP collects the payment from the insurance company that issued the bond.
CBP mandates all importers must file an Import Bond to clear their entries. This is compulsory even when duty-free goods are imported into the country.
A Customs Bond is essential for clearing customs of commercial goods valued over US$ 2,500 and is subject to specific payment requirements from other US government agencies. For example in the US, besides the mandatory Customs Bond, all food items require additional documents as per the guidelines issued by The Food and Drug Administration (FDA). This also applies to duty-free import shipments.
Listed below are the two types of Customs Bonds:-
Also known as a Single-Entry Bond or SEB, this bond allows for a one-time customs entry. This type of Customs Bond can be availed if the importer only imports low-cost value goods. It is best recommended for those companies that import less than four shipments into the US annually.
This bond is needed for covering multiple/ongoing entries made by an importer at all ports of entry into the US. This type of bond works well for those importers who deal with a large number of entries across several US ports of entry every year. A Continuous Customs Bond is also needed for high-value shipments. The bond is valid for one year from the date it is issued.
A Customs Bond makes the importing process easier for companies as it covers the payment of duties and taxes applicable on the goods imported into the US. All the goods that are subject to federal requirements must be covered by the Customs Bond. A Customs Bond is essential even when the shipment is transported from one state to another. It covers all the goods entering the country by air and via sea.
There are two means of availing a Customs Bond. One way is by approaching the international freight forwarder or a reputed and established customs broker licensed in the US.
Reaching out to a customs broker is the easiest method of obtaining the bond as he/she is aware of the application processes and well-versed in handling the related documentation and paperwork. The second way is to acquire the bond on your own. For this, you must purchase a bond from a surety licensed by the US Treasury Department.
As we have already read above, importers can buy a customs bond through their customs broker who directly deals with the bond provider or the surety company. When the customs bond is purchased, the customs broker files for a unique bond number on behalf of the importer.
Purchasing your bond through a reliable and reputed customs broker ensures that your bond is from a highly rated surety company. It can also result in lesser hassles and significant cost savings. The customs bond consultant and the customs broker will also help you choose the type of Customs Bond your company requires depending upon the kind of goods you are importing into the country.
To understand how a typical US Customs Bond application form looks like, click HERE
Customs Bond agents play a key role in the smooth completion of the Customs Bond procurement and processing system. The importers have a vital partnership with these agents who ensure that the shipment clears the port of entry. The best option for the importers is to work with those agents who are capable of single-handedly dealing with the entire process.
Besides the primary role of securing import bonds, a Customs Bond agent also keeps the importers informed about the updates and changes within the CBP, and also works on adhering to the policy changes that can impact the import process.
An experienced Customs Bond agent should be updated on the latest import/market trends and the seasonal changes in demand for a particular type of goods. The individual is also best placed to advise a client on scheduling freight arrivals so that there is no traffic at the port of entry.
A Customs Bond agent even makes sure that his/her clients comply with all the mandatory and other regulatory requirements. This can help in avoiding flagging imports that are not in compliance at the point of entry, thus saving time and money.
The top agents work closely with the US Customs Clearance and keep their clients informed about the factors that may hamper their imports. The best Customs Bond agents work towards making their clients knowledgeable and well-informed importers.
After all the relevant details are filled in, the Customs Bond must be verified. Details such as the full legal name of the importer/principal, legal designation or state of incorporation, physical address of the company, and the CBP Identification Number, etc. should be checked for its accuracy. If the service of a customs broker is used, the agent ID number must be provided along with the signature of the party authorized to bind the surety to the bond contract.
An application or a letter to the CBP must accompany the Customs Bond stating details such as the name and the CBP ID of all parties to the bond, the nature of the goods to be imported, and the estimated taxes, fees, and duties paid in the previous year or within the past 12 months.
While buying a Customs Bond, the importer should understand that the bond works as an insurance policy. The importer must purchase a Customs Bond for a specific amount of coverage, the price of which varies as per the type of bond chosen.
To obtain this bond, an importer must pay for the coverage of a minimum of US$ 50,000 or 10% of the fees and taxes paid in the previous year. While the cost for this coverage can fluctuate, it is economical to purchase a Continuous Bond if the importer plans to import three or more shipments in a year.
These types of bonds are slightly complicated. The minimum amount of the bond must equal the value of the goods, including the taxes and fees due on them. If the import shipment must meet the requirements of another federal agency, the bond must be worth at least three times the value of the goods imported. The price of the bond can also vary according to the surety/insurance firm you are working with. If you are shipping the consignment by sea, you will need additional coverage for Importer Security Filing (ISF) .
The most commonly used Customs Bonds are the Single-Entry Customs Bonds and the Continuous Customs Bonds. If goods are imported into the US but are also exported out of the US, an importer can make use of a Duty Drawback Bond which refunds 99 percent of the duties paid on the imported goods upon its entry and clearance into the US.
The pricing of a Customs Bond depends on the value and type of bond. The price of a Single-Entry Customs Bond is calculated based on the individual shipment. Whereas, the Continuous Customs Bond is priced at 10 percent of the total taxes, duties, and fees paid by the importer over 12 months.
Single-Entry Customs Bonds are valid only for one time and cannot be renewed while the Continuous Customs Bonds are valid for one year from the date they are issued. After one year, the bond stays on file with the CBP until a termination notice is issued by a surety company or the customs broker.
The bond must be regularly renewed or it remains inactive. Payment of surety is required to renew the Continuous Customs Bond. The renewal process allows both the importer and the surety an opportunity to review the bond and make any modifications if deemed necessary.
When you work with an experienced and professional customs broker, you can get your Customs Bond within two to four business days. The broker sends your paperwork to the customs for approval. After it is filed electronically with the CBP, the bond is usually registered in the CBP database within two hours of keying in the details.